San Bernardino Becomes Third California City Seeking BankruptcySubmitted by PWA on Wed, 07/11/2012 - 13:15
The city council of San Bernardino, California, voted on Tuesday to file for bankruptcy, marking the third time in recent weeks a city in the most populous U.S. state has opted to seek protection from its creditors.
The decision by the leaders of San Bernardino, a city of about 210,000 residents approximately 65 miles east of Los Angeles, followed a report by city staff that said the city faced an imminent financial crisis.
The report said the city had exhausted its reserves and projected spending would exceed revenue by $45 million in the current fiscal year which started on July 1.
Chapter 9 bankruptcy would give San Bernardino an opportunity to restructure its battered finances, city staff said during a webcast of the city council meeting.
But the council's vote may backfire on San Bernardino in the municipal debt market, and raises concerns about local officials in California potentially looking to bankruptcy protection as an easier solution than making tough decisions about spending cuts and raising revenue, said Dick Larkin, director of credit analysis at muni bond broker-dealer HJ Sims.
"Am I troubled? You bet," said Larkin. "I couldn't believe how quickly this vote happened."