With more than $1 billion in debt, California’s San Bernardino filed for bankruptcy
on Wednesday. The city, which is the third in the state to go bankrupt
in five weeks, blames its economic catastrophe on the 2007 housing
crash.
The bankruptcy filing
states that the city has between 10,001 and 25,000 creditors and owes
“more than $1 billion.” It disclosed a 30 percent shortfall in the
city’s budget – $46 million.
San Bernardino is California’s third city to file for bankruptcy protection in the past two months, following Stockton and Mammoth Lakes.
The filings come at a time when California cities are struggling with
rising pension costs and growing unemployment. San Bernardino currently
has $195 in unfunded pension obligations, $61 million in unfunded
retiree healthcare and $40 million of workers compensation.
“Just by looking around you can see that the city is going down,”
small business owner Marcus Nelson told the Associated Press. “On this
block there’s only three business – [mine] and two other pawn shops.”
In the mid-2000’s, San Bernardino took out $190 million in bonds and
loans to pay for projects, including a new arena, new parking garages
and a new city hall.
But budget problems hit hard in 2007. The city of about 210,000
residents suffered from the collapse of the housing market, and had the
second highest foreclosure rate in the US.
“We lost in the course of a single year 16 million dollars in sales
taxes. 60 percent of our property values were lost. When you understand
that a city is largely financed by sales and property taxes – when you
lose your economic base in that kind of a free fall – you’re in
trouble,” the city’s mayor, Patrick Morris, told AP.
But the extent of the city’s debt was largely unknown until recently. A recent report by a city attorney
claimed officials had falsified budget reports to the mayor and council
for the past 13 years, in an attempt to cover up the scale of the
city’s liabilities.
San Bernardino may not be the last California city to go bankrupt. Bankruptcy filings are usually a rare occurrence, with only 640 having been made since the Great Depression.
But other cities in the state are also in deep fiscal trouble. In
July, the mayor of Compton, a small city outside of Los Angeles, asked
state auditors to investigate unspecified “waste, fraud and abuse of
public monies.” Financial officials predict it could file for bankruptcy within the next month.
Auditors are also worried that Victorville, California could go down the same route.
And in San Bernardino, a city where 75 percent of its budget goes to public safety agencies, the bankruptcy will lead to widespread layoffs or cuts in employee compensation, affecting the police and fire departments.
While unemployment is on the rise, San Bernardino is struggling to
rebuild itself as it joins a trend of California cities declaring bankruptcy.
Source - http://rt.com/usa/news/california-city-san-bernardino-719/
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