San Bernardino Declares Fiscal Emergency

The San Bernardino City Council on Wednesday night declared a fiscal emergency, effectively allowing the city to expedite its bankruptcy filing.

Wednesday night's action would allow the city to make a case it should be exempt from state law requiring municipalities to wait 60 days and negotiate with creditors and employees before declaring bankruptcy.

Councilmembers voted 5-2 to authorize both a fiscal emergency and bankruptcy, which the city has 30 days to file.

The vote came after a decision on the same issues was postponed during a Monday meeting at which speakers from the 213,000-resident city pleaded with council members not to declare fiscal emergency.

At that meeting, the city's finance director reportedly said there had been no sign to the council of internal borrowing that had caused problems in earlier budget years.

Finance Director Jason Simpson told the council that the city borrowed money from restricted funds to meet payroll and other expenses, and then the restricted funds were replenished. Eventually, the city ran out of money to keep doing that.

The borrowing practice, which Simpson admitted was unusual, had not been disclosed to the council, city officials said, according to the San Bernardino Sun.

Internal documents given to NBC4 showed that officials in City Hall knew that deficits were looming for years.

City Attorney James Penman had previously said 13 of 16 years of budget documents had been falsified, masking the city's deficit, but he did not elaborate until Monday.

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The council last week voted to authorize Penman to file for Chapter 9 bankruptcy to ease a dire cash crunch. The council's Wednesday meeting is to in part to avoid mediation and head straight to bankruptcy court.

The proposed fiscal emergency declaration notes the city's "dire financial condition" and states that the city is unable to pay its bills over the next 60 days.

The bankruptcy resolution states that without bankruptcy protection, San Bernardino would be unable meet its payroll, a situation "which would endanger the health, safety and welfare of the citizens of the city."