San Bernardino, Calif., heads closer to bankruptcy

San Bernardino, Calif., took another step toward bankruptcy July 24 when the City Council voted unanimously to suspend debt payments, freeze vacant jobs and quit paying into a retiree health fund, according to Reuters. By halting bond payments, the council effectively approved defaulting on the city’s debt as part of a three-month emergency plan.

The plan will likely lead to the city making a formal bankruptcy filing within the next 30 days, making it the second largest city in the nation to file for bankruptcy. The city is preparing a second, longer-term bankruptcy plan as it regroups under Chapter 9 court protection, when a judge will take over decisions concerning the city’s debts.

San Bernardino faces a $45.8 million budget deficit, created by a combination of the bad economy and poor management. The city attorney has said that budget officials presented falsified budget documents to the City Council for 13 of the last 16 years. The city is in the middle of accounting probes and expects more, officials said Tuesday.

San Bernardino, a southern California city of about 210,000 people, is the third California city planning to file for bankruptcy since June. Stockton, Calif., the nation’s largest bankrupt city with about 300,000 people, filed June 28. Mammoth Lake, a much smaller city, voted to seek bankruptcy protection July 3. Jefferson County, Ala., which filed in 2011, is the largest local government bankruptcy.