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San Bernardino Council Votes for Bankruptcy

San Bernardino's city council last night voted 4-2, with one abstention, to go into Chapter 9 bankruptcy. Prior to the vote, the city attorney said the city could not pay employees August 15. The city experienced a real estate bust with a high number of foreclosures. Unemployment has been consistently extremely high. Earlier this year, Stockton and Mammoth Lakes filed for bankruptcy.

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San Bernardino's city council last night voted 4-2, with one abstention, to go into Chapter 9 bankruptcy. Prior to the vote, the city attorney said the city could not pay employees August 15. The city experienced a real estate bust with a high number of foreclosures. Unemployment has been consistently extremely high. Earlier this year, Stockton and Mammoth Lakes filed for bankruptcy.

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Comments
37

According to their city attorney, the city budget officials had falsified documents for 13 of the last 16 years, in order to hide the city's deficit spending. "For the last 16 years the budget prepared for the council showed the city was in the black," Penman said, not naming those allegedly responsible. "The mayor and the council were not given accurate documents." Officials said the city's fiscal crisis has been years in the making, compounded by the nation's crushing recession and exacerbated by escalating pension costs, lucrative labor agreements, Sacramento's raid on redevelopment funds and a city reserve that is tapped out.

July 11, 2012

And how many other cities have been hiding dangerous deficit spending for years? Best, Don Bauder

July 11, 2012

If that is true then PRISON time should be chased as fast as possible, don't ever expect it to happen tho.

July 11, 2012

The Federal Reserve was aware of problems with the Libor rate; the Bank of England may have been involved in the manipulation, which affected hundreds of trillions of dollars of financial transactions. Will anything happen? Same answer. No. Remember that in San Diego, bureaucrats that covered up the massive pension deficits eventually got off the hook. Best, Don Bauder

July 11, 2012

When houses are foreclosed on is the bank that forecloses responsible for the property taxes? Do they file an appeal with the county to reduce the tax liabiltiy on the property? Will the city officials who falsified the documents be going to jail?

July 11, 2012

Whoever owns the property is responsible, so if a bank forcloses then the bank owers the tax.

July 11, 2012

I would think that after a bank takes over a house, it then has to pay the property taxes, but I haven't looked that up. Do the banks file an appeal to get the tax liability lowered? Probably. Will the San Bernardino bureaucrats allegedly responsible for covering up the city's deficits go to jail? Very, very doubtful. Best, Don Bauder

July 11, 2012

SurfPuppy's explanation sounds right, as above. That is probably one reason that banks are not foreclosing on many homes that are in serious default, and in which people are living mortgage-free. Best, Don Bauder

July 11, 2012

The banks do not file tax appeals, they don't have the asset long enough and to be very honest are too damn stoopid. I dealt with all/any banks/financial institutions in the commercial meltdown, and all of them are morons, the bigger the bank the more stupid they were- Bank of America was the dumbest ever. They would be BK right now if not for the gov, and one reason is they have awful customer service, a corporate culture of incompetence.......Fannie Man and Freddie Mac-on man do I have stories, they are even dumber than the banks ...If everyone had a few hours I could keep them very entertained with bank incompetence.

July 12, 2012

Remember that some of theses foreclosures are taking a long time. have read of some people going as long as 3 years with out making any payments before the banks even started the process. I know from talking to friends in real estate that a lot of the foreclosures that they have dealt with, the banks have simply ignored the taxes, much like they ignored upkeep on the homes, until the property sells. Then it becomes part of the negotiation of the sale. I know it sounds counter productive, but I would guess that with so many foreclosures, some smaller munis have made so many cuts that they just don't have the budget and or personnel to go after them.

July 11, 2012

The muni puts a tax lien on the property, which is first in line to be paid, ahead of trust deeds, so they will get the taxes. The bank is going to pay the tax lien, or maybe try to negoiate it in the purchase agreement, but I have never seen this hapen myself. I cannot stress enough how dumb these banks/lenders are, including fannie and freddie, it was even worse in the 1989-94 commercial REO mletdown. The federal RTC was without a doubt one of the-no the worst- worst run, dumbest federal agecies I ever saw, and exhibit #1 on why the gov should never be in charge of large scale projects-no matter what it is

July 12, 2012

LOL....it doesn't get any better than this-and SB bypassed the meet and confer 60 (??) cooling of period under an "emergency" clause of that anti BK law just passed..LOL

Get used to this-it is going to be repeated over and over again the next 3-5 years.

July 11, 2012

Agreed: There will be more San Bernardinos -- plenty more, and not just in California. Best, Don Bauder

July 11, 2012

I don't think they bypassed it so much as simply followed the second alternative. You can look up the bill if you like but the short version is a muni has o go thru a process of notifying all of the "interested Parties", they have a set time to respond, then they choose a mediator who is supposed to make a "neutral evaluation". That's where they have 60 days to try and come to an agreement. We all know that Brown wanted this to keep the public unions happy. San Berdo took door # 2. Basically, they had to come to a finding that the financial state of the local public entity jeopardizes the health, safety, or well-being of the resident of the local public entity’s jurisdiction or service area absent the protections of Chapter 9 . Specifically that the entity will not be able to pay it obligations within the next 60 days.. I do find it interesting that one of there people said that current employee pension obligations will not be affected

July 11, 2012

In one of these bankruptcies, the question of current excessive pensions has to be addressed. Some municipality -- perhaps several in unison -- will have to pledge to bring the subject to the table: past promises that can't be met financially have to be broken. The case will probably go all the way to the U.S. Supreme Court. Best, Don Bauder

July 11, 2012

That question was already answered in Central Falls RI where the BK court cut pensions (police and FF) by 55%. If any muni goes after pensions they have the federal ruling from Central Falls backing them up.

July 12, 2012

Not sure the Rhode Island decision sets a precedent in California. Best, Don Bauder

July 12, 2012

Central Falls ruling from the court-It is a federal court-and while not in the same circuit it will still be valid law under the Federal Rules Decisions and persuasive precedent.

If the pensions become a target they are going down, and sooner or later one fo the munis will take on Calpers who are going to litigate the issue-I say litigate it and get an answer.

July 12, 2012

Yes, I have been talking and swapping emails for two days on the San Bernardino case, and, of course, covering the broad muni BK topic for almost as long as I have been with the Reader (9 years-plus). Yes, BK court is federal. Yes, courts can dissolve contracts; that's what bankruptcies are all about. Personally, I hope that many of the excessive salaries and pensions of public employees can be reduced through the courts. Reducing excessive pensions (and too-early retirements, among other things) is essential for San Diego's solvency. But this is not an open-shut, slam dunk case. I think it will go to the U.S. Supreme Court. Best, Don Bauder

July 12, 2012

Maybe, the SCOTUS should take a hard look at it-but they are also unpredictable, as we saw in Obamacare and Roberts jumping sides (shocking to me in every sense).

July 13, 2012

I hope SCOTUS does look at it intensely. However, I am very skeptical of the makeup of the current court. There are members (Scalia, Thomas, among others) that appear to be incapable of looking at a case objectively or analytically. Best, Don Bauder

July 13, 2012

I have said from the get go Thomas has NO place on the SCOTUS, and that is a fact. Scalia, who has an ego like DOnald Trump, can make some very well written and intelligent decisions, but his ego gets in the way some of the time, as we saw in the Obamacare dissent, where he made personal attacks on Obama. Alito, nothing special, Roberts lied to get appointed, he said he was only going to call balls and strikes, not try to run the game, he is definitely trying to run the game.

July 13, 2012

Agreed: Thomas does not have the qualifications. Scalia not only has the ego of Donald Trump, he appears to have the IQ of Donald Trump. I haven't read his decisions, but I can't imagine they are well reasoned. Alito and Roberts are simply Chamber of Commerce representatives on the court. Best, Don Bauder

July 13, 2012

No, Scalia is very intelligent and he uses his superior intellect to push hid ideology, I thought he was going to be the one nominated for chief justice when Renquist died........ But the bottomm line is the law, the Constitution, is all a game of interpretation, there is eough room in the interpretation to make the law go anyway you want it to.....

July 17, 2012

I think we've been down this road before. It's not 55% for everyone. It's up to 55%, depending on some variables and some retirees will have no reduction at all. I don't have a pension, so I am not the best to interpret it, but here's the actual plan submitted. Maybe someone smarter than I will take a look at it. http://www.rib.uscourts.gov/newhome/central_falls/117/117-7.pdf

July 12, 2012

I am sure I am not as smart as you, but I do know one thing: I don't have time to read this thing now. Best, Don Bauder

July 12, 2012

I doubt very much that you aren't as intelligent as I am. I'm just an average guy who doesn't know a lot about anything, but does know something about a lot. And I know that that if you were so inclined, you could have read this document in probably less than than 2 minutes.

July 13, 2012

You may have average intelligence, but I have sub-average intelligence. Besides, I am 76 years old, and age exacerbates the cerebral deficiency. Best, Don Bauder

July 13, 2012

Yes, the CF, RI pension cuts were progressive, as they certainly should be, it is not the $20K-$40K ones BK'ing the system, it is the so called public safety where there were guys receiving in retirement 3 times more than their highest wages working.

July 12, 2012

Agreed: the biggest abuses around the country have been public safety -- police and firefighters. But teachers deserve the pay they get and the retirements they receive, for the most part, in my opinion. This is not black and white. Best, Don Bauder

July 12, 2012

We are always going to disagree on the teacher compensation issue.......

July 13, 2012

Yes, we have never agreed on that one, SurfPup. But that's the problem, in my mind. You can't paint this with a broad brush. There are government employees who work very hard for inadequate pay and retirements -- teachers, environmental workers, etc. Best, Don Bauder

July 13, 2012

I think teachers get a good, not great, pension, the average teacher retires with full benefits at age 58, very close to the 50, 55, 60 that state and local muni employees retire at.

They have bullet proof job security which is worth a 30%-50% premium on wages IMO. They are never laid off or fired after the first 5 years, that is never seen in the private sector today..........

July 13, 2012

There are incompetent, overpaid teachers, just as there are incompetent, overpaid professors. Still, as a group, I say they deserve their meager pay and perhaps even their early retirements. I agree that teachers do not deserve absolute job security, and I don't believe they have it. Best, Don Bauder

July 13, 2012

I read last evening that San Bernardino has until at least Wednesday the vote whether or not to declare a fiscal emergency. City council members delayed making a decision after a hearing last night where many residents and city employees urged the city to seek an alternative. Apparently, since the announcement last week, The city’s credit cards have been canceled, many vendors are now demanding payments in cash and as many 25 employees have said they plan to retire shortly, which will mean large payouts for unused vacation time as well as an increase the pension payments the city must make. The council also voted unanimously to direct staff to begin formal negotiations with all unions on renegotiating contracts. One member of the city council has also said that there has been no evidence brought forward to substantiate the city attorney's claims of falsified budget documents and the city attorney has since later backed away from that statement, saying he was unsure if there had been intentional intentional wrongdoing. So the saga continues.

July 17, 2012

if the statement is true that they only have $150K in liquid cash, and that will not last 3 weeks, then BK is coming, because the fact is the pension costs are rising exponentially, no matter how much they save today-that pension scam is going thru the roof with every new day.........that will never be corrected without either a BK or a major renegotiation of contracts-including for current retirees IMO.

July 17, 2012

San Bernardino is the unwashed arm pit of SoCal. It used to be such a beautiful city in the early years, filled with orange groves and mountain views. 40% of its residents are on some kind of government assistance. Endless streams of homeless people wonder around downtown. Hookers and drugs can be obtained openly on Baseline St. anytime. I owned a piece of property on East 5th St, just a few blocks from downtown and it was worthless. Most of the neighboring properties went to the county for back taxes, after the crack head renters burned them down, as they did my Grandma's old house. You should see what happened to a formerly nice neighborhood in the Del Rosa section of town, north of Hwy. 210. The Big Bear fire came down in 2003 and hopped over houses destroying like every 4th home. Soon the nice family neighborhood became a cars on lawn/bars on the windows place. Very sad. I'm sure the citizens of Redlands would appreciate it if they bulldozed the whole city and started over. Luckily I sold, so I never have to get off the 215 Fwy again. Every former SB council person should be in jail for what they did to that city.

July 20, 2012

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