Is San Bernardino Mishandling Its Bankruptcy?

Mayor Pat Morris and his allies have mismanaged the City of San Bernardino into bankruptcy.

Are they also mishandling the San Bernardino’s bankruptcy itself?

That’s the assertion made in an article by San Joaquin County news site, Recordnet.com on May 27, 2013.

The article compares the differences between the way Stockton and San Bernardino have gone about bankruptcy.  The article asserts:

If there’s a right way to go about municipal bankruptcy, Stockton may prove to be the poster child. If there’s a wrong way, look to San Bernardino.

The California cities are on similar, but hardly parallel, paths.

Stockton started early with fiscal emergency declarations, community meetings, a unified City Council and an attempt, largely through the legislative (AB506) process, to avoid bankruptcy before plunging into it.

On April 1, a federal judge accepted the city’s Chapter 9 application – giving Stockton, population 296,000, the label of being the nation’s largest city to ever enter bankruptcy. But, indirectly, the court also stated that the city had done what it could to avoid the designation.

San Bernardino struggled for months with defining its fiscal status, the city council was split over what course to take, it skipped AB506, a recall of the city’s elected leadership is under way and dissolution as a municipality has been discussed.

The article continues to lay out the vast differences in the way Stockton and Sacramento have handled providing public safety and paying pension obligations.

Stockton and San Bernardino have taken different paths when it comes to public safety.

Each city has a dramatically reduced police force, but Stockton’s crime rate the first four months of 2013 has actually fallen. San Bernardino’s is rising, and Mayor Patrick J. Morris has said he is considering eliminating the department and contracting with the county sheriff.

There is another difference in the approach to bankruptcy by the two communities.

Stockton chose not to reduce its payments into the California state pension fund, known as CalPERS. Still unanswered by the federal bankruptcy court is whether the city can restructure what it owes other creditors, including bondholders while meeting its full pension obligations.

San Bernardino a year ago took the opposite course, halting contributions to the California Public Employees Retirement System while paying or, in some cases, deferring bond debt.

CalPERS did not oppose Stockton’s bankruptcy filing, but has taken a stance against San Bernardino’s attempt. CalPERS is the largest debt holder for both cities.

Once again the failed leadership of Mayor Pat Morris is on display for the world to see.

The Morris Legacy is not a pretty one, but a cautionary tale of how not to run a city.

It may now also be a study of how a city should not go about municipal bankruptcy.