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Plenty of blame on long road to San Bernardino bankruptcy

Politics, labor and the stalled economy are among factors cited for city's woes.

July 12, 2012|Phil Willon and Abby Sewell, Los Angeles Times
  • A welcome sign on 6th Street greets visitors in San Bernardino.
A welcome sign on 6th Street greets visitors in San Bernardino. (Irfan Khan / Los Angeles…)

Cash was so tight in San Bernardino that potholes went unfilled, burned-out streetlights were left untouched and ball fields languished unmowed.

That was two years ago, when the City Council learned that San Bernardino's $22-million budget shortfall would jump to $38 million by 2012, sending the city into financial ruin.

City leaders slashed the workforce, extracted temporary concessions from labor unions and auctioned off public land. But they failed to heed warnings that those steps weren't nearly enough to address endemic problems in the Inland Empire city. Instead, calls for swift, dramatic action — such as raising taxes or outsourcing the police and fire protection — fell victim to a noxious political atmosphere that has paralyzed City Hall throughout the economic crisis, according to interviews with past and present city officials.

DOCUMENT: San Bernardino bankruptcy report

"I told the council two years in a row that, if this continues, we're going to be looking at bankruptcy. I got criticized for bringing up the word 'bankruptcy.' They called it scare tactics," said former City Manager Charles McNeely, who resigned unexpectedly in May. "The politics of that place are just impossible to deal with."

McNeely wasn't surprised when the council, facing a $45.8-million budget shortfall in the current fiscal year, voted Tuesday night to seek bankruptcy protection, the third California city to do so in the last month. San Bernardino is broke, without even enough money to pay employees through the summer.

The financial turmoil in San Bernardino, while in many ways a product of its own politics, illustrates the devastating effect the economic downturn has had on cities and the basic everyday services they provide, Palmdale City Manager David Childs said.

PHOTOS: California cities in bankruptcy

"Palmdale has been hit hard, like many cities," said Childs, past president of the International City/County Management Assn. "We'll get through it. But I can really sympathize with them being on the brink. One or two bad things can put a city over the edge. One or two good things can save them."

The possibility that city actions could lead to criminal charges was revived Thursday, after the Sheriff'sDepartment said it had launched an investigation several months ago into allegations of "possible criminal activity within departments of the San Bernardino city government." Officials did not elaborate. "The investi¿gation is continuing and details will not be released at this time," the statement said.

On Thursday, San Bernardino city leaders were engaged in damage control. "It is important to note that in order to balance the city's budget, deep cuts will have to be made across the board," interim City Manager Andrea Miller said in a statement. "We will continue to provide essential services and are committed to meeting our obligations."The police and fire chiefs of the city held a news conference to reassure residents that public safety will not be compromised.

Shortly after taking the job in late 2008, McNeely and his staff prepared a "most likely case" financial projection laying out the mushrooming budget deficits in the years ahead. McNeely said "any seventh-grader" could see the troubles ahead.

"I don't think anybody was wasting money; there was never money to waste," he said. "The city's revenue base has just been on the decline for years."

Other than Indian gaming, the major employment sources for city residents depend on public funding that has proved volatile during the recession: Cal State San Bernardino and a community hospital, according to a financial report submitted to the council Tuesday. About 80% of the city's taxable parcels are residential, the report said.

The city's unemployment rate is above 15%, compared to 10.9% in the state, according to the report. Meanwhile, more than 40% of city residents receive some form of public assistance, according to Redlands economist John Husing, who advises cities and companies throughout the Inland Empire. Without more jobs or rising property values, there is little way to raise revenue, the budget report warned.

Many of the city's efforts to kick start the city's tax base, declining by more than $16 million a year, have either stalled or been rejected by the politically divided City Council, McNeely said.

San Bernardino's economic development agency paid $13 million for the abandoned Carousel Mall in 2011 after private efforts failed to transform the vacant shopping center into a hip spot for retail and downtown housing. The council rejected tax increases, saying that residents were already feeling the financial pinch, and shot down proposals to install downtown parking meters or have the Police Department run its own impound lot.

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