A federal judge ruled Wednesday that the City of San Bernardino is eligible for bankruptcy protection. The city, facing a $24 million deficit, filed for bankruptcy a year ago.
The city asked the bankruptcy court to allow restructuring of its debts, including those it owes its own employees and retirees. A mediator will now work with the city and creditors to negotiate payment of debts.
While San Bernardino is a fairly small city, with a population of about 213,000, the case is being watched closely by officials in other debt-stressed cities in California, and also in bankrupt Detroit. They are watching to see whether the bankruptcy court will let them change pension contracts. That matter was not taken up by the court Wednesday.
San Bernardino has also asked the court to let it reject its collective bargaining agreements with police, firefighter and employee unions. Wages and benefits make up about three-quarters of the city’s budget. The city expects to save about $26 million with the personnel cuts they’ve imposed.
Three unions representing the city’s active firefighters, police and other workers want the judge to let them contest changes in their wages and working conditions that were imposed unilaterally after the city declared bankruptcy. Generally, bankruptcy proceedings put a freeze on litigation, and the unions are looking for an exception so they can go to court over the labor issues.
The unions say the changes violate their rights to collective bargaining and they want to file unfair labor practice complaints. Four other city unions representing mostly managers have accepted the cuts.
Four city unions representing mostly managers of police, fire and city executives, and a union of some general employees, agreed to changes in wages and benefits, but three unions for rank-and-file firefighters, police and San Bernardino Public Employees Association have not.
The city started directing 14 percent of firefighters' salaries into their retirements, so take-home pay has been reduced by at least that much. Overtime assignments are also cut as the city fire department is using minimum staffing.
Before the bankruptcy filing, city employees had been able to cash in their unused sick, vacation and holiday time – the city put an end to that. It also capped accumulation of sick pay at 26 weeks.
The judge will later rule on objections to the bankruptcy filed by the state public employees retirement system known as CalPERS, which wants the city to keep the pension promises it made in better times.
The city wants its employees to start paying half the cost of their retirements into CalPERS.