A stark plan to get cash-poor San Bernardino through September

San Bernardino Councilman Rikke Van Johnson explains municipal bankruptcy process at a town hall meeting in late June.
San Bernardino Councilman Rikke Van Johnson explains municipal bankruptcy process at a town hall meeting in late June.
Steven Cuevas/KPCC

The San Bernardino City Council will look tonight at a plan to stretch the insolvent city’s scarce dollars through the end of September.

The city manager is asking the council to stop paying debts, stop paying on city leases, freeze hiring for all but essential jobs, suspend purchases of any equipment and put off new construction. The plan also calls for the continuation of pay cuts to most city employees.

Those steps could save the city more than $11 million through September.

The city is in a fiscal emergency declared by the council last week. That step was a prelude to filing for bankruptcy. The city has already been stripped of its usual lines of credit and doesn’t have enough money to pay its bills and make its mid-August payroll.

To keep city services at the same level, the city needs $166 million, but expects to take in only $120 million.

“The city’s financial situation is dire, with no revenue or other funding sources available to balance the city’s budget and address prior years’ deficits,” Interim City Manager Andrea Travis-Miller wrote in her report to the council.

Not only is the city short on income for the budget year that began July 1, it is already starting out $18 million in debt. Every bit of the city’s cash on hand – about $27 million – is in restricted accounts that can not be spent on general city operations.

The city has already taken harsh measures to reduce the cost of city operations. It has spent its reserve funds, borrowed from restricted funds, laid off employees and sold assets. But more must be done, Travis-Miller said.

To get the city to a balanced budget for the coming year, the city needs about a 30 percent cut in expenses.

She said the needed savings could not come solely from redesigning city operations. And state laws restrict the city’s ability to borrow money, raise taxes, or impose fees without voter approval.

The city staff has still not fully diagnosed recent failures to accurately report the city’s financial status. The city has hired an independent accountant to comb through past accounts.

Others are digging as well. The Department of Housing and Urban Development is auditing how the city used federal dollars in the Community Development Block Grant program. The city says an audit of its Economic Development Agency – which managed redevelopment projects in the city -- is also underway.

Travis-Miller said she expects further audits from other state and federal agencies.

San Bernardino - 2012-07-24 Mayor and Common Council - Full Agenda-1051[1]