San Bernardino City Council postpones vote on bankruptcy budget

San Bernardino City Hall on May 14, 2008 in San Bernardino, California. The city is facing deep economic problems.
San Bernardino City Hall on May 14, 2008 in San Bernardino, California. The city is facing deep economic problems.
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After a marathon and at times combative public meeting, San Bernardino city leaders Wednesday night delayed a vote on a budget that could slash staff and services by up to 30 percent.

The city filed for emergency bankruptcy protection a few weeks ago. It needs to deliver a new budget to the bankruptcy court by the end of September.

Years of plummeting tax revenue, questionable accounting practices and then the sudden loss in redevelopment money pushed San Bernardino into insolvency.

According to city manager Andrea Travis-Miller, each day the city doesn’t act on the revised spending plan, it sinks $125,000 deeper into debt.

“We can’t stop our costs, our expenditures at this point. It’s not just payroll,” said Miller during Wednesday’s seven-hour Council meeting. “It’s a whole host of other things that we need to effectively operate this city. We need to replace street signs and things of that nature."

Recommended budget cuts would slash public works programs, parks and libraries. The police department won’t replace retiring cops.

About 40 percent of the department’s civilian positions: gone. Nearly a dozen firefighters: demoted.

Some fire stations will close 10 days a month. And San Bernardino might be unable to replace aging equipment, said city consultant Michael Busch.

“I think the scariest part to me about all of this is, you’re using all revenues to keep the city going day-to-day,” Busch told the Council. "And what that means is there are certain things not being done. I assure you there is not money to replace significant capital items or infrastructure should it break."

The Council may not have acted on the proposed “austerity plan,” but in a controversial move, it did approve a plan to borrow money to cover the next payroll.

Tempers flared as council members tangled over a proposal to borrow money from restricted funds to ensure it could pay employee salaries. In some cases, that kind of borrowing is illegal. After several council members balked at the proposal, frustrated Councilman Fred Shorett shot back.

“It’s a government code violation, so tell ‘em to come and get us, we’re in bankruptcy,” said Shorett. “We don’t have the money and what do we do if we don’t make payroll?”

Shorett was interrupted by city attorney James Penman.

“Excuse me, that is exactly why we’re in bankruptcy!” said Penman. “We did not follow the law, the law was clear.”

Penman said unauthorized borrowing from restricted funds is what led San Bernardino into bankruptcy. Authorities are investigating that allegation.

“The City Attorney's Office put out a memorandum in 2009 stating how you could borrow from the restricted funds, legally,” explained Penman.

“You had to pay them back within 364 days, but it also said that only the mayor and the Council could authorize borrowing from the restricted fund, and someone had the same attitude that I just heard expressed here,” said Penman, referring to councilman Shorett.

“'So what? So we break a law, let ‘em come and get us!’ Well guess what? They’ve come to get us, and they got us!” Penman said.

San Bernardino’s interim city manager Andrea Travis Miller offered an assurance that borrowing from certain restricted funds is legal if the Council approves it.

With that, the Council did just that: it voted to borrow money from restricted funds to cover the payroll. The Council has the option to review that decision in six months.

Budget hearings resume Tuesday and will continue until all city department heads have proposed how they intend to cut staff and spending. Once San Bernardino passes a stripped-down budget, lawyers for the city will submit it to a federal bankruptcy judge for final approval.