The city of San Bernardino reached another milestone on its way to recovery Wednesday when a federal judge said she would approve the city’s bankruptcy plan, which clears the way for the city to exit Chapter 9 protection in the next few months. Here are some questions and answers about the settlement and what happens next to the city of more than 200,000 people.
Q. What are the main parts of the plan that the judge approved?
Under the plan, many creditors will only be paid back about one cent for every dollar they are owed, saving taxpayers about $350 million.
San Bernardino voters approved a new city charter in November that improves the city’s governance. "It will take years to fully recover from its prior financial ills, but the city has been brought into the mainstream with other California cities in its governance practices and can operate in a fashion similar to other cities in the region and the State," the city said in a statement.
The city has cut its workforce almost in half, eliminating over 250 positions between 2009 and 2012, despite population growth of nearly 25,000 people.
The city has also outsourced trash collection and its fire service, which is now handled by the county.
The agreement preserves the city’s agreement with CALPERS, the retirement program for public-sector employees. That means employees will get their full pensions, which one economist does not think should happen. "We have to remember that pensions are an enormous and growing burden to cities," said Chris Thornberg, an economist at Beacon Economics, who closely studies in the Inland Empire. "You would have liked to have seen the judge make CALPERS take a little bit of a haircut just to set a precedent that this a problem." San Bernardino argued that if it terminated the deal, it would be impossible to retain or hire city employees. The city did restructure its collective bargaining agreements so that the City no longer provides subsidized health insurance coverage, which will save $44 million for retirees and $51 million for current employees.
Q. Will this all be enough to get San Bernardino back on its feet?
In a statement released Thursday, the city called this a 'watershed' moment, and says it is poised for a 'renaissance.' However, there is still a long road ahead. San Bernardino is one of the poorest communities in the state. The per capita income of city residents is less than $15,000 a year, about half the state average. The median housing price there is just about $152,000 compared to 366,000 for the state as a whole.
"Until the city can restore a decent level of municipal services to attract new residents, new population growth is expected to continue to be in the poorer population sectors of the City where the demand for city services is even greater," the city said in bankruptcy filings.
"This is an important part of San Bernardino County, and the faster they get up and running the better," Thornberg said.
Q. What’s the biggest thing the city needs to do now?
Everyone agrees the answer is reducing crime. In bankruptcy filings, the city said cutting its crime rate and changing San Bernardino’s perception as a “dangerous” city are the most pressing issues; San Bernardino has more than double the violent crime rate as its neighbors. Of the 63 California cities with populations between 100,000 and 400,000, San Bernardino has the second worst crime rate (only Stockton ranks worse.)
The crime problem has been made much worse because of cuts to the police force; The number of sworn officers has been reduced by 30 percent since 2008. Under the bankruptcy plan, the city will be able to add officers, though the future number is still well below its 2008 peak.
Q. Has everyone agreed to the plan?
The city finally came to agreement with creditors and bondholders, which took a long time to do, evidenced by the fact that this all took four years – considerably longer than other municipal bankruptcies, like Detroit and Stockton.
One person who didn't approve of the agreement is Duane Folke, a lawyer representing Paul Triplett, who in 2006 received a $7.7 million judgement with the city in a police brutality case.
“It took 21 separate phone calls to get (the city’s bankruptcy attorney) Mr. Glassman on the phone, and then when I got him on the phone I got a penny on the dollar — a penny on the dollar for a man who’s going blind,” Folke told U.S. Bankruptcy Judge Meredith Jury, according to the San Bernardino Sun.
However, Jury said since Triplett is a part of the group of unsecured creditors that agreed to the plan he is only entitled to $77,000.