Bankrupt San Bernardino Closes Libraries to Close Deficit

San Bernardino, California, the second-largest U.S. city to enter bankruptcy, will close its branch libraries, dismiss school crossing guards and buy fewer bullets while under court protection.

The reductions are part of a plan to reduce a budget deficit by two-thirds, to $16.4 million from $45.8 million, approved by the City Council yesterday. The council backed away from some cuts in the Fire Department, meaning that the city may not realize all of the savings outlined in the proposal until those cuts or alternatives are adopted.

Three municipalities in the largest state by population, led by Stockton, have sought court protection from creditors since the end of June. California cities suffered steep declines in tax revenue after the recession depressed property values and reduced retail sales. At the same time, local governments are burdened with higher employee costs including pensions.

“The situation is dire,” Andrea Travis-Miller, the interim city manager, told the council as it began deliberations Sept. 4. “We’re dealing with an $18 million cash deficit. We have a structural deficit of $45.8 million this fiscal year and we have unfunded liabilities to the tune of $300 million that we will have to deal with.”

The city of 209,000, about 60 miles (100 kilometers) east of Los Angeles, sought Chapter 9 protection in U.S. Bankruptcy Court Aug. 1, saying it would be unable to cover payroll within two months. Officials have said the move was prompted by an almost $12 million drop in revenue from a peak of $133 million in 2008.

Rising Retirement

The city’s retirement costs are projected to rise from $20 million in the year ended June 30 to $24 million five years from now, according to the budget document reviewed by the council. Estimated pension obligations exceeded assets by about $320 million as of June 2010, according to the document.

Measures approved by the council would shrink the police force by 18 officers from 289 through attrition, fire 41 of the Police Department’s 104 civilian employees, and reduce purchases of ammunition and other supplies. The city also would close two community centers set up to reduce gang violence.

Council members said the public safety cuts were particularly onerous in a city that had 14 murders per 100,000 people last year, about three times the national average, according to FBI data.

San Bernardino has about $90 million of outstanding bond debts, according to the budget document, and another $200 million owed to holders of securities issued by the city’s now- dissolved redevelopment agency.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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