San Bernardino Says It Chopped $29 Million From Deficit

Bankrupt San Bernardino, California, officials said in a status report released today that they’ve eliminated about $29 million from the city’s budget deficit, and are making progress “toward fiscal stability.”

City administrators also asked a U.S. bankruptcy judge supervising their Chapter 9 case in Riverside to set a status conference within 45 days to help resolve objections to their decision to seek court supervision.

“The city has made expenditure reductions that substantially reduce its staggering $48.5 million budget deficit,” resulting in “a remaining projected budget deficit of about $16.03 million for the current fiscal year,” wrote City Attorney Paul Glassman the eight-page report.

He said city staff “are diligently working” to develop a plan for a balanced budget for this fiscal year. Among the cost savings were budget cuts, “revenue offsets” and “adjusted net transfers,” according to court papers. The city also said it saved money by deferring payments to the California Public Employees’ Retirement System, apparently the city’s biggest creditor.

San Bernardino, with about 200,000 people, lies about 60 miles (97 kilometers) east of Los Angeles. It’s the third California city to file bankruptcy since June.

Under Chapter 9 of the U.S. Bankruptcy Code -- used by governmental entities that can’t pay their debts -- a municipality must prove that it is eligible for court protection from creditors.

In the status report, the city said that without court protection from creditors, it wouldn’t be able to pay employees, and service debt for police cruisers, fire engines, or garbage trucks to protect the health and safety of its citizens.

The case is In re San Bernardino, 12-28006, U.S. Bankruptcy Court, Central District of California (Riverside).

To contact the reporter on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net

To contact the editors responsible for this story: John Pickering at jpickering@bloomberg.net; Michael Hytha at mhytha@bloomberg.net