San Bernardino Sues California Agencies to Get Tax Money

Photographer: Jonathan Alcorn/Bloomberg

People walk across the street in San Bernardino, California. Close

People walk across the street in San Bernardino, California.

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Photographer: Jonathan Alcorn/Bloomberg

People walk across the street in San Bernardino, California.

San Bernardino, the insolvent California city, sued the state’s tax and finance departments seeking to block them from withholding sales and property tax revenue owed to the city.

The city was told March 4 that unless $15 million is turned over to the state by a redevelopment successor agency, sales and use taxes owed to San Bernardino may be withheld and property taxes due to the redevelopment agency and the city may be held back, according to the city’s complaint filed yesterday in U.S. Bankruptcy Court in Riverside, California.

The city will be forced to shut operations as early as mid May and no later than June 1 if the taxes are blocked, according to the complaint. The successor agency has no cash and is insolvent to the tune of $15 million, City Attorney James Penman said in the filing. The city seeks a court order stopping the state from withholding the funds.

San Bernardino was the third California city to file for bankruptcy last year. The city of about 209,000 people lies about 60 miles (97 kilometers) east of Los Angeles. A fiscal emergency, brought on by a $46 million budget shortfall, forced it to stop paying some creditors and seek court protection, the city said.

A bill upheld last year dissolved local redevelopment agencies and redirected their funds to the state to fill a budget gap.

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: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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