Late Tuesday, the City Council of San Bernardino, Calif., filed for Chapter 9 bankruptcy. Today, it was learned that city officials are blaming massive financial mismanagement for the city’s $45 million deficit, and have contacted agencies, reported the San Bernardino County Sun and other media outlets.
The Sun reported:
Interim City Manager Andrea Travis-Miller and Finance Director Jason Simpson had discovered that city officials have misreported the city’s fund balance for 13 of the past 16 fiscal years.
In each of those years, Penman said, officials reported a surplus when in fact the fund was operating at a deficit.
“The information was discovered in probably the last 60 days, and the elected officials became aware of it very recently,” he said. “The (interim )city manager and finance director were verifying the information to make sure of what they presented, which was appropriate, because when you report a bombshell like this you want to be sure.”
Penman said he could not give additional information, including which agencies he had given the evidence, because of the pending bankruptcy.
The officials are necessarily keeping things close to the vest on the agencies that have been contacted. But you can bet the district attorney or U.S. attorney are among them. This smells like massive fraud in the Route 66 town.
It’s no secret that the Route 66 town of San Bernardino has suffered through the bursting of the real-estate bubble and the subsequent economic recession. But the even-worse bad financial news for the city obviously was unexpected.
UPDATE: Some perspective from the Redlands Daily Facts about the effect the bankruptcy will have.
UPDATE 7/14/2012: The Sun reported that the city’s auditors reported the deficits, and saw no signs of falsification.
What does this mean for the residents?
Nobody’s sure yet. Layoffs are almost certain, but the city has several weeks to submit a reorganization plan.