The story of San Bernardino Bankruptcy Analysis is significantly different from other US towns that faced either insolvency and bankruptcy. The blend of the economic and political reasons made San Bernardino case very different. The city with about 210, 000 residents located about 65 miles east of Los Angeles declared a fiscal crisis in 2012. The announcement cited ‘ more than $1 billion of debts and making it the third California city to seek protection from creditors.’ (Reid, 2012). Such extensive debt amount by the city led to the filing for Chapter 9 protection. Until these days, this case of filing is known as the longest municipal bankruptcy in the recent years. Besides, this very bizarre bankruptcy case left a lot of open questions for further review.
The convoluted political and economic realm in the city was one of the major factors that led to the bankruptcy. Many officials who were in power in San Bernardino proved to be ineffective. Frequent rotation of the officials who held their positions in the city created the situation where the major political and operational decisions became difficult to push for the effective review. The so-called hybrid authority in the city on both sides of the social protection resulted in the confusing structure of the city management. For instance, unlike many other US cities, police chiefs in San Bernardino are usually appointed by the mayor and are subject to further approval by the council. The complex bureaucratic structure and bizarre reporting requirement by different authorities resulted in the very confusing structure of the city management. Partially, this was one of the leading reasons behind the insolvency of the city.
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The primary reason that enabled the city to file for bankruptcy was the estimated asset of debt amounting to about 1 billion USD. As soon as the economic situation reached a critical point, the city council of San Bernardino voted for the adoption of the three-month fiscal plan, aiming at the suspension of the debt payments, freezing vacant jobs. While this short-term was put in place, the city had to develop a more precise bankruptcy plan. In the case of San Bernardino, it is clear that the cities possess an option for filing for bankruptcy based on the legal basis. The legislation allowing such filings was first adopted during the time of the Great Depression, yet the filings proved to be a rare occurrence. The data suggests that only 640 filings took place since 1937.
In comparison to other towns that underwent bankruptcy in the recent years, the case of San Bernardino is very special. One of the major reasons behind the insolvency was the simple, economic reasoning of spending more than obtaining the revenues. Besides that, a rather complicated system of checks and balances made the matters even worse. For instance, between 2004 and 2014, the city experienced five city managers, four financial directors, five police chiefs and five public works directors. Besides the economic instability, none of the figures responsible for the operational processes in the city managed to produce a long-term agenda aiming at economic stability. Instead, it leads to even growing disorganization. The announcement of the bankruptcy was a forced decision by the city authorities. Otherwise, they would be unable to make payrolls. A rather short-term vision of what was coming ahead of time prevented the local authorities from making balanced decisions.
Prior to announcing the bankruptcy, the public authorities had to address the management confusion. The process was taking place throughout two years of the court proceedings. Besides discussing the economic bankruptcy, the personnel management had to make corrections and define managerial processes, that will guide the processes inside the city. The charter committee was responsible for developing a new proposal based on the similar cases of cities in California. The charter introduced a major change to the governance of the city, which will require a transition to the council-manager form of government.
The ramifications of filing for bankruptcy were primarily felt by businesses. The investment flows into the city decreased substantially. Given that the city was under the Chapter 9 and Chapter 11 protection, the perception of the local stability substantially lowered.
2017 marked the year from San Bernardino emerged from bankruptcy. The bankruptcy period that lasted for five years in the city was finally over. There was an attempt to end the bankruptcy in 2015, yet unsuccessful. On June 15, 2017, the city made a public announcement, stating its readiness to pay the creditors under the bankruptcy exit plan. Following the filing for bankruptcy in August 2012, these years were some of the most difficult in terms of economic stability in the city. Before emerging from bankruptcy, the local authorities were forced to undergo several court proceedings to prove their readiness for approval of the financial restructuring plan. As soon as the judge approval was received, the city received more prospects for the prosperous future. In the broader perspective, the exit from bankruptcy marked a positive trend among other Californian cities that announced bankruptcy, as the economic cost was immense.
To exist from bankruptcy, San Bernardino came up with the plan that ultimately cost at least 25 million USD for California. Essentially, the plan introduced the cutting costs and folding the fire department in San Bernardino. The high retiree cost was another major issue faced by the local authorities. The city came up with the solution to pay holders its ‘its pension obligation bonds 40 percent of what they are owed to erase $45 million of the debt over time.’ (Christie, 2017). The city employees would feel a little consequential impact in the aftermath of the financial restructuring in the city. Besides that, the citizen in the city was very patient about the bankruptcy and demonstrated an understanding attitude towards the 45 million USD deficit faced in the city. In such a way, the city started making the first steps towards moving to the economic stability.
Besides existing from the bankruptcy, the city council managed to pass the balanced budget that aimed at increasing the staffing of the police. In addition to that, the city passed the Violence Intervention Program, following a deadly shooting that took place in town. Thereby, the city name and the perception of the efforts improved too. One shall understand that the bankruptcy exit program comprised a very substantial chance for the local authorities to demonstrate their commitments in making the managerial processes in the city more efficient. A huge team of attorneys and consultants put a lot of efforts in bringing the city back to growth.
To sum up, the bankruptcy in the town of San Bernardino demonstrates an important lesson of how an economic crisis is interlined with the policy agenda and the decision-making processes in the locality. The more desire there is to improve the economic stability, the more desire to bring operational substance there should be. The immense cost of the five-year crisis in Southern California serves an excellent example of improving preventive measures to prevent other parts of the US from facing the similar experiences. The successful exit from the bankruptcy presents the example that even the more severe crisis can be resolved upon the well-though measures in place.
