“SAN BERNARDINO >> The city’s exit from bankruptcy, which Judge Meredith Jury approved months ago, is now official.
The effective date of the bankruptcy exit — June 15 — means the city has 30 days from then to start making payments to its creditors under the terms laid out in its bankruptcy exit plan. Those obligations had been halted since August 2012, when the city filed for bankruptcy and began the long process of crafting and negotiating approval for the exit plan.
Payments to creditors already have started, the city said in a release Monday.
Mayor Carey Davis said in a statement that he appreciated the hard work by many people during the nearly five-year bankruptcy process.
“Due to the patience and commitment of San Bernardino employees, citizens and businesses, and the sacrifices of creditors, we have come to the City’s momentous exit from that process,” Davis said. “The proceedings guided us through a process of rebuilding and restructuring, and we will continue to rebuild and create systems for successful municipal operations. We will continue to dedicate our attention to improving service delivery, quality of life, and attracting business investment to our community.”
Five years ago, San Bernardino faced a $45 million deficit for the 2012-13 year, forcing an emergency bankruptcy filing.
While the court stopped creditors from collecting their debts or suing the city from then until now, officials made major changes to its operating structure, annexed into the county fire protection district and contracting out for refuse services.
Now, the City Council is set to pass a balanced budget that increases staffing in key departments including police — in addition to the Violence Intervention Program, the city’s name for their planned version of the Ceasefire program that dramatically reduced homicide in other cities — and new street rehabilitation, street light and traffic signal repair and maintenance for storm drains and medians.
That’s in large part thanks to a plan that pays many creditors as little as 1 cent for every dollar they would have been entitled to without the bankruptcy. All told, the city’s savings from the bankruptcy amount to $350 million, according to the city.
Attorneys and consultants working on the bankruptcy cost close to $25 million since 2012, a number that will grow much more slowly now but not stop completely, City Attorney Gary Saenz said Monday.
Two alleged victims of police misconduct, who would receive only 1 percent of what a jury might award them, are appealing the bankruptcy, and other creditors will go through an alternative dispute resolution process to determine what the city will pay them.
In addition to beginning payments under the plan and the removal of a stay that had blocked lawsuits against the city during the bankruptcy, Saenz said he expected the official end of bankruptcy to improve the city’s image.
“One of the greatest effects is the perception,” Saenz said. “Being in bankruptcy is a cloud over the city, if you will. Notwithstanding that filing for bankruptcy can be beneficial for a city that reached the point where we were, there is a cloud. … Now, I think people should give San Bernardino a second look and see that it is an ideal place and has a lot of potential.”
While a large majority of creditors voted to approve the city’s bankruptcy plan, this isn’t a day to celebrate, said Jeff Breiten, president of the City of San Bernardino Retired Public Employees Association.
“The city may not have a cloud hanging over anymore, but those retirees who had their retirement benefits impaired in the bankruptcy will never have those benefits restored,” Breiten said Monday. “We hope that our elected official do not return to the spending habits that resulted in the city filing bankruptcy, but we have already seen expenditures approved by the council such as positions in City Manager’s Office and the call center that may not be really necessary while the city should be creating a reserve funds for unexpected events.””
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