San Bernardino Bankruptcy: California City Seeks Protection From Creditors In US Bankruptcy Court

The California city of San Bernardino filed for bankruptcy on Wednesday, citing more than $1 billion of debts. The filing makes it the third California city to seek protection from creditors in recent weeks.

With more than 200,000 residents on the eastern tip of greater Los Angeles, the city of San Bernardino filed an emergency petition for Chapter 9 Bankruptcy with a regional U.S. bankruptcy court, according to a news release from the city's interim manager.

The protection comes just after the city, which is located 65 miles east of Los Angeles, declared a fiscal crisis last month. The crisis was prompted by a report that said local government had tapped out its reserves and projected spending would top revenue by $45 million in the fiscal year that began on July 1.

San Bernardino filed in the United States Bankruptcy Court, Central California District, which states that the city has "more than $1 billion" in liabilities, and estimates that it has between 10,001 and 25,000 creditors. In addition, San Bernardino has estimated assets of more than $1 billion.

On July 24, Interim City Manager Andrea Travis-Miller told the City Council that it must cut $45.8 million from the $166-million budget to ensure the city remains solvent throughout the current fiscal year. The plan was reportedly set in place to suspend debt payments, freeze vacant jobs and quit paying into a retiree health fund while city staff produce a more detailed bankruptcy plan.

"The bankruptcy filing was just to get the protection in place, to kick the process off," a city spokesperson said of the plan. But according to the report filed on Wednesday, "the city has reached a breaking point."

According to the news outlet, an estimated $10 million to $16 million in annual revenue has evaporated in recent years as taxable sales dried up and property values plummeted in the city, the report said.

The other two to file for bankruptcy recently were Stockton, with around 300,000 residents, according to 2010 U.S. census data, and Mammoth Lakes, a resort town, where visitors and seasonal residents outnumber the just over 8,000 permanent inhabitants.

The Mammoth Lake filing took place July 2 after a property developer won a $43 million court judgment against the resort town.

Stockton, which like San Bernardino has suffered from the housing crash that was particularly severe in southern California, filed for bankruptcy in June. It was the largest U.S. city to do so.