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A View Of San Bernardino Bankruptcy From San Diego

Evening Edition

Above: Pat Shea, a bankruptcy attorney in San Diego, talks to KPBS about San Bernardino's bankruptcy.

Aired 7/16/12 on KPBS Midday Edition.

Guests

Aaron Burgin, Watchdog reporter, UT San Diego

Pat Shea, bankruptcy attorney in San Diego.

Transcript

Last week, San Bernardino became the third California city todeclare bankruptcy, after Stockton and Mammoth Lakes.

"Buckling under rising employee costs, recession-racked revenues and the sudden takeaway of millions of state dollars, officials in the city of San Bernardino said they risked being unable to make payroll and satisfy creditors," U-T San Diego's Aaron Burgin reported after visiting the city.

Bankruptcy attorney Pat Shea told KPBS cities are forced into bankruptcy by "systemic financial problems they are unable to address."

He said either cities have lawsuits "that went badly for them," as in the case of Mammoth Lakes, or “you’ve just improperly managed your financial condition.” He said San Bernardino was in the latter group.

The city had increases in "fixed obligations they’ve added to over the years," he said, including operating expenses and salaries and pensions. Those, combined with flattened or even decreasing revenues coming in, led to its problems.

Shea said a theme among these bankrupt cities is they were unable to deal with problems like labor, debt, infrastructures and pensions.

“If you don’t deal with those things when they come up, early, you will wind up pushing the can down the road until you can’t avoid it any longer, and then you’ll be in bankruptcy,” he said.

In 2005, while Shea was running for mayor, he advocated for San Diego to file for bankruptcy. Shea said since then, city leaders have become more aware of the city’s problems.

“Back in 2005, there was a big debate about whether we had a problem in the first place,” he said.

He said some of the city’s issues have been addressed, while others have not.

San Bernardino faces a $46 million deficit, Burgin reported. It has cut its workforce by 20 percent and negotiated $10 million in employee concessions.

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