Fourth California city to file for bankruptcy this year

Atwater, a city of roughly 28,000 in California's Central Valley, may declare a fiscal emergency as soon as next week, but it is trying to avoid becoming the fourth California city to file for municipal bankruptcy this year, its mayor said.

Under California law, a local government must either declare a "fiscal emergency" or go through a 60-to-90 day confidential negotiation process with its creditors before it files for municipal bankruptcy. Since late June, three Golden State cities-Stockton, San Bernardino and Mammoth Lakes-have filed for bankruptcy protection.

"We are planning to stay current on our ... bonds," said Mayor Carol Joan Faul in a telephone interview with Dow Jones Newswires. "We are hoping to avoid" bankruptcy, she said, "but as far as I'm concerned, we may have to declare a fiscal emergency" on Oct. 3. Read more >>

26 municipal bankruptcy filings since 2010

Many local governments across the U.S. face steep budget deficits as they struggle to pay off debts accumulated over years. As a last resort, some have filed for bankruptcy.

Governing is tracking the issue, and will update this page as more municipalities seek bankruptcy protection. In June, Stockton, Calif., became the largest U.S. city to file for bankruptcy. San Bernardino, Calif., was the most recent city to approve a bankruptcy filing after City Council members learned the city had only $150,000 left in its bank accounts.

Central Falls, R.I., and Jefferson County, Ala., both filed for bankruptcy in 2011. Harrisburg, Pa., and Boise County, Idaho, also filed for bankruptcy, but their claims were rejected.

The majority of Chapter 9 bankruptcy filings have been submitted by utility authorities, special districts and other taxing entities. In Omaha, Neb., eight Sanitary and Improvement Districts have filed for bankruptcy since 2010.

Bankruptcy Filing Totals Since 2010
All Municipal Bankruptcy Filings: 26
City and Locality Bankruptcy Filings: 6
Expected Local Government Filings: 1 (City of San Bernardino)

Municipal Bankruptcies Map
The map shows all municipalities filing for Chapter 9 bankruptcy protection since 2010, along with local governments voting to approve a bankruptcy filing.  Read more >>

Broke City of San Bernardino Can't Pick Up Garbage

The consequences of the city’s fiscal crisis took a trashy turn during a hearing Monday night when San Bernardino officials noted garbage pick-up was among the obligations they might not be able to afford after turning their government into a cash-only operation.

The City Council voted Monday to delay the vote until Wednesday to avoid mediation and head straight to federal bankruptcy. The council previously had voted to file for Chapter 9 bankruptcy protection, but Monday night members expressed a desire for more time to look over financial information and talk to constituents.

CBS2 reporter Jeff Nguyen reports the City of San Bernardino can no longer pay for anything on credit, such as gasoline for its fleet of garbage pick-up trucks. As a result, taxpayers may be left holding the bag for taking away their trash promptly as early as Wednesday.

“The trash and the streets are not going to be swept,” warned city sanitation worker Jerry Zuniga. “You leave the trash there for too long, it’s going to be health issue.” Read more >>

California Bankruptcies Only the Beginning

San Bernardino became the third California city to file for bankruptcy in the past few weeks ... but it won't be the last. Many municipalities in the Golden State and around the nation are struggling to cover their costs as the economic malaise continues to hurt tax revenue streams, experts said. This will lead to more municipal bankruptcies, which have been rare until now.

"This is not the end. This is the beginning," said Peter Navarro, business professor at University of California, Irvine. "As cities see it can be done and is being done, it will give them the idea to do it." The San Bernardino City Council voted Tuesday to file for Chapter 9 bankruptcy after the interim city manager issued a report that outlined its dire straits. Some $10 million to $16 million in annual revenue has evaporated in recent years as taxable sales dried up and property values plummeted.

Despite negotiating tens of millions of dollars in concessions and reducing its workforce by 20% over the past four years, San Bernardino was facing insolvency and would not have enough cash on hand to meet its obligations, according to the report. "The city has reached a breaking point," the report said, noting the municipality of 211,000 residents was facing a $45 million shortfall. Read more >>