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SAN FRANCISCO San Bernardino, California, won
final court approval on Friday for its financial restructuring
plan, clearing the way for the city to wrap up the bankruptcy
case it launched more than four years ago when its leaders
learned it was facing insolvency.
“I look forward to the city having a prosperous future,”
U.S. Bankruptcy Judge Meredith Jury said at the conclusion of a
hearing in Riverside, California.
Jury said she would issue a written opinion on her decision
but did not say when.
In December, Jury had said she would approve San
Bernardino’s restructuring plan, the product of a bankruptcy
that cost the Southern California city at least $25 million to
press and litigate.
San Bernardino filed for Chapter 9 municipal bankruptcy in
2012, marking the third filing of its kind that year by a
San Bernardino’s filing came on the heels a report by city
staff that said the city faced an imminent financial crisis
because it had exhausted its reserves and projected spending for
the looming new fiscal year would exceed revenue by $45 million.
The city’s plan for mending its finances involves cutting
costs by folding its fire department into San Bernardino
County’s fire services district.
Retiree healthcare costs will also get slashed while city
employees’ pensions will be protected, and San Bernardino will
pay holders of its pension obligation bonds 40 percent of what
they are owed to erase $45 million of the debt over time.
San Bernardino expects its restructuring to cut $350 million
in spending over 30 years, according to a city spokeswoman.
The city’s plan promises to restore financial stability,
said Michael Sweet, a partner at the Fox Rothschild law firm in
San Francisco who handles municipal restructurings.
“I like the fact that they just didn’t budget their way
through this, but made significant structural changes, which
appears to have put them a much better footing,” Sweet said.
“We’ll have to see if it holds,” Sweet added.
The case is In re City of San Bernardino, in U.S. Bankruptcy
Court, Central District of California, No. 12-28006.
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