San Bernardino, won final court approval on Friday January 27, 2017, for its financial restructuring plan, clearing the way for the city to exit the bankruptcy case it launched more than four years ago at a cost of $25 million 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.
The city’s plan 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.
Judge Jury’s decision capped San Bernardino’s efforts, including lengthy negotiations with its employees, retired employees and creditors, to repair its finances. In December, Judge Jury had said she would approve San Bernardino’s plan (see below), 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 California city.
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 case is In re City of San Bernardino, in U.S. Bankruptcy Court, Central District of California, No. 12-28006. The final proposed plan can be viewed below.