`SCARS NEVER GO AWAY'
Emerging from financial woes, city looks to maintain stability
Three weeks before Christmas 2016, U.S. Bankruptcy Court Judge Meredith Jury confirmed San Bernardino's bankruptcy plan, the final major hurdle on the path to recovery. “The city came in in financial chaos, and it's leaving in much better shape,” Jury said in her ruling. “I have lived in this region for 40 years … and I've always said the city needed help. I'm glad it got it.” Set to hold the city accountable for what it would pay its creditors and when, the Plan of Adjustment became effective June 15, 2017, just six weeks shy of the five-year anniversary of the city's emergency bankruptcy filing. “From the beginning,” Mayor R. Carey Davis said in a press release, “we understood the time, hard work, sacrifice and commitment it would take for the City to emerge from the bankruptcy process. Due to the patience and commitment of San Bernardino employees, citizens and businesses, and the sacrifices of creditors, we have come to the City's momentous exit from that process.” Estimates pegged direct costs of the bankruptcy at more than $20 million. But it saved San Bernardino and its taxpayers more than $300 million in debts, City Attorney Gary Saenz said at the time.
Moving forward
DAVIS, SAN BERNARDINO MAYOR (2014-18) » We made some significant changes throughout those four years … many of which were very heated and unpopular moves, but necessary in order to be able to, in my view, help write the city's path for the future.
GIGI HANNA, SAN BERNARDINO CITY CLERK (201220) » The bankruptcy created the need for innovation and creativity. It wasn't good, of course. It was a very painful time, but there were improvements made because of it.
SAENZ, SAN BERNARDINO CITY ATTORNEY (2013-20) »
A bankruptcy is something that is not pleasant to do. You owe money. You owe for good cause and good reason, and [it's] money you should pay if you can. But given the option is to go belly up or have these
amounts owed reduced significantly to allow you to survive and provide services to voters, there is a huge trade off there.
VIRGINIA MARQUEZ, SANBERNARDINO COUNCILWOMAN (2010-18) » Those were very tumultuous and difficult times for us as a city because we didn’t know what the outcome would be.
SAENZ » People say it must be gratifying. It was gratifying to help the city and the people of San Bernardino, but not to reduce the obligations we had, because many of those obligations were created in good faith, and many people we owed money to needed that money. Small businesses that did services for the city, and reducing what we paid them does not feel good.
But it was what needed to be done under the circumstances to get the city solvent and allow the city to survive.
HANNA » There was, at least from my perspective, a lot more attention paid to budgets, to spending (afterward). There was more meaningful conversation between departments and finance where you had to be really discerning about the money you were asking for for the next budget.
ANDREA TRAVIS-MILLER, SAN BERNARDINO CITY MANAGER (2012-13, 2017-19) » People were weary of the bankruptcy process. Exiting bankruptcy was a long time coming and a lot of difficult decisions had been made. The point I consistently tried to stress with everyone is, this doesn’t mean we’re free necessarily from oversight or can go back to our former ways of managing things.
SAENZ » It’s a long road to get from a situation where there’s dust in the bottom of your money bag to being able to provide a sufficient level of service to the people of the city based upon your revenues.
TRAVIS-MILLER » We began modeling all financial decisions differently. Prior to the bankruptcy, the council would, during budget discussions, say, “We want to add a new position.” After, instead of just adding a position, we projected what the costs of that new position would be five, 10, 15 years down the line. We did that with all decisions, and it was frustrating for people who’d been living on a shoestring budget for so long and had a feeling that once bankruptcy was over and the Plan of Adjustment was approved, there wasn’t going to be that continued austerity spending.
But that needed to continue.
HENRY NICKEL, SANBERNARDINO COUNCILMAN (2014-20) » We were having discussions in 2016-17 about the need to likely to go to voters on a sales tax. What really disappointed me was it seemed like a political decision to delay that till after the 2018 election, which I think was a mistake. I think there was a thought pattern that if we’d put it on the ballot in 2018, it would jeopardize incumbents.
MARQUEZ » There were preliminary discussions (about a sales tax), but I don’t believe they were serious. It was an option that was brought to the table, but we chose not to because we were already devastated (by the bankruptcy fallout). NICKEL » We were heading back to bankruptcy. Even though we got out in 2016, the ongoing obligations in terms of our unfunded pensions and so forth were going to bury the city again. We had to go to voters with a tax measure. We knew that coming out of bankruptcy in 2016. To this day, I’m so disappointed in some of the political leaders that at that time decided not to go forward with a measure in 2018.
SAENZ » After the bankruptcy, I think the city was really poised for a new start. … Now we’ve gotten past the main problem the city has had in its entire history and now we’re ready to move the city forward. The city had gone downhill for a number of decades, and although we had drafted a new charter and indeed were poised, we ended up with players and with a mayor, in my opinion, who was not willing to follow the charter.
DAVIS »
I don’t think the new charter had enough time to be integrated with the council. The council was used to the old way of doing business and this was a 180-degree change as to how the council was supposed to view themselves, which was as a body that makes decisions by building consensus and then supporting that policy, even though an individual council member may not agree with it.
FRED SHORETT, SAN BERNARDINO COUNCILMAN (2009-PRESENT) » The charter committee, they were very diligent. They worked hard and had the right intentions. They worked diligently to do the right thing, but I think they left the charter quite vague and missed some very important areas. … I think that was their intent. They wanted to leave it a bit vague, but in retrospect, it was a mistake to do that.
DAVIS » The council-manager form of government is effective when the council works as a body. That is the theory. The practical implementation of that is a difficult process, especially when not all the council members are in alignment with that changed philosophy.
THEODORE SANCHEZ, SANBERNARDINO COUNCILMAN (2018-PRESENT) » Problems go away really quickly when you have all the money in the world or an enormous budget. A lot of cities are able to get away with a lot of mistakes, a lot of mistakes, many more mistakes than San Bernardino has ever had. They can get away from that because they have the tax revenue. But we don’t.
NICKEL » We’re still a city that’s struggling, and it’s going to take a lot of discipline on the part of political leaders and the community to ensure we build back the vital fiscal infrastructure and means to generate consistent, ongoing revenue to support a city of our size and our complexity.
PAT MORRIS, SANBERNARDINO MAYOR (2006-14) » The epilogue is still being written on this recovery from bankruptcy. Discipline has to be maintained and who you put in seats is so critically important.
SAENZ » It’s very significant that the players you have involved understand the charter and have the intention to help the city. You can have the best charter in history, and if you have players who are not interested in following or being limited by it, it’s not going to work well.
NICKEL » For all the warts and scars that the city has that came out of the bankruptcy process, I think we did what we had to do, and we’re continuing to do what we have to do. I’m very confident that the city can do what it needs to do to get back on its feet. We’re a great city, an All-America City. I think we can be one again, but it’s going to take courage and leadership.
MARQUEZ » We’re on the right track, and I’m hoping we will continue to be on the right track.
SHORETT » Scars never go away, but I think we’ve gotten past them. We’ve got all new council members, new staff. For the longest time our answer to lack of services was, well, we just came out of bankruptcy. We’re bankrupt. We don’t have the resources, and that’s going away.
That is not valid anymore. Our finances are in pretty good shape.
SANCHEZ » Back in the ’70s, the ’80s, council members, the mayor were saying, ‘We’ve got plenty of money.’ Until we didn’t. ‘It’s impossible, impossible we can go bankrupt.’ Until it happened. We have council members who have never once experienced having to make budget cuts. They’ve only ever known milk and honey. … Whereas (Councilmembers) Juan (Figueroa), Sandra (Ibarra) and myself, it was baptism by fire. That’s why we’re very conscious about making sure we spend within our means.
SHORETT » All cities are fragile always. You never know for sure, but we’ve got a reserve account. We are doing OK. Revenues are good, pretty strong. How long is that going to last? It might not last forever. You’ve got to have rainy day funds. Businesses look at their revenue stream and cut costs accordingly, and I’ve always said government needs to run like a business to be effective and efficient, and government, generally, is not.