Editorial: San Bernardino bankruptcy lesson: No one wins when a city goes broke

The bankruptcy exit plan that the San Bernardino City Council adopted Monday is the best that could be expected given the terrible circumstances that led the city to insolvency three years ago.

That doesn’t mean it’s great for anyone involved. Every stakeholder loses something of real value. Current employees will lose jobs or colleagues as fire, trash and other services are outsourced. Police officers will lose guaranteed raises that, incredibly, were written right into the city charter 60 years ago. The city’s retirees will have to pay for what used to be free lifetime healthcare, as part of a deal with the city to fully fund pension payments.

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FOR THE RECORD:
Bankruptcy: A May 20 editorial on San Bernardino’s bankruptcy exit plan said city retirees used to get free lifetime healthcare. In fact, their healthcare costs were subsidized by the city. That subsidy will now be ended for most retirees. —
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Bondholders lose almost all of their $50-million gamble on San Bernardino. And residents of the poorest big city in the state will continue to feel the ongoing service cuts that have become routine since San Bernardino’s leaders declared the city was broke. Worse, they may have to pay higher taxes for the pleasure.

The bankruptcy plan does have a thin silver lining, one that ought to give a measure of hope to residents and employees who expect to stick it out in San Bernardino for the long term, either by choice or by necessity. That bright spot is the proposal to fix the underlying cause of the financial distress.

What, the economy? Good luck with controlling the ups and downs of global markets. No, while the Great Recession did expedite the city’s insolvency, the roots were planted years before in the form of a nutty governance structure that left no one fully in charge.

That’s not our assessment; that’s the conclusion of city leaders, many of whom joined City Hall after their predecessors were recalled or lost election in 2013. They deserve credit for going beyond the simple bankruptcy plan to propose a rewrite of the city charter.

“Neither the community or the city organization or business understands who is really in charge and can reliably make decisions,” the current city manager and city attorney wrote in the recovery plan.

Generally, cities have one of two governance structures: a strong mayor system or a council-manager system. San Bernardino has a version of both — a structure made all the nuttier by the division of responsibilities between the mayor and city manager and the ability of the council to override decisions by the mayor. This structure set up an accountability vacuum that proved disastrous in the last decade as city leaders made promises to employees they couldn’t keep.

The bankruptcy exit plan isn’t a great deal for the people of San Bernardino. But it is necessary, and will set the city on a more stable path if the voters approve the charter revisions to be developed by a city task force. Let’s hope they do, and that other cities and employee unions learn the larger lesson here: No one wins when a city goes broke.

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