San Bernardino to use restricted funds for payroll

The city of San Bernardino will raid restricted funds to pay its employees and try to remain solvent while it seeks protection in Bankruptcy Court.

The decision came after a marathon Wednesday night meeting rife with finger-pointing and political sniping over how to slash city spending by nearly a third.

In the end, the council postponed action on a budget and opted to do what city officials had previously done to forestall the fiscal crisis — borrow from funds not intended for day-to-day expenses, a practice that has drawn federal scrutiny of the city’s books.

Councilman Robert Jenkins suggested that such borrowing got the city in trouble in the first place, and argued that the council should take more time to consider the move.

“If I don’t have the restricted funds, I won’t be able to make payroll” this week, interim City Manager Andrea Travis-Miller warned.

Faced with a $45.8-million budget shortfall, the city has drafted an austerity plan that calls for a 30% cut in spending, layoffs of at least 100 city employees, closing three library branches and possibly rotating fire station closures. The council will take up the proposed plan Tuesday.

Even if the council approves those measures, the city would be $7 million in the red, Travis-Miller said.

“The city of San Bernardino faces a fiscal crisis of staggering proportions,” Mayor Patrick Morris said.

The council session was steeped in controversy before it began, after city officials announced that the council would review the budget-slashing plan in closed session. After being blistered by the local newspapers and getting an earful from residents, Morris and the council reversed course and held the hearing in a public session at City Hall.

The council then started arguing over whether the hearing should be postponed. Morris rejected any delay, saying that the matter “was critically important.” He was quickly attacked by City Atty. James Penman.

“We never had a mayor who led us into bankruptcy, but now we do,” said Penman, who had unsuccessfully challenged Morris for mayor.

Penman’s comment prompted boos and catcalls from the audience, which is familiar with political infighting among city leaders.

Earlier this month, San Bernardino became the third California city to declare insolvency this year, joining the Central Valley city of Stockton and Mammoth Lakes in the eastern Sierra Nevada.

The action came after Travis-Miller told the council that San Bernardino would probably not have the money to make the payroll in August.

The U.S. Department of Housing and Urban Development and state Department of Finance launched audits of the city’s finances after San Bernardino officials acknowledged that the city had improperly borrowed from restricted accounts to help keep the city afloat.

phil.willon@latimes.com