San Bernardino's bankruptcy frustrates residents

Patrick Morris, mayor of San Bernardino
Patrick Morris, mayor of San Bernardino
CBS News

(CBS News) SAN BERNARDINO, Calif. - Some cities in California are fighting financial ruin. San Bernardino filed for bankruptcy Wednesday, the third California city to do that in two weeks. What's happened to the boom towns?

Last week it was Mammoth Lake. The week before that it was Stockton. The problem is the glacial pace of the economic recovery and huge pension and health payments to city employees.

San Bernardino is a city with nearly 16 percent unemployment. The foreclosure rate here is three times the national average.

Patrick Morris, the town's mayor, says the recovery hasn't reached his town.

"We have a host of our residents who are not working, not paying taxes, don't have disposable income so they are not shopping. That's a problem for us," Morris said.

Tax revenues have plummeted and the city now has a $45 million budget hole. It has cash to pay city workers for just one more month. The city workforce has already been slashed 20 percent and employees have given $10 million in salary and benefit concessions.

The city council decided to file for bankruptcy so it can renegotiate its labor agreements. Right now, San Bernardino expects to take in $120 million in revenue this year, but it pays out $126 million to workers and retirees. So before a single city service is performed, San Bernardino is already $6 million in the red.

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The city attorney now says that in 13 of the past 16 years budget documents were falsified, masking the depth of the problems. The firefighter's union calls bankruptcy the easy way out.

"I interpret the bankruptcy as them protecting their fiscal mismanagement for years and years and years. It is giving them basically a freebie," said firefighter Steve Tracy.

Kathy Mallon has lived in San Bernardino for 10 years. She blames city leaders for not seeing this fiscal cliff coming.

"Why weren't you awake? Why were you asleep at the wheel? I'm not surprised we are in this dire of straights. Am I angry? Absolutely!" Mallon said.

Despite the tough shape this city is in, the mayor is still optimistic. He mentioned at least three times in an interview with CBS News Wednesday that a Amazon is about to open a big warehouse here that is expected to create 1,000 jobs.

  • Ben Tracy

    Ben Tracy is a CBS News White House correspondent based in Washington, D.C.