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San Bernardino, Calif., files for bankruptcy with over $1 billion in debts


San Bernardino, Calif., filed for bankruptcy protection on Wednesday citing more than $1 billion of debts and making it the third California city to seek protection from creditors.

San Bernardino declared a fiscal crisis last month after a report said local government had tapped out its reserves and projected spending would top revenue by $45 million in the fiscal year that began on July 1.

The filing, made in the United States Bankruptcy Court, Central California District, states that the city has "more than $1 billion" in liabilities, and estimated that it has between 10,001 and 25,000 creditors.

It also states that San Bernardino, a city of about 210,000 residents 65 miles east of Los Angeles, has estimated assets of more than $1 billion.

San Bernardino's city council voted on July 24 to adopt an emergency three-month fiscal plan that would suspend debt payments, freeze vacant jobs and quit paying into a retiree health fund while city staff produce a more detailed bankruptcy plan.

Grant Hindsley / AP, file

San Bernadino city employee Rafael Tinoco empties trash barrels in a neighborhood in the Southern California city last month.

A recent report by the city attorney said officials had falsified budget reports to the mayor and council for 13 of the last 16 years, hiding the scale of the city's debt.

"The bankruptcy filing was just to get the protection in place, to kick the process off," a city spokesperson said.

In the past two months, the cities of Stockton and Mammoth Lakes have also filed for Chapter 9 bankruptcy protection, a special bankruptcy provision for municipalities.

Stockton, which like San Bernardino has suffered from the housing crash that was particularly acute in southern California, filed for bankruptcy in June, becoming the largest U.S. city to do so.

Other cities in California are also in deep fiscal trouble and more could file for bankruptcy.

On July 17 the mayor of Compton, a city outside Los Angeles, said he had asked state auditors to look into unspecified "waste, fraud and abuse of public monies." That city could file for bankruptcy by September 1, its financial officials said.

In Victorville, also in southern California, auditors in January said there "was substantial doubt about the city's ability to continue as a going concern."

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