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San Bernardino has become the third city in California to file for bankruptcy in recent weeks.
The City Council voted Tuesday night to file for Chapter 9 bankruptcy protection, which would allow local authorities to suspend payments to creditors while they seek court approval for a plan to get the city's finances back into the black, Reuters reported.
Interim City Manager Andrea Travis-Miller said the filing could take a month to prepare.
According to Bloomberg, the city of 209,000 residents, located about 65 miles east of Los Angeles, faces a $45 million budget shortfall due to “accounting errors, deficit spending, pension and debt costs and lack of revenue growth” and doesn't have enough money in its coffers to meet the August payroll.
City Attorney James Penman told the packed City Hall meeting that the dire state of the city’s finances had gone unnoticed because budget officials had falsified documents presented to the council for 13 of the past 16 years, the Los Angeles Times reported.
Penman stopped short of naming those responsible, but warned of potential chaos in the city if the motion to seek bankruptcy protection was not passed.
“If the employees are not paid on August 15, on August 16 there will be a mass exodus of city employees,” he told the council before the vote.
“People are not going to work when they don’t get paid. Most of our employees will not show up to work. That would include police, fire, refuse, everybody. The city will virtually shut down.”
Other cities in California to have filed for bankruptcy are Stockton, a community of 292,000 east of San Francisco facing a projected $26 million budget shortfall, and Mammoth Lakes, a mountain resort of 8,200, which is short $43 million.
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