San Bernardino, California
The historic California Theater. (Frank Perez for SB Sun)

California cities are going down one after another, San Bernardino City council gathered a consensus vote to file for bankruptcy on Tuesday, LA Times reports. This marks the second city to file for bankruptcy in less than two weeks, after Stockton (voted on June 26th 2012) and Mammoth Lake (voted on July 2nd 2012). Among the Calif cities, San Bernardino is the second largest with an estimated population of 210,000 (US Consensus 2010), while the biggest one to fall down was Stockton with an approximate count of 292,000 (US Consensus 2010).

Businessweek reports that the city had the third-highest foreclosure rate in the U.S. in May, area’s unemployment rate was 11.8 percent in May, which is about 43% above the rate that was observed for rest of the country, according to U.S. Labor Department data. Each resident of San Bernardino was held to $1,506 of debt which is 5.4 percent of personal income.

San Bernardino is facing a budget shortfall of $45.8 million which makes the city council incapable of funding salaries of city workers. The reason behind this impending liquidation comes from the indirect debts and losses that the city has suffered from the housing bubble burst which then led to deficit spending, pension and debt costs, and lack of revenue growth. It is noteworthy that during the housing boom, the city’s economy soared up.

People of California state are arguing that the major blame of these filings for seeking protection are due to bad decisions and action plan by Governor Jerry Brown (For example, $8 billion budget for high-speed rails), the rise of government unions and the ramifications from 2008’s fall of economy.

Earlier this month, Mammoth Lakes filed for the same Chapter 9 clause to seek protection under bankruptcy citing that it lacked the resources to pay-off a $43 million judgement. Mammoth Lakes Land Acquisition won a court order whereby the city had to pay a sum that was three times its annual budget. As the city was already facing a $2.8 million deficit from 2011, the payment was beyond its expenses.

When Stockton filed for bankruptcy in late June, it became the first Calif city to file since Vallejo in 2008 and the seventh city to petition for protection in this year. The Chapter 9 was added by Congress in 1937 to the bankruptcy law which gives municipalities the option to seek protection. Six petitions were filed in 2010 while thirteen filings were seen in 2011. At this rate, when already seven municipalities have petitioned for protection, we might see an even larger count of filings for this year.