California, Cities | featured news

Stockton and San Bernardino, the two California cities that have filed for bankruptcy protection, are both considered test cases in the epic battle over whether municipal bondholders or pensioners will absorb most of the pain when a government goes broke.

"Welcome to SugarDaddie.com, U.S.A." That's what the town sign would likely read if Woodside, Calif., decides to take SugarDaddie.com up on its offer to change its town name. While the publicity stunt may seem outlandish, with $11.65 million on the table, the prospective name change is no joke.

Jeffrey A. Michael, a finance professor in Stockton, Calif., took a hard look at his city’s bankruptcy this summer and thought he saw a smoking gun: a dubious bond deal that bankers had pushed on Stockton just as the local economy was starting to tank in the spring of 2007, he said.

Moody's plans to review its debt ratings of California cities over the next few weeks and said it believes the risk of default on municipal bonds in the state is rising.

The Anaheim City Council heard public comments for over three hours Wednesday from residents who want voting districts they say will increase Latino representation. But the council rejected the proposal on a 3-2 vote.

Senate President Pro Tem Darrell Steinberg (D-Sacramento) says it's too early to make changes in a mediation process for municipalities seeking to file for protection. Legislation that could have delayed some municipal bankruptcies has been tabled after being opposed by the mayors of California's largest cities, including Los Angeles' Antonio Villaraigosa.

San Bernardino must cut government spending by a third, almost assuredly resulting in widespread layoffs or pay reductions for city workers, as it prepares to officially file for bankruptcy protection, city officials said.

San Bernardino leaders' decision means the city could avoid months of state-mandated mediation as it seeks bankruptcy protection. The San Bernardino City Council on Wednesday declared a fiscal emergency, an acknowledgment that the city is nearly broke and a legal maneuver that will allow leaders to file for bankruptcy protection without going through months of state-mandated mediation.

The Sheriff's Department said Thursday it was working with police and the district attorney's office to investigate possible criminal activity within the government of San Bernardino, where city officials voted this week to take the rare step of filing for bankruptcy.

The San Bernardino City Council votes to file for bankruptcy. Facing a $45-million budget shortfall and the prospect of not being able to pay city workers, the panel Tuesday voted to file municipal bankruptcy, the third California city to do so in recent weeks.