SAN BERNARDINO, Calif. — The Southern California city of San Bernardino voted to file for Chapter 9 bankruptcy this year, joining the ranks of two other California cities that have sought after court protection, according to Bloomberg.
“If the employees are not paid on Aug. 15, on Aug. 16 there will be a mass exodus of city employees,” city attorney James Penman told the council before the vote, according to Bloomberg. “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.”Comment on this story
The city’s vote makes it the third city to go bankrupt in the state. Stockton, a city of 292,000 people in northern California, filed for bankruptcy on June 28, while Mammoth Lakes, an 8,200-person mountain resort, sought protection from creditors on July 3.
Experts say the municipal bond market will struggle due to San Bernardino’s decision.
“When you’ve got headlines like this, it creates anxiety for investors,” said Robert Miller, a senior portfolio manager in Menomonee Falls, Wis., for Wells Capital Management, told Bloomberg. “They’re going to require higher rates of return to buy their debt, especially at the local level.”