PAT SHEA A BANKRUPTCY ATTORNEY IN SAN DIEGO JOINS ME TO TALK
ABOUT THE FACTORS CONTRIBUTING TO SAN PERSON DEAN OH, THANK YOU
FOR BEING HERE.
PAT, GIVE US THE 30 SECOND RENDITION LEADING SAN BERNADINO
THIS TO THIS IMPORTANT.
>> SAN BERNADINO HAS A SYSTEMIC FINANCIAL PROBLEM THEY HAVE BEEN
UNABLE TO ADDRESS.
IT'S ONE OF TWO THINGS AN A CUTE PROBLEM LIKE THE ONE IN MAMMOTH
LAKES WHERE THEY HAD A LAWSUIT GO BADLY FOR THEM.
OR IF YOU IMPROPERLY MANAGED YOUR FINANCIAL CONDITION.
SAN BERNADINO IS IN THE LATTER GROUP.
THEY HAVE INCREASES IN FIXED OBLIGATIONS, BONDED DEBTEDNESS,
SALARIES AND PENSIONS, FLATTENED REVENUES AND THE PROSPECT OF
THINGS GETTING WORST.
THEY WERE UNABLE TO WORK OUT A DEAL AND NOW THEY'RE IN
BANKRUPTCY.
>> Peggy: THREE CALIFORNIA CITIES HAVE RECENTLY FILED FOR
BANKRUPTCY OR SAID THEY WERE GOING TOO.
IS THERE A CONNECTION, DO THESE SHARE ONE COMMON DENOMINATOR?
>> IT'S NOT A COMMON DENOMINATOR.
FOR THE ONES WITH SYSTEMIC PROBLEMS IT'S A RECURRING THING.
IT'S THE INABILITY TO DEAL WITH SUBSTANTIALLY WITH FINANCIAL
PROBLEMS IN VARIOUS SECTORS OF FINANCIAL CONDITION.
MEANING IF YOU HAVE A PROBLEM WITH YOUR LABOR SYSTEM YOU HAVE
TO DEAL WITH THAT.
BONDED DEBTNESS YOU HAVE TO DEAL WITH THAT.
>> AND PENSIONS.
IF YOU DON'T DEAL WITH THOSE THINGS WHEN THEY COME UP, EARLY,
YOU WILL WIND UP PUSHING THE CAN DOWN THE ROAD UNTIL YOU CAN'T
AVOID IT ANY LONGER AND YOU GO INTO BANKRUPTCY.
>> Peggy: WHAT IS THE NUTS AND BOLTS FOR A CITY THAT FILES FOR
BANKRUPTCY.
WHAT HAPPENS TO THE WORKERS, WHO GETS PAID WHO DOESN'T?
>> INTERESTING TORE MUNICIPALITIES NOT A LOT HAPPENS
THAT'S SPECTACULAR ON THE FRONT END.
THEY CONTINUE TO OPERATE, PAY EMPLOYEES, CONTINUE TO BE OPEN
FOR BUSINESS, ISSUE PERMITS AND DO WHAT THEY NEED TO DO TO THE
EXTENT THEY HAVE THE MONEY TO DO IT.
WHAT HAPPENS IS THE CREDITORS SIT DOWN AND WAIT FOR THE
MUNICIPALITY TO COME UP WITH A PLAN, THEIR OUTLINE FOR WHAT
THEY WOULD LIKE TO DO TO REA CERTIFICATE AND REACHIEVE
FINANCIAL STABILITY.
>> Peggy: SPEAKING OF PLANS IN 2005 YOU ADVOCATED FOR SAN DIEGO
TO FILE FOR BANKRUPTCY.
>> I DID.
>> Peggy: THEY DID NOT DO IT.
>> THEY DIDN'T.
>> Peggy: NOW, HOW WELL OF A JOB DO YOU THINK THEY HAVE DONE IN
GETTING THINGS IN ORDER?
>> I THINK THEY'RE MORE AWARE AND OPENLY AWARE.
IN 2005 TIMEFRAME THERE WAS A DEBATE WHETHER WE HAD A PROBLEM
IN THE FIRST PLACE.
THAT WAS THE FIRST DEBATE WE HAD.
WE HAVE COME A LONG WAY TO ACKNOWLEDGE WE HAVE SERIOUS
STRUCTURAL FINANCIAL ISSUES THAT HAVE TO BE ADDRESSED.
SOME HAVE BEEN ADDRESSED.
SOME CONTINUE TO BE NAGGING PROBLEMS AND IT'S A FUNCTION OF
MANAGING THOSE INTO THE FUTURE.
>> Peggy: ORANGE COUNTY TOOK A LONG TIME.
THEY WERE ONE OF THE FIRST TO FILE.
HOW LONG DOES IT TAKE TO RECOVER.
FOR SAN BERNADINO, ONCE THINGS GET GOING, WILL THAT IMPACT THE
STATE.
>> TWO QUESTIONS.
HOW LONG DOES IT TAKE TO COME OUT?
WHAT IS THE IMPACT?
IT TAKES TIME TO GO THROUGH THE PROCESS.
IN ORANGE COUNTY IT TOOK JUST UNDER TWO YEARS TO COME UP WITH
A PLAN.
IT'S NOT TOO SHORT OF A TIME OR TOO LONG OF A TIME TO GO FROM
INSOLVENT TO SOLVENT.
THESE TEND TO BE QUICKER THAN ASSESSING OUTSIDE OF BANKRUPTCY
BECAUSE YOU'RE DEALING WITH IT ALL AT ONCE.
THE IMPACT ON THE COMMUNITY IS HOW SUCCESSFUL THE PROGRAMS ARE.
IF YOU HAVE MUNICIPALITIES IN CHAPTER 9 AND RECOVER QUICKLY
THEY GET THROUGH IT AND THEIR CREDIT IS ESTABLISHD AND
REINVIGORATED AND OTHER MUNICIPALITIES GET A BENEFIT AS
WELL.
>> Peggy: THEY WILL RECOVER FASTER IF THEY MOVE.
STATE LAW MAKES IT MORE DIFFICULT TO FILE FOR CHAPTER 9.
TELL ME ABOUT THAT.
>> I'M NOT A FAN OF THE NEW LAW ENACTED LAST YEAR REQUIRING A
NEGOTIATING PERIOD BEFORE A MUNICIPALITY CAN GO INTO
BANKRUPTCY UNLESS IT'S A FINANCIAL EMERGENCY DECLARED
WHICH SAN BERNADINO IS LIKELY TO DO.
THEY PROVIDE OBLIGATIONS TO NEGOTIATE WITH CREDIT TORE
CLASSES INCLUDING LABOR UNIONS.
THE STATE LAW GETS IN THE WAY OF GETTING ON WITH THE PROBLEM.
>> ALRIGHT.
WE WILL FOLLOW THIS STORY CLOSELY.
THANK YOU, PAT SHEA, FOR BEING HERE.
>> MY PLEASURE.