SAN FRANCISCO San Bernardino, California's city council will receive an opinion from its legal staff on July 16 on whether the city needs to enter into pre-bankruptcy mediation with its creditors, a statement from the city's spokeswoman said on Thursday.
A state law requires financially distressed municipalities to enter into talks with creditors to try to avert Chapter 9 bankruptcy filings, but they may skip negotiations by declaring a fiscal emergency.
The city council will receive an opinion on its options at its next regular meeting next week, the statement said.
San Bernardino's city council voted on Tuesday to file for bankruptcy, marking the third city in recent weeks in the most populous U.S. state to opt to seek protection from its creditors.
The statement added that city staff are preparing a plan to balance San Bernardino's budget that would be presented to a bankruptcy judge in the event of a Chapter 9 filing within the next 30 days.
"While many measures have been instituted over the last four years to balance the City's budget, our financial situation has continued to decline and that has brought us to a critical point," San Bernardino's interim city manager said in the statement, adding that a Chapter 9 filing would allow the city to provide essential services and restructure its finances.
The vote by the leaders of San Bernardino, a city of about 210,000 residents about 65 miles east of Los Angeles, followed a report by city staff that said the city exhausted its reserves and projected spending would exceed revenue by $45 million in the current fiscal year which started on July 1.
San Bernardino could join the California communities of Stockton and Mammoth Lakes in bankruptcy court.
Stockton, a city of nearly 300,000 in the state's Central Valley, last month became the most populous U.S. city to file for bankruptcy. It failed after three months of talks with its creditors to obtain concessions to close its $26 million budget gap.
Mammoth Lakes, a ski resort town of about 8,000 residents, filed for bankruptcy last week due to a nearly $43 million legal judgment against it.