Economic & Business Development


Author's Image
Posted on
View toward San Bernardino, along the usually dry bed of the Santa Ana River, from the hills to the north. The mountain in the left-center distance is Mount San Jacinto, 50 miles away en route to Palm Springs. (James Fallows)
Within the next few days, the citizens and leaders of San Bernardino, California, will have an experience that most people in most other cities have been spared. A federal judge will receive a report from the city council, acting on advice from an outside consulting group, and then will tell the city how it must change its ways to stay in operation.

For the past two and a half years, San Bernardino has officially been bankrupt. Technically that means it’s been subject to protection under Chapter 9 of the federal bankruptcy code. In the business world, people are familiar with bankruptcy under Chapter 11, which gives struggling companies protection from creditors so they have a chance to survive. (I learned about Chapter 11 on my very first magazine job, since the publisher filed for protection one day after I signed on.) If the companies make it—and that little magazine did, still going strong some 40-plus years later—they emerge from bankruptcy. If they don’t, they move into Chapter 7, which covers the divvying-up of liquidated assets among creditors.

Cities don’t really have the choice of liquidating and going out of business. So when they can’t keep up with pensions, payrolls, services, and other obligations, they get temporary bankruptcy protection under Chapter 9. But they know that sooner or later they need to come up with a plausible matching-ends-with-means plan for coming out of bankruptcy.

That’s the story you’ve heard about Detroit, Michigan, Stockton, California, Birmingham Jefferson County, Alabama, Vallejo, California, and other cities that were pushed over the brink by the post-2008 financial crash. And it is the one about to come to a conclusion, likely by this weekend, in San Bernardino.

More-or-less restored former Santa Fe train station in downtown San Bernardino. The city’s fortunes rose with railroad construction and work yards, and fell as the yards and other factories went elsewhere. Amtrak and LA-area commuter trains still stop here. As a grade-schooler I was bundled to this station by my parents, with my brother and sister, for the four-day train trip to visit relatives on the east coast. (Wikimedia commons.)

Every city has a story, and for a lot of the cities we’ve visited the story involves a challenge, and a response. Greenville, South Carolina, lost its textile mills, and then found new industries. Eastport, Maine, lost its sardine canneries and is now trying a surprising range of new alternatives. The quaintly beautiful lakeside town of Holland, Michigan, watched its downtown wither, until local benefactors put up the money for an eccentric-sounding but effective system to keep the streets and sidewalks snow-free and inviting all year round. And on down the list.

At face value the story of San Bernardino might seem to be a depressingly familiar life-is-unfair, regional-decline tale. The city’s employment base, which had always been blue-collar and (for California) highly unionized, lost not one but all of its main strongholds. We went into some of the details previously here. The city’s population is more “majority-minority” than the state as a whole—about 60 percent Hispanic for San Bernardino, versus about 40 percent for California—and significantly poorer. The median household income in the city is under $40,000, versus over $60,000 for the state and over $50,000 for the country. This makes San Bernardino the poorest city of of more than small-town size in California.

Mural by Phil Yeh at the McDonald’s Museum. This is on the site of the very first McDonald’s hamburger restaurant, on E Street in San Bernardino. (James Fallows)

All of that is San Bernardino’s challenge. But it’s not the real problem. An even-poorer community would have had better prospects if it had been able to concentrate its resources and efforts where needed most. (Really? Really—we’ve seen that happen. It’s much of the story of the area of northeastern Mississippi called “the Golden Triangle,” which is poor and challenged by anyone’s standards. It’s also the backstory of Fresno, whose population is majority Hispanic and on-average poor but which is undertaking some big ambitious projects.)

The real problem for San Bernardino is not the people who live there or the businesses that have left. Rather it’s the city’s rules for governing itself.

I know that this sounds like an impossibly dry civil-service point, and believe me that I wouldn’t stress it if I hadn’t come to believe it. Brief example: Despite the city’s poverty, pay for its police and firefighters has been automatically tied to levels in some of California’s wealthiest cities, and has kept going up as the city’s resources have gone down. The report from the professional consulting group that has been working with the city government to analyze the city’s plight (Management Partners, of Cincinnati), which is due within a few days, is likely to focus on the near-impossibility of reviving or even governing San Bernardino, let alone getting out of bankruptcy, unless it goes through something like fundamental constitutional reform.

Why do I say that the report is likely to come to that conclusion? Because it’s what this same consulting firm warned in two “disaster ahead! change course now!” reports for the city before the bankruptcy, in 2007 and 2010.  And why do I mention it at all? Because it suggests a different civic conclusion than the one that has run through many of our previous reports.

* * *

Last year in a magazine article, I made the point that has come up frequently through of our travels: that at just the moment when common-sense, practical-minded governance is proving so difficult at the national level, it prevails at the city and regional level.

San Bernardino has, so far, been an exception to that pattern, in ways I’ll describe in due course. Why should this even matter to people outside the town? Because it directs attention to the often-neglected reality that the rules and norms of our governing systems really do matter.

For instance: The fledging United States found that they really couldn’t survive under the flawed rules of the Articles of Confederation. It took the practical-minded revisions of the Constitution to create a functioning republic. Of course in practice our Constitution is no longer so practical minded. Madison, Hamilton, and Washington would never have set up a two-votes-per-state Senate if there were a 70-to-1 population difference between states, as we now have between California and Wyoming; nor life tenure for Supreme Court justices, if longevity had been so great. But America has been rich and lucky enough to get along with a flawed system. Similarly, California as a whole is rich and vital enough, barely, to survive its crazy “reform”-minded term-limit rules and its initiative system.

San Bernardino’s governing system is as unusual among cities as California’s is among states, or America’s among nations. But unlike California as a whole, and unlike America, San Bernardino is not rich or lucky enough to survive the handicap of a badly flawed system. It doesn’t have the same margin for error. That is the drama that will come to a climax very soon when the consultants offer the “Plan of Adjustment” they have worked out for city officials recommending how San Bernardino should make its way forward, and the supervising federal judge, Meredith Jury, rules on the plans.

When the plan comes out, I’ll give a few examples of what’s broken in the city’s system—and explain how, for example, the man below has been involved for decades in efforts to change San Bernardino’s course. His name is Pat Morris, and last year he completed two terms as mayor—after previous decades in San Bernardino as an innovative judge (known for promoting alternatives to incarceration), a school-board member, and a district attorney. Recently I mentioned the way that millennial-era members of San Bernardino’s “Generation Now” had committed themselves to healing a bruised city. Pat Morris, who began practicing law in the area 50 years ago, has been working toward the same end.

Pat Morris, former judge and major  (Alex Gallardo / Reuters)

When the report comes out, I’ll be back to discuss the problems it has diagnosed and the prescriptions it recommends. Also we’ll hear more from people who have decided to stay and try in San Bernardino, despite the odds. For background reading until then, consider a ten-year recovery plan Pat Morris issued during his final State of the City address, that address itself, and a 2012 report by our friends at Marketplace on the challenges of governing a bankrupt metropolis.