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Residents of bankrupt California city launch council recall

A sign advertising bankruptcy filing is seen hanging off a road sign in San Bernardino, California September 11, 2012. REUTERS/Lucy Nicholso
A sign advertising bankruptcy filing is seen hanging off a road sign in San Bernardino, California September 11, 2012. REUTERS/Lucy Nicholso

By Tim Reid

LOS ANGELES (Reuters) - Up in arms against the leadership it blames for San Bernardino's bankruptcy, a group of business people and residents on Thursday launched a campaign to recall the California city's council, mayor and city attorney.

The group, looking for a "clean sweep" inside crisis-hit San Bernardino, presented its initiative on the steps of City Hall before a crowd of residents and local media.

San Bernardino, a city of 210,000 about 65 miles east of Los Angeles, filed for bankruptcy in August 2012 citing a cash-flow crisis and a budget deficit of $45 million for the current fiscal year.

While any court decision on bankruptcy protection for San Bernardino looks several months off, Stockton, another California city that declared bankruptcy last summer, was awarded Chapter 9 protection by a judge last month.

Both cities are considered test cases in the battle over whether municipal bondholders or pensioners should absorb most of the pain when a local government goes broke. Battle lines have been drawn in the two cases between Calpers, the state pension fund, and Wall Street bondholders over how they will be treated as creditors.

San Bernardino passed a new budget last week that calls for it to resume payments to Calpers in July - after a year of non-payments - but not to many other creditors, including holders and insurers of its $50 million in pension bonds.

The Stockton bankruptcy has progressed more quickly and the city appears more organized to deal with proceedings than does San Bernardino, where the case has become bogged down in procedural issues involving financial evidence. The city and its creditors are due to meet again in court next week.

The group of San Bernardino business people and residents seeking to eject the city's current leadership needs to collect enough signatures by July 30, and find viable candidates, to challenge the seven council members, the mayor and city attorney in November's election.

The group, San Bernardino Residents for Responsible Government, is led by local businessmen Scott Beard and Tom Brickley. Beard says there are "10 core members" of the group and they have been planning the recall drive for nearly a year.

"We are very frustrated with the performance of our council and we have to take some action," Beard said in a telephone interview.

"We just feel the only way to correct that problem is to change the entire leadership."

Beard said the group already had four people willing to stand as council candidates, but he declined to provide their names. He said the group is talking to others so the entire council will be challenged in November.

Recall elections are difficult to execute. In San Bernardino's case, the group must collect signatures of 25 percent of registered voters in each of the city's seven wards to bring a recall election against each council member, and 15 percent of the city's registered voters to challenge the mayor and city attorney.

If the group obtains enough signatures in each council district and across the city, it will force all seven council members, plus the mayor and city attorney, onto November's ballot, with a challenger for each. Otherwise, only three of the council's members would be on the ballot in November.

That process could cost at least $200,000, the city says. Beard says the group has already raised $80,000 and has pledges for at least $100,000 more.

Beard said it was worth spending the money, and replacing the current council, which has been riven by infighting and dissent. A new one could "work together, create jobs, protect residents and come up with a viable long-term plan for the city," he said.

After the procedural hurdles have been navigated, voters must then be convinced to vote for the challengers and kick the incumbents out.

Fred Shorrett, a council member, said the move was "ill-advised," adding, "I certainly understand the frustrations of the community. But this is throwing the baby out with the bath water. This is not good for the community in light of the bankruptcy proceedings."

James Penman, long the city's attorney and a particular target of the recall advocates, wrote in the San Bernardino Sun newspaper that the move was irresponsible.

He said the city had made significant progress in the bankruptcy proceedings, citing last week's new budget. "What San Bernardino needs most today is unity and continuity," Penman wrote.

(Reporting by Tim Reid; Editing by Steve Orlofsky)

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