San Bernardino's City Council declared a fiscal emergency on Wednesday in a 5-2 vote. The declaration was made in part in order to avoid a period of lengthy mediation, much like the city of Stockton just went through.

What Fiscal Emergency Means for Civil Mediation

This will allow them to seek Chapter 9 bankruptcy without having to go through mediation.

As they saw from Stockton, CA's recent example, California towns in mediation with creditors are required to take six months before any such decisions can be made.

San Bernardino apparently didn't think they had time for this and so they went ahead and filed fiscal emergency. Now they don't have to submit to civil mediation or other mediation services before they get bankruptcy protection.

Why They Chose Bankruptcy Over Mediation Services

The interim City Manage warned that they were looking at a budget that wouldn't have nearly $46 million of what it needed to go on with this next fiscal year. This is what led to the emergency declaration.

In the same meeting, the San Bernardino City Council agreed to file for bankruptcy protection. Next week, the council will start creating its "survival budget" until city attorneys can file with the federal Bankruptcy Court.

Town Avoids Mediation After Coming Under Assault

San Bernardino is already looking down a July budget that needs $5 million more than the city actually has. The city's credit line has been rescinded, and officials are claiming that the short-term credit market has "stiffed" the town.

Its emergency status may let the city avoid provisions in a recent California law that would otherwise require it to enter into mediation with creditors, as well as unions.

The California city of Stockton recently filed for bankruptcy after six months of joint mediation with creditors. However, that city has now entered into talks with many creditors on an individual level, looks to come to terms with well over half of them.