Bankrupt San Bernardino is threatening to sue the state of California over demands it owes millions of dollars in property taxes, Reuters reported today. In letters dated February 21 and March 4, the California Department of Finance demanded the city pay $15.2 million in property taxes related to its former redevelopment agency. If the city does not pay the money by April 3, the state could dock the funds from San Bernardino's future sales and property tax revenues, the letters state. In response, San Bernardino's city attorney said in a letter to California's state controller, John Chiang, that the threat to withhold tax revenue is "illegal" and a "willful violation" of federal bankruptcy law, which protects debtors from creditors' demands during proceedings. If California does not withdraw its threat to dock future city revenue, "the city will have no choice but to institute proceedings" against the state controller and other state officials, James Penman, San Bernardino's city attorney, wrote in a March 8 letter.
