San Bernardino said it won't try to reduce its obligations to the $296 billion California Public Employees' Retirement System, Sacramento, despite a recent ruling opening the powerful pension fund to such challenges in bankruptcy court.
A lawyer for the town revealed its decision Tuesday, less than seven weeks after the judge in Stockton's municipal bankruptcy made it easier to impose cuts on CalPERS.
“The 800-pound gorilla in the case is CalPERS,” said San Bernardino attorney Paul Glassman in court.
San Bernardino filed for bankruptcy in August 2012 and cut a deal with CalPERS in confidential mediation sessions that began last year. Details of the agreement had been secret until Monday, when the city outlined the terms in a court filing.
As part of the deal, the city agreed to file a debt-adjustment plan by September, a date that was quickly rejected by U.S. Bankruptcy Judge Meredith Jury at a hearing Tuesday in Riverside, Calif. Ms. Jury demanded a detailed proposal by May 30. Nothing short of an earthquake that leveled the city would persuade her to move the deadline, she said.
Ms. Jury also questioned the effectiveness of mediation that took up nine months only to result in CalPERS getting paid in full. She asked whether San Bernardino had a strategy for cutting debt and getting out of bankruptcy.
“I would hope by 28 months into the case that the city would have a game plan,” Ms. Jury said at the hearing.
Creditors including bond insurer Ambac Assurance Corp. have said it might be impossible to put together a workable plan without cutting pension benefits and other labor costs.
