San Bernardino bankruptcy draws objections from pension plan, union

By Jim Witters

Wilmington, Del., Oct. 25 - The City of San Bernardino, Calif.'s bankruptcy filing is being challenged by the California Public Employees' Retirement System and the San Bernardino Public Employees Association, which say the city may not be eligible for bankruptcy protection, according to documents filed Oct. 25 with the U.S. Bankruptcy Court for the Central District of California.

CalPERS is seeking a deadline for the city to submit its proposed plan of adjustment. And the agency wants to postpone status conference on the city's eligibility to allow sufficient time to review the plan.

The union says the city "has not carried its burden of demonstrating that it is eligible to file for, and remain in, bankruptcy under the protections of Chapter 9."

CalPERS argument

"The city appears to be operating post-petition at a substantial deficit and has so far been unable to produce a budget that covers its ongoing operating expenses, let alone allows it to pay any prepetition claims," the CalPERS objection states.

Accordingly, CalPERS believes it is premature for the court to consider the city's eligibility for a Chapter 9 filing.

"In filing this preliminary objection, the goal of CalPERS is not to start a costly battle over eligibility but rather to defer any dispute about eligibility until the city has produced credible projections, which could form the basis of a feasible plan," court documents state.

The city's obligations to CalPERS, trade creditors and other creditors are accruing rapidly.

"The city has not proposed a balanced budget for approval by its City Council and has not filed a pendency plan to support its allegation that it desires to effect a plan to adjust its debts. At this point in the case, it is impossible to determine whether the city meets the eligibility requirements of Chapter 9," CalPERS argues.

San Bernardino Public Employees Association

The union's objection states that the city has not carried its burden of demonstrating that it is eligible to file for, and remain in, bankruptcy under the protections of Chapter 9, and that its petition was filed in bad faith.

The city ignored repeated warnings of an impending fiscal crisis, the union says.

"Although the city bases its need for a declaration of a financial emergency (in lieu of a neutral evaluation of its debts) on the late discovery of its fiscal condition, the facts show that if the city was blind to its fiscal reality, such blindness was willful," the objection states.

"The city was repeatedly warned that the failure to implement fiscally responsible practices and utilize viable revenue enhancements would result in bankruptcy. Instead of acting appropriately, the city adopted a budget for FY 2011-12 that was destined to fail, and then waited for a foreseeable crisis to become a reality. This is a blatant end-run of the neutral evaluation process."

"Chapter 9 is not a substitute for political will," the union says.

A hearing on the objections is scheduled for Nov. 5.

San Bernardino filed for bankruptcy on Aug. 1 in the U.S. Bankruptcy Court for the Central District of California. The Chapter 9 case number is 12-28006.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.