LOS ANGELES — San Bernardino filed papers in U.S. Bankruptcy Court in Riverside, California, seeking summary judgment that would allow it to file for protection over the objections of the state's pension fund and a city employee union.
U.S. Bankruptcy Judge Meredith Jury scheduled a hearing on summary judgment for Aug 28 during a June 4 hearing saying she wanted "to light a fire" under creditors, who she deemed were slowing the process. The city, which is seeking protection under Chapter 9 of the bankruptcy code, filed its arguments for summary judgment on Friday.
"The city requests that the court deny all the objections in their entirety and enter an order for relief so that the city can continue discussions and negotiations with its creditors, devote more of its limited resources to those negotiations, and prepare and propose a plan of adjustment," the city's attorneys said in the filing.
San Bernardino and Stockton, Calif., which both filed bankruptcy last summer, are the first cities to test a state law requiring municipalities to enter mediation with creditors before they file bankruptcy. Stockton, which entered mediation prior to filing, was deemed eligible to be in bankruptcy earlier this year. Claiming a fiscal emergency, San Bernardino went directly to the bankruptcy court without undergoing mediation. In both cities, the state's pension fund has been battling with attorneys representing bondholders. The California Public Employees' Retirement System claims that it cannot be impaired under California law. In Stockton, city leaders have kept up on pension fund payments, which means a larger haircut for bondholders. In San Bernardino, the city has missed approximately $13 million in payments to the pension fund — and San Bernardino Mayor Pat Morris told the Bond Buyer earlier this year that the city may never make up those payments.
An interim hearing on summary judgment for San Bernardino is slated for July 17.
Creditors opposing eligibility, which include the Calpers and the San Bernardino Public Employees Association, have until Aug. 3 to file documents related to summary judgment.
Calpers and the city employee's union have disputed the city's eligibility on two of the five elements of eligibility set in bankruptcy code, according to the city's filing. SBPEA argues that the city has not met the eligibility requirements while Calpers argues that the city has not satisfied the element regarding the city's "desire to effect a plan."
The city has provided the pension fund and employee union with 20,000 pages of documents during an informal discovery process, according to the filing. The city also has met and conferred with the objectors in an effort to resolve the remaining informal discovery disputes, the filing states.
Jury had allowed the creditors and city attorneys to conduct what she termed "informal discovery" in the hopes that they would work through some of the discovery issues, so they could move forward on arguments related to whether the city is eligible to be in bankruptcy.
