San Bernardino Wins More Time to Support Bankruptcy

San Bernardino, California, won more time to prove it should remain in bankruptcy as a judge told city officials to develop a temporary budget by December or risk losing Chapter 9 court protection.

U.S. Bankruptcy Judge Meredith M. Jury agreed to put off until Dec. 21 a court showdown between San Bernardino and California Public Employees’ Retirement System over whether to throw the city out of bankruptcy. To remain, the city must make progress on a so-called pendency plan, Jury said today in Riverside, California.

“Without that, you can’t even be moving toward adopting” a permanent plan to adjust the city’s debt, Jury said.

To stay in bankruptcy under Chapter 9 of the U.S. Bankruptcy Code, a city must show that it is willing to adopt a long-term plan balancing debt with revenue. To pass that test, the city must show progress on the pendency plan, Jury said.

San Bernardino, home to about 209,000 people about 60 miles (97 kilometers) east of Los Angeles, was the third California city to file for bankruptcy since June. A fiscal emergency, brought on by a $46 million budget shortfall, forced it to stop paying some creditors including Calpers and seek court protection, the city said.

The case is In re San Bernardino, 12-28006, U.S. Bankruptcy Court, Central District of California (Riverside).

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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