Calpers Seeks to Sue San Bernardino Over Pension Payments

San Bernardino, the California city fighting to remain in bankruptcy, should remain under court protection from its creditors because a new budget shows the city is making progress, officials said in court papers.

The spending plan that San Bernardino planned to submit yesterday will resolve the chief complaint of the California Public Employees’ Retirement System, the city said in papers filed in U.S. Bankruptcy Court in Riverside, California. Calpers had urged the judge overseeing the bankruptcy to throw it out because the city hadn’t approved a so-called pendency plan saying how it would pay its bills while under court protection.

“It is in the best interest of the city and its creditors to avoid months of delay in this case and potentially hundreds of thousands of dollars that the city cannot afford to spend litigating,” Paul Glassman, the city’s bankruptcy attorney, said in court papers.

Calpers is seeking to sue San Bernardino over missed pension payments as well as asking U.S. Bankruptcy Judge Meredith A. Jury to dismiss the city’s Chapter 9 petition. Should Jury grant either request, Calpers would be free to sue San Bernardino in state court to seize property or find some other way to collect the debt the pension fund is owed.

Calpers spokesman Brad Pacheco said he couldn’t immediately respond to a request for comment on the filing.

In August, San Bernardino became the third California city to file bankruptcy in less than three months. The city of more than 200,000 people lies about 60 miles (97 kilometers) east of Los Angeles. A fiscal emergency, brought on by a $46 million budget shortfall, forced it to stop paying some creditors 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 reporters on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

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

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