Oct 17 The largest U.S. public employee pension
fund said Thursday that it would appeal an August court ruling
granting Chapter 9 bankruptcy protection to the city of San
The California Public Employees' Retirement System (Calpers)
has fiercely opposed San Bernardino's bankruptcy since the
Southern California city asked for protection from its creditors
in 2012. The city, reeling from a housing bust, a decades-long
decline in manufacturing, and soaring employee salary and
pension costs, said it had run out of cash to meet its daily
The city suspended its $1.2 million bimonthly payments to
Calpers at that time - an unprecedented move - though it resumed
payments in July 2013. In August, a U.S. bankruptcy judge ruled
San Bernardino eligible for Chapter 9 bankruptcy protection.
Calpers said in a press release Thursday that it would
appeal "on the grounds that the city did not consider
alternatives to filing for Chapter 9 protection, did not file
its bankruptcy petition in good faith, and has not provided
reliable financial information."
San Bernardino, beset by infighting among local officials,
has struggled to keep its finances in order as officials
including the city manager and the city finance director
resigned in the wake of the bankruptcy filing.
The case is one of several municipal bankruptcies that are
expected to set important precedents about whether municipal
bondholders or pensioners get priority when a city goes broke.
The California city of Stockton, which is also in
bankruptcy, has continued to make all payments to Calpers, and
the pension fund has not opposed that city's eligibility for
When San Bernardino was found eligible for bankruptcy in
August, U.S. Bankruptcy Judge Meredith Jury said: "I don't think
anyone in this courtroom seriously thought the city was anything
But Michael Gearing, an attorney representing Calpers, said
her decision set a "dangerous precedent" that will encourage
other cities to "create a crisis because they have a large
number of creditors."
(Reporting by Jonathan Weber in San Francisco; Editing by Lisa