* Unlike Stockton, San Bernardino bankruptcy crawls along
* Protracted fight over paperwork slows case
* Calpers says talks with city "painfully slow"
By Tim Reid
LOS ANGELES, April 8 Creditors of bankrupt San
Bernardino, including America's biggest pension fund and Wall
Street bondholders, meet in court on Tuesday in a case bogged
down in arguments over the city's disclosure of financial
The slow progress in San Bernardino's case contrasts with
that of another California city, Stockton, which last week was
declared eligible for municipal bankruptcy in proceedings that
have moved relatively swiftly since it filed for Chapter 9 last
For San Bernardino, which filed for bankruptcy just a month
after Stockton and declared a fiscal emergency to avoid
pre-bankruptcy negotiations with creditors, it is still unclear
if the judge will be able to set a trial date to determine the
city's eligibility for Chapter 9 protection.
"It's like Stockton is on jet fuel, and San Bernardino is
walking," said Karol Denniston, a bankruptcy attorney with
Schiff Hardin in San Francisco, who is not involved in either
"One city has got liquidity to work with and sophisticated
planning. The other fell into bankruptcy and is crawling along,
with a lack of staff and chaos. It's as different as you can
Both cities are considered test cases in the battle over
whether municipal bondholders or pensioners will absorb most of
the pain when a government goes broke. Battle lines have been
drawn in both cases between Calpers, the state pension fund, and
Wall Street bondholders, over how they will be treated as
Last August San Bernardino, a city of 210,000 60 miles east
of Los Angeles, stopped paying its $1.2 million, twice weekly
employer contributions to Calpers - America's biggest pension
fund with assets of $256 billion. The pension fund is opposing
its bankruptcy petition. Stockton has kept current on its
Calpers payments, and the fund did not oppose that city's
Calpers says that for months it has been asking for an array
of financial information from San Bernardino, whose city manager
and finance chief both quit earlier this year. Last week San
Bernardino's council voted to contract out its finance
A Calpers spokesman said there had been "fruitful" meetings
with San Bernardino, but "progress remains painfully slow."
Last week, three labor unions asked the judge overseeing San
Bernardino's case to allow them to sue the city in state court,
so the unions could try and overturn contracts imposed by the
city that cut pensions and other benefits.
The judge, Meredith Jury, said she would probably rule on
that motion on Tuesday, but indicated that she was unlikely to
allow the unions' request to bypass the federal bankruptcy
In December, she also blocked a similar attempt by Calpers
to bypass the bankruptcy court and collect on its overdue
pension payments from San Bernardino.
The judge also repeated an assertion she made at an earlier
hearing - that she is convinced the city is insolvent.
Denniston said what the city must now show is that it acted
in good faith with its creditors when it declared bankruptcy.
The burden of proof on that is higher for San Bernardino
than in Stockton, because in San Bernardino's case the city
declared a fiscal emergency before filing for bankruptcy - a
move aimed at avoiding pre-bankruptcy negotiations with
Denniston said San Bernardino is the first city to take the
fiscal emergency route, and must now show that, among other
things, that it was not a self-created fiscal emergency due to
years of bad financial management, which some creditors,
including Calpers, claim.