RIVERSIDE CA May 8 The federal judge overseeing the bankruptcy of San Bernardino expressed frustration on Thursday over the slow progress of talks between the city and its biggest creditor, the California Public Employees' Retirement System (Calpers).
Federal bankruptcy judge Meredith Jury said she will probably set a deadline for the city to file a bankruptcy plan, known as a plan of adjustment, at the next hearing on June 19.
Progress in the city's bankruptcy has been painfully slow. San Bernardino, about 70 miles east of Los Angeles, filed for Chapter 9 bankruptcy protection in August 2012 and does not appear close to presenting a plan of adjustment, which lays out how creditors will be treated.
Stockton, another California city which declared bankruptcy about the same time as San Bernardino, is close to emerging from the process. Detroit, Michigan, which filed the biggest municipal bankruptcy in U.S. history in July 2013, filed a plan of adjustment to deal with its $18 billion of debt in February.
In the San Bernardino case, the city and various creditors met again in court on Thursday. The city is in mediation talks with Calpers, America's biggest public pension fund with assets of $277 billion. The city and Calpers said they needed more time to continue their private discussions, which are subject to a judicial gag order.
Corey Glave, an attorney representing the city's firefighter union, said the slow progress of the city's talks with Calpers was taking a heavy toll on union members.
Last January the city unilaterally imposed drastic pay and benefit cuts on its safety unions - representing a 14 percent cut in benefits - which the unions oppose but cannot fight while the bankruptcy proceedings continue.
Glave said some firefighters were being forced to declare personal bankruptcy because of the pay cut, and the slow progress in the mediation talks was only prolonging the pain.
The San Bernardino case is being closely watched by creditors. Along with Detroit, it is likely to set precedent on whether retirees or Wall Street bondholders should suffer the most when a local government goes broke. (Editing by Andrew Hay)