February 13, 2013 / 1:50 AM / 7 years ago

San Bernardino police, firefighters seek to sue bankrupt city

* Safety workers object to pay and benefit cuts

* Seek to bypass bankruptcy protection to sue in state court

* Claim police morale at “low ebb”

By Tim Reid

RIVERSIDE, Calif., Feb 12 (Reuters) - San Bernardino’s police and firefighters unions will ask a judge later this week to let them sue the bankrupt city over pay and benefit cuts, arguing that officials have abused bankruptcy laws to impose concessions on safety workers.

A lawyer for the city’s police union, Ron Oliner, on Tuesday told the federal judge overseeing the case, Meredith Jury, that after recent cuts to police pay, pension benefits and staffing levels, morale in the force was at a “low ebb” and they had no alternative but to try to sue the city in state court.

An attorney for the stricken city’s firefighters union, Corey Glave, said they would do the same, in coordination with the police union.

The large and growing burden of public pension debt, in addition to salaries and overtime - particularly for San Bernardino’s safety workers - has become a prominent issue in the city’s bankruptcy as it seeks to cut costs.

Earlier this month arbitrated negotiations between the city and the unions for the police, firefighters and public employees broke down. The following day the city council voted to impose pay and benefit cuts on the workers.


The announcement by the representatives for the police and firefighters came during the latest court hearing in the California city’s attempt to gain Chapter 9 bankruptcy protection. The city of 210,000 located 65 miles (105 km) east of Los Angeles filed for bankruptcy on Aug. 1, citing a $46 million deficit for the current fiscal year and little leeway to pay the city payroll.

It was the third California city to declare bankruptcy last year, following Stockton and Mammoth Lakes.

San Bernardino’s biggest creditor by far is the California Public Employees Retirement System, or Calpers. The city pegs its debt to America’s biggest public pension fund at $143 million.

San Bernardino has not made its $1.2 million, twice monthly payment to Calpers since its bankruptcy declaration last August. Calpers, which manages $241 billion in assets, opposes the city’s bankruptcy application.

No city has ever unilaterally suspended payments to Calpers, which manages pension plans for state government employees and many municipalities and local government agencies around California.

The bankruptcy could be a test case as to whether the pensions of government workers take precedence over other payments in a municipal bankruptcy - a high-stakes issue for pension plans and their beneficiaries, and for the Wall Street bondholders who lend money to governments.

Until Jury rules on whether San Bernardino is eligible for bankruptcy, all actions by creditors are stayed.

In December, the bankruptcy judge ruled against an attempt by Calpers to have the bankruptcy stay lifted so the pension fund could sue the city in state court to collect pension arrears.

Asking for the stay to be lifted is what the police and firefighters unions will do later this week. The public employees union, representing about 54 mid-level city officials, made the same move last week.

So far, Judge Jury has seemed sympathetic to the city’s plight and appears to be giving it time to supply voluminous financial records demanded by Calpers and other creditors.

The next hearing is set for March 5.

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