PDFs: San Bernardino's court filing | Supporting budget documents
Catch up: San Bernardino
Despite its filing for bankruptcy, San Bernardino is making progress toward a workable budget and has met other requirements for bankruptcy protection, so the court should set aside creditors' objections, the city's attorneys argue in a response filed Friday with bankruptcy court.
The 24-page document was submitted to U.S. Bankruptcy Court in Riverside along with 122 pages of budget documents, including the pendency plan the City Council passed on Monday.
It will be up to bankruptcy Judge Meredith Jury to decide whether the arguments are valid, said City Attorney James F. Penman, but officials are confident in their arguments that the city qualifies for Chapter 9 bankruptcy protection.
"I think it answers both factually and legally the assertions made by CalPERS and some of the others who have questioned the city's eligibility for bankruptcy," Penman said. "I think it makes it clear that the law does not require us to file a pendency plan at the same time that we file our petition and, I think, that some of the other objections that were raised similarly are without foundation in federal bankruptcy law.
Attorneys for the California Public Employee Retirement System had argued that the city not filing or passing - until Monday - a pendency plan earlier was evidence that the city "cannot demonstrate a desire to effect a plan to adjust its debts," a requirement for bankruptcy.
But the law doesn't require filing by any specific date, the city said. Jury had indicated the city should include details from the plan in Friday's submission, which it did.
CalPERS also argued the city didn't file in good faith because it didn't meet beforehand with its creditors and required extra attention because of "the appearance of administrative shortfalls."
The city said it wasn't able to meet with creditors because it owed money to thousands of people and bankruptcy came up suddenly, prompting a declaration of fiscal emergency, which is specifically allowed under California law.
As for the city's administrators and their decision to defer CalPERS payments, that's because the city is insolvent - to be expected in bankruptcy, they say.
The city also responded in detail to an objection by the San Bernardino Public Employee Association, which represents the city's middle managers.
"The SBPEA objection is replete with misstatements of undisputed facts," the city says, and misunderstands the relevant bankruptcy law.
Neither attorneys for SBPEA nor CalPERS' spokesman returned calls seeking comment.
Five individuals and one corporation - the one operating the Flesh Club in San Bernardino, which is the subject of a longstanding lawsuit with the city - also objected. The city responds simply that those don't cite legitimate legal grounds or meet court requirements. Jury, the bankruptcy judge, earlier agreed with that characterization.
The city also asks Jury not to allow "discovery" - the requirement for the city to provide evidence - on a variety of issues it says are irrelevant to the question of whether it qualifies for bankruptcy protection, such as those related to the budget process on years other than 2012-13.
Penman and other city attorneys ask for a narrowing of grounds for objection, hoping that many of the issues will be dismissed from court. But Penman took pains to say there was nothing specifically against CalPERS, the city's largest creditor and one of several groups to which the city has deferred payments.
"We are not trying to pick a fight with CalPERS," he said. "We simply don't have the money available to pay them and pay our essential service-providing employees."
This report has been modified to correct the words of City Attorney James F. Penman, who referred to "service-providing employees," and to more accurately reflect the people responsible for the city's filing.
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