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Calpers Files a Legal Motion Against the City of San Bernardino

“LOS ANGELES (Reuters) – America’s biggest public pension moved aggressively against the bankruptcity of San Bernardino, California, on Tuesday night over the city’s decision to halt payments to the fund.

The move laid bare a high-stakes battle shaping up between Wall Street and state pension funds over how they are treated when cities run out of money.

The powerful¬†California Public Employees’ Retirement System (Calpers) filed a legal motion declaring its intention to sue San Bernardino for millions of dollars in pension arrears, a move that the fund has never before had to make in a municipal bankruptcy.

San Bernardino, a city of 210,000 about 60 miles east of Los Angeles, filed for bankruptcy protectionon August 1. Since then, it has halted its bi-weekly, $1.2 million payment to Calpers, saying it wants to defer any payments to the fund until fiscal year 2013-2014. Calpers says the city is already $6.9 million in arrears since August 1.

The San Bernardino bankruptcy is fast emerging as a precedent-setting case over how creditors, especially Wall Street bondholders and insurers, are treated in a municipal bankruptcy, because never before has a city seeking bankruptcy halted payments to Calpers or threatened its historical primacy as a creditor.”

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