San Bernardino's and Compton's disputes with CalPERS, the state's public employee pension fund, could have ramifications for other cities and their creditors, credit rating firm Moody's said in a new report, the Los Angeles Times reported today. "These situations could open the door for courts to decide whether pension payments can be legally suspended or modified if a California local government is in financial distress and/or bankruptcy," Moody's wrote in its weekly credit outlook released on Friday. On one hand, the report warned that if the financially troubled cities succeed in delaying or reducing their CalPERS payments, it "could incentivize other financially distressed cities to seek concessions from all creditors," including bondholders. On the other hand, if cities are not required to make full pension payments while in bankruptcy, the report said, more might be left for other creditors, including bondholders.
