Bankrupt San Bernardino and its biggest creditor, the California Public Employees' Retirement System (CalPERS), said on Thursday that they have made substantial progress in recent negotiations over how much the city will pay the pension fund as part of any bankruptcy package, Reuters reported yesterday. The California city has been in court-ordered mediation talks with its creditors since late last year. It filed for bankruptcy in August 2012 with a budget deficit of $45 million. It is likely to set a precedent on whether retirees or Wall Street bondholders should suffer the most when a local government goes broke. San Bernardino took the unprecedented step of halting its bimonthly employer payments to CalPERS, America's largest public pension fund, for an entire year after filing for bankruptcy protection. It resumed payments in July 2013. It owes more than $17 million to CalPERS, which has assets of $277 billion. A key question in San Bernardino's case is whether the city will seek to reduce its monthly payments to CalPERS through federal bankruptcy protection. More mediation sessions are set for April. The San Bernardino chapter 9 case has progressed slowly, and it is still not clear when the city will produce a bankruptcy plan.
