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A move by bankrupt San Bernardino to spend up to $200,000 on a public relations firm has angered some of the cash-strapped California city's creditors, who face deep cuts under an imminent exit plan, Reuters reported yesterday. Negotiations between San Bernardino and most of its creditors have stalled, three months before it must produce a court-ordered bankruptcy exit plan. The city, 65 miles east of Los Angeles, is in year three of a bankruptcy process beset by delay and dysfunction. City officials have made clear their intention to significantly cut their debt to the holders of $50 million in pension obligation bonds. The city has imposed deep cuts to its police and fire departments and wants to enshrine those cuts in a bankruptcy plan. On March 2 the city council is set to discuss invited bids from eight public relations firms to improve the city's communications strategy. Bids have ranged from $72,000 to $201,000 annually. The city already has a $600,000 contract for fiscal year 2014/15 with a financial consultancy to help with the bankruptcy. In November it hired a management consultancy in a $300,000 deal.

Bankruptcy Judge Thomas Tucker will take over Detroit’s landmark bankruptcy case today following the retirement of Bankruptcy Judge Steven Rhodes, the Detroit News reported today. Judge Tucker, a federal bankruptcy judge since 2003, was named the successor Wednesday by R. Guy Cole Jr., Chief Judge of the U.S. Court of Appeals for the Sixth Circuit in Cincinnati. Judge Tucker will resolve lingering disputes over claims in the biggest municipal bankruptcy case in U.S. history and enforce the city’s plan to shed $7 billion in debt, restructure another $3 billion and plow $1.7 billion into improved services. The city emerged from bankruptcy in early December.

Bankruptcy Judge Steven Rhodes said that it was an easy legal decision to authorize pension reductions in Detroit's bankruptcy but that he felt still compassion for the city's retirees and citizens who suffered because of the city's financial collapse and water shutoffs, the Detroit Free Press reported today. Judge Rhodes, who presided over the largest municipal bankruptcy in U.S. history from start to finish, said that he invited citizens to speak in his courtroom on multiple occasions during the case because he wanted to hear their input. "I was genuinely interested in what their concerns were and how I could possibly deal with them, if I could,” Judge Rhodes said. Still, his groundbreaking ruling on Dec. 3, 2013 giving Detroit emergency manager Kevyn Orr the authority to reduce the city's pension obligations was prudent, the judge said. Michigan's Constitution describes public pensions as a contractual obligation that cannot be cut, but federal bankruptcy law allows contracts to be severed. "I have to say that from a legal perspective, it was not a particularly difficult decision," he said.

Bankruptcy Court Judge Steven Rhodes ruled yesterday that the nearly $178 million charged to Detroit by law firms and consultants for fees and expenses in its historic chapter 9 case was reasonable, Reuters reported yesterday. Judge Rhodes said that he based his decision mainly on the complexity of the bankruptcy case filed in July 2013 as well as substantial reductions that the firms agreed to make in their bills. "The city is now on a path to success precisely because of the expertise, skill, commitment, endurance, personal sacrifice, civility and proficiency of all of the professionals in the case, including most certainly those whose fees are subject to review in this opinion," the judge wrote.

Detroit Mayor Mike Duggan said that the post-bankruptcy city will record its first balanced budget since 2002 when the current fiscal year ends on June 30, Reuters reported yesterday. "We still have to run a very tight budget every single week in order to stay on track," Duggan cautioned in his state of the city address on Tuesday. He added that while Detroit must report to a state-created financial review commission, that oversight will end if the city pays its bills and balances its budget for three straight years. Detroit exited the biggest municipal bankruptcy in U.S. history in December, shedding about $7 billion of its $18 billion of debt and obligations. The end of the historic bankruptcy also marked the departure of state-appointed emergency manager Kevyn Orr and the return of power to run the city to Detroit's elected officials. Duggan said the city continues to work on the Great Lakes Water Authority, a deal between the city and three counties to regionalize water and sewer services. The deal, which was a key component of the city's debt adjustment plan, ran into a snag when Oakland County Executive L. Brooks Patterson raised concerns about the lack of new audited financial statements for the Detroit Water and Sewerage Department amid fears that declining revenue will lead to big rate increases. A Feb. 6 order by Bankruptcy Judge Steven Rhodes indicated that mediation was continuing over the water authority.

Lawyers for bankrupt San Bernardino, Calif., and the city's creditors clashed in federal bankruptcy court yesterday, with a major bondholder accusing the city of stoking "Main Street versus Wall Street fires,” Reuters reported yesterday. San Bernardino, now in its third year of bankruptcy, accused the bondholder and its bond insurer allies of trying to overwhelm the city with litigation and derail its efforts to produce a viable exit plan. At the same time, a major bondholder claimed it should be treated on equal terms to that of the city's biggest creditor, CalPERS, California's public pension fund. The growing tension between the city and some of its biggest creditors come after the Luxembourg-based bank Europäische Pfandbrief-und Kommunalkreditbank AG, which holds $50 million in pension obligation bonds, filed a lawsuit against San Bernardino in January. Also suing the city in the same lawsuit are Ambac Assurance Corp., which insures a portion of those bonds, and Wells Fargo Bank, the bond trustee and flagship bank of Wells Fargo & Co.

Bondholders who extended roughly $50 million to bankrupt San Bernardino, Calif., are criticizing city leaders who plan to protect money for employee pensions but negotiate cuts on the city's other debts, Dow Jones Daily Bankruptcy Review reported today. In court papers, the Luxembourg bank that represents bondholders said the city's decision to make full payments to the state's employee pension fund "was not guided by any sort of strategic vision." Citing a recent ruling from another bankrupt California city, the bank's lawyers said that San Bernardino leaders need to make pension cut decisions at the same time that they redraw contracts with its police and firefighter unions. Since the city filed for bankruptcy on Aug. 1, 2012, San Bernardino leaders still haven't reached new money-saving union agreements for its police officers and firefighters as part of their effort to cut more than $20 million in labor costs from the city's budget.