Continuing an ongoing trend of over-committed U.S. cities of all sizes seeking bankruptcy protection, San Bernardino, California has been engaged in negotiations with its largest creditor, CalPERS for several months.  When the city took the unusual step of withholding the employers’ portion of payments to CalPERS, mediation was invoked to settle the issue. 

CalPERS insist that all other cities in bankruptcy have made this portion of the payments.  San Bernardino however insists that it is within its rights, under its negotiated agreement with the creditor, to make partial payments.  The city and representatives of the creditor agreed to court-appointed mediation to settle the issue as the city makes moves to emerge from bankruptcy.  The court placed a gag order on the proceedings; the exact attendance and nature of the conversation were kept confidential.

San Bernardino, a city of over 200,000, is approximately $16.5 million in debt to CalPERS and other creditors, plus accruing interest.  The city sought Chapter 9 Bankruptcy protection in 2012.  State law requires municipalities to negotiate with creditors prior to declaring bankruptcy, but San Bernardino avoided this requirement by declaring a fiscal emergency, which allows municipalities to skip procedural rules.