U.S. judge overseeing San Bernardino bankruptcy sets deadline for city plan

By Robin Respaut (Reuters) - More than two years after San Bernardino filed for bankruptcy, a judge on Tuesday set a deadline for the California city to propose a plan to manage its Chapter 9 protection. U.S. Federal Bankruptcy Judge Meredith Jury said she was surprised to see how the case had progressed and hoped "the city has a game plan." Jury set a May 30 deadline for the city to submit a blueprint to exit bankruptcy. "Let's know sooner than later," Jury told attorneys. After months of mediation, the city said it had reached a deal with the California Public Employees' Retirement System (Calpers) to pay the pension fund money it owed on deferred payments in full. Payments started in July and would continue through June 2016. But the city wanted more time to present a plan to manage its bankruptcy, especially after it was derailed by a voter rejection of a Nov. 4 ballot measure. The measure would have freed up more funds by scrapping a rule that sets police and firefighter wages based on salaries in wealthier cities. Paul Glassman, San Bernardino's bankruptcy attorney, had told the judge that the measure's defeat was a "game changer" and had thrown the restructuring plan off track. Jury was incredulous. "I can't tell you how surprised I was to see the city had put all of its balls in the charter-amended basket, and you had not considered an alternative," said Jury. "That was never going to be enough. Good heavens, the attorneys' fees in this case is probably several years' worth of adjusted (police and fire) salaries." San Bernardino, a city of 210,000, located 65 miles east of Los Angeles, declared bankruptcy in July 2012 with a $45 million budget deficit. In the last month, the cities of Detroit and Stockton were given the green light to exit Chapter 9 protections. Detroit, a far bigger city that declared bankruptcy in July 2013 with $18 billion of debt, produced a bankruptcy plan within eight months. Stockton, California, which declared bankruptcy just before San Bernardino, saw its plan to exit bankruptcy approved on October 30. The $3.7 trillion U.S. municipal bond market has closely followed municipal bankruptcy cases, with a keen eye to see how financially distressed cities manage their debts to Wall Street, compared with other creditors such as employee health benefits and pensions. (Reporting by Robin Respaut, additional reporting by Tim Reid; Editing by Cynthia Osterman)