San Bernardino Seal

By Tim Reid
RIVERSIDE Calif. Thu Sep 11, 2014 7:51pm EDT

(Reuters) – The city of San Bernardino, California, may impose cuts to its firefighters overtime and pension benefits in a bid to reach a bankruptcy exit plan, the federal judge overseeing the case said on Thursday.

In a tentative ruling, federal U.S. Bankruptcy Judge Meredith Jury said San Bernardino was entitled to unilaterally impose benefit cuts on the city’s firefighters, something their union had fiercely opposed.

Jury conceded that the cuts, which involve greater pension contributions by firefighters and reduction in overtime, were a hardship on the firefighters.

But she said the city had also been persuasive in showing that what it had been paying in terms of benefits to the firefighters was a financial burden, and being able to reject the firefighters’ collective bargaining agreement was a key step to forming a bankruptcy exit plan.

San Bernardino, a city of 205,000 65 miles east of Los Angeles, filed for bankruptcy in August 2012 with a budget deficit of $45 million.

It is one of a handful of municipal bankruptcies being closely watched by the $3.7 trillion U.S. municipal bond market. Bondholders, public employees and other state and local governments are keen on understanding how financially distressed cities handle their debts to Wall Street, compared with other creditors such as pension funds, during Chapter 9 protection.

Last month the city reached an undisclosed deal with its police union. In June, it also reached a deal – subject to a judicial gag order – with its largest creditor, the California Public Employees’ Retirement System (Calpers).

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