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Hoping for progress, San Bernardino sets bankruptcy case deadlines

By Robin Respaut

RIVERSIDE Calif. (Reuters) - The city of San Bernardino, California, set new deadlines in an effort to accomplish some measure of progress in a municipal bankruptcy case that has slowed to a crawl over the past two years.

On Thursday, U.S. Bankruptcy Court Judge Meredith Jury agreed to a series of dates presented by San Bernardino that outlined a roadmap for the city to negotiate with its police and fire unions. Under the new schedule, the city aims to propose a preliminary plan of adjustment, a blueprint at the center of a municipal bankruptcy case, in early fall.

"We are preparing a 'small p' plan," Paul Glassman, the attorney representing San Bernardino, said during a status hearing on Thursday. "Both sides wants to schedule things quickly, that is what we’re hearing."

After entering Chapter 9 protection in August 2012 with a budget deficit of $45 million, San Bernardino's case has nearly come to a standstill. The city spent months in mediation with is largest creditor, the California Public Employees' Retirement System (Calpers), before reaching an interim deal last month.

During that time, unions representing safety workers became increasingly anxious with the lethargic pace of progress. Earlier this year, the city imposed unilateral pay and benefit cuts on its safety unions. The unions opposed the move, but they cannot fight while the bankruptcy proceedings continue.

"We would like to see the process accelerated a little bit," Corey Glave, attorney representing the city's firefighter union, told the court.

Under the new schedule, San Bernardino aims to potentially hash out its disagreements with its police and fire unions this summer, before returning to the court for a pre-plan hearing in September.

The judge told lawyers representing the Southern California city that she hoped the new deadlines would put "a fire under the city to get whatever you need to get done done."

San Bernardino 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 keenly interested to understand how financially distressed cities handle their debts to Wall Street compared to other debtors, like large pension funds such as Calpers, during Chapter 9 protection.

Stockton, another California city that declared bankruptcy around the same time as San Bernardino, is significantly closer to exiting Chapter 9. Detroit, Michigan, which filed the biggest municipal bankruptcy in U.S. history in July 2013, filed a plan of adjustment to deal with its $18 billion of debt in February.

San Bernardino's next status hearing is scheduled for Aug. 14.

(Reporting By Robin Respaut; Editing by Grant McCool)

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