For over a year, CalPERS has waged a legal battle against representatives from the City of San Bernardino over the city’s pending declaration of bankruptcy.

After a court ruling on Wednesday, it is apparent that CalPERS has lost the first round. Bankruptcy Judge Meredith Jury declared that there were no apparent alternatives than for the city other than to declare bankruptcy and undergo a dissolution of assets.

“I am ruling as a matter of law that the city is eligible,” Jury said. “I don’t think anyone in this courtroom seriously thought the city was anything but insolvent.”

CalPERS is concerned about the implications of this ruling, as it could send a message to other cities that they can avoid pension obligations by simply failing to maintain sound finances. They had argued that the city’s pension funds should not be subjected to the bankruptcy ruling in the same way as the city’s other creditors.

San Bernardino’s pension fund amounts to over $260 billion and is the city’s largest creditor. Jury has delayed her decision regarding the amount the city must pay CalPERS. A ruling on that front is expected on Wednesday, September 4.

Read the full article at the San Bernardino Sun.