California's giant pension fund is among creditors opposing San Bernardino's attempt to convince a judge that the debt-ridden city is eligible for Chapter 9 bankruptcy protection.
A federal bankruptcy judge in Riverside hears arguments on Friday.
The city 60 miles east of Los Angeles filed for Chapter 9 bankruptcy protection in August after learning it faced a $46 million budget shortfall.
It also halted payments to its biggest creditor, the California Public Employees' Retirement System.
CalPERS calls the bankruptcy a sham, claiming the city filed bankruptcy to buy time. Pension documents say the city's new budget plan doesn't qualify because it depends on deferring payments owed to CalPERS and other creditors.
City Attorney James Penman told council members on Monday that the city has a very strong case.