City Of San Bernardino To Pay Pensions Despite Bankruptcy
RIVERSIDE, Calif. – The city of San Bernardino has agreed to pay the California Public Employees’ Retirement System all that it owes in bankruptcy proceedings. It is the 2nd city in recent months that chose to give pensions despite a court ruling according to which the benefits can be cut if the employer is bankrupt.
San Bernardino Sun reported on Wednesday that a filing on Monday in U.S. Bankruptcy Court in Riverside settled a deal in which the city will pay $13.5 million, which is the amount of money it missed since it declared bankruptcy in 24 equal installments. It also includes interest and fees over the next 2 years, beginning in July.
In June, a deal was announced by the city and CalPERS but the details were not made public at that time. The agreement ends months of deadlock between the city and CalPERS, its largest creditor. $4.5 million is the amount of money which has been paid to CalPERS by the City.
With the cost of public pensions increasing, the Stockton and San Bernardino bankruptcies were considered important tests of whether cities would choose to reduce benefits to exit bankruptcy.
A creditor, in Stockton challenged the city’s decision to keep paying CalPERS. San Bernardino stopped payments from CalPERS for several months after it filed for bankruptcy protection in the year 2012, accumulating a past-due account of about $14 million. Some of the city’s elected leaders also discussed about attempting to decrease San Bernardino’s ongoing $24 million-a-year contribution to the pension fund.
At a hearing held on Tuesday, creditors discussed the details of CalPERS repayment and some bondholders showed that they were not in favor of the plan.
In 2005, the city issued bonds to cover its pension costs and those bondholders are among the creditors who have been annoyed with the long period of negotiations.
Vincent J. Marriott III, who represents ErsteEuropaischePfandbrief- und Kommunalkreditbank AG, the Luxemburg-based holder of bonds said, “That deal is really more of surrender. At worst, the city will find there is no feasible plan that could incorporate the deal with CalPERS”.
Unions for police and firefighters said the city was taking too much time for the settlement with CalPERS and a delay was annoying their members.
According to police union attorney Ron Oliner, “It should be no surprise to the court that the bondholders don’t want money used to pay employee pensions”.
U.S. Bankruptcy Judge Meredith Jury also gave the city a time period of 6 months at a hearing to incorporate the deal into a final exit plan and said if it doesn’t, the case will be dismissed and the court will not make any decision.
The city has been in bankruptcy for 2 years and 4 months and has been negotiating in closed-door proceedings.
“I’d rather say this is a hard, hard deadline, and the Earth is going to have to move under San Bernardino,” to get a delay in the time given, she added.
News Source: www.MercuryNews.com