By Tim Reid
LOS ANGELES, Feb 7 (Reuters) - Negotiations between the
bankrupt California city of San Bernardino and the state's
public pension fund over the city's unprecedented suspension of
pension payments have failed to produce an agreement before a
crucial court hearing, officials said on Thursday.
Senior officials at the California Public Employees
Retirement System, the biggest U.S. public pension fund and San
Bernardino's biggest creditor, have met with city budget
officials and held telephone conversations with the city's mayor
over the past several weeks, a Calpers spokesman said.
San Bernardino still has not provided crucial financial
information, or proposed a plan for resuming its twice-monthly,
$1.2 million payments to the fund, the Calpers spokesman said.
The judge overseeing San Bernardino's request for bankruptcy
protection told the city in December that it must provide more
financial information to its creditors. Calpers says its efforts
to help the city produce the information have not been as
productive as it expected, but still hopes something can come
from negotiations before the next court hearing on Tuesday.
San Bernardino, a city of 210,000 people about 60 miles (96
km) east of Los Angeles, filed for bankruptcy protection on Aug.
1, citing a $46 million deficit for this fiscal year and little
leeway to make day-to-day wage payments.
The court has yet to rule on whether San Bernardino is
eligible for Chapter 9 bankruptcy protection. Calpers argues
that it is not. In the meantime, all collection actions by
creditors are halted.
San Bernardino appears to be struggling with basic
day-to-day operations, raising questions about its ability to
manage a complex bankruptcy process. The two officials with the
most knowledge of the city's finances - City Manager Andrea
Travis-Miller and budget chief Jason Simpson - have both
resigned in recent weeks. Neither responded to calls and emails.
The city has hired an outside consulting firm, Urban
Futures, and is paying it nearly $850,000 for help with the
bankruptcy and other matters.
No city has ever unilaterally suspended payments to Calpers,
which manages pension plans for state government employees and
many municipalities and local government agencies around the
The bankruptcy could be a test case as to whether the
pensions of government workers take precedence over other
payments in a municipal bankruptcy - a high-stakes issue for
pension plans and their beneficiaries, and for the Wall Street
bondholders who lend money to governments.
Should the bankruptcy judge rule that the pension fund not
be paid in full in a restructuring of the city's debt, other
struggling California cities could be tempted to alter their
payments to Calpers.
At the Dec 21 hearing, U.S. Bankruptcy Judge Meredith Jury
ruled against an attempt by Calpers to bypass the federal
bankruptcy court and collect San Bernardino's pension arrears in
state court. But the pension fund's attorneys reserved their
right to go to state court anyway, potentially setting up a
showdown over whether federal bankruptcy law trumps state law
when it comes to government employee pensions.
Calpers' chief executive, a senior actuary and another
official traveled to San Bernardino on Dec. 20 and met with the
city's manager and finance chief to discuss the arrears. Calpers
officials say they offered financial experts to help the
understaffed debtor sort through its financial records.
Calpers is seeking detailed projections of costs and
revenues, and a line-item breakdown of the city's provisional
bankruptcy budget plan, which ran to just 12 pages. None of that
has been provided, Calpers says.
"Calpers has done everything we can to reach out to leaders
in the City of San Bernardino to better understand their
financial situation to help with solutions," said Robert
Glazier, a Calpers official.
San Bernardino's mayor concedes there is nobody inside the
city with the knowledge or expertise to replace the departing
city manager and budget chief. He says he is making every effort
to replace them.
"They are not lining up at the door of the city to come and
work for us," said Fred Shorett, a San Bernardino council
member. "Obviously we are facing huge challenges."
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