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(Adds judge's comments about Calpers)
By Robin Respaut
SACRAMENTO, Calif., July 8 (Reuters) - The judge in Stockton, California's bankruptcy on Tuesday ruled that the city has collateral worth $4 million with which it could pay holdout creditor Franklin Templeton, dismissing the city's contention its collateral was worthless.
At the same time, U.S. Bankruptcy Judge Christopher Klein made no ruling on Tuesday on whether the California Public Employees' Retirement System, or Calpers, should be made to accept less than the entire amount it is owed while bondholders take losses in the case.
Klein's ruling on the collateral in the case of Stockton, which filed for bankruptcy in June 2012, followed a trial that concluded last month and centered around Franklin's objection to the city proposing to repay it less than a penny on the dollar for a debt of about $36 million.
The city's collateral against bonds held by Franklin includes two golf courses, a community center and a park, which the city had estimated had no value while Franklin had pegged their value at $6.12 million to $17.34 million.
"Of course one of the problems with appraisals is everyone comes in with an appraisal that supports their position," Klein said from the bench on Tuesday. "Judges have long figured out that they need to be skeptical with their opinions."
Klein challenged Calpers, Stockton and its public employees to counter his reading of the California Public Employees' Retirement Law, which he understood to spell out that Calpers itself could not be impaired in bankruptcy but employees' pensions could be.
"It seems to me if you're going to take away part of an individual's pension, the individual employee is the creditor and Calpers is in effect a servicing agency," said Klein. "It looks to me like Calpers does not bear the financial risk of a shortfall in payments. Instead the structure of the (law) places that risk on the employee."
Klein questioned a $1.6 billion termination fee that Calpers has said it could impose on Stockton if the city ended its contract with the $285.2 billion pension fund.
"It really makes me wonder whether this so-called lien is the kind of thing that could be enforced," said Klein. "I'm going to need some explanation about why I should take that lien seriously."
The question of how Calpers, the largest U.S. pension fund, should be treated is of keen interest for investors and bond issuers in the $3.7 trillion U.S. municipal bond market.
The treatment of pension systems has been uneven in the handful of recent municipal bankruptcy cases.
In the case of Detroit, the largest-ever Chapter 9 insolvency case that will go to trial later this summer, the city has proposed that city pension funds share some of the loss.
But in Vallejo, California, which emerged from bankruptcy in 2011, Calpers was left whole.
The next hearing is scheduled for Oct. 1. (Reporting by Robin Respaut; Writing by Dan Burns; Editing by Andrew Hay and Lisa Shumaker)