* City council passes budget to pay Calpers, not bondholders
* Little debate, mayor worries about other creditors
By Tim Reid
SAN BERNARDINO, CA, April 22 Bankrupt California
city San Bernardino passed a new budget on Monday night that
will allow it to resume paying into the state pension fund on
July 1 as it continues to renege on other debts including
payments to bondholders.
The city council vote comes nearly a year after it halted
contributions to the California Public Employees' Retirement
System (Calpers), the United States' biggest pension fund.
Patrick Morris, San Bernardino's mayor, has said the city's
other debts "must be taken care of and must be attended to" -
but there was no debate about those dues by the council.
There was no discussion either about the city's arrears to
the pension fund, which tops $12 million.
The decision to resume the $1.2 million, biweekly employer
contributions to Calpers while continuing to defer pension bond
debt will intensify the battle between the pension fund and Wall
The case has been bogged down in disputes about the scope of
documents the city must provide to its creditors. Unlike
Stockton, another California city which a judge approved for
bankruptcy on April 1, a decision on San Bernardino's
eligibility for Chapter 9 protection still appears some way off.
Both San Bernardino and Stockton are considered test cases
in the titanic battle over whether municipal bondholders or
current and retired employees will absorb most of the pain when
a state or local government goes broke.
Calpers, which manages $256 billion in assets, is San
Bernardino's biggest creditor. Holders of its $50 million in
pension bonds count as the city's second-biggest collective
creditor, according to the city's bankruptcy filing.
Calpers is opposing San Bernardino's quest for a formal
declaration of bankruptcy and it is the only city to have ever
halted payments to the fund. Stockton kept current on its
payments to Calpers and the pension fund did not oppose that
city's bid for Chapter 9 protection.
Calpers said earlier in April that San Bernardino's decision
to start repaying the pension fund was a "smart business
Other creditors, including the holders and underwriters of
San Bernardino's pension bonds, have not commented about the
city's budget after calls and emails by Reuters.