* San Bernardino enters talks with creditors
* Calpers demanding nearly $17 million in arrears
* City wants to pay $13 million
By Tim Reid
LOS ANGELES, Nov 25 Bankrupt San Bernardino,
California, enters mediation with its creditors on Monday and
will immediately dispute the amount the California Public
Employees' Retirement System (Calpers) says the city owes in
pension arrears, according to people with knowledge of the
city's preparations for the talks.
In what could presage a groundbreaking showdown with
America's largest public pension fund, San Bernardino officials
will challenge Calpers' calculations and also seek a longer
repayment term on the debt.
Calpers says that after San Bernardino halted its employer
contribution to the fund for an entire year after filing for
bankruptcy protection in August last year - the first time a
California city has ever paid less than its full dues - its
arrears stand at just under $16.5 million, plus growing
City officials say it is unclear exactly how the arrears
figure has been calculated. They say they owe Calpers about $13
million. City officials also want to seek as long a period as
possible to repay the deficit, and block potentially onerous
interest charges and other fees.
How the city plans to tackle the issue of its arrears to the
pension fund, which manages $277 billion in assets, was part of
a draft plan for creditors, or "term sheet," handed in October
to Meredith Jury, the federal bankruptcy judge overseeing the
Judge Jury has ordered details of the term sheet be kept
secret. San Bernardino's three days of closed-door negotiations
with creditors will be mediated by Nevada bankruptcy Judge Gregg
Zive, who was appointed by Judge Jury. It will also be the first
time the city has had substantive negotiations with its
creditors since it declared bankruptcy on Aug. 1, 2012.
The San Bernardino case is taking a much different course
than that of Stockton, another California city that filed for
bankruptcy last year. Stockton has kept current on all payments
to Calpers and decided not to take on the pension fund in its
bankruptcy, while bondholders have agreed to accept
substantially reduced repayments.
Calpers has supported Stockton's bankruptcy, but has fought
San Bernardino's quest for Chapter 9 protection at every turn.
In San Bernardino, the stakes are high for the pension fund
because it has strenuously argued that all cities and other
local entities must always pay it in full, and on time, even in
In San Bernardino's case, like the much larger bankruptcy
case in Detroit, the question of whether pension benefits can be
cut has become a central issue.
San Bernardino resumed paying Calpers in July, but has
reneged on its debt to bondholders and other creditors since
August 2012, including the holders of $50 million in pension
Rosanna Westmoreland, a Calpers spokeswoman, said San
Bernardino owes $16,418,628 in arrears. Until last week, Calpers
had pegged the figure at $17 million.
"They are slowly paying down what they owe," Westmoreland
said. She said interest was only being assessed on payments
logged with Calpers to date, and that the city was behind in its
Calls and emails to the city and the city attorney went
Calpers administers benefits for more than 3,000 city, state
and local agencies, or nearly 3 million people. Many California
cities are struggling to meet growing pension costs, which are
typically by far their biggest expense.