RIVERSIDE CA (Reuters) - California’s public pension fund said on Tuesday that the bankrupt city of San Bernardino has a lot more cash than it had previously disclosed and more than enough money to pay off its debts to the retirement system.
Crisis-hit San Bernardino, a city of 210,000 located 65 miles east of Los Angeles, declared bankruptcy on August 1 last year and immediately suspended its $1.2 million biweekly payments to the California Public Employees’ Retirement System, or Calpers.
When it declared bankruptcy the city said it was overwhelmed by pension debt and could barely make payroll, and did not have the cash to keep current on its payments to Calpers, America’s biggest public pension system with assets of $256 billion.
But a Calpers attorney asserted in a court hearing on Tuesday that the city had $26.8 million in the bank as of January of this year - far more than the $4.2 million that the city said it had on hand.
Last month, the city council voted to resume paying its employer contributions to Calpers from this July - but will continue to renege on payments to other creditors, including the holders and insurers of $50 million in pension bonds.
San Bernardino and Stockton, another California city in bankruptcy, are considered test cases in the 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 opposes San Bernardino’s quest for Chapter 9 bankruptcy protection, pegs the city’s arrears so far at $12 million, and says it will seek full repayment of the debt. In an emailed statement, Calpers also said it will continue to charge penalty interest.
Calpers said it remains opposed to San Bernardino’s bankruptcy application despite the city’s decision to resume payments to the fund.
In federal bankruptcy court on Tuesday, Michael Lubic, an attorney for Calpers, said recent information provided by San Bernardino showed “the city had a lot more money last year than anyone thought.”
Lubic said that in court filings made by the city as recently as March, the city stated it only had $4.2 million cash-on-hand as of January.
“The real number is $26.8 million,” Lubic told Meredith Jury, the federal bankruptcy judge overseeing the case.
After the hearing, Lubic told Reuters he had based the $26.8 million figure on a legal declaration made last month about the city’s finances by Michael Busch, a financial consultant who has been hired by the city to manage the bankruptcy.
“There are materially different numbers that are coming out,” Lubic told the judge. “Calpers believes there is sufficient cash to pay Calpers and its other administrative claims.”
Calls to San Bernardino’s city manager and the city attorney’s office were not immediately returned.
Unlike Stockton, which was approved for bankruptcy protection by a judge on April 1, the San Bernardino case has been bogged down over disputes about the scope of documents the city must provide to its creditors. The judge ordered another hearing for June 5.
Reporting by Tim Reid; Editing by Jonathan Weber and Tim Dobbyn