Regional News

A San Bernardino Union Could Withdraw Its Opposition to the City's Bankruptcy

LOS ANGELES — The San Bernardino Public Employees Association could remove its objection to the California city’s eligibility to be in Chapter 9 bankruptcy.

U.S. Bankruptcy Judge Meredith Jury granted SBPEA’s request for an extension to file an objection to summary judgment on the city’s eligibility.

Creditors had until Friday to file objections, but SBPEA now has until Tuesday. The deadline also could be extended another three days beyond that without the city and employee’s union returning to the judge, according to the judge’s order.

The city and SBPEA reached a tentative agreement on Aug. 1 regarding certain terms and conditions of employment, according to court documents.

If ratified by the mid-management bargaining unit members and approved by the city’s common council – expected to happen as soon as Monday – SBPEA would withdraw its objection to the city’s eligibility to be in bankruptcy and the city would withdraw its motion to reject the collective bargaining agreement of SBPEA, according to court documents.

The city’s staunchest opposition to its eligibility to be in bankruptcy has not come from the city unions, but from the California Public Employees’ Retirement System.

The pension fund filed more than a dozen documents Friday arguing that the judge should deny summary judgment and instead schedule dates for a trial on the issue.

A hearing on the eligibility question is scheduled Aug. 28.

CalPERS attorneys argued in court papers that “genuine issues of material fact exist as to whether the city is eligible for relief.”

The pension fund asked the judge in court documents to deny summary judgment and set a status conference at a later date to outline how “formal discovery” should proceed – and set a date for an evidentiary hearing/trial on the merits of the city’s request for an order of relief.

CalPERS attorneys contend that the city has yet to file a pendency plan with consistent numbers regarding the city’s current financial position, or an accurate picture of its financial situation prior to its August 2012 bankruptcy filing.

Jury allowed an informal discovery process in the hope that all of the parties would resolve some discovery related issues and the creditors could narrow the scope of their requests.

CalPERS argued in court documents that the pension fund cannot present facts essential to justify its opposition without a formal discovery process.

Throughout the course of the case, CalPERS has consistently stated to the court that prior to the ruling on the contested eligibility motion, discovery was necessary, CalPERS attorney Michael Lubic argued in a court document.

The city has missed scheduled payments to CalPERS, drawing a contrast to other large California municipal bankruptcy cases.

Vallejo, which emerged from bankruptcy in 2011, never challenged employees’ pension benefits.

And Stockton, which filed for Chapter 9 soon after San Bernardino did, has also made no move to touch CalPERS pension payments or benefits, even as it seeks to impose sizable haircuts on many bondholders.

CalPERS supported Stockton’s successful efforts to be declared eligible for Chapter 9 bankruptcy. Bondholders and insurers challenged it.

In San Bernardino, the so-called POB (pension obligation bond) creditors, which include Ambac Assurance Co., Erste Europäische Pfandbrief-und Kommunalkreditbank AG and Wells Fargo NA, have come out in support of the city’s efforts to seek bankruptcy protection.

The POB creditors filed a joint document in mid-July urging the court to grant summary judgment in favor of the city on Chapter 9 eligibility; to overrule in their entirety the objections to eligibility filed by the SBPEA, CalPERS, and other creditors; and enter an order of relief.

The POB creditors are interested parties, because of their roles with respect to the city’s issuance of $50.4 million in taxable pension obligation bonds to refund the city’s obligations to CalPERS relating to municipal employees’ pension benefits, according to the filing.




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