RIVERSIDE, Calif. — San Bernardino has neither the inclination nor the money to make up for the payments it has missed to the California Public Employees' Retirement System, Mayor Pat Morris said.

Although the city plans to resume payments to the pension fund beginning July 1, it's unlikely the city will ever be able to catch up on missed payments, Morris said in an interview following a bankruptcy hearing here Tuesday.

"There is no way in the world that we can make CalPERS whole," Morris said. "There is going to have to be a workout."

San Bernardino stopped making payments to CalPERS for its employees' pensions after it filed for bankruptcy on Aug. 1.

The city also has missed $3.9 million in bond payments, but city officials are not commenting on negotiations related to payment on those bonds, and the issue did not come up during the hearing.

San Bernardino's financial woes stem from cash flow problems as opposed to debt as was the case in the Stockton, Calif. bankruptcy, Michael Busch, president of Urban Futures, which is advising the city in the bankruptcy, said in an interview following the hearing.

The city has about $90 million of outstanding pension obligation bond debts, according to budget documents, and another $200 million owed to holders of securities issued by the city's now-dissolved redevelopment agency.

Although the city is the successor agency to the former redevelopment agency, the RDA is not included in the bankruptcy, Busch said.

U.S. Bankruptcy Judge Meredith Jury postponed discussion on motions from CalPERS and several city employee unions for a relief of automatic stay to sue the city outside of bankruptcy court to a May 7 hearing. She also postponed further discussion of the city's eligibility to be in bankruptcy.

The bulk of the hearing held Tuesday centered on discussion of the city's efforts and ability to provide creditors with financial documents related to cash flow and the city's liquidity problems.

Meetings Urban Futures has had with creditors have helped to alleviate some of those concerns, Busch said.

CalPERS and attorneys representing bond interests, who led efforts to increase the availability of financial documents to creditors at a December status conference, were largely silent at Tuesday's hearing.

Busch said that is because Urban Futures and city employees have been working diligently to make sure all of the creditors have the information they need.

The city also has increased the number of people working in its finance department, partly through a contract with Urban Futures to fill three vacant positions on a contract basis.

The city has 14 employees, full time and contract staff in the finance department, but city officials also authorized funding three additional positions, said Paul Glassman, an attorney representing San Bernardino in the bankruptcy.

The city does plan to hire three more employees to reach the full complement of 17 full-time finance department positions, said Glassman, an attorney with Stradling, Yocca Carlson & Rauth.

Although Morris conceded his city's bankruptcy is not moving through the process as quickly as Stockton, he said he doesn't anticipate it taking the three years it took Vallejo, Calif. to exit bankruptcy.

The mayor was confident that the city will be deemed eligible to be in bankruptcy.

"We are broke," Morris said. "The judge said it in very clear and well-shaped words."

Crafting an adjustment plan in bankruptcy court is the only way the city can solve its financial problems, he added.

Busch told The Bond Buyer last week that the city does plan to resume payments to CalPERS on July 1. Those payments are included in a draft budget proposal that Urban Futures plans to present to the City Council at its April 15 meeting, he said.

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