LOS ANGELES — The San Bernardino, Calif. firefighters union has replaced the California Public Employees' Retirement System as the most adversarial creditor in the city's Chapter 9 bankruptcy.

Following mediation, CalPERS reached a tentative agreement with the city, announced in a June 18 filing.

During a status hearing held Thursday afternoon, Bankruptcy Judge Meredith Jury released the firefighters union from mediation.

Attorneys for the firefighters union claimed the confidential nature of the meditation was preventing them from protecting employees in ongoing budget negotiations, according to a court filing.

The confrontations between the city and CalPERS and between the city and its unions have pushed creditors for $50 million in pension obligation bonds into the background. Attorneys for the bondholders have been fairly quiet since the meditation process began on Nov. 24.

The city hasn't made payments on its pension obligation bonds since it filed bankruptcy in August 1, 2012, according to filings on the Municipal Utilities Rulemaking Board's EMMA website.

San Bernardino firefighters have claimed the city has approximately $75 million in stockpiled money, which City Attorney Gary Saenz said in a prepared statement "is an incorrect claim that deserves clarification."

The majority of the $75 million in question represents the stated balance of invested "restricted fund accounts," Saenz said.

These are special revenue funds and restricted funds that are used to track monies that are legally designated for a specific purpose and cannot be used for other activities, he said.

"Pursuant to our city charter, these funds cannot be reallocated for any other general purpose item, including the fire department," Saenz said.

The union is "aware of the restricted nature of these funds and we are disappointed that union leadership is attempting to confuse and mislead residents," said Mayor Carey Davis.

"Most San Bernardino residents are aware that this is my first foray into politics, and that my entire career has been working with budgets and financial matters," Davis said. "To that end, I am very conscious of the need for the city to be very transparent in our bankruptcy negotiations and the budget planning process."

Financial data is included in council meeting agency packages that include both "city warrants" and a monthly treasurer's report, which are available on the city's website, according to city officials. The city also has been providing direct distribution of financial data to creditors.

According to San Bernardino's 2010 audited financial report, its most recent, the city said it had $223 million of outstanding debt at the end of June 2010, of which $131 million were tax allocation bonds. The city also had $48 million of pension obligation bonds, $12.5 million of revenue bonds and $31 million of certificates of participation.

City officials said they planned to file a CAFR for fiscal 2010-11 very soon and would catch up on the remaining audited financial reports by the end of this year.

The city council will vote on a $131 million balanced budget on June 23. That budget includes $10.6 million in payments to creditors, according to Michael McKinney. The budget documents that were available did not have a break down on which creditors would be paid what amounts.

The largest creditors are bondholders, fire and police unions, and the pension fund.

The pension obligation bond creditors, which include Ambac, Assurance Co., Erste Europaische Pfandbrief-und Kommunalkreditbank AG and Wells Fargo NA, came out in support of the city's efforts to seek bankruptcy protection in an August 2013 hearing - but have not been heard from much since then.

Attorneys for the bondholders have taken a low-key approach through the bankruptcy proceedings. Previous filings have indicated that efforts for the city to strike an agreement with CalPERS took center stage in the mediation process.

The last filing by POB creditors was a joint document filed in mid-July 2013 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 San Bernardino Public Employees Association, 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, according to the filing.

According to EMMA notices, scheduled interest payments of $1.01 million each on San Bernardino pension obligation bonds went unpaid on Oct. 1, 2012, April 1, 2013, and Oct. 1, 2013.

Wells Fargo Bank is the trustee on the bonds.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.