Skip to comments.Bankrupt San Bernardino to halt payments to Calpers, bondholders
Posted on 11/27/2012 5:56:14 AM PST by Uncle Chip
SAN BERNARDINO, California (Reuters) - Bankrupt San Bernardino, California, voted on Monday to present a plan to a bankruptcy judge that seeks to balance its budget through deferring payments to the state's public employee pension fund and to the city's bondholders.
San Bernardino has already halted its biweekly $1.2 million payment to the California Public Employees' Retirement System (Calpers) since it filed for bankruptcy protection on August 1.
The city calls the halted payments "deferrals," but under the pendency plan it would not resume any payments to Calpers until the 2013-2014 fiscal year. It also wants to negotiate its debt to Calpers so it can be repaid over 30 years.
Calpers, America's biggest pension fund which serves many cities and counties in California, is San Bernardino's biggest creditor. The city lists its unfunded pension obligations to Calpers at $143.3 million. Calpers says if the city halted its relationship with the fund immediately the debt would be $319.5 million.
Calpers has already formally objected to San Bernardino's bankruptcy filing. While it says it wants to negotiate with the city, it has also said it will ultimately take legal action to recoup any unpaid pension payments.
San Bernardino's case sets up a showdown between Calpers and other creditors, particularly Wall Street bondholders and insurers, over how they will be treated in the bankruptcy.
Calpers has long argued that pension contributions cannot be touched, even in bankruptcy. Wall Street has signaled that it intends to fight Calpers' historical primacy as a creditor in the San Bernardino case.
Such a fight could have far-reaching implications for Calpers and other creditors in future municipal bankruptcy proceedings.
(Excerpt) Read more at news.yahoo.com ...
There will be a war over this. Pensioners vs producers.
We already have a pretty good inkling about how that will turn out. The treatment of the "secured" creditors of General Motors is the best example. There are more RAT pension votes than RAT bold holder votes.
Should do wonders for any future bond sales! Or will the reluctance to buy municipal bonds be branded unpatriotic?
What a mess these people have gotten themselves into. And the mindset of “kick’in the can down the road” until it’s no longer the incumbents problem has led to all of this.
I don’t know what will happen in the future but I do hope that borrowing by governments to pay for projects today will someday end. Of all of the reforms I could imagine, “Cash on the Barrel-head”, is the second one I would most like to see.
The first of course would be, no more taxes on Property. That one tax system has nearly destroyed the concept of “private property” here in the U.S. of A. How can someone truly own their property if the Government can take it away for not paying taxes on it?
If I was a California government employee and had a choice between a pension and a one-time distribution in the near future, I’d take the distribution.
Of course, then Obama would probably just get Bernanke to start buying it, instead. :)
Here’s an idea.... employees paying into their own retirement fund...
Keep kickin the can down the road stops working when you get to a really really steep incline
“There will be a war over this. Pensioners vs producers.”
Pensioners generally think and have the expectation that taxpayers exist to pay their pensions, while taxpayers generally think that they should get services for the taxes they pay.
I’m not sure there is anything local, state and federal employees/pensioners would NOT do to taxpayers/citizens to get the money they think they should get. They are legion, and they are going to be very angry when we can’t pay them anymore.
Not just that but CalPERS has a huge Wall Street portfolio and is often making demands of companies whose stock it holds -- including some of the big Wall Street banks.
I'm sure one of the requirements for its portfolio is that any company whose stock it owns not hold any California bonds or other California liabilities. Wait until that blows back on them.
Ironic that San Bernardino was where McDonalds, one of the most successful private sector businesses in history, was founded. Just wait until the new tax increases take effect and even more companies and individuals abandon California for lower tax and more business friendly states in the south and southeast. Dems will do for California what they did for Detroit.
I don’t think Kalipornia can be saved
Failure to buy bonds will soon be subject to what John Roberts will call a “tax.”
They just have to hang on until Jan. 21. That’s when the bailout request will hit Obama’s desk.
I imagine one of the first thoughts that will cross their mind is to both expand and encourage euthanasia for those over the age of 60.
Like in Britain, tell hospitals that for the elderly, euthanasia is “opt out”. So unless they put in writing that they *don’t* want to be euthanized, it’s automatic.
“I imagine one of the first thoughts that will cross their mind is to both expand and encourage euthanasia for those over the age of 60.”
As in just about everything, if you are counting on government to take care of you in any phase of your life, you are going to be sadly disappointed.
If you aren’t otherwise healthy or can’t pay to keep yourself alive, it should go without saying that government isn’t going to do it for you. But in this day and age, erstwhile conservatives want their socialist healtcare programs.
You might even be one of them.
True, but it wouldn't be an issue if the folks in control hadn't made a lot of promises then kept up the bad practices until they could no longer be kept. I was promised free health care for life when I joined the military and it is no longer free (although the deal is a lot better than folks in the private sector). I kept my end of the deal and gave them 24 years vs. the 20 years that was required - why shouldn't I be upset that "they" broke their end of the deal? I understand that the "pensioners" are no longer "producers", but they made end of life plans based on the contracts they had worked under and have every right to expect the deal (even if outlandishly lavish) to be adhered to.
San Bernardino’s next step in bankruptcy is to move to an “end-in-place” of all existing pension obligations (meaning the present value of existing pension accounts are what they are but will not grow by additional contributions), and establish all pension obligations going forward under outside pension fund managers, outside of Calpers. It could use TIACref for instance.
Calpers is a state-run near monopoloy outfit, not a private company. It is not deserving of any sympathy for pension contributions not yet paid-in to it. It needs to be working with towns to help devise solutions. Why? The local government bankruptcy situation in California is going to grow, not recede. Calpers needs to admit it’s own promises on returns were too rosy, too rosy on benefits that were too generous; and it needs to help with solutions, not simply demand that past agreements have to be honored “in toto”. It has to use some of its own massive earnings to (a) help bridge the gap, by (b) lowering expected returns to pension account holders, and (c) using some portion to help minimize short falls in pension contributions in the near term.
If Calpers were not the government near-monopoly that it is, I might feel differenly about what should now be expected of it.
There must be something in the air today. In several different threads I have posted stuff that is mildly sarcastic, or just plain observational, yet have had people responding like they were spoiling for a fight, and I had written something offensive.
No, I am not a socialist, nor do I like socialist anything, and it’s pretty discomfiting for others to even suggest that I am or do.
This is a different scenario.
Here the bond insiders think they are entitled to 100% secured status regardless of the law.
There are no good guys here. Remember these are the thugs using bonds the way unions use strikes.
No, the true war would be between pensioners and the welfare class. The reason SB is bankrupt is it has too many people taking public assistance, and not enough paying taxes.
“No, the true war would be between pensioners and the welfare class.”
That would solve the problem if it went far enough.
So, tell me this, if the City Of San Bernardino is not making biweekly pension fund payments to CalPers as agreed, then pension coverage for current and future pensioners of the City Of San Bernardino is in jeopardy because it is not being funded, correct?
Or, does everybody pretend that the pension plan continues on as planned with no interruption, despite the City Of San Bernardino failing to fund it?
If there are no consequences for failing to fund, then they’ll continue failing to fund.
Government agencies are so stupid when it comes to money. You’d think it wasn’t theirs or something. /s
“No, I am not a socialist, nor do I like socialist anything, and its pretty discomfiting for others to even suggest that I am or do.”
Then quit sounding like a socialist. If you are willingly dependent on government health care and they try to kill you with inadequate socialist medical care to save money on you for Sandra Flukes birth control, who’s fault is it?
I was not sounding like a socialist. I was being sarcastic. And not grasping that even after I explained the joke makes you sound somewhat dense.
It will happen. The feds will bailout CA.
"Too Dem to Fail".
“I was not sounding like a socialist. I was being sarcastic. And not grasping that even after I explained the joke makes you sound somewhat dense.”
You were sounding socialist, and not as out of place as you should have sounded. It used to be that the sarcasm would be obvious, even hilarious around these parts, nowadays socialism in the form of medicare/social security is not laughed at anymore.
Can you make up a knee-slapper about a dead ambassador? Maybe I’ll get my sense of humor back.