San Bernardino Sets Aside $10.6 Million To Repay CalPERS

When San Bernardino went bankrupt, it stopped paying its creditors, including its biggest one: CalPERS.

It suspended pension payments to the country’s biggest retirement system for a full year – those payments totaled $13.6 million.

Now, the debts have come due: San Bernardino will set aside $10.6 million from its budget this fiscal year to pay back CalPERS.

From Reuters:

Bankrupt San Bernardino has begun repaying millions in arrears to the California Public Employees’ Retirement System (Calpers) in a deal that has ended an acrimonious relationship between the California city and its biggest creditor.

San Bernardino has set aside $10.6 million in its current budget, which has yet to be published, to pay an unnamed creditor. A senior city source, speaking on the condition of anonymity because details of the Calpers deal are subject to a judicial gag order, confirmed that creditor is Calpers.

San Bernardino suspended the payment of debts to all creditors when it declared bankruptcy. Its decision to strike a deal with Calpers first, and begin paying arrears before a bankruptcy exit plan could be formulated, shows the reluctance of California cities to take on the pension giant, which insists that it must always be paid in full, even in a bankruptcy.

The city declared bankruptcy in August 2012 and suspended its employer payments to Calpers for an entire year after entering Chapter 9 protection, running up principal arrears of $13.5 million, according to Calpers.

San Bernardino began monthly payments of between $600,000 and $700,000 to Calpers in July, according to the source. A second official, budget officer for the city Dixon Mutadzakupa, confirmed that arrears payments to Calpers had begun.

It wasn’t clear whether the city was only on the hook for $10.6 million. If that were the case, San Bernardino would only be paying CalPERS 80 percent of what it owes.

It’s also possible the city could pay the remaining $3 million during the next fiscal year.