By Ryan Hagen, The Sun
Posted: 03/27/15, 12:01 AM PDT
RIVERSIDE >> San Bernardino’s lack of progress as the deadline to file a bankruptcy exit plan approaches is “perplexing” and shows an important contrast with other cities that have gone through bankruptcy, according to an attorney representing the city’s pension obligation bondholders who also was involved in bankruptcies in Detroit, Stockton, and Central Falls, Rhode Island.
The possibility that the city’s auditor won’t have all of the city’s financial statements audited by that May 30 deadline to file the Plan of Adjustment is particularly worrisome because the city’s bankruptcy appeared so suddenly after officials realized their budget calculations were off by more than $40 million, revealing a deficit of $45.8 million rather than a more manageable $3.1 million, attorney David Dubrow, who represents Ambac Assurance Corp, said Thursday in U.S. Bankruptcy Court in Riverside.
Although U.S. Bankruptcy Judge Meredith Jury said she would be “shocked” if the consultants the city brought in hadn’t gotten the city’s finances to a much more reliable state, especially since one audit had been completed on the finances since the bankruptcy filing, Dubrow said he remains worried.
“We would be shocked, too … but they were off by so much before,” he said. “They could still be off in a material way.”
Dubrow said that reliable financial statements were important in negotiated settlements that characterized other municipal bankruptcies. Out of the major cities he had been involved with as an attorney, only Stockton failed to come to an agreement with all creditors — with just one objecting.
San Bernardino, by contrast, had no “complete settlement,” he said, excluding an agreement with the California Public Employees’ Retirement System, or CalPERS, that he characterized as partial.
“This case is in some respects an outlier,” he said. “… It has been a perplexing question at least for me trying to understand why this case has gone on as long as it has and has not progressed more.”
His perspective, Dubrow said, was that San Bernardino’s lack of negotiating success stemmed in significant part from the lack of one or two people who could speak for the city and then win consensus among other policy-makers.
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