By Ryan Hagen, The Sun
Posted: 05/14/15, 4:49 PM PDT |
SAN BERNARDINO >> The proposed bankruptcy exit plan released to the public for the first time Thursday would pay 1 percent of the $50 million owed to pension obligation bondholders, slash retirees’ healthcare coverage, and contract out for services, including fire and waste disposal, among other changes.
The City Council is set to vote Monday on the plan prepared over the last few months by city leaders, consultants and attorneys, in advance of the May 30 deadline to submit the roadmap — called a Plan of Adjustment — to U.S. Bankruptcy Court.
Two of the 10 “classes” of creditors are “unimpaired,” meaning they would be paid fully: those required by the California Constitution to be paid out of restricted revenue sources and the California Public Employees’ Retirement System, with which the city negotiated a settlement in June.
In supporting documentation, the city says that despite deep cuts it’s already made — eliminating about 250 employees, making numerous other cost-reduction strategies, continuing to defer $200 million in essential capital maintenance and replacement of fleet vehicles — it says a structural deficit of more than $20 million remains in the General Fund.
Only about $51.7 million of the $357.9 million in potential labor savings for Fiscal Year 2014-15 through 2033-34 have already been implemented through negotiations and mediation, according to the document.
Retirees also agreed to a settlement, increasing what retirees pay for health care by putting them in a separate healthcare plan, which the city says will save it $370,000 per year beginning in 2016.
The increased medical cost for retirees, which varies by retiree, was worth it to ensure pension benefits remained intact, said Jeff Breiten, president of the City of San Bernardino Retired Public Employees Association.
“The immediate concern was the agreement that the city had with CalPERS,” he said. “And the retiree association’s first priority was the preservation of our CalPERS benefits that have been earned by the retirees over the past several decades.”
Each group of creditors, except the two that are unimpaired, are entitled to vote to accept or reject the plan. But the city says in the plan that it will ask the bankruptcy court to force the plan into effect regardless.
“As the Recovery Plan makes clear, our first priority has to be the delivery of adequate municipal services,” City Manager Allen Parker and City Attorney Gary Saenz write in a memo regarding the plan. “The pain will be shared among all stakeholders; employees, retirees, citizens (in the form of impaired service levels until the City can retain its footing) and capital market creditors. Only by undertaking the difficult process of refashioning the City into a modern municipal corporation can we be successful in creating a solvent future.”
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