w***t
发帖数: 8175 | 1 (Reuters) - Less than two years after exiting bankruptcy, the city of
Vallejo, California, is again facing a budget crisis as soaring pension
costs, which were left untouched in the bankruptcy reorganization, eat up an
ever-growing share of tax revenues.
Vallejo's plight, so soon after bankruptcy, is an object lesson for three U.
S. cities going through that process today - Detroit, Stockton and San
Bernardino, California - because it shows the importance of dealing with
pension obligations as part of a financial restructuring, experts say.
The Vallejo experience may be particularly relevant to Stockton, which is
further along in its bankruptcy case than Detroit and San Bernardino and has
signaled its intention to leave pension payments intact.
All three current bankruptcies are considered test cases in the titanic
battle between Wall Street and public pension funds over whether municipal
bondholders or current and retired employees should absorb most of the pain
when a state or local government goes broke.
"Any municipal bankruptcy that doesn't restructure pension obligations is
going to be a failure because pension obligations are the largest debt a
city has," said Karol Denniston, a municipal bankruptcy attorney in San
Francisco.
"A city like Vallejo can be reasonably managed but it is still going to be
flooded out because it cannot be expected to keep up with its pension
obligations."
Calpers, the retirement system for California public employees, said it had
"reached out" to Vallejo to discuss concerns. "Employers looking to cut
costs have some options that can make benefits easier to manage in the near
term, some of which Vallejo has already taken," Calpers said in a statement.
"We are pleased Vallejo has remained committed to delivering on the pension
promises it made to its employees."
Calpers is the largest pension system in the United States and serves many
California cities and counties. It has long argued that it has a much wider
responsibility than managing pensions for individual cities. It says state
law mandates that it is the custodian of the entire fund, and as such is
unable to renegotiate pension rates that cities have agreed to with their
workers.
Vallejo, a port city of 115,000 near San Francisco that was staggered by the
closure of a local naval base and the housing market meltdown, filed for
Chapter 9 bankruptcy protection in 2008 with an $18 million deficit.
During its three-and-half year bankruptcy, the city slashed costs, including
police and firefighter numbers, retiree health benefits, payments to
bondholders and other city services.
The only major expense the city did not touch was its payments to the $260
billion California Public Employees Retirement System.
"We realized we did not have the time or the money to take on a giant
behemoth like Calpers," said Stephanie Gomes, Vallejo's vice mayor.
Now city leaders say that growing, and unexpected, costs to Calpers are
putting its post-bankruptcy budget under enormous strain. The city budget
shows a deficit of $5.2 million for this fiscal year, and that is set to
rise to $8.9 million next year unless significant cost savings can be found.
When Vallejo entered bankruptcy in 2008, its annual employer payments to
Calpers were $8.82 million, or 11 percent of the city's general fund,
according to the city's finance department.
When it exited bankruptcy at the beginning of 2011, the payments to Calpers
were just over $11 million, or 14 percent of the fund. The latest budget
pegs those payments at $15 million, or 18 percent of the general fund.
The increase comes largely from the recent decision by Calpers to lower its
projected investment return rate, from 7.75 percent to 7.5 percent, and to
change the way it calculates long-term pension maturity dates.
Those changes mean cities, state agencies and counties must pay rate
increases of up to 50 percent over the next decade. Vallejo expects an
increase in pension contribution rates of 33 to 42 percent over the next
five years.
"Our five-year business plan was based on things we knew," said Deborah
Lauchner, the city's finance director.
"Now we have to figure out a way to pay for these new Calpers rates. Every
time we react to the last rate change they impose, they come up with another
one. I understand they want to improve their funding status, but it's on
the backs of the cities."
David Skeel, a bankruptcy law professor at the University of Pennsylvania
Law School, said: "Vallejo made a conscious decision under enormous pressure
not to mess with Calpers. That is a decision coming home to roost."
Marc Levinson, of the law firm Orrick, Herrington & Sutcliffe, was the lead
attorney for Vallejo in its bankruptcy and has the same role for Stockton.
He says his clients would welcome pension reform in California, and he is
the first to say that contributions to Calpers are a big problem for cities.
But, Levinson said, dealing with the issue is no simple matter.
"How does a city start a new pension plan when it can't pay its bills?",
Levinson said. "How can a city break away from Calpers and still retain
employees when other jurisdictions have a pension plan?"
Vallejo has met in full its annual payments to Calpers since exiting
bankruptcy, and even accurately projected them.
"But just because a cost is projected does not make it sustainable," said
Lauchner, the finance manager.
Dan Keen, Vallejo's city manager, said the only way for the city to meet
growing pension costs is to get more concessions from city unions - contract
negotiations are underway - and to cut services further.
Keen said options were to slow or freeze hiring and make other cost cuts,
for example, at the city marina. But he added: "The reality is we don't have
anywhere else to cut."
Gomes, the city's vice mayor, said of Calpers: "It's the biggest part of my
city's problem. I don't know any city that can afford it."
(Editing by Jonathan Weber and Dan Grebler) |
|
