Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Bankrupt San Bernardino Favors CalPERS Over Bondholders
Author: Joel R. Glucksman
Date: May 3, 2013
Key Contacts
Back
The city council of bankrupt San Bernardino announced it will resume making payments to the state pension fund – the California Public Employees’ Retirement System, or CalPERS – to the chagrin of the city’s bondholders.
Municipal lawmakers approved a new 14-month budget that will require it to prioritize some creditors over others. The council voted to continue making $1.2 million pension payments on a bi-weekly basis effective July 1. In doing so, however, the city’s budget leaves no room to make payments to the city’s bondholders.
San Bernardino is not the first city faced with the decision of whether to prioritize payments to state pensions or Wall Street bondholders, but its decision to favor the pension fund may have an impact on how other distressed cities manage their own financial troubles. CalPERS is currently San Bernardino’s largest creditor, and called the city’s decision to continue payments a “smart business decision,” Reuters reports.
While the city agreed to resume pension payments, it left a great deal of uncertainty in how it plans to tackle other areas of debt. In what Mayor Pat Morris coined as the city’s “survival budget,” the amounts allocated toward repaying debt may fluctuate or face adjustments as the city continues to seek out solutions and meet its debt obligations.
“This budget of ours that leads us through the next 15, 16 months continues to defer critical obligations that must be acknowledged and paid off,” Morris told the San Bernardino Sun.
San Bernardino filed for bankruptcy law protection under Chapter 9 of the Bankruptcy Code last August. Since that period, it has deferred tens of millions of dollars in debt, and its survival budget focuses primarily on contributing to its state pension fund and covering critical needs for its residents, including police and fire services.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
Author: George McGowan
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: George McGowan
Why Every Business Should Conduct an Annual Insurance Coverage Review
Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)
Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan
How to Effectively Use Contracts to Manage Risk
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan
Understanding Portability for Estate and Gift Tax
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.