Bankruptcy could cut San Bernardino fire pensions

Bankruptcy could cut San Bernardino fire pensions

 

San Bernardino fire patchIt was a hot 102 degrees last Thursday in San Bernardino — perfect weather for a city bankruptcy “cramdown.” Federal Bankruptcy Court Judge Meredith Jury ruled the city, as Reuters reported, “may impose cuts to its firefighters’ overtime and pension benefits in a bid to reach a bankruptcy exit plan.”

In bankruptcy law parlance, according to Investopedia:

“Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved.”

The city wants keep vacant positions for firefighters who don’t show up for work. That would cut $4 million  in overtime costs. And firefighters would have to pick up the former city contribution to their pensions, which amounts to 14 percent of their net pay.

Jury said the city was persuasive in proving the current pensions and benefits contributed to the city’s bad finances. She now is allowing the city to reject the firefighters’ collective bargaining agreement.

In the bankruptcies of private businesses, federal bankruptcy courts have near-total discretion in disposing of assets and liabilities. But the San Bernardino and Detroit bankruptcies are testing whether judges have similar powers in municipal bankruptcies, in particular involving union contracts and pension obligations.

San Bernardino’s city charter expressly forbids imposing pay cuts on police or firefighters’ salaries, so the cuts have to be made to overtime and pension benefits.  The city is pursuing an amendment to its charter in a ballot initiative in November that would allow cuts in police and firefighters salaries as well.

The firefighters’ union wants to appeal the judge’s decision based on allegations the city didn’t follow state law in its negotiations. Judge Jury said their claim was mostly not legitimate.

Lucrative

The bankruptcy proceedings have brought forth the reason the city went bust.

Annual pay for the top 40 San Bernardino firefighters averages $190,000. And it averages $166,000 even for the bottom 40 firefighters.

If the court-ordered changes are enacted, those amounts would be reduced, respectively, to about $163,400 and $142,760.  The latter number still would be 3.6 times the city’s median income of $39,097. Moreover, San Bernardino remains one of the least expensive places to live in California, with the median price of a home $166,100, less than half the state price of $383,900.

San Bernardino filed for bankruptcy under Chapter 9 of the Federal Bankruptcy Code in August 2012. At that time the city was running a $45 million annual operating budget deficit.  As of January 7, 2013, the City General Fund had an $18,730,274 operating deficit.

San Bernardino reached an agreement with the California Public Employee’s Retirement System in June this year that cannot be disclosed due to a judicial gag order.  The city already has started making back payments to CalPERS for pension contributions.  Another undisclosed deal with the city’s police union was reached in August.

Economic problems 

The immediate cause of the bankruptcy was the city’s establishment of pension benefits equivalent to wealthier cities its own size, rather than pegged to its economic and tax base. Although the city’s economy finally has begun recovering from the Great Recession, it enjoys nothing near the productivity of such wealthy California coastal areas as Silicon Valley.

Even before the Great Recession, the city was hit with the closure of Norton Air Base. The city lost its economic base and has become a magnet for lower-end housing.

The city’s unemployment rate was 12.2 percent as of July 2014. And 17.6 percent of the population was below the poverty level in 2012.

Building permits were down from 537 in 2005 to 23 in 2012.  Burglaries are running at an all-time high of 1,306 per 100,000 of population as of 2012.

The city lost 32,937 in population from 2000 to 2012.  San Bernardino is the poorest city of its size in California and the second poorest in the United States after Detroit, which also gave its employees lavish pay and benefits that could not be sustained.

Selling water 

Strangely, the bankruptcy has not advanced consideration of one source of income for the city: groundwater. It is especially valuable during this time of drought.

The city is unique in arid Southern California because it has more groundwater than it needs.  It has so much groundwater that 1.5 million acre-feet are potentially extractable.

Plans have been in the works for decades to sell some of its excess groundwater to other water agencies, but this has never happened due the quality of the groundwater, local problems and California’s bureaucratic water transfer process.

The huge regional Inland Feeder water pipeline is about 10 miles east, but the city has never capitalized on its proximity as a potential economic resource.

14 comments

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  1. Hondo
    Hondo 16 September, 2014, 02:24

    The old saying goes ” If someone offers you something that looks too good to be true, most likely it is”. Those contract negotiations between the firefighters union and the city were a combination con and crime. Even under the best economic scenarios, those contracts were bogus and way under funded. We are due for another economic downturn and even if it is a mild one its gonna slam San Berdooo, Mineral hot springs, Stockton, ect. Lets not even talk about LA which hasn’t created a job since Clintons first term.
    Hondo……

    Reply this comment
    • Tough Love
      Tough Love 16 September, 2014, 06:07

      A better choice of words ….

      Instead of “and way under funded”, it should be “and with grossly excessive, unnecessary, unjustifiable, and unsustainable pensions”

      Reply this comment
  2. Captain
    Captain 16 September, 2014, 11:23

    “San Bernardino’s city charter expressly forbids imposing pay cuts on police or firefighters’ salaries, so the cuts have to be made to overtime and pension benefits. The city is pursuing an amendment to its charter in a ballot initiative in November that would allow cuts in police and firefighters salaries as well.

    It’s disgusting that city council members would add this charter amendment. They are/were clearly union funded council members working for the unions, to the publics detriment. If any of these council members are still serving they need to be shown the door.

    Reply this comment
  3. LetitCollapse
    LetitCollapse 16 September, 2014, 14:22

    I expect the best and the brightest in San Berdoo to start delaying their response times to 911 calls now. Or there will be a work slowdown in the local jail clogging up the court system. Whenever there is talk of reducing pay or benefits that’s the typical response. Wait for it.

    Reply this comment
    • Tough Love
      Tough Love 16 September, 2014, 16:02

      That should be responded to with a Ronald Regan moment …. fire them ALL.

      Reply this comment
      • LetitCollapse
        LetitCollapse 16 September, 2014, 17:27

        No TL. Cops generally can’t get fired. That would violate POBOR. Besides, it’s really difficult to find HS grad replacements for a compensation north of $200,000/sarc.

        Did you read that after the Rialto cops were forced to wear body cameras that the incidences of police abuse and citizen complaints dropped by about 60%? hah. Gee, what a surprise, eh? Who woulda figured? 😀

        Every single badge wearing and gun toting cop in America should be forced to wear a body camera.

        Now the excuse used is that body cameras cost too much. But if the body cameras would prevent $4M judgements and settlements for bad shootings and police abuse – the program would pay for itself. But the pols are getting paid off by the unions to sustain the status-quo and protect the bad cops – so this will be a very slow work in progress.

        Reply this comment
  4. S & P 500
    S & P 500 16 September, 2014, 15:19

    Tha SBFD insignia should have a pirate skull and crossbones on it. It looks like the FD is running out of money to steal.

    Reply this comment
  5. Donkey
    Donkey 16 September, 2014, 18:19

    As I have always said, the RAGWUS will start eating their own!! The FF’s will go before the LE feeders, but in the end they will have destroyed their own scam all by themselves. 🙂

    Reply this comment
  6. Hondo
    Hondo 16 September, 2014, 18:31

    Wayne notes in his article that the average salary of San Berdoo is $39k. I’m wondering if those stats include all of the excessive public union salaries. I’m guessing it does and I wonder what the mean income is in San Berdoo if those govt salaries were left out of the equation. I’m guessing closer to 25k. If you factor in the pensions, those union contracts amount to crimes against humanity. Those citizens of San Berdoo voted for more govt., and they got it. Kalifornia leads the nation in income inequality and this is one of the reasons why.
    Hondo…..

    Reply this comment
  7. Captain
    Captain 16 September, 2014, 22:05

    “Annual pay for the top 40 San Bernardino firefighters averages $190,000. And it averages $166,000 even for the bottom 40 firefighters.”

    But, “If the court-ordered changes are enacted, those amounts would be reduced, respectively, to about $163,400 and $142,760.

    – What a complete joke. The bankruptcy numbers should be cut by another 40 percent. FD jobs, based on the thousands of qualified candidates that routinely apply, and the very linear career path they’re afforded which rapidly accelerates their wages & pensions, and all the excessive paid leave they receive, and their very liberal rules regarding overtime (they get paid overtime even when they don’t work overtime, and the lack of fires – the FD, in just about city in the State of California – is the most overpaid and under utilized labor force with the highest cost, in every city.

    The FD’s are also the most political, have the most endorsement clout (that is changing rapidly as more & more people understand they’ve been screwed by FD PAC’s), spend the most money on their favored candidates that promise to approve their contract RAISES.

    If the Public safety unions endorse a candidate taxpayers should vote the opposite – or at least question the motives of the public safety unions. Chances are the Publics Safety has nothing to do with the Public Safety Union (police & fire) endorsement of candidates, and more to do with police & fire hiring the people that will approve their next bloated contract.

    Reply this comment
  8. Captain
    Captain 16 September, 2014, 22:07

    “Annual pay for the top 40 San Bernardino firefighters averages $190,000. And it averages $166,000 even for the bottom 40 firefighters.” But, “If the court-ordered changes are enacted, those amounts would be reduced, respectively, to about $163,400 and $142,760.

    – What a complete joke. The bankruptcy numbers should be cut by another 40 percent. FD jobs, based on the thousands of qualified candidates that routinely apply, and the very linear career path they’re afforded which rapidly accelerates their wages & pensions, and all the excessive paid leave they receive, and their very liberal rules regarding overtime (they get paid overtime even when they don’t work overtime, and the lack of fires – the FD, in just about city in the State of California – is the most overpaid and under utilized labor force with the highest cost, in every city.

    The FD’s are also the most political, have the most endorsement clout (that is changing rapidly as more & more people understand they’ve been fleeced by FD PAC’s), spend the most money on their favored candidates that promise to approve their contract RAISES.

    If the Public safety unions endorse a candidate taxpayers should vote the opposite – or at least question the motives of the public safety unions. Chances are the Publics Safety has nothing to do with the Public Safety Union (police & fire) endorsement of candidates, and more to do with police & fire hiring the people that will approve their next bloated contract.

    Reply this comment
  9. S Moderation Douglas
    S Moderation Douglas 17 September, 2014, 20:13

    Unfettered

    The mutual exaggeration society.

    Reply this comment
  10. Concernes SB citizen
    Concernes SB citizen 25 September, 2014, 12:13

    Where are all of these figures coming from? I have been following these stories and staying involved in getting the truth here in San Bernardino and most of the things I just read here are incorrect. 1 thing, those high salaries include all the extra hours the firefighter are being forced to work because the City won’t allow them to hire to fill empty positions. If they don’t work then fire stations have to be closed because there aren’t firefighters to work at them. I don’t want my fire station closed. What I was told by Mr. Parker was the City saves money by not hiring and paying the overtime. Another incorrect statement above was that the unions got the charter section put into place. That too is false, the citizens placed it on the ballot back in something lime 1938, it was am ended I. The 1950’s but still there were no such thing as a fire or police Union at rhw time. From what I’ve been told, the union did not support the present or previous mayor, or 6 of the seven current council members. They also didn’t support what was a voting majority for what I was told and it appears to be true, 6 of the 8 years that Mayor Morris was in office. So I don’t see how they controlled anything. There is also a lot of mentioned. About the “excessive paid leave” the firefighters get. But when looking through the MOU’s of all the labor groups, I found that they actually have the least amount of paid leave time off of any of the City’s labor groups. People should read these for themselves, they are all on line on the City website.

    Reply this comment
    • Tough Love
      Tough Love 28 September, 2014, 16:02

      While your handle is “Concernes SB citizen”, it sounds to me like you (or a family member) are (or will be) the recipient of a Public Sector pension ….. and don’t want it diminished.

      There is simply ZERO justification for firefighter pensions that are now ROUTINELY 5+ times greater in value at retirement than those of comparable Private Sector workers retiring with the SAME pay, with the SAME service, and at the SAME age.

      And YES, when factoring in BOTH the MUCH richer pension formulas AND the ridiculously generous (and hence VERY VERY costly)”provisions” (such as VERY young full-unreduced retirement ages, and COLA increases) they are indeed ROUTINELY 5+ times greater in value at retirement.

      It’s WAY past time for this financial “mugging” of the Taxpayers to end … and for the future service of all CURRENT (not just NEW) workers.

      Reply this comment

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