After Stockton Ruling, Pension Treatment Still Unclear

October 31, 2014 – In The News
The Bond Buyer

Michael Sweet was quoted in The Bond Buyer article, "After Stockton Ruling, Pension Treatment Still Unclear.” Full text can be found in the October 31, 2014, issue, but a synopsis is below.

Stockton, California’s bankruptcy confirmation hearing came to a conclusion on Thursday, although the ruling did not bring much clarity about the treatment of pension obligations in Chapter 9 bankruptcy.

U.S. Bankruptcy Judge Christopher Klein during Stockton's Chapter 9 case gave his view that pension obligations can be impaired in California, but Stockton did not present him with a request to impair pensions.

Fox attorney, Michael Sweet, said he wasn't surprised by Klein's decision, giving the signals he was sending and the fact that the city made it clear that it didn't want to impair pensions.

He said that the city to watch is San Bernardino.

"They haven't put their plan out yet and they showed that, unlike Stockton, they were willing to explore the possibility of reducing the CalPERS payments," Sweet explained. "It'll be interesting to see if San Bernardino considers impairing pensions as part of their plan."

Sweet said Stockton's future will come down to "intangibles."

"A piece of paper from a judge doesn't bring a city back," he noted. "The question is, do people want to do business in Stockton, are people going to buy homes in Stockton, do people feel safe in Stockton, do they have a flight of public safety officers who go somewhere else?"