San Diego City Council heard an offer to settle a five-year-old civil lawsuit filed by the city’s retirement system today, which could cost the city more than $100 million if it loses.

The San Diego City Employees’ Retirement System is seeking about $177 million for the city’s actions in its two pension underfunding schemes in 1996 and 2002, specifically related to how the city paid its annual bill for retiree health care, said Elaine Reagan, SDCERS’ attorney.

The retirement system made its latest settlement offer within the last month, Reagan said, but she declined to discuss the settlement’s terms — including whether it required a payment this year.

A trial date is scheduled for April 13. If the city loses, Reagan said, it would be forced to pay a judgment this year. That would be a tall order given the city already is making $200 million worth of budget cuts.

City Attorney Jan Goldsmith said the city’s argument is that past pension underfunding settlements bound the retirement system from receiving future payment from the city.

Even if the city loses at trial, Goldsmith said he doesn’t expect to have a new $177 million bill. He argued the city should receive credit for the payments it has made already because of the underfunding settlements.

Last fall, the city failed to have the case dismissed. It’s trying again for a dismissal on March 19.

Another wrinkle adds pressure for both sides to settle. The city pays the retirement system’s legal bills win or lose because the system adds its legal costs to the city’s pension debt.

“To be honest, our whole goal is to avoid a trial,” Goldsmith said.

He added the council would again discuss the item in closed session next week.


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