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City officials privately discuss next step in Colorado Springs dispute with PERA

By: jakob rodgers jakob
February 22, 2014 Updated: February 22, 2014 at 5:57 am

The clock is ticking for Colorado Springs, and millions of dollars are at stake.

The next possible step in the dispute over millions in possible pension liabilities resulting from Memorial Hospital's lease to University of Colorado Health falls to the city of Colorado Springs - and it could come as early as next week.

Hanging in the balance is a foundation whose job includes handling $259 million from University of Colorado Health to Colorado Springs, an amount that was placed in escrow pending the outcome of the case.

Exactly how much money that foundation has to dole out for public health grants - its main focus - depends largely on the outcome of this case, and the millions in interest owed to the Public Employees' Retirement Association, should the pension fund prevail.

City officials have offered no indication of whether they plan to appeal a private judge's Feb. 11 ruling that sided with PERA.

City attorneys have declined to comment on the issue, "because the case is still pending."

But one deadline - the filing date for an interlocutory appeal - lies within 14 days of the date of the order, said Kim Melchor, a city spokeswoman. Should the city choose that route, an appeal could come midweek - but other types of appeals feature deadlines that are weeks away.

"It's really their call and we'll see what happens," said Adam Franklin, PERA's general counsel.

Colorado Springs City Council met in executive session on Wednesday to discuss the case, but details of the discussions haven't been released.

"I think we want to make a decision quickly," said Councilwoman Jan Martin, who declined to comment further.

The case stems from a voter-approved decision to lease Memorial Hospital to UCHealth for 40 years - a move that caused about 4,000 hospital employees to leave PERA while transitioning from the city's payroll to UCHealth.

City attorneys argued that the city owes nothing to PERA, in part because employees weren't moving to another public entity, but a private one. Also, the city contended it didn't owe anything because it was up to date on its payments when the Memorial Hospital employees left the pension fund.

But on Feb. 11, a retired Adams County judge ruled that the city ignored the process in Colorado state statutes that spelled out exactly how entities could leave PERA - a process that included approval by PERA's board, 65 percent approval by hospital employees and, importantly, money to ensure that any future liabilities to PERA were covered.

PERA sought $190 million from the city, plus interest of 8 percent per month - which was $15 million as of Oct. 28.

How much of that money will go to the pension fund is unknown, said Margaret Kwoka, an assistant professor at the University of Denver's Sturm College of Law.

"The likelihood of appeal turns on the magnitude of the stakes in this case," Kwoka said.

Should an appeal be filed, both parties also might be able to settle, Kwoka said. Harlan Bockman, the judge presiding over the case, did not mention in his ruling how much the city had to pay PERA - only that the city must pay its liabilities.

Until a final judgment is rendered or the parties settle, the $259 million payment from UCHealth to the city will remain in escrow. Of that amount, $185 million was earmarked for possible PERA liabilities.

Anything left would go to a foundation established to handle money received by UCHealth as a part of the lease deal - a foundation whose aim it is to help pay for public health initiatives.

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