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Colorado Springs' feud with PERA rests before retired judge

January 27, 2014 Updated: January 27, 2014 at 8:15 pm

DENVER - The moment Memorial Hospital's employees left Colorado Springs' payroll, the city's pension obligation for nearly 4,000 people ended, a city lawyer argued Monday before a retired Adams County district court judge.

A state pension fund attorney countered that reasoning with one word: "Absurd."

Colorado Springs and the Public Employee Retirement Association attorneys voiced their cases Monday before a privately hired judge on whether the city owes PERA more than $190 million in pension liabilities.

The hearing - at a conference room high in a Denver skyscraper - amounted to each side's last chance to make their argument to Harlan Bockman, a retired judge hired amid a dearth of settlement talks. Bockman could rule in myriad ways - such as awarding all the money to one side, dismissing both claims or, in a more unlikely decision, once again setting the matter for trial.

Such privately hired judges are unique, and they are known less for mediation talks or arbitration and more for fast-tracking legal cases.

The city has $259 million in escrow that it received when University of Colorado Health began its 40-year lease of Memorial Hospital on Oct. 1, 2012. Much of that money was to pay for possible PERA liabilities, but there are stipulations on how that money can be spent.

A foundation has been set up to help dole out money that remains from the PERA dispute.

On Monday, lawyers focused on a 1988 provision in Colorado statutes that allows certain local government entities to leave PERA - given a few conditions.

For example, PERA's board must approve of any departure, and 65 percent of departing employees must vote to leave the pension fund.

Colorado Springs never followed that process when seeking to divest Memorial Hospital employees from the system. A lawyer representing Colorado Springs claimed the statute never applied to Memorial Hospital's departure - in part, because Memorial's employees weren't moving to another public entity, but a private one.

With the city unbound by that statute - and with the city no longer employing people at Memorial Hospital - Colorado Springs owed nothing to PERA, said Christopher Handman, a partner with Hogan Lovells, a Washington, D.C., law firm representing the city.

"Our point is that the statute never obligated us to jump through the hoops that they (PERA) wanted us to jump through in the first place," Handman said.

Lawyers representing PERA repeatedly hearkened back to statements made by lawmakers while they drafted the statute, and the pension fund's attorneys repeatedly voiced grave concerns for the system's actuarial health if Memorial doesn't cover the liabilities.

The city's decision not to pay appeared to happen only after it received a liability estimate that far exceeded early expectations, said Dan Reilly, partner of the Denver-based Reilly Pozner LLC law firm.

"They cannot jump off the ship if this system is going to work," Reilly said.

Bockman repeatedly lamented that the statute would easily apply to this case had Memorial Hospital employees left PERA to join another government-established pension system. Instead, those employees went to a private entity - leaving the outcome in question.

The case becomes further complicated, he said, when considering that the lease took effect more than a year ago - without the city's PERA liability being resolved first, as is normally the case.

"What happened here is that everything went backwards," Bockman said.

Bockman said he expects to issue his decision to lawyers on each side in about a week.

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