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Roundtable: Sale Of UT; Dire Straits For Schools; Guilty Pleas In SEDC Case

November 18, 2011 1:22 p.m.

Roundtable guests this week:

Mark Sauer, KPBS News Senior Editor

Emily Alpert, education reporter,

Will Carless, investigative reporter,

Related Story: Roundtable: Sale Of UT; Dire Straits For Schools; Guilty Pleas In SEDC Case


This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

ST. JOHN: San Diego's daily newspaper has survived the media meltdown of the last few years. Now it's being bought by a local developer. What will this mean in our local media landscape? This is the KPBS Midday Edition Roundtable.
It's Friday, November the†18th. I'm Alison St. John. And here at the Roundtable today, we have with us Mark Sauer, senior editor of KPBS news, and former writer for the San Diego Union Tribune. He'll be talking about the sale of the UT to developer Doug Manchester.
SAUER: Good to be here.
ST. JOHN: And we have Emily Alpert who covers city schools for Glad you came in, Emily.
ALPERT: Thanks for having me.
ST. JOHN: And Will Carless, also of voice of San Diego, investigative journalist on the guilty pleas of Carolyn Smith of the southeast development corporation. Good to have you back
CARLESS: Always a pleasure.
ST. JOHN: And we want to hear from you this hour. Please join us with your views and questions on 1-888-895-5727.
So the big news this week is that our local newspaper is being sold again. Platinum Equity which bought the San Diego Union Tribune from the Copley family in 2009 is selling it to developer Doug Manchester. And it appears to have made a handsome profit in the process. Mark, in theory, local ownership sounds like a good thing. Do you think there -- that there might be some concerns? That it might bring a more pointed agenda in the content of the paper?
SAUER: There are concerns based on what we've seen so far in the new owner's own press release reported in the newspaper and of course on KPBS and all the other outlets. They talk about being a cheerleader for business. And John lynch is quoted in the voice of San Diego today talking about having the sort it is reporters unabashedly promote the Chargers stadium, and this sort of thing is troubling going in, are because newspapers are supposed to be fiercely independent voices in the news columns, publishers can do what they wish, of course, in the editorial make and have whatever political slant and columns and editorials they want. But to sit and say we're going to be cheerleaders for this, what if the Chargers are committing fraud? What if it's a terrible deal for the taxpayers? What happened to inflict the comfortable and comfort the afflicted? This is -- all of this raises some eye brows and red flags to say the least. All of that said, obviously you have to wait till they take over, and see what happens. So far they're saying that the current publisher, Ed Moss, and editor, Jed light, will remain in place. The contribution will continue on the same as we go, but new owners have a way of sometimes deciding they're going to go in different directions and ways. But another comment again voiced today from Mr. Lynch saying that we've got to stop obstructionists, when it comes to the Chargers deal. It's a shovel-ready job for thousands. I don't know how laborer sitting here in San Diego is looking at this today, if we're promoting the 1%ers. So this does raise a lot of questions. He also talks about it's also show biz. A lot of folks I worked with for the years at the UT who aren't in show business. They're in print journalism
ST. JOHN: I'd really like to hear from our listeners today. This is an opportunity for you to express some of your thoughts on this latest development. So 1-888-895-5727 is our number. Are you glad the paper seems to be doing so well? Or are you concerned about the future? Are you turning to other ways to get your news? We want to hear from you. 1-888-895-5727.
Will, here we're hearing from John lynch who perhaps you can tell us a little bit about him. Many people have heard about Doug Manchester. But he has a media background, right? But the latest we're hearing from rob Davis's reportering is that he does have a pretty specific objective
CARLESS: What an extraordinary story by rob. And I'm just -- I actually went surfing with rob this morning, and we were talking about this, and he told me more about this interview. And it seems like the one -- sort of 101 what not to do when you take over a newspaper, come out and start talking about the biases and the skewing that you intend to do with the newspaper going forwards. He's giving fuel to his critics. Anybody who was under any -- who had concerned about this couple of very important very powerful guys coming and taking over this newspaper, he's just sort of thrown them this fodder. I don't know very much about Mr. Lynch. I understand he used to run radio stations back in the day. I understand his radio empire didn't fair so well.
SAUER: It faired well enough that he sold it for 100 and 52,000,020 some stations, according to his bioon the Internet. And Rachel Lang, oddly enough, UT reporter and an aide to mayor Sanders, wrote a story I was reviewing this morning from 2006 saying lots of things through Mr. Lynch's career seemed gloomy as endeavors, and he always wound up turning them around and having the gold dust in the end
ST. JOHN: So he's a good entrepreneur.
SAUER: Right
ST. JOHN: But you as a journalist who worked for 27†years for the paper, do you feel line someone who's been ruynning a sports radio stations and -- is really set to run a journalistic enterprise?
SAUER: Right. He doesn't have the experience. And platinum equity did not either. And they're businessmen. And a newspaper is a business. So if they leave it to the professional journalists, if they keep that firewall in between the editorial -- and these comments today, I agree with you, more than raise eye brows. However it may be somebody who's enthusiastic coming in and really maybe hasn't gotten his feet wet, hasn't come into the doors, hasn't sat in the news room a little bit. Of course, you hope an owner doesn't sit in the news ram. But maybe once you get in and understand what's going on and what the role of your newspaper is, and why your readers are loyal to you, maybe that tune changes.
CARLESS: Something similar happened at the LA Times, didn't it? You have Sam Zell, a real estate magnet come in and bring in a bunch of radio executives to run the newspaper. There was a really shocking story in their biggest competitor, the New York Times. Talking about how the news room culture changed, and these guys who were essentially radio jocks did I understand. I'm not suggesting Mr. Lynch is of thattilk. I know nothing about the guy. But certainly it's a bit of an odd choice.
ST. JOHN: It might be reassuring if he were to come out and speak more publicly about some of his positions
CARLESS: Absolutely. I think people really want to know. And with all this -- again, why add fuel to the fire? Why not tamp down some of these criticisms and talk about the wall between the owners and the news room, and all of these issues that are of real concern to people?
SAUER: This is a brand. You have loyal readers. Their own story talked about how they improved circulations. You've got hundreds of thousands of readers here. And you can go off a cliff in a hurry if you change that culture and what you're doing in some way that people observe is biassed in terms of favoring business interests or anyone.
ST. JOHN: What do you think has been done right by Platinum equity? It does seem they've managed to double the value ever this thing in three years
SAUER: Well, they have. They caught a lot of good friends of mine, who took buyouts or were involved in layoffs, and that's not unique to San Diego. It's been down-sizing papers across the country. And they did a number of advertising things right, pagination things, technical things with the newspaper, microzoning, offering lower cost ads to people so they could reach specific customers in their area of the city. Smart things like that that increased the revenue line as they were cutting and cutting the overhead. So by all appearances they kid what they do, they come in and take a business accident improve it, and turn it. They just bought the Detroit piston, for example. Don't know if they know anything about basketball. But they have been successful. Their track record shows that. This is a whole different animal with the local and very wealthy businessmen.
ST. JOHN: Do you think that's the potential for increasing the value of this paper with the new owners now as much as it has been increased in the last three years?
CARLESS: They're making a profit, right? They turned a $25†million profit last year.
SAUER: And they were facing losses of 7 or 8 million the last year.
CARLESS: If you look at it in terms of a business acquisition, but also whether you want to call it a mouth piece, a megaphone, whatever, you start to look at those two things, it's not a bad deal, really. You've got the cash to buy it, take on an asset that making a lot of money, and get all the ancillary benefits that could potentially come with it too. I wanted to say as a journalist, especially working for voice of San Diego, which make no bones about it was set up to be a competitor to the, you know T. We've been watching them over the last few years, seen the editorial stance soften, and I've been thinking these guys are starting to become more of a threat, lean, mean machine than they were before. Of
ALPERT: One of the interesting moves I thought was the community editorial board. The way the tone completely changed. You had people like earny McCraig who's a pretty far left retired teachering helping to weigh in, where in the past it was Chris reed.
SAUER: You rarely saw earny in those pages jajayeah, yeah,
ST. JOHN: So someone who covers education, you are wondering whether that might change.
ALPERT: Exactly. Have there been many other newspapers that have done that? I thought it was a fascinating move.
ST. JOHN: I know the New York Times do meet with community members from time to time. I don't know if it's the same structure as the Union Tribune but you say that's a good move and you would hope to see that continue?
ALPERT: Yeah, I thought -- it was a less sort of explosively interesting editorial page. You wouldn't get these things where people would throw down their coffee and say oh, my gosh! But I thought the discussion was more nuanced. You could tell that there were people with very different opinions in the look talking to each other and working it out.
SAUER: In the past, they were pretty hide-bound, conservative. A lot of the columns they ran, you're absolutely right. And that tone may shift back
CARLESS: That's where the real power lies in a newspaper. For an owner, that's your one mechanism for making your voice heard.
>> Unless you're going to bleed into the editorial page, which we have a long tradition of. The McCormicks in Chicago, the Chandlers in Los Angeles, the Copleys here when Jim Copley was still Alive up until the mid-70s. And I think that did change.
ST. JOHN: 1-888-895-5727. Keith is on the line from Chula Vista. Go ahead.
NEW SPEAKER: Good afternoon. I'm sitting here as a long type listener, reader. The Copley press, and not too optimistic about where we're going. The newspaper which won the Pulitzer prize for very good journalism, very good investigative journalism -- as a matter of fact, they ousted the man that the union had endorsed in every election and that was good journalism. Then they fired the people when the new people come by and fired the guys who got them the Pulitzer prize. And we don't know where we're sitting with the Manchester. He certainly doesn't look to be a very open-minded person. But we can only tell what happens when it happenses
SAUER: Right, I think why you're expressing the concerns of a lot of long-time readers. You're talking about the duke Cunningham case for which the paper won the Pulitzer. And Marcus stern, a wonderful colleague of mine is gone. I believe he's still with propublica now. They took buyouts
SAUER: They did not fire them. But they were down size, he took a buyout, other folks got laid off. And a lot of the things frankly they was proud of you and a lot of the colleagues I respected in recent years before I left the paper, many of the series we did, the investigations, it is longer pieces, are the Sunday takeout, they're not attempting those anymore because they don't have the space, time, energy or staff
ST. JOHN: How has the staff shrunk?
SAUER: At the peek of the news room, we probably had close to 400 people. I think they're down to under 100 people now
ST. JOHN: Another call here from Bob in Northpark. What's your position on this?
NEW SPEAKER: Basically -- right now, the UT is just dealing with the world of the Internet and what's going of a dramatic change in the media. And my opinion about papa Doug buying the UT is that right now, it's just a glorified blog. And it's just a manifestation of what's going on with the media.
ST. JOHN: You think that the UT is already glorified blog, bob?
NEW SPEAKER: Well, just by papa Doug's --
ST. JOHN: Oh, his image.
NEW SPEAKER: Of saying he just wants to probusiness and glorify businesses and things like that. It's just --
ST. JOHN: You're concerned.
NEW SPEAKER: The paper itself is just going to become -- an opinion or as the voice of San Diego says, just a megaphone for his point of view.
ST. JOHN: Well, thank you for making that point, Bob. In fact, John lynch is the one who said he'd like to see the paper be probusiness.
CARLESS: Here's the thing. Whether you're left, whether you're right, whatever your political viewpoint is, I think that this is troubling. And the reason that it's troubling is that we've got limiteds, increasingly limited resources in this field that we do, in this business that we're in, which is such an important business for our community. There are limited, limited resources. Now, the largest resources that we have in this town are at the UT. The most reporters, the most significant resources. They're still the big dog. They're not a glorified blog at all. I don't think that's true. I think they do a lot of good work. Once you get into a situation where there could be bleeding in of editorial content, where you could be eroding away the good work that they do do, that should be troubling to everybody, not just because you don't agree with the politics of the person who's in charge.
SAUER: I'll give you an example of that. You look at the very, very spirited and aggressive reporting that we did, I did part of it, but sandy dolby, my old colleague did most of it, on the Catholic church abuse scandal here in the diocese of San Diego paid out 200 millioned -- she took a lot of heat, we never heard one word from her. We had folks calling up who were strong supporters of the diocese, and they'd call me and say you're talking to the wrong fellow. And that was fine. I never heard a thing about that. Mr. Manchester is in the same position. Let's give him a chance, see what happens out there. But this can change things
ST. JOHN: I want to did back to Bob's comment about papa Doug. He likes to be called papa Doug. And there's this paternal image is being put over, which is expanded on his website, there's a movie there which likens him to Richard the third, then extols his heroic qualities, talks about his family values. You wonder why it's still up there after the recent divorce. And there's a sense of a certain paternalistic image here that has some relation to it
CARLESS: Frankly, I think it's odd. Telling people to call you papa Doug, I find odd. I talked to a lot of people and I find that a very strange way of acting and behaving. Journalists in the news ram have called him, and he's corrected them and said, hey, it's papa Doug. I find that weird
ST. JOHN: Talk more about where Doug Manchester's sympathies may lie. He has made some political stands in the past
CARLESS: Provided a lot of money for the proposition eight campaign.
SAUER: Hundred 25 thousand dollars
CARLESS: That's the most notable, I think.
SAUER: There was a push in the 90s to move Lindbergh field to Mira Mar, which is fine. He's a developer, a voice in the community, and he likes that push. When you're an owner and publisher of a newspaper, it's a different situation here. If you're --
ST. JOHN: Speaking of that, we have someone on the line, Ron, from Mission Hills. Go ahead.
NEW SPEAKER: There used to be a website that Manchester had talking about the developing the east Mira Mar area. He wants to take the airport out and make it a little Balboa. But the point is the newspaper is still a powerful voice in town, and if he has it, he's going to have a huge megaphone.
SAUER: Absolutely.
ST. JOHN: Yeah, okay. So you're saying there may be a push for a new airport. You don't think that issue has been settled yet?
CARLESS: Well, he's involved -- let's look at the things he's involved in. . He's built the first 5 star hotel in San Diego, which funny you have enough was on the front page of the Union Tribune the day before the sale. Massively involved in an issue you know a lot about, which is the water fronts, the Navy Broadway complex. You got the proposition eight issues. He's -- for people who don't know hip, he's a big-time hotelier, and developer and --
SAUER: Very successful
CARLESS: Very, very successful. I don't know what other businesses he's involved in. I've never met the guy either.
ST. JOHN: So there's not just the political but also this business bent which seems to be the thing becoming clear. And I must say, it would be very interesting to hear either Mr. Manchester or lynch on mid-day.
SAUER: And we may get there. Quite understandable they want to wait till the sale goes through and have it all consummated and move on from there. The other thing is, you're talking about real estate. There's real estate at certainly the mission valley site, a 5-story building there, connected to a massive printing plant, which the Copleys were successful enough some years back to spend 42 million cash on a state of the art printing press. If they're going to keep the paper printing for another ten years as they're indicating, perhaps half that building is empty where the news and advertising staff is. Maybe they move that to some Manchester property downtown, another place to house them, keep the plant there, do something else, take the building down, build new towers. Who knows?
ST. JOHN: Some have talked about it, that it might cease to be a print publication
SAUER: It could, but some of the indications are that that'll be some time before that happens
ALPERT: At least ten years now?
SAUER: A lot of speculation at this point
ST. JOHN: A lot more to be discovered over the coming days. Will we'll stay tuned to that.


ST. JOHN: Emily Alpert, who covers city San Diegos for voice of San Diego, Will Carless, voice of San Diego, and Mark Sauer. Emily, things have looked bad for weeks. What's the latest twist in this crisis?
ALPERT: Over the summer, the state legislature passed this budget that basically said we're going to save schools by assuming that we'll have four billion in revenue that we really hope will turn up. And they sort of included this escape clause which was if that 4 billion doesn't turn up, then there's going to be these automatic devastating cuts in the middle of the school year. The key thing that happened this week was that the first of two reports that are going to decide whether or not these cuts happen came out from the legislative analyst's office, and what Tuesday was that the state is projected to be -- these are all still projections, 3.8†billion for that 4 billion estimate, which would force these kinds of cuts for schools. At this point, everybody is still waiting it see what the department of finance will say, and whether its estimate will be much better, which could be a ray of hope for schools
ST. JOHN: When would that happen?
ALPERT: December†15th. But basically this was the first chance they had to get some good news about this, that could have pulled them away from it, and they did not get that good news
CARLESS: It was really, really bad. Much lower.
>>> The schools banked on it being good and not laying off a bunch of teachers. Was it the school psychiatric's stition to do that?
ALPERT: There were definitely some encouragement by the state. The state put out inflicting messages. The bill this summer said we want you to keep your staffing level, we're encouraging people to rehire, and at the same time the governor puts out this message saying but don't make yourself broke, by the way. So different districts took this differently. There's some that did not rehire any teachers, and took some heat from their unions. San Diego Unified decided to go ahead and take at least as much of the cash it thought it was going to get and use today to rehire teachers
CARLESS: I think it's really important that people understand how ludicrous this mechanism was. What the did was pretend that you're going to get $4†billion extra, then mandate school districts go out and spend it. They wrote it into the law. They said you must spend this pretend money. But if we don't get the money, then we're going to take it away, even though you're already spent it
ALPERT: Right. And the thing that's galling about this is that it is really hard to cut a school budge in the middle of the school year because you can't lay off teachers in the middle of the school year. They can't say oh, we're just going to cut -- and legally, they can't lay off teachers
ST. JOHN: I wanted to ask you about that. I heard on our station this morning that CSU, the board, announced that it will withhold promised pay raises for faculty. I don't know if that's legal, but -- if they can do it, why can't school districts do that?
ALPERT: Raises will be a separate issue they'd have to negotiate with the union. Blue one of the main ways that a lot of school districts have saved money is by making classes larger, laying off teachers. You can't do that in the middle of the year
ALPERT: So the main option that the state givem them was to say you can shorten your school year by another five days. Of the problem with that is you also have to negotiate that with the union, because the only way you get savings from that is by paying teachers for five few year days. The response from ail of school districts was this isn't really an option
ST. JOHN: Do you have a child in city schools? How have the cuts affected your child's education? There are a couple of plans out there on the board
ST. JOHN: How realistic are they?
CARLESS: The basic problem is the problem that a lot of people face in their day to day budget, which is that they don't have enough money coming in to meet the amount of money they have to spend next year. And right now, the minimum amount they have to cut out of next year's budget is around $6†million. And this argument that it's another 30 because if they make the cut, the argument is that then becomes the minimum -- maximum amount of money you're going to get next year. There's been a couple of plans proposed. Scott Barnett is the main guy, he's come out with a sort of 5-page written plan that wasteful relies on teachers taking a paycut.
ALPERT: All employees, right?
CARLESS: Sorry. All employees. Exactly. He reckons that will save in the legion of 60 to $7†million. That is coupled with the school district coming to an agreement, with the unions in 2010, that we've called the ticking time bomb that said for two years you're going to have you take five unpaid days off, which will save us $20†million, but next year in I think it's March or June†2012, the first pay increase starts kicking in, and teachers and employees start to get a number of pay increases. One of the big solutions that the district really has to look at seriously is rolling back that. That's going to cost them, I think it's $36†million each year.
ALPERT: Between the furloughs and if they -- if they finish the furloughs and put off the raises that it would be --
ST. JOHN: So it is legal to create fur hoes for teachers, is it?
ALPERT: Yeah, it's legal. The issue is, you still have to negotiate it. And this is the key issue that Barnett has to reckon with. He has a plan out there, but unless he --
ST. JOHN: How come the governor, the former governor Schwarzenegger just exposed furloughs on state workers? But school districts can't just impose workers --
CARLESS: That's a good question. I don't know the answer to that.
ALPERT: The law they passed, the billion bill that said here's your option, cut these five days, didn't make an allowance for that. I don't know if nay can.
SAUER: If you've got contracts in place, I think the lawyers and union leaders are going to get directly involved. These are agreements.
ST. JOHN: Where are we at in terms of the rest of the school year? If we cut again, will California have a shorter school year than any other state in the nation?
ALPERT: I believe so. There's a really good associated press article about this. Basically San Diego unified is already five days short of what it would typically be. If nay cut more, we'd be getting to a point where -- most of the folks in education right now are saying we need a longer school year. We need less breaks, we need more time just for kids to be learning. And we're moving in the exact opposite direction.
ST. JOHN: I want to ask mark, why do you think the School Board didn't take one of the most concrete options that was offered them to close some schools the other month? Milly speaks, they're like a deer in the headlights
SAUER: Right. That's exactly it. You saw the pushback. We all covered that, got into these community meetings and people screamed bloody murder. Some of the schools that were on the list were schools that have made great strides in test scores, distinguished schools, and earning this identification, and all of a sudden, it is -- well, are let's close these. And they kind of laid this plan out. It's a devil a deed. I don't envy any of these folks who have to sit here and try to pear back these enormous sums year after year. And you saw the pushback, and politically it just became too hoot
CARLESS: And one of the points is that it doesn't at the very end of the day save much money. It saves a maximum of 5, $6†million. If you're faced with $90†million of devsits, these guys are saying, is it really worth it to upset this many people and get this much political backlash to save 5 million bucks when depending on these very big decisions we have to make with our unions, we might be going insolvent next year anyway?
ALPERT: And charter schools are hungry for space in San Diego. When districts have opened schools, they're obligated to offer that space. The risk that people have talked about is you shut down a school, people are upset, they open up a charter in that exact same location and everyone says, why am I going to go two miles away when I've got the school across the street?
CARLESS: Then you lose the money from those students
ALPERT: Exactly.
SAUER: Right.
ST. JOHN: One of the other issues that came out today in the Union Tribune is that the school district is no longer able to finance its bonds, to build new schools. And that was something a lot of parents were very excited about.
ALPERT: This is the one bright spot in the whole budget situation. Everyone, was, like, we have the bond, no matter what, we can turn to the bond, and it's this separate pool of money. The problem is that property values have dropped substantially. Growth isn't what they were expecting. And so the amount of money that they're getting out of this tax annually has been continually declining and forcing them to slide down the schedule they already built. Now they're saying they might need to do a full stop and not do any construction at all.
SAUER: And are a hydrogen ripple effect with that through jobs and the economy.
ST. JOHN: That's right, isn't it?
ALPERT: This board is now talking about trying to pass on a follow-on bond that would free up money by mopping up all these repairs they're doing with their day to day budget. It's going to be a lot tougher sell to say we're going to go out and ask you to pay a new tax, another bond, which, by the way this other bond is dead in the water right now.
CARLESS: His idea basically is that you force teachers -- ask teachers to take a paycut, negotiate this paycut on the front end, then on the back end, you try to pass a parcel tax that would refill that money, so bring teachers' salaries back up to where they were before.
ST. JOHN: It is amazing that Scott Barnett who was with the taxpayers' association would be volunteering to put a tax on the ballot
CARLESS: It is, but it's quite smart because basically he's saying his position on taxes is that people have to decide on them, and obviously we have this democratic process to decide on them. What he's basically doing is having a referendum on teacher pay. If you don't agree that teacher pay should be cut by this much, vote for this parcel tax.
ST. JOHN: 1-888-895-5727 is the number. And we have a caller with a good question. Kathy, thanks for joining us.
NEW SPEAKER: I just wondered if the school district did go into insolvency, would that then make it legal or would that allow the contracts with the teachers' union to be nullified?
ST. JOHN: Anyone know the answer?
SAUER: We touched on this in a story recently. It gets into a dicey area on that. And it hasn't happened very often. That is did he have con4. We don't want to get into that point. But you get into these receiverships, and I'm certainly not a lawyer. Each -- the quick answer to that, and eye superficial answer, I'm afraid, is that each situation is different. And each district is different, depending on the contracts agreements they have in place.
CARLESS: I would assume that you still have the two basic legal entities in tact. The school district and the employee union. That contract should in theory be valid.
SAUER: But bankruptcies in general, of course of the city of Detroit itself has its own school problems and problems in general. A national story. The mayor there said that they're probably going to be insolvent by April, and a receiver may come in and take over the all sha bang, the schools, the city, everything.
ST. JOHN: I was going to ask Emily, if the school goes bust, the state is supposed to take over, right? Are this any examples of where the state has taken over and what it's done to control the issue?
ALPERT: Sure. The main one people know about in Californiaical is Oakland. Which was taken over by Randy ward, our county superintendent. And I believe that went on for quite a long time, right?
CARLESS: Still going on. They're still paying off the loans for it.
ALPERT: And the key thing that people need to understand about this is that basically you have a state appointed administrator who takes over for the superintendent, the School Board becomes an advisory panel. And that state appointed administrator does not need to listen to you when you come down to the School Board and say don't close my school.
SAUER: You lose local control
ALPERT: Completely. And that's a scary possibility if Tharp to come up
ST. JOHN: And as the three of you observing this around the table, what do you put the chances of the school district avoiding this fate?
CARLESS: It depends on what happens on December†15th. If they do make these mid-year cuts, the trigger cuts, pretty much everyone on the School Board and the superintendent and the CFO have all said we have no idea how we can cut that much out of our budget.
ALPERT: Yeah, if I were to bet, I would bet that the legislature is going to go something in the middle of the year to avoid this because politically -- elections are coming up, they don't want be the legislature that did huge cuts to schools. I don't know that it's going to be a solution that solves anything though, because we still have the financial question here. It may at least avoid the incredibly uncomfortable position of having to make mid-year cuts, but I think we're still going to have the underlying issue of how do we finance our schools?
SAUER: It all comes down to the simple thing from local state to federal level, you got two ways to create budgets and quality education or anything else in these public endeavors and that is to raise tax revenue and do watch the budget on the other end. That's that balance, and that's what we argue about in this state and across the country. There's an aversion to taxes.
ST. JOHN: All right well, we'll have plenty more time to talk about this. Of so let's move on.


ST. JOHN: Corporate greed is a big issue these days. The occupy movements focuses on it. It's in this context that we'll talk about the guilty plea this week by the former president of the southeastern economic development corporation,ing Carolyn Smith, it's been three years since Will Carless uncovered the big bonuses awarded by Smith and her finance officer to employees of the SEDC, and this week it seems like the story has come to a conclusion. We have Will Carless and Emily Alpert of, and Mark Sauer, senior editor of KPBS news. This was very much your story, will. Remind us what the charges were fancy Carolyn Smith.
CARLESS: The charges, they stem Friday this secret clandestine system of bonuses that we uncovered back in 2008 where essentially the -- they were accused of sort of raiding the funds for this redevelopment agency to write themselves large bonus checks. And they were charged back in May by the state attorney eligible, both Dante and Carolyn were charged with five felony counts of various crimes, embezzlement of public funds being the most serious. That sort of went away, and they clearly came up with a plea deal over the last few month, and suddenly heard that they were going to be in court on Wednesday, went in, and out came the word guilty.
ST. JOHN: What brought about these guilty pleas?
CARLESS: I don't know. I really don't know. They did it.
ST. JOHN: The state attorney general's office
CARLESS: Right. In our reply, I've no doubt in my mind after having conferred this for a year.5 that they took the money. And clearly now they've admitted to taking the money. There was a lot of -- I think that the discussion basically other the legal discussion was about whether or not they were allowed to take the money, whether they had been approved, whether anybody had approved it. Carolyn had in the wake of our stories had been vehemently defending what she'd done, saying that it had been approved by her board of directors. It hasn't. We comprehensively proved that it had not.
ST. JOHN: That raises a question of why had it not? Where was the oversight?
CARLESS: Yeah. And when you talk about blame in this whole thing and corporate greed, and things like that, there's no doubt in my mind that these guys were faced with the opportunity to put a lot of money in their pockets and to make an awful lot of money and make themselves and other people pretty wealthy. And the mechanisms that were in place to stop them from doing that clearly failed. Sure, people are going to do bad things. But we have a system of checks and balances that the board of directors just clearly wasn't on the wall. All the mechanisms that should have stopped it failed.
SAUER: What I and a lot of people wonder, what goes on in the minds of these folks that think, boy, I just deserve this. Of it's not enough to have a good job with good benefits and be a public serve apt, and get up and go to work every day. They think, gee, I really deserve all this extra stuff and I have an opportunity to get in the piggy basic and get it. Carolyn shed some light on that over the years. We wrote a story, the Court documents had fascinating stuff in them about her stating we're going to get our money. And the image that's sort of come out of that is basically you've got SEDC, which is down in southeastern San Diego, and you've got CCDC, which is the real big downtown -- CCDC employees get paided more money, there's more opportunities there, it's a bigger organization. And there was certainly this feeling that SEDC were the underdog, and why shouldn't we be making as much money as them? Why shouldn't we be getting the raises that we feel that we're due? One of the -- a lot of the bonuses stemmeded from the fact that they came -- that Carolyn Smith came in front of the City Council and said we want you to give us this much of a pay raise this year. The City Counciled no, everybody across the city is tightening their belts. She was then quoted as saying we're going to get our money anyway, and then paid out what would have been the pay raises in these secret bonuses. It's a little bit of feeling that you're not getting what you're worth, and also that you're being cheated out of what you're owed.
ALPERT: This is also bred by having these quasi governmental agencies, you know? Which you work for something that is very clearly a governmental agency, maybe it's not as easy to kind of slide over that line of well, it's okay, this happens in the corporate world. We can do that.
CARLESS: Right, I spent quite a few days, like, camped out in the SEDC offices in 2008, and if you went down there, you would have been surprised by the furn tire, it was designer furniture, there was beautiful art on the walls. Their stationary was this thick, expensive paper. It sort of exuded this corporate wealth. Then you contract that with going down to the mayor's office, which really is a bit of a dump.
ALPERT: The school district.
SAUER: Tell me about it. The tenth floor of that council thing where I worked for a while after I left the Union Tribune, it's just remarkable. Talk about institutional architecture
CARLESS: Right. I think that these guys did see themselves as sort of nongovernment at in a way, part of the corporate world. But every penny that was paying their salaries and paying for all that art was coming out of the public
ST. JOHN: Has there been any change in the city? The public versus the private corporation? I feel like people in the city feel having a corporation deal with economic development is a good idea. Yet there is this uncomfortable relationship with the public money funding it
CARLESS: There was a lot of talk in the wake of our stories, and we also did some investigating of CCDC and uncovered some shenanigans over there. Of the wake of those two stories, the summer of redevelopment of 2008, there was a lot of talk from the City Council about disbanding these two organizations. That hasn't happened am obviously at the same time, we have had this parallel thing going on with basically, you know, redevelopment being knee capped.
ALPERT: I think those were examples that helped play into that. People talked about, what was it? The mermaid bar in Sacramento in then they talk about SEDC and CCDC.
ST. JOHN: Do you think SECD is going to be as effective as it has been with all the changes happening to the state what is the future of this corporation?
CARLESS: I'd have to say I haven't been following it very closely. I've sort of been following the trial, and what's been going on there. My understanding is that this is in litigation right now, they're trying to figure out what's going to happen with this money. If they have less money going through the covers, they can do less stuff. It's important to know that in the wake of what happened, in the wake of Carolyn Smith being fired and arrested, they really cleaned up shop there. They completely took out -- they almost I think now have completely changed the board. There's a new leader in this who seems very driven and very much focused in putting them in the right direction. SEDC as a concept is a good concept. It's there to advocate for the neighborhood, and to get public dollars working in that neighborhood and investing in those neighborhoods. And there's nothing wrong with the concept. It's just that the people --
SAUER: You get vast sums of money and human beings involved, and we've seen this throughout history. Look at the 9 billion in cash missing in Iraq, and a similar amount in Afghanistan. And these are all government reports am think of the amount of cash. We're talking about forklift it is of cash, truck loads. What happened to all of that stuff? You start putting vast amounts of money through any pipeline here, and human being being what they are will start dipping in.
ST. JOHN: Do you think there's some kind of an ethic, when you hear aboutine Rand, and atlas shrugged, and if people just followed their own self interest, we'd be living in a better world?
CARLESS: I guess so. But we're talking about people who are paid by out of taxpayer money. We're talking about people who are in the business of essentially sort of some diluted form of socialism, right? They're taking public money and reinvesting it in the community. So are alternate not like these people are business people going out and being entrepreneurs and everything else
SAUER: Their idea generated this money. That wasn't the case
CARLESS: They're getting a paycheck from you and I at the end the day, and what was so galling about SEDC, is they're supposed to be reinvesting this money in places that really, really need it. That's what I think upset people so much. When you see close to a million dollars or maybe more than a million dollars being funneled instead into a few people's pockets --
SAUER: In some of the toughef neighborhoods in San Diego
ST. JOHN: Yet isn't it true to say you've come across people who still feel like Carolyn Smith never did anything wrong?
CARLESS: Fewer and fewer. The story the other day, when she was fired -- when she stepped down back in July, 2008, there was a whole room full of angry supporters who stood up and talked passionately and vehemently. Last time, in 2008, when I came on this show and talked about it, there were people calling in angrily accusing us of victimizing her. When she was in the courtroom the other day, she was on her own. Not a single person, not a single supporter. And not a member of family, nobody there. And I think that -- and certainly I haven't had any -- I'm not getting angry calls from people. I had a call from a lady when the charges game down when she pleaded guilty on Wednesday, I had a call from a lady who called me up in May when the charges were brought, and she called me and essential apologized and said I'm sorry, I shouldn't have chewed you out.
ST. JOHN: I think this is ras bigger questions about public, private partnerships in general, which is something which is becoming increasingly prevalent. And I want to put a call out and ask our listeners too, what do you think about the wisdom of public private partnerships. 1-888-895-5727. Is the city capable of really providing the kind of oversight that would avoid this kind of corporate manipulation of resources?
SAUER: Apparently not in this case. And you would wonder, you mentioned earlier about the well-appointed offices and all, did they ever visit those offices? The council staff who know where they work did they ever go in there and say, whoa, what's going on here?
ALPERT: That was also part of the idea. It was to get this corporate vanear on things. You're talking about the corporate expertise. I think people also expect that, that it looks more corporate, that's what's fascinating about the quasi cooperatalist of it
CARLESS: The real people should be keeping an eye on these people, the people who work at the newspapers and voice of San Diego and other organizations. And this brings it back to what was so important about when you've got somebody who's coming out and saying we're probusiness. What does that mean? Does that mean you're going to give people an easier ride, if somebody is a organization and not a government entity, therefore they are given an easier ride on things? These two stories in conjunction, this story should help put context on why the first story we talked about is so important
ST. JOHN: Especially in view of people like Carl demiy who would like to privatize city services more and more, and see that as a benefit for the public. Then you wonder about the oversight, and --
SAUER: It gets down to this philosophical divide where government always bad, private sector always good. Private sector always does things more efficiently and effectively. Now we're talking about this muddied nether area here, no man's land between the public and the private.
ALPERT: The thing I get scared about too is being explicit about the guarantees that we're used to in the public world extending when people get public money. The public records act, open meetings, that type of thing. Just being very, very clear about, look, if you're going to take public money, there's a level of scrutiny that you need to expect with it. And I don't think that's happened in every case
CARLESS: There were, again, mechanisms to keep an eye on SEDC. People just weren't doing their job. The board of trustee, I believe the attorney who stood by and watched all of this happen, and allowed it to happen, weren't doing their job. But the City Council weren't paying enough attention
ST. JOHN: And that was the basis on which Carolyn Smith said she wasn't not guilty
CARLESS: Exactly. They let me do it. So it's not my fault. And part of this, of course, is that Carolyn comes from a very powerful, L connected background. Her father was a big, big powerful political figure. He's in ill health now, but for years he was a very, very powerful figure. And there was a certain reluctance on the behalf of the City Council, on the behalf of arguably local prosecutors, to retake her arm and to go into this sort of little bastion that she had built for herself.
ST. JOHN: And what are the penalties she's facing now?
CARLESS: The prosecutor said they're going to ask for a year in jail. A year in prison. And for restitution of $700,000 between the two of them. My understanding is that the judge basically sentences them, they're going to be sentenced on January the†20th, and that he can give them that or some other punishment.
ST. JOHN: Okay, well, thank you very much. An interesting discussion. I really like what you did at the end there, will, to bring it back to the importance of having a good, independent paper that is not just probusiness but is really looking at how our community is functioning from all angles.