A Year in Review: San Diego’s Financial Woes
Tuesday, December 26, 2006
The financially strapped city of San Diego has made it through another year. The mayor and council have struggled to get the city’s financial credibility back on track, after being banned from the bond market for failing to reveal the massive billion dollar pension deficit. KPBS reporter Alison St John takes a look at what’s been accomplished this year, and what’s facing the city in the year ahead.
One of the best times to get a glimpse of how San Diego residents feel about city government is during the public comment period before council meetings.
Collins: You have streets undone, you have lights broken, you have public safety in disarray.
That’s frequent city critic Hud Collins. He’s is one of those who believes that to get the city back on track, the politicians will have to bite the bullet and raise taxes.
Collins: You cannot go forward unless you raise money, we need to have money.
The city of San Diego’s pension deficit still hovers around $1.4 billion, retiree health benefits threaten to add another billion, and deferred maintenance is hundreds of millions of dollars more that have to come from somewhere. But Mayor Jerry Sanders assures voters his five year plan will handle the problem with no new taxes -- at least, not for now.
Sanders: Again I need to tell everyone that it requires a public vote to raise taxes and until we regain the trust of the public, we don’t stand a chance for any revenue increase.
Sanders is guardedly positive about the progress he’s made in the past year to restore the city’s credibility, both in the eyes of the citizens and the eyes on Wall Street. He points to the recommendations in a $20 million consultants report and the conclusions of a federal investigation.
Sanders: We have got the Kroll report behind us, the SEC investigation behind us, the city’s moving again and I think that’s what’s important to the citizens of San Diego.
Indeed, a poll by Competitive Edge Research shows 66 percent of San Diegans believe the city’s headed in the right direction now, compared to only 22 percent a year ago. And in spite of the city’s languishing credit rating, chief financial officer, Jay Goldstone, is upbeat about its reputation in financial circles.
Goldstone: The financial markets still want to loan us money at a minimal premium, to my surprise.
Goldstone says even if the city’s credit rating is not restored by next spring, he’ll be able to save the city nearly $4 million a year by renegotiating one of the city’s biggest liabilities -- the Petco Park bonds.
However, San Diego’s city attorney is far from reassured by events. Mike Aguirre worked for over a year on finalizing a settlement for the city with the Federal Securities and Exchange Commission. The settlement required no fine and was relatively lenient on the city. But Aguirre points out that the SEC warns the city faces dramatically escalating pension payments in future years. By 2009, for example, pension payments become a whopping 35 percent of all payroll costs.
Aguirre: This is a problem that isn’t just a five year problem, this is a problem that’s going to last for the next 20 years, and every year that goes by, the cost becomes increasingly more prohibitive. That’s what the SEC pointed out.
Aguirre is determined to solve the city’s problem by rolling back pension benefits. However, at this point his legal efforts appear to be failing, as a State Superior Court judge has tentatively dismissed most of his arguments. Aguirre plans to appeal the ruling.
But City Council president Scott Peters is dismissive of the lawsuit’s chances. Peters says he is putting his faith in Mayor Sanders’ five year financial plan, which sets the city on course to pay down the pension deficit in 20 years. Peters also alludes to benefit changes to be negotiated with the unions at the bargaining table.
Peters: If we have to be on a weight reduction in terms of the pension and health care, it may be we cannot lose all 15 pounds in one year, but we ought to commit ourselves to a reduction program over time.
But cutting payroll and pensions is what has led to an exodus of police officers to other more financially secure cities.
Peters: We have to address the defection of the police and there’s no contemplation of how to do that yet. We have to address that in the next budget
Next year’s budget will test the cooperation between the mayor and council. Sanders admits that, even with 900 jobs cuts, and no salary increases, next years’ budget will be even leaner than last year’s.
Sanders: I am worried about next year’s budget. We have an $87 million gap -- we’ve closed it to 24 million. We’ve got to seek further cuts to close that all the way.
Looking ahead to a fresh year, the mayor, the council and the city attorney will try to work together to resolve the city’s daunting problems, but more clashes are inevitable.
Look for the mayor and council to spar over budget cuts, such as when the mayor tried to cut a subsidized swim program in Barrio Logan, but the council rebelled and restored the program. And look for tensions to flare up again between the city attorney and council members, like this recent episode.
Madaffer and Aguirre: You are out of order, No I am not. You are completely out of line… What is out of order is what is going on here which again is non compliance with the law. Mr Aguirre you are being a disgrace to the city! Mr Madaffer !Mr Aguirre ! Mr Madaffer you are ….
Between the dueling personalities, the evolving power structure at City Hall, and the overwhelming financial pressures, San Diegans may be justifiable apprehensive about how the city will make a dent in its deficit in 2007. Alison St John, KPBS News.