Carl DeMaio Discusses City Budget, Proposal to Build New City Hall, Convention Center
Thursday, June 18, 2009
Should the City of San Diego build a new city hall? What are the arguments for and against expanding the convention center? How much will both of those projects cost the taxpayers? We speak to 5th District City Councilman Carl DeMaio about the city budget, and to find out what he thinks the city's priorities should be right now.
DOUG MYRLAND (Guest Host): These Days in San Diego. I'm Doug Myrland, sitting in for Maureen Cavanaugh. Well, should the City of San Diego build a new city hall? What are the arguments for and against expanding the convention center? And how much will both of those projects cost the taxpayers? Those are just a couple of the subjects that we want to talk about in our upcoming conversation with 5th District City Councilman Carl DeMaio. And, Carl DeMaio, welcome.
CARL DEMAIO (5th District Councilman, City of San Diego): Great to be here, Doug.
MYRLAND: I want to start off by talking about your district. And my producer Hank Crook and I were looking at the map yesterday and the thing that struck us about your district is that it's quite a ways away from a lot of the issues, that – physically, that you're dealing with, you know, the convention center and downtown. You know, your district is north of 52, kind of on either side of I-15, and it's kind of a different mental space up there. And I wondered if we could just talk about that for a minute and talk about the characteristics of your district.
DEMAIO: Well, my district is, I think, very much like most districts in the City of San Diego. We have hard-working families who want a better quality of life and are seeing that quality of life erode because of higher taxation and cuts in city services. They see their roads falling into disrepair. They see response times on police and fire getting longer and longer. They see library hours cut back, Park & Recreation programs withdrawn. And these concerns really are what driving (sic) me at city hall, is how do we fix the financial problems so that we can safeguard the city's financial health and how do we start getting city government working again and providing the basic city services: roads, police and fire response times, Park & Rec programs, and libraries.
MYRLAND: When you think about a lot of the neighborhoods in your district, they're a little newer than a lot of other places, so do you still have infrastructure problems? I don't really think of potholes as being a big problem in Rancho Bernardo. I don't live there but every time I drive there, it looks pretty new and nice.
DEMAIO: Oh, Doug, you got to come back up, you know, to Rancho Bernardo and pay us a visit because we do have significant infrastructure issues relating to our roads. If you just sit on Mira Mesa Boulevard during rush hour, you barely creep along. And these are really big concerns for my residents. I'd say that infrastructure is up there with the issue of financial recovery for the city. We have seen, in all parts of the city, and I think it's unfair to characterize any part of our city as more privileged when it comes to infrastructure because we all are having infrastructure problems and that's because the politicians over the years have neglected to pay what is necessary to maintain our infrastructure and to expand it. And so we have something in the City of San Diego called deferred maintenance and it's over a billion dollar liability. You all hear about the pension liability of two billion, the retiree healthcare of another billion, but the other liability that I think we need to address is our infrastructure liability of a billion, probably 1.5 billion by now with today's numbers. And all of these liabilities have been created because the city politicians did not manage the money properly. They gave away the store and they were not focused on the fundamentals of city government, which is the basic services that I'm trying to get our city focused on.
MYRLAND: Now you've certainly been on the record about how you feel about a lot of these budgetary issues, and when the budget was passed a week or so ago you were a vote against it.
MYRLAND: It went ahead and passed. So here you are now in the situation where you've made your statement but now you have a budget that has been passed. What can you do now to make sure that that budget is properly implemented? What's your next set of goals and priorities now that you've lost that battle about the fundamentals of the budget?
DEMAIO: Well, Doug, I wouldn't call it a winning or losing battle. I voted against the budget because I wanted to highlight my concerns with some of the elements. Let me put on the table that I was very happy with certain things that we were able to do this year. The mayor and the city council, jointly in a unanimous vote, reduced labor costs by $32 million, started to trim some of the salaries and the excessive benefits that we've seen in city government. The budget also maintained services levels as of right now in terms of park, recreation and library programs, and that's very important to me, that we not cut into the good government programs that our neighborhoods require. But here's where I had a problem and this is why I voted no, is to highlight these problems and really try to force more attention on them. The budget is balanced because it raids one-time reserves and one-time monies to the tune of $15 million. And we looked at other funds that we consider one-time, it could be about $22 million in one-time monies. That's not a structurally balanced budget. You cannot basically live off of the coins you find in the cushions of your couch. You have to maintain your own family budget in a more structurally balanced way. Second, it raised taxes and fees on working families in San Diego at the worst possible time, $7 million. And, third, there's no provision in this budget, Doug, for the on-coming state cuts: $24 million in gas tax, $36 million in property tax. And I believe that we should have been more proactive with reducing waste and inefficiency in each of the departments. Now I don't just say that; I follow it up with actual concrete recommendations and plans. And so about five, six weeks ago, before we passed the budget, I laid on the table $22 million dollars in efficiency reforms that we should implement so that we have that reserve to take on the state budget cuts so that we can avoid the taxes and fees. Unfortunately, my colleagues felt that, well, we'll deal with this problem later on. At least the ideas are there and I hope that we can get back to the table, the budget table, and start addressing them.
MYRLAND: Well, I've looked at that list and I suspect some of them are going to come back onto the…
MYRLAND: But I also suspect a couple of them won't. Are you going to be open to the idea of maybe increasing some fees in some ways?
DEMAIO: Not on working families and particularly not right now. I find it unacceptable that people would suggest that a city government with the level of waste and inefficiency that we have—and this is documented and I did a op ed for the Voice of San Diego just last week where I outlined $150 million in waste and inefficiency that we need to address. I find it unacceptable that a city government so wasteful would turn around and say instead of us tightening the belt like all the businesses, all the families, all the nonprofits, right now in this bad economy tightening their belts, what we're going to do is we're going to pass our problem on to you, the working families. We're going to raise the fee for your kid to go and do Little League soccer, you know, other rec programs to use the field at night. We're going to raise library fees. We're going to raise fees on working families and small businesses. That's not acceptable. You're passing the problem on to others. It's exactly, Doug, what Sacramento's doing by raiding local government funds. They're not solving their problem, they're, instead, passing it on to local governments and saying we're just going to take your money and that's a sort of shortsighted leadership and irresponsible financial management that, I think, voters are fed up with. They want real solutions and they want our governments, all levels of government, to start living within the means.
MYRLAND: Let's talk for just a minute about not increasing some fees that already exist but that may be implementing one that a lot of other cities have implemented and that is to have residents pay something for garbage collection.
DEMAIO: Well, that's – Yeah.
MYRLAND: And we were looking at that district map and Hank and I were saying, gee, some of these folks are about three blocks away from other people who are not in the city of San Diego, and they have to pay something to have their garbage picked up. Isn't that kind of an obvious public policy shift that is worth discussing?
DEMAIO: Well, you don't reward a city that has as much waste and inefficiency as the city of San Diego does with more money. That's like giving alcohol to the alcoholic. Let's make sure that the city finishes the job of reform in every department. One of the things I'll point out is that the trash collection, we did a budget examination, in my office, of our city's trash pick-up system. And our system uses more employees and more trucks to collect the same amount of trash than the private sector. And in Chula Vista, for example, Allied Waste, a private contractor, actually provides the service to those residents. And when we benchmarked against Allied Waste's model, in terms of how many staff they use, how many pieces of equipment they use, what we found is that they use a different schedule, a different process and, as a result, are able to cut their labor costs by 15%. And their drivers actually are more happy. They're able to earn overtime when necessary. In the city of San Diego, I see trash trucks in the Miramar Landfill coming back at one o'clock in the afternoon, noon, from their shift. Allied Waste would never allow that. They would require that they adjust the schedule so that the people work a full day. And that's – those are some of the reforms that we need to start looking at. But here's what's causing those reforms not to be implemented. You have very powerful labor unions that like the idea of having more workers and a higher head count because for every person working in city government, they get the dues. And they're like any other enterprise, they want to increase their customer base. Well, guess what, the taxpayers foot the bill for that and what we have to do is be really responsible – more responsible with how we're spending the taxpayers' money. So when people say, well, let's do a trash tax, in light of all this waste? That's throwing good money after bad. Let's demand those reforms first and then look at whether additional changes are needed.
MYRLAND: But given the reforms that were made in the last budget, wouldn't you characterize those labor relations as having been fairly calm these days and, you know, that there's been some cooperation with the unions?
DEMAIO: What I have to say is that we've made a good start. I was thrilled that three out of the five labor unions actually joined us in a mutual agreement to reduce some of these salaries and benefits. But, Doug, the reality is, while I can call it progress—and I celebrate that progress and I really do appreciate their cooperation—we still have more waste and inefficiency to reduce. The benefits are still not sustainable. We still have to get to the job of retiree healthcare reform, which is $1.2 billion of unfunded liability. We still have to reform our pension, which is still $2 billion underwater. We still have to look at things like other perks and benefits. Vacation schedules, City of San Diego workers get 38 days. The maximum is 38 days personal leave and holiday time. You know, and so when you look at some of the reforms, by benchmarking some of those benefits against what the working family in San Diego gets, the average family in San Diego, if we just adjusted city employee benefits and salaries to what the average working family in San Diego gets, you've be able to save hundreds of millions of dollars in taxpayer funds annually, and that's what, I think, our focus needs to be.
MYRLAND: Well, you've also talked a lot about outsourcing city services which, of course, puts you in conflict with some of the unions as well. How can you be sure that when you talk about outsourcing that you really are saving money and that you really are creating a positive outcome? Other cities have had mixed results with outsourcing.
DEMAIO: Right, and I've studied this for well over 15 years in my role as a government efficiency advisor. First of all is that not only do I support managed competition, or as you call it, outsourcing. I don't like the term outsourcing. I like managed competition because I don't want to judge the outcome. Maybe the city workers will win the work and, in 85% of the cases nationwide, city workers submit the winning bid because they know the system better, they know where the fat is, they know where the bodies are buried, and they are able to reduce that. It's the pressure of competition that really gets us the cost savings. That being said, it's not just me that supports managed competition; it's 60% of San Diego voters who spoke in 2006 when they unan – when they passed Proposition C. That's an important thing to remember, is that this is not something that I believe our politicians have the luxury of refusing to do. This is something that's voter approved, voter mandated, and I believe that we need to get to the job of implementing the tool that voters gave us in 2006. We've seen, across the country, that if you hold both sides accountable for cost and performance standards and you really get those performance measures woven into the contract and you have good contract oversight that managed competition can save ten to fifteen percent on every single tax dollar studied. And that's what I think we need to be looking for.
MYRLAND: So why haven't we seen some more managed competition, to use your term, that voters approved in 2006?
DEMAIO: Well, Doug, it gets back to that other issue about the labor unions: headcount. They want a larger bureaucracy. Why? Because the more people that are hired at taxpayer expense for city government means more dues-paying members. Again, it's a natural inclination for the labor unions to say, hey, we want to hire more staff.
MYRLAND: Well, I have to push back a little bit on that because I think that unions have a purpose other than just collecting dues. I mean, I think they would say that they're trying to watch out for the best interests of their members. And it brings…
DEMAIO: Have you…
MYRLAND: …it brings me to – I want to pull this up…
MYRLAND: …on a little higher point of view. You've certainly put – positioned yourself as someone who wants to reform the relationships with the unions. Isn't it a little difficult to continually sort of, I think they would say—I'm not saying this but I think they would say—you know, kind of demonize the hard-working people in the city…
DEMAIO: Wait a minute.
DEMAIO: Wait a minute.
DEMAIO: Wait, wait, wait, Doug. I want to correct something. I mean, we do have hard-working people in the city and our workers, the rank and file work force, they care passionately about San Diego and the programs that work and whether it's the library or the trash system or Park & Recreation. But there's a difference between our 11,000 city workers, rank and file, and the people at the very top of the labor unions who are calling the shots. And, in fact, when people talk about, gosh, you know, these city employees are on the take with all these pension benefits, I stop and correct them. I say, wait a minute, the benefits are excessive, absolutely, and we need to reform them but remember the rank and file didn't negotiate those deals. Union bosses and city politicians negotiated those deals. Now I don't like to sit here and cast blame, and I don't. I don't feel that you attack people in this problem. You need to attack the core problem and find positive solutions and implement those solutions. You need to be judged based on who you are able to influence to get to a solution and a compromise rather than demonizing and dividing. And I think that's a real important thing, Doug, that I pride myself on never engaging in, that you do not attack people personally not do I, frankly, respond to personal attacks. And being in public office, you sometimes get some unfair personal attacks levied at you.
MYRLAND: So you are trying very hard to separate the message about individ – or, you know, the rank and file with their representation, the people who represent…
DEMAIO: Right, you have to separate the union bosses from rank and file city workers. And second of all, you have to separate out the financial realities from blame. I don't care about blame. The reality is – because I'm not going to debate blame because you don't know who's to blame. If people are always going to say it's someone else's problem, it's the politician, oh, it's the union boss. But the reality no one can disagree with is that we're $2 million underwater in our pension system. We're $1.2 million underwater in our retiree healthcare system. And the benefit levels, Doug, are not sustainable. So we can either engage in blame or we can say, okay, let's put ideas on the table and, as we did in this last cycle of negotiations, and this is where I see a glimmer of hope, hope that we can move forward to mutual agreement with our labor unions because at some point we have to restore the partnership between labor and management in order to provide good city services.
MYRLAND: I want to move on…
MYRLAND: …to the convention center and city hall but I've got to ask you one more related question on this subject and I know that you've probably thought about it because I know you're a policy kind of guy. Why is the city in the pension business in the first place? Why don't they just join calPERS like a lot of other cities in California.
DEMAIO: Doug, you ask a really good question. And I've been looking at the pension system from every angle to see how can we bring it back to solvency. Unlike other officials that have come and gone, I don't believe there's a silver bullet. I believe that what we have to do is slowly but surely make various reforms to bring the system back into solvency and that one reform isn't going to do it. Bankruptcy isn't going to do it. Going into court and filing a lawsuit saying, voila, all the benefits are gone doesn't do it. And so one of the things I have looked at is, are there cost savings associated with moving to calPERS. Here's my problem. I have looked at calPERS, Doug, and you think the City of San Diego's pension system is bad? Wait until we actually have to pay the bar tab coming due at the state level for state pension benefits. I've seen some very questionable practices in terms of how they project out earnings, how they make investment decisions, how they calculate the cost of retirement benefits. They have a 40 year amortization schedule. And I've talked to pension experts who really believe that that's really not the proper way to be forecasting out the cost. So I would be very cautious about looking to one system and saying voila, this is what would work.
MYRLAND: Well, we'll do another program about this…
DEMAIO: Absolutely. I look forward to it.
MYRLAND: …and talk about that a little more. But I do want to ask you about the city hall and the convention center.
MYRLAND: And it seems to me that your public position on those issues has been, well, let's not be in a hurry. Is that a fair characterization?
DEMAIO: I want to make sure, because, Doug, there have been so many examples where taxpayers have been burned by politicians, developers and special interests on these projects, and so I'm at city hall digging deep. I don't take anything that these people say for granted. I really question every assumption and I look at the financial modeling. And, for example, on the city hall, I think it's the wrong project at the wrong time. The numbers are horrifically flawed. They are manipulating the numbers, and I'm very strong on that word but I do seriously believe they have done everything they possibly can to put lipstick on the pig here to make it look like a great savings when, in fact, we would lose money during the very period of time when we need to save money, which is the ten to fifteen year cycle that we need to reorganize our city's finances. On the convention center, I'm a little different in my view. I'm still withholding judgment. I'm cautiously optimistic that we can make something work. And the reason why I look at the convention center than (sic) the new city hall is that the new city hall is an expense, it's office space, it doesn't provide any value. The convention center, we've seen how we do bring jobs in with travel and tourism. Thirty percent of hotel bookings here in San Diego result from conventions and meetings. The travel and tourism industry in San Diego produces 160,000 jobs for San Diegans. It produces millions, hundreds of millions of dollars in TOT revenue to the city's general fund that we use for police, fire and road repairs, so the municipal services. So I am open to that investment, that public works project, because it's an economic infrastructure project rather than a cost-of-operating infrastructure project like the new city hall. Here's my concern. It looks like some of the special interests around the convention center are suggesting that it would be paid for by taxes and fees on San Diego's working families. I have met with them from day one and I've said the only way I will support this project is if it makes financial sense in terms of the design, contiguous space that will bring more meetings in that we actually need to expand the convention center. Number two, that you pay for it without a general fund subsidy, and that the payments are made by those that directly benefit. And that, in my opinion, would be people in the hotel and tourism industry here in San Diego. I'd also like to see the Port of San Diego, which owns the land underneath the convention center, pony up some money. There's a little dirty secret, is that they earn all the revenues off the parking structure in the convention center and it's $6.5 million annually. I want to see the Port of San Diego, which has about $60 million in cash reserves right now on its balance sheet, step forward and participate and contribute to that project if we're going to move forward.
MYRLAND: Now with this convention center idea, there are going to be all kinds of special interests, if you will, running their own set of numbers and making their own case.
MYRLAND: It's like the NFL doing the analysis of what a Super Bowl brings to a community.
MYRLAND: All right, so where do I, as a taxpayer or as a member of the media, go to some really neutral kinds of analysis? I mean, there are so many stakeholders here, where – who should be responsible for really doing that analysis and being a neutral third party?
DEMAIO: Well, I think that you have a lot of watchdogs that are out there. I certainly am trying to be that on the city council, which is why my office has been dedicated to looking at the budget numbers for every major project. And we have a risk matrix which is we don't look at every small thing, we look at the big things like a new city hall or a convention center because a failure for oversight on those projects costs taxpayers potentially tens of millions of dollars and that, I cannot sit silent on. I'm dedicated to really truth-testing the numbers. But I'm not always right so what we need to also have are other groups that are out there looking at the numbers such as the media, local media, should be digging deep. We get a lot of our information from news reports and we exchange information with reporters and say, well, what are you working on? Well, here's some information that we have at city hall. The transparency, I think, is the most important ingredient, is when things are done in open session, when things are done in a highly participatory process, you get more eyes looking at it and, therefore, you get more review. I think, you know, my concern has been on both these projects that we probably need a lot more outside review than has been given particularly on the city hall project.
MYRLAND: And where should that outside review come from? Would you turn to a local university? Is there a city audit function that could do that? I mean, I don't want to get the figures from the convention center and, frankly, I don't want to get them from the anti-tax advocates…
MYRLAND: …because, you know, they have a point of view as well. So who is it that we look to? Is it SANDAG?
DEMAIO: Well, I think what you do is you look to a whole chorus of people that are in the civic dialogue. The media, you would look at watchdogs, you would look at proponents, so you have project boosters and watchdogs.
MYRLAND: I don't know I'd let the media do that analysis looking at the – we did a program the other day about the economic state of the news media.
DEMAIO: Right. No, no, I – But they do still turn out some really good stuff and what you want to do is not take any one source as definitive. What you want to do is have a variety of points of view and perspectives coming to the civic dialogue on each of these projects. And what my problem has been is that some of these things have been done behind closed doors in the past and so by shining a light on it from my office, I'm hoping to stir discussion. The best way to do that on the city hall, by the way, is to insist on a public vote. If it has to be presented to voters and there gets to be a spirited campaign around whether we should have a new city hall or not, I think that that will surface a lot of arguments and analysis from the outside that would be very helpful for decision making.
MYRLAND: A little while back in our conversation you mentioned fire protection…
MYRLAND: …and that's got to be a big subject in your district because it – because there's lots of trees and you…
DEMAIO: We've been hit…
MYRLAND: …look at where the fires have gone through.
DEMAIO: …two times in the past seven years, yes.
MYRLAND: So talk to me a little bit about how you approach that subject, and particularly I want to ask what your feeling is about the multiplicity of fire districts that we have in this county.
DEMAIO: Well, I think, you know, the city, obviously, has its own fire department and it does an exceptional job. For the resources that we are able to provide, given our financial crisis, the Fire Chief, Tracy Jarman, and her team have done an exceptional job and I'm always inspired and amazed by the work they do. There are ways for us to become more efficient and deploy resources better. I'm very concerned about the lack of physical equipment. For example, Doug, during the last fire, we operate the fire department on shifts of three so we only have equipment for about a third of the workforce. Well, during one of these big emergencies, and I call it surge capacity, when we have a big emergency, we put all of our fire fighters out there in the field but not all of them have equipment so you're – you have about two-thirds of them without proper equipment. And so I think targeted investments in equipment—and that can be done on a multi-jurisdictional basis, where the cities around the region, the county, perhaps even the state, the military, can work together on placing equipment and doing joint use agreements. Second is, brush management. We have to manage the fact that we have developed in the, what we call, the wild urban – wild land urban interface, where the risk of fire is a bit higher. The climate change and our drought have contributed to additional issues. So we need to be able to do brush management, and the city just got a grant a year ago. But you can clear brush one year, if you don't maintain it the value of the money that you just spent is melted away, so we need to make sure we're able to maintain that. And, finally…
MYRLAND: And you think that's a responsibility of the city, not of the homeowners?
DEMAIO: I think it's a – it's a both and. I think that the city needs to help the homeowners and individual residents, homeowner associations, as well as clear its own land. And it really is a partnership between both sides. The final area is evacuation. I am extremely concerned about the ability to get information out to residents during an emergency. And so, you know, you mentioned audits earlier, I've talked to the auditor about doing a performance audit of the 911 – the reverse 911 system in San Diego because we have had problems in the past. In my office, we've been looking at a project where we would go out and identify senior citizens who are living alone but don't have access to evacuate and identify who they are so we can check in with them and maybe match them up with a ride. So there are a number of things that we need to be doing on evacuation to protect people's public safety while the professionals go in and try to mitigate any sort of emergency through their response.
MYRLAND: We've only got a couple of minutes left but you can't talk about fire without talking about water.
MYRLAND: And water is also an issue and we're talking about saving water. What's your general point of view on where we ought to be going in a public policy way with our water issue?
DEMAIO: Well, we need to look at it from a market standpoint and I don't think the government has done a good job of managing the water issue. In fact, that's why we are in the water crisis that we face. And I believe that you need to look at it in two parallel tracks. One is, providing incentives for conservation. And I think the best incentive is monetary, so pricing your water differently. And the second track should be expanding our water supplies, and it's not one source. We need to look at a portfolio approach of water supply that includes purple pipe, which would be recycled water for irrigation purposes, it would include desalinization, and it would also include looking at ways for us to stretch the water supply from other sources of water outside of San Diego County like we did with the Imperial Valley water transfer a few years ago.
MYRLAND: We had a guest on the show the other day suggest a new system of connecting aqueducts, so maybe we'll talk about that in the future. But we are out of time on this conversation. We've been speaking with Carl DeMaio. Thank you very much for being with us.
DEMAIO: Thank you, Doug, appreciate your time.
MYRLAND: He's on the San Diego City Council, represents the 5th District of San Diego. And you're listening to These Days in San Diego.