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City Of San Diego Facing $179 Million Deficit

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Aired 10/9/09

The City of San Diego is facing a $179 million budget deficit, and Mayor Jerry Sanders says "everything is on the table" when it comes to cuts to reduce the debt. What programs or services are likely to be cut?

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Video unavailable. Read transcript below.

Above: Editors JW August and David Rolland discuss how the city got saddled with a nearly $200 million projected budget deficit.

GLORIA PENNER (Host): Well, San Diego Mayor Jerry Sanders has been particularly visible the past few weeks. He’s issued a plethora of media advisories from ballyhooing a new firefighting helicopter to announcing a victory in the city’s fight to retain its sewage treatment waiver. He’s been giving out awards. He’s been making speeches to community groups, and he even met with the U-T editorial board. But he had some bad news to share as well. So, Scott, let’s talk about the bad news. How much of a surprise was it that the city will face a $179 million shortfall when the new fiscal year begins in July?

SCOTT LEWIS (CEO, voiceofsandiego.org): It’s not a surprise and I don’t think people should – I think people should actually stand guard from anybody – or at least be defensive when somebody says that this is a major surprise. You know, we have – we are set up right now as a city simply not to take in the amount of money that we’re set up to spend, and this has been the case for years and years and years and years. The difference with this is that we finally have no one-time solutions to make up and the economy has stretched us to a point where we simply have to come up with some major solutions or deal with the pain in a way that we’ve never done in the past. And I think, you know, the city is set up for the long term in a better way than it was before. One of the reasons that we even know the kind of deficits that we’re facing is because of a five-year budget forecast that the mayor put out. And the mayor instituted a process of doing these five-year budget forecasts in a way that I think is healthy for the city to look at these revenues and to explain them and to talk about them going forward, and what kind of assumptions he’s using for that. But this is not a surprise and you’ll have the city say, well, it is a surprise. The economy’s – it’s the worst economy we’ve ever seen. Well, you know, you know, last year when they did this five-year budget outlook, they said that, you know, this was the worldwide economic crisis, things had fallen apart, everything was in trouble but they still predicted that the tourism occupan – or the transient occupancy tax, this is the tourist tax that people pay when they stay at a local hotel, they figured that that would still go up no matter what was happening with the economy, no matter what was happening with other things. We have not conservatively projected where we’re going to be, and the independent budget analyst at the City has reminded the City to be more conservative. But we’ve always been more rosy than we needed to be and now we’re acting as though it’s a major surprise and that’s un – inappropriate.

PENNER: But that’s really interesting. What Scott is saying is that we, for years now, our revenues have not kept up with our expenses, that we have gone ahead and spent even though it was clear that we weren’t taking in as much money as we’re supposed to. I mean, how is the, let’s say, the anticipated shortfall for this year, the year we’re in right now, David, absorbed? I mean, we ended up with a balanced budget. We somehow managed – We’re not feeling a great deal of pain and yet we were warned that this year that we’re in right now, this fiscal 2010 year, it was going to be a problem. But nobody seems to be really feeling the pain.

DAVID ROLLAND (Editor, San Diego CityBeat): Well, yeah, I mean, like Scott mentioned, one time fixes, one time solutions. I don’t know that the – I don’t know if there’s – the magic budget fairy has anymore fairy dust to spread around. I mean, we’ll see. Every time we think that there are no hidden pots of money anywhere, somebody seems to find one. I mean, we thought we were out of hidden pots of money last spring when we did the last municipal budget but they found, what was that, I don’t know, like $18 million in a…

JW AUGUST (Managing Editor, KGTV 10News): Yeah.

ROLLAND: …socked away somewhere, so we’ll see. I doubt that those pots of money exist.

LEWIS: Literally found it. They literally said we didn’t know it was there. The money they say they find is one-time revenue sources that should be able to be used for situations like this when the economy collapses to help us bridge the gap between long term solutions when they can be implemented and the kind of short term payment we’re facing. But right now we’re facing the short term pain and they can’t make long term solutions to fix it. And this is the exact consequence of having a situation over the last several years where these long term solutions haven’t been implemented.

PENNER: But, JW, the mayor is talking about the equivalent of an across-the-board 24% reduction in all city departments now. You know, with some departments cutting more, some cutting less, even the fire department, the police departments are going to be affected.

AUGUST: He’s been pretty frank about it. Everybody’s going to have to – everybody’s going to pay. Nobody’s going to get a free ride in the government, city government. I’d like to see how it plays out but that’s what the mayor’s saying…

PENNER: So he was…

AUGUST: …even to the police union and he...

PENNER: Well, listening to what Scott said, you know, somehow we always seem to find pots of money to…

AUGUST: Right.

PENNER: …help tide us over. It doesn’t sound this time as though the mayor is…

AUGUST: I…

PENNER: …expecting a pot of money.

AUGUST: I don’t think there’s any more miracles. I mean, we’ve got a $225 million pension payment due next year. What are we going to do when that thing hits? We’ve always underfunded. We’ve always spent more than we made and it’s coming due, and I think this is it.

PENNER: All right, so let me turn to our listeners on this. Well, you’ve heard the story. I mean, it may sound like just a numbers game, sometimes this always does sound like a numbers game, but when the mayor says to all the city departments we’re going to cut an average of 25% of your budget, you know that you’re going to feel it. What is your concern? And, you know, is it time to move out of San Diego and go to a place that seems to have a more balanced municipal budget? Our number is 1-888-895-5727, 895-KPBS. David Rolland.

ROLLAND: Well, you mentioned that the 24% cut across the board that they’re talking about. You know, Ben Hueso, the city council president, said something sort of poignant. You know, he mentioned one department specifically. He – The other day when they were having their budget hearing, I think it was on Wednesday, he said like Code Compliance, you know, the people that go around and make sure everybody’s following the rules in terms of, you know, land use code and that sort of thing. He said, they can’t cut their budget by a quarter. He said, there’s just – there’s no point in having a Code Compliance Department at that point. So this is really – I think really finally going to get pretty serious.

PENNER: And Scott Lewis?

LEWIS: Well, I think that’s a great point. Look, a city has five basic responsibilities: provide water, get rid of sewage and trash, provide police and fire protection for emergencies and for response to crime, and then to provide streets and transportation things. And so what you’re going to see is beyond those five things, major, major cuts to the point where I’ve been using the term dissolving city. I don’t think that if you have a park or a recreation center or any other type of amenity in your neighborhood that depends on city support, I don’t think you can plan on the city supporting it into the long term without setting up a little government of your own.

PENNER: Okay, we’ll come back in a moment and continue this discussion, which is going off on a rather sad, even drastic, note. This is the Editors Roundtable and I’m Gloria Penner.

# # #

PENNER: This is the Editors Roundtable. I’m Gloria Penner. And I’m at the roundtable today with David Rolland of San Diego CityBeat, Scott Lewis of voiceofsandiego.org, JW August from KGTV 10News, and it’s his birthday today, so when you call in, you may want to with him a happy birthday. And our number is 1-888-895-5727. We’re talking about the City of San Diego’s budget deficit that’s expected in July, almost $200 million or even possibly more than that and what we can do about it. So, Scott Lewis, this – we are one of the 18 cities in the County of San Diego. Are we worse off than the other cities? Is San Diego worse off, let’s say, than Oceanside?

LEWIS: San Diego’s been cutting services and dealing with budget deficits in a way that other cities haven’t during economic boom times. Again, we used one-time funds, things that should have been used to get through a crisis, we used that – those funds during what were relatively prosperous economic times. This is the difference with the City of San Diego and this is why it’s so disheartening and worrisome, is that we now have none of that cushion available and we have none of the long term solutions in place. So it’s a situation, again, the City’s not set up to take in as much money as it’s set up to spend, what’s called a structural deficit. And the independent budget analysts at the City’s been warning about this for years and this may be the first year where we actually come face to face with it in a way that residents finally understand and that politicians finally are able to articulate.

PENNER: Okay, you know, I want to take one call before we have to end this segment. We haven’t gotten to the phones on this because there’s so much to discuss but Chris in Fairmount Park is with us so, Chris, you’re on with the editors.

CHRIS (Caller, Fairmount Park): Yes, good morning…

PENNER: Good morning.

CHRIS: …and great show.

PENNER: Thanks.

CHRIS: I just – I think it’s worthy of note at least that, you know, we had an election that centered on this issue that we’re still talking about. And there were a number of ideas kicked around during that election and it seems everything got kicked down the road. The ideas for solving it were passed over. Bankruptcy was laughed at, and tax increases were scoffed at. And here we are, we still have the problem, no meaningful solutions were taken. Yes, our current mayor did implement some good accounting practices, but those are things like doing your homework that any administration should have been doing. And here we are a number of years later. Now, you know, tax increases seem more absurd. Imagine if we had started, you know, collecting the, what is it, $11.00 per household per month for garbage over the past three years, some of the deficit that we now look at would be gone because we would’ve been able to pay more toward our structural deficit.

PENNER: Yeah, and I – my understanding is even if we were to go ahead and start a trash collection fee, it wouldn’t be enough and fast enough to offset the shortfall that’s expected in July. Chris, thanks…

AUGUST: But that…

PENNER: …so much for your call. JW.

AUGUST: But that doesn’t mean we don’t do it. That doesn’t mean because it’s not going to immediately – We have to pay a price here. We’re going to have to figure out what we want to lose and what we want to keep.

PENNER: Okay, so you really get me to my next question, JW. Is this city council and this mayor up to handling such a crisis or is it too political or too soft to make the tough choices?

AUGUST: Yeah. Well, I really appreciate the fact that the mayor’s doing all these press conferences these days and I hope that reflects on his interest in getting out in the community and finding out what’s going on and trying to spread the word about conservative fiscal policy. I think it’s still a little early with this council. I mean, they are very political but then they always are.

PENNER: Okay, and what do you think, J – not JW. David Rolland.

ROLLAND: Well, all the council can really do is make cuts. You know, they can cut the expense side of the ledger. They can’t, themselves, raise a bunch of money without voter approval. The problem you get there is there are a lot of people that say this is a low tax city, and they’re right, but then the counter argument comes from people who are against raising taxes and they say, well, that’s all we’re going to be doing is paying for bad decisions in terms of employee benefits. You know, back – Like Scott was saying, you know, one of the ways the city dealt with its problems in the past was to basically take money from the pension system and, in order to do that, they had to promise the employees more in benefits. So the anti-tax people have kind of a good leg to stand on that this city can’t be trusted to do that sort of thing even though it is a low tax city, so that really complicates matters.

PENNER: Final word, Scott.

LEWIS: Some of the major reforms and major cuts that need to occur right now would be more attractive if it were made clear in some of the long term revenue solutions that the mayor would be willing to make. I think you’re going to see things like the trash tax come up, you’re going to see a stormwater fee probably come up. This is a deal where I think only property owners, through a mail-in ballot, might be able to do and, you know, there’s a lot of things like that that might come up but the mayor and the city council, I think, have a glorious opportunity right now to remind people that they didn’t set these long term liabilities in motion and that maybe they haven’t fixed them yet. Maybe the mayor needs to say, well, you know, the mayor has put in, like JW said, some fantastic financial accounting systems and the systematic changes that he’s put in place are good but the structure is still not reformed, and that he has a fantastic opportunity to say, okay, not we put the systems in place, now we can say that we’ve got to cut these things, we’ve got to cut this compensation level, we’ve got to cut this, and in exchange for willingness to participate in those discussions, I will pursue a plan to review and to raise our revenues.

PENNER: One final question for you. I started off by saying we’re seeing a lot of the mayor lately. Why do you think he’s so engaged in center stage public relations lately?

LEWIS: Well, I think, you know, there’s going to be some major things that happen. People are going to lose parks, they’re going to lose services that they’ve come to enjoy, and he needs to make it clear and he’s going to try to make it clear that he’s doing all he can. And I think that, you know, again, this is an important opportunity to really lead us through. He can be remembered into the long term, decades from now, for having reformed and set the city on a better course. He has not yet done that.

PENNER: Isn’t that something that Carl DeMaio, Councilman Carl DeMaio is pushing for?

LEWIS: There’s a few people pushing for that. You know, Tony Young, Kevin Faulconer. Others are trying to figure it out but nobody has very clearly articulated where they’d hoped the city would be in ten years, and the person who does, I think, will have a chance to be remembered.

PENNER: Okay, well, we need to move on because we have one more segment that deserves some time, and thank you all very much for your contributions to that discussion.

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