The Dichotomy Of San Diego’s Debt
Friday, March 19, 2010
An update on San Diego city finances. Why are we facing another deficit? Could a newly approved bond measure get the Chargers off the hook for their stadium debt?
GLORIA PENNER (Host): So, just when you thought the City of San Diego had its budget under control through June 2011, along comes news that another $25 million sinkhole has appeared and, once again, something’s got to give to close that new gap. Tom, first of all, why are we facing another deficit?
TOM YORK (Contributing Editor, San Diego Business Journal): Well, I think it’s, you know, it’s another issue that’s erupting from the pension scandal in the – that happened, you know, ten years ago, is that, you know, people said we would pay a price for this and this is the price we’re paying. We’re struggling with this now as we go forward, trying to make sure that there’s enough money there to cover all the promises that were made to city employees years ago but weren’t funded. So, you know, it’s just one step. Plus, the economy has taken the – sort of the wind out of the sails of the city’s ability to tax. You know, tourism is down, business activity is down, so the taxing levels are down. At the same time, the demand on the city treasury is rising.
PENNER: Well, I – What I don’t understand is, let’s start with the revenue shortfall, you know, that sales taxes are down, that hotel taxes are down, and, Kent, let me turn to you just generally. I mean, how could our budget experts, whether they be City of San Diego budget experts or county or anything, not project that revenues from sales and hotel rooms would continue to fall as long as the economy is slow?
KENT DAVY (Editor, North County Times): Because California’s a state full of very, very bright people yet we have the – we do not have the ability to accurately predict exactly what’s going to happen in economic turns. You see it at the state level. We see it at the federal level. We’re going to see it in the – in the City of San Diego. North County cities are in the same boat. Both Escondido and Oceanside have got new shortfalls or shortfalls that they’re struggling to fill in this year’s budget let alone next year’s budget.
PENNER: But the economists have been telling us that we’re not going to see a full recovery for years. So who’s going to expect that people are going to be buying things or traveling while the economy is slow? I mean, it just seems to me that it’s clear.
DAVY: To borrow a phrase, you’ve got to cut the cloth to fit and that’s an issue with regard to government saying we have to downsize ourself to a point to where we can pay as we go.
PENNER: Okay, well, I’m going to throw out a fast question to our listeners and say, all right, another deficit and, by the way, we are going to be borrowing in order to fix those roads and streets and the falling-in roofs of places like our police stations, and we’re going to talk about that as well. How pleased are you with the way that the City of San Diego is handling its finances? Our number is 1-888-895-5727, 895-KPBS. Tom, I’m going back to you on this. The mayor is saying he’s looking at longterm solutions. Now other than raising taxes and borrowing more money or stripping city services bare, what might be longterm solutions?
YORK: Well, one of the things that came up last week was that the city did a refunding of three different bond – existing bond issues and they roll it up into $185 million bond issue. And this money that will be refunded will – refunding these debts will be used to repair streets and roads and also fix up fire stations and police stations. But it’s a very costly way of doing business, this, you know, issuing bonds to pay for existing repairs because the bonds last for 30 years and by the time the 30 years is over, the streets and the roads and the fire house and the police station are going to probably need to be rebuilt let alone repaired. So…
PENNER: Not only that but, Vicente, by stretching out a bond payment for 30 years, even if you haven’t had children yet, your children will end up, if they stay in San Diego, helping to pay for this. Or if you have kids, your grandkids are going to do it. Does that kind of sensibility, you know, affect the way government thinks?
VICENTE CALDERON (Editor, Tijuanapress.com): I think this is like a fashionable way to deal with things because we are seeing the same in Tijuana. Recently, we have a big, major prob – road problem (unintelligible), where it took about 17 thousand million of pesos. That is the highest amount borrowed by the city and they are fixing a lot of the roads. The improvement, you can see it. But as you were saying, the next administration will be in a very deeply debt and I don’t know how many other services are already deficitarial. They’re going to be – they will have to cut.
PENNER: Okay. Tom, did you want to respond to that or…
YORK: Well, what I…
PENNER: …shall I go to the phones?
YORK: Well, I just had one quick question.
YORK: I think a lot of the procrast – or the, you know, the budget analysts who look at what’s going to be happening a year from now, two years from now, I think a lot of it’s based on political decision making. It’s trying to, you know, put the best face on something and right now it’s, you know, things are very tough in the private enterprise, and so the, you know, taxation’s going to be down. It’s going to be down for a while. I think these people are going to have to get more realistic about what’s going to be coming into the city coffers…
YORK: …and to the state coffers and the county coffers.
PENNER: This is true, and by the time everything is resolved, the current crop of city council members and the mayor will be termed out and they won’t even be around to see what the end result is. Let’s hear from Alex in Rancho Bernardo. Alex, how are you and come on in and join the conversation.
ALEX (Caller, Rancho Bernardo): Oh, thank you for taking my call. I was wondering how come whenever the Spanos or the Moores family or one of these ballplayers they need the money, we are always available with our checkbook. And whenever the city needs money, there’s not a single cent for fixing the roads or when the water pipes are bursting out, they just got to patch it up. I’m surprised now. People of San Diego, I don’t want to be gullible but it’s getting pretty ridiculous because, you know, we’re spending all this money for these player, you know, for the stadium’s players and even a study where to build a stadium. We’re, you know, the last time I heard they were spending $160,000 to – where to build the stadium.
PENNER: Well, a hundred sixty…
ALEX: You know, if…
PENNER: I’m sorry.
ALEX: No, I’m serious, you know, this is getting ridiculous. While, you know, we’re having to dodge these potholes and we’re getting, you know, the half-closed schools and firing teachers, I mean, this is insane. And yet, you know, the owners of these ball, you know, baseball or the footballs, you know, they end up selling their team for like ten times the price or they trade in their players and get the money for it. If you need the money, tax the, you know, the baseball. Tax the football.
PENNER: Okay, Alex, I got it. I got it. And that gives me an opportunity to ask one last question of Tom before we go off the air. There is a concern that with this new bond deal, and I won’t go into the details of it, the Chargers will be cleared of their debt to the city for the Qualcomm improvements that were incurred in 1996. What happens? I mean, is that a possibility? Must – Do we know that the Chargers will no longer be owing that money to the city once we borrow all this money through a bond?
YORK: Well, I think that’s speculation and I think that’s the people who opposed this, I think that’s what they’re saying. But I think where there’s smoke there is fire, and I think there’s some move afoot to get the Chargers into a stadium downtown, whether it be publicly financed, privately financed, or a combination of the two.
PENNER: Just very quickly, how important is it for the debt that the Chargers owe to the city to be cleared up for them to build a new stadium in San Diego?
YORK: Well, it unencumbers the land that exists now for Qualcomm Stadium and so that would allow the city to either sell that or lease it back to – or lease it out to someone so, like I say, it’s a precursor to moving ahead.
PENNER: Any chance that the longterm solution will be to raise taxes in San Diego?
YORK: Always, there’s always chances of raising taxes.
PENNER: Okay, well, thank you very much. Gentlemen, thank you so much. Kent Davy, New York Times – New York Times, I wish, right?
DAVY: You and I wish the North County…
PENNER: No, no. The North County Times, yes.
YORK: The New York Times wishes it.
PENNER: Yes. Tom York from San Diego Business Journal. Vicente Calderon, Tijuanapress.com. I want to thank our listeners and our callers. This is the Editors Roundtable. I’m Gloria Penner.
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