S.D. Mayor Discusses Budget, Local Jobs, Fire Pits
Monday, May 10, 2010
What are the biggest challenges currently facing the City of San Diego? We speak to Mayor Jerry Sanders about the city's budget, local jobs creation, downtown development, and today's announcement on the future of beach fire pits.
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. Making short term fixes to the San Diego budget has occupied a lot of Mayor Jerry Sanders’ time lately. But while the economy continues to dominate city government's concerns, there are many other issues, like development, jobs, and the upcoming primary election stirring up city hall. Mayor Jerry Sanders is here to address a number of those issues. And good morning, Mayor Sanders, thanks so much for being here.
JERRY SANDERS (Mayor, City of San Diego): Well, thank you, Maureen. I’m happy to be here this morning.
CAVANAUGH: And we’d like to invite our listeners to join the conversation. If you have a question or a comment for Mayor Sanders, give us a call at 1-888-895-5727 or you can post your comment online at KPBS.org/thesedays. Well, let’s start with the budget. How is the city’s budget doing for the remainder of the year? How’s that shaping up?
SANDERS: Well, it looks like we’ll be – we’ve got the last fixes in for this year, and that’s for going to 2011. And we were able to balance it, but it was a tough budget. I mean, we put away $179 million as what we had to balance in December and I applaud the council for going early on it. Most other cities are now grappling with this issue for the first time. But we knew at the time we didn’t know where the revenues were going to be and we’ve had to fix about another $30 million over the last several weeks, and we have a new management system, a new computer system, that came in to replace what was – it could only be called antiquated. It was an old 1970s mainframe and everybody had their own systems. Now everybody’s on one system and we’re starting to get some efficiencies out of us – out of it, and that’s what helped us balance without having to cut more people.
CAVANAUGH: Now, there was much made of this budget correction that happened in December and that it was an 18-month budget, so when do you actually have to prepare a brand new budget now?
SANDERS: Well, this budget, the 18-month, will actually be docketed and they’re holding the last of the budget hearings this week for that last little piece of it, but we got most of it done then. That allowed us to achieve about $25 million in long term savings to kind of cushion the blow of the economy. We’ll go back next year now, after this budget’s passed in June, and next year’s budget should be the last budget where we have a structural deficit. And what that means is for years and years, in fact, decades, they’ve used one-time money, they haven’t made the correct payments to the pension, they haven’t funded retiree healthcare, they haven’t done a lot of that. We have 70 million, 75 million next year, and from then on we’re making the correct payments on everything. We’ve got the reserve levels at the levels they should be, and from then on as the revenue grows, the services can be restored over a period of time.
CAVANAUGH: Well, as you said, this is a long term deficit the city has been shouldering for quite some time. I’m wondering, how much – what are the long term solutions that you’re putting in to correct this?
SANDERS: Well, the long term solutions have been over the last four years and that’s been – we’ve cut about 1450 positions, which is – it’s a huge savings. We’ve actually funded the correct amount on the pension system every year. So the year before I became mayor, even though the bill was $136 million, the council only paid $36 million that. So over the past four years, we’ve paid the correct amount every year and as the economy starts to rebound, that’ll start cutting the pension payment down because of the earnings. And we’re not taking out the earnings anymore, like they used to. They used to take what they called excess earnings and anyone who has a 401(k) knows there’s no such thing as excess, it’s supposed to cushion your retirement plan when times are bad. We stopped taking anything out of this pension system now. And then the other long term fix is we put a new pension system in place for new employees. So new employees hired after 2005 can no longer get into the DROP program, they can’t purchase service credits. Both of those caused some pretty deep problems in the pension system. And for all employees hired after July of last year, they no longer are in the same pension system, and the new pension system costs half as much. It’s part defined contribution and part defined benefit. Ultimately, that’ll lead, over the next 20 years to some very significant savings for the taxpayers.
CAVANAUGH: Speaking of the employee retirement system that you’ve been taking about, the city’s filed a lawsuit against its own pension system, its own employee retirement system. I think a lot of people might be confused about why the city would do that. Can you explain the motivation behind this lawsuit?
SANDERS: There is a board that runs the pension. San Diego Serves is our pension system administrator. It has a group of people on it that are appointed. Some are elected by the membership. They can do virtually what they want within the confines of the city charter once they have it. The new city attorney, not new any longer, but Jan Goldsmith, said the charter says that substantially equal is how the charter says we’re supposed to contribute to the system. All of our employees except for one group are now paying their half every year, and in the past that wasn’t the case. But he’s taken it even further and said substantially equal according to the memos that he’s gotten from an outside law firm means that you also share in the gains and losses and that employees, when you have a very bad year, should be paying a higher amount that next to make up for that. That’s what’s in the courts right now.
CAVANAUGH: And so that would mean that the city wouldn’t have to shoulder the entire burden if, indeed, investments went down and they weren’t at the level projected.
SANDERS: That’s exactly right. And that could be smoothed out over a period of years so you don’t have huge fluctuations in the amount the employees have to pay. But what he’s basically said, and it’s in court right now, everybody should share both in those losses and make sure that they pay their fair share of it, but they should also share in the gains. And in many years you have gains that far outweigh the seven and three-quarter assumed rate that our pension system has and most pension systems do.
CAVANAUGH: If the city prevails in this lawsuit, what could it mean for the city’s finances?
SANDERS: Well, it could mean an extra $40 million a year, at least in the short term, that we wouldn’t be paying, that the employees would pick up over a period of years. And the pension system has already said that public safety should be paying about $3 million more of the city’s obligation because of disability retirements and things like that.
CAVANAUGH: I’m speaking with San Diego Mayor Jerry Sanders. And I want to ask you, before we leave the topic of the long term fixes for the long term deficit that San Diego has, any new taxes for people? Any new fees in order to make up that difference?
SANDERS: No, there’s – you – The charter says you can go out without a vote of the people and do what they call a pension fee or a pension tax. We’ve opted not to do that. I don’t think that’s fair at all. I don’t think taxpayers think that they should step in and fund a retirement system that’s much more generous than the ones that most people are in. What you’ll find is all government right now, every city, every county, every municipal agency of any type has got huge pension debts because these pension systems were set up in the fifties and sixties. They’re called defined benefit plans, which means the employer pays the bulk of that and it guarantees a specific amount when you retire. And they’ve been underfunded for years and years and years throughout the entire United States. And some of the pension systems are creaking and slowly starting to fall. In New Jersey, they had an article in the Wall Street Journal recently that said that they’re raising taxes every single year municipally just to pay pension and retiree healthcare benefits. In California, people just wouldn’t stand for that.
CAVANAUGH: Does it surprise you that some surveys have shown that one of the things San Diegans might be willing to pay more for is street repair?
SANDERS: No, it doesn’t surprise me at all. If you go in some of our neighborhoods right now, the streets are pretty bad. But we’re funding 134 miles of street repair this year. And when I say street repair, that’s complete overlay, complete asphalt, brand new streets. We’ll also be slurry sealing probably 100 miles of street to prevent any further decay. And that’s one of the things that people have talked to us about. 134 miles in one year is the most that’s ever been done in the history of San Diego so we’re actually listening to what the people have to say on that.
CAVANAUGH: Unemployment has been such a big issue in all of the nation, in California and in San Diego. I know that you support, Mayor Sanders, an ordinance that will offer incentives for city contractors who hire and use local workers. What’s the status of that proposed ordinance?
SANDERS: It just went through rules committee, which means it’ll come to council fairly soon. You know, we need to keep our local contracting companies, our local workers working, because it generates more in tax flow in San Diego but it can’t be some outrageous differential. They’ve got to compete with other contractors from other cities or even other states. And one of the things that we have found since San Diego’s in California, California has high employment taxes. We’ve got a lot of out-of-state contractors now doing a lot of the heavy construction. We’d like to even that playing field so that our contractors have at least an equal opportunity to bid on those contracts.
CAVANAUGH: You’ve gotten some criticism lately with the conflict in your objective for local jobs in the City’s first outsourcing contract. Apparently, this successfully contracted outsourcing deal in the City’s help desk, help service desk, it’s gone to a company based in LA who uses overnight phone workers in India. So how do you jibe that with your commitment to local jobs?
SANDERS: Well, first of all, it doesn’t use any out-of-country workers. It had one worker that would’ve been there during certain hours and when council made their displeasure known at that, we contacted the company and had them keep it locally. But they’re hiring local companies to do a large part of that work. In fact, one of them is a minority-owned company, which we’ve also been working very hard to break our contracts apart so local small businesses can also get in on those. But in DPC, which was a city agency, the people were not employed by the City of San Diego, they’re not in our retirement system, we don’t pay them, we’ve had them for 30 years and they’ve never had any competition and the prices have been very high. Just on the help desk, which is about a $2.8 million contract with DPC, by going out to competitive bid, the low bid was $1.2 million. And I thought that was very reasonable to outsource that because that means we get to keep city employees in other areas because we’re saving that money. We would like local contractors to win those. We’ll make sure in the next round of bidding, because there’s $42 million more in the DPC contract, we’ll make sure none of that goes overseas but even DPC was going to send a lot of the work out to Columbus, Ohio. So, you know, we’re in a global marketplace with especially on the IT contracts but we’re finding intense competition and we think we can save probably 40 to 45% on the next (unintelligible) of contracts.
CAVANAUGH: Is the City – Do you and the City have anything else up your sleeve to stimulate job growth in San Diego?
SANDERS: We’ve been working very hard on clean tech, and clean tech is a new cluster, much like biotech and wireless and high tech. We have been working, we have a nonprofit organization called CleanTECH San Diego that’s run by people in the industry. We’ve created about—when I say we, I’m talking about the whole industry’s created about 1800 new jobs in San Diego over the past year and a half. That’s considerable considering the job losses in almost every other sector. So we continue to work on that. We’ve gone back east and talked in Washington, talked in Sacramento, about some incentives to attract new clean tech companies but it’s growing very rapidly. And right now, there’s about 300 new companies that have started up in San Diego and about 600 companies altogether when you throw in companies like SDG&E and Qualcomm who by products of what they do is actually in the clean tech arena. So it’s a marriage between the research institutions like UCSD and San Diego State and SPAWARs and these other companies who have by products of their research that allow us to create whole new companies that have created whole new products.
CAVANAUGH: My guest is San Diego Mayor Jerry Sanders. And we have a caller on the line. John is calling from San Carlos. Good morning, John, and welcome to These Days.
JOHN (Caller, San Carlos): Good morning. Good morning, Your Honor.
SANDERS: Good morning, John.
JOHN: How are you today?
SANDERS: I’m doing great.
JOHN: I’m calling to see what your opinion is of Marti Emerald’s suggestion that all non-union city employees make no more than you get paid in order to restore cuts to the city’s fire department.
SANDERS: Well, first of all, that’s going to be difficult because about 40% of our firefighters make more than $100,000 because they work a considerable amount of overtime so that we don’t have to hire as many. I think that probably you’re going to find that it would also be hard to attract management to San Diego and I’m talking about somebody who runs our public utilities. We just lost Jim Barrett, who was nationally known for his public utility work in water and sewer rates. He was paid about $168,000, offered a job in Coachella Valley as the number two person there, and that’s out in the desert with about a $60,000 pay raise. So we need to be competitive in some areas but we certainly need to contain costs in others.
CAVANAUGH: Let’s talk about the four large development projects downtown. There’s been the push for the central library, the expansion of the convention center, construction of a new city hall and possibly a new stadium for the Chargers. I know that I’m lumping a lot of things together because they all have their separate issues but, on the whole, do you support these construction ideas?
SANDERS: Well, we’ve actually pushed them forward. We have two funds in the City of San Diego. We have the general fund, which is about $1 billion, that’s police and fire, park and rec, libraries, just about the whole city bureaucracy along with that. These projects would either bring money back by saving it, or they wouldn’t use any general fund money at all. For instance, a new library. That’s about $80 million CCDC, which is money that can only be used, by state law, for the redevelopment area, can’t be used for any other city function. We’ve got about $20 million in a state library grant that if we don’t use, it has to go back to the State of California. It can’t be used on our branch libraries, only on a downtown library. $20 million would come from the San Diego Unified School District who would like two floors in the new library for a high school, which is an excellent use of that. It’s on the trolley line. The students would go half day at San Diego City College, half day in the new campus. And then the rest of it comes from donors. So none of that comes out of the general fund and, in fact, one of our donors, who’s very sophisticated, said I want the hours to remain the same and you’re going to need more people so I’ll actually fund for five years any increase in personnel you put in there. So that’s the type of thing we’re trying to do. Convention center is another huge project. That returns about $2.36 for every dollar that’s invested. Huge job generator, good jobs. About 12,000 jobs there right now. We’re in danger of losing some of the largest conventions, which bring in a lot of sales tax, a lot of revenue to the city. We make about $30 million a year in tax from the convention center that goes into the general fund for police and fire. This would be funded, none of it out of the general fund, it would be funded by hotels, restaurants, all of those who benefit most greatly from that, perhaps a rental car tax, something like that but none of that would be general fund money. The civic center, we have about – we have a city hall. It was built in the sixties, doesn’t have sprinklers, only highrise downtown that’s non-sprinkled. It’s filled with asbestos. It’s – Just to keep it running for ten years, it’s cost us $40 million because the plant is so old. We have about fourteen and a half million in rent every year that goes outside to other office buildings downtown. If we were to take that money and build a new office complex that would house all of the city workers, we believe we can save about a million a year for the first ten years, and then it ramps up considerably in the savings. So once again, that saves the general fund money instead of costing it. And, finally, if you put in a Charger stadium in the downtown area, much like Petco, that would be paid for both by the team and by redevelopment money which can only be used in the redevelopment area, and we think it could have the same impact that Petco’s had in terms of being an economic generator. And everyone can see what’s happened around Petco with the building and the hotels and the restaurants, and we believe the same thing could happen at the east edge of downtown. So none of these projects take money out of the general fund; they all create a tremendous number of jobs both in the construction phase and in the long term phase, and that’s the reason I think they’re important projects.
CAVANAUGH: Let me ask you, the people of San Diego will go to the polls in next month and they will vote on the City’s strong mayor form of government. Of course, that takes the mayor off the city council, makes the mayor the elected executive officer of the city, and leaves the city council as the legislative branch. You’ve been the city’s first strong mayor, and what do you think of the experiment so far?
SANDERS: Well, I think it would be hard to go back. Before, there was no accountability. If something went wrong in the city, much like the pension crisis, you have an unelected city manager who pulls the strings behind the scenes and past councils would say don’t bring anything controversial in front of council. You handle it behind the scenes. You make it balance. And that’s how we stopped making our pension payments. That’s how we started getting creative in the way we were disclosing things. Having a strong mayor means that everything’s done in public. And I take my budget to the council in public, any legislation goes forward to them in public, all these four projects we just talked about go forward in public. None of that can be done behind the scenes anymore. And the accountability comes back to me. People can say the mayor’s not doing a good job or the mayor is doing a good job but they know who to really point at. And I think it’s really critical that we continue with that system into the future. I don’t benefit from parts of it. I’ll be terms out in 2012. The ninth council district will be adopted in 2012 after the census, and also the veto, which will be a two-thirds veto instead of the veto we have now which is only five votes, the same five to pass something, will come in then also. So this is not about me. This is about the future of San Diego. And I think if you even talk to a lot of the council members, they may not like it in some ways but they have their own independent budget analyst now that verifies or does their research to make sure when they vote on issues, they’ve got a completely untainted view from what I’m putting forward. And I think that’s a good system of checks and balances.
CAVANAUGH: Last Monday, the city council voted in favor of a resolution calling for a repeal of Arizona’s controversial immigration law. We’re a border city, Mayor Sanders, as you’re well aware of. What’s your take on that law that was recently passed in Arizona?
SANDERS: Well, I think it came out of frustration in Arizona. We have the same frustration in San Diego, we have the same frustration all along the border. And that’s that the federal government has done nothing to work on a comprehensive immigration reform so that people feel like it’s at least something that people are paying attention to. I don’t agree with what Arizona did. We don’t want our police officers becoming immigration officers. We’ve had to downsize our police department. Our police department, the people out there are working on crime prevention, they’re working on making our neighborhoods safe, and we’re absolutely maxed out right now without taking on another whole layer of responsibility that some would like to throw on local law enforcement agencies without putting any money into that at all. So I just don’t think it’s a good idea at all. And I think it puts victims in a situation where they don’t want to call the police then, and we’ve been very successful in reducing crime over a long period of time by engaging the public, by making sure every victim of crime calls because they’re not worried about what the ramifications are later.
CAVANAUGH: And finally, Mayor Sanders, an anonymous – the anonymous donation that has kept the San Diego City fire pits going for the last 18 months is about to run out in June and you are going to be announcing today some major development to those fire pits and their long term viability here in San Diego. What’s that announcement?
SANDERS: Well, we’ll be announcing today that some more donors have stepped up to fund the fire pits, probably for the next year or year and a half, maybe longer than that. It’s kind of a funny thing. You talk to people about fire pits. I don’t talk to many people who use them but they like the idea of them. It’s kind of San Diego. We’re probably the only city around that still has fire pits because they do create a huge maintenance load. But people like those, they want to have the idea that they can go down to them, and it’s kind of captured the attention of a lot of people and we’ve got some donors stepping up.
CAVANAUGH: And are those donors still anonymous?
SANDERS: They’re still anonymous.
CAVANAUGH: That’s very interesting. Mayor Sanders, I have to thank you so much for speaking with us today, and we could’ve spoken for a much longer time. Will you come back?
SANDERS: I will.
CAVANAUGH: Thank you so much. I’ve been speaking with San Diego Mayor Jerry Sanders. If you’d like to comment on what you’ve heard this morning, you can go online, KPBS.org/thesedays. Coming up, a North County update as These Days continues here on KPBS.