SD Adopts Reforms Aimed At Cutting Long-Term Debt
Tuesday, October 5, 2010
Why did the San Diego City Council approve three financial reform measures before voters have the opportunity to decide on Prop. D?
Why did the San Diego City Council approve three financial reform measures before voters have the opportunity to decide on Prop. D? We talk to Metro Reporter Katie Orr about the motivation behind the recommendations from the Citizen's Fiscal Sustainability Task Force, and how the reforms could cut down on the city's long-term deficit.
Katie Orr, metro reporter for KPBS News.
MAUREEN CAVANAUGH: The San Diego City Council promises additional budget reforms over and above those in Proposition D. I'm Maureen Cavanaugh, coming up on these days, the new measures reflect concerns that the budget reform's included as part of the half cent sales tax proposal will not be enough to solve San Diego's structural deficit. We'll hear what a business task force has proposed.
And then the Second Chance program in San Diego is celebrating the first year of Jolt, an intensive program to rehabilitate juvenile offenders issue that's all ahead this hour on these days. First the news.
I'm Maureen Cavanaugh. And you're listening to These Days on KPBS. A group of budget reforms are linked to San Diego's half cent sales tax increase on the ballot next month. Proposition D says the sales tax hype won't kick in until the City Council in facts the reforms. But a task force made up of San Diego business leaders told the City Council yesterday those reforms alone may be too little too late. So counsel members approved a resolution to try to make additional budget reforms. KPBS metro reporter Katie Orr joins us with more. Katie?
KATIE ORR: Morning, Maureen.
MAUREEN CAVANAUGH: What are the three reforms the council gave its approval to yesterday?
KATIE ORR: So these reforms are meant to fix the city's structural budget deficit within the next few years issue right now, the city spends more than it takes in revenue consistently, so it has this structural budget deficit. These reforms would require the city to save an additional $73 million a year through service cuts or efficiencies or other means. It would also put a spending cap of $20 million. The city would not be able to spend more than $20 million a year above its five year projected out look to restore services. And it would require that if there is a surplus, half of that surplus would go toward either the city's debt or toward savings.
MAUREEN CAVANAUGH: So where did these ideas come from? Who makes up the citizens' fiscal sustainability task force?
KATIE ORR: Right. The idea came from the task force. And it was formed in 2009, and it was charged with hooking at the city's fiscal sustainability. And at that time, it came out with a report that had 12 recommendations for what this city need said to do to get back on the right track. And sort of infamously, it said that if the city did not follow those recommendations it needed to consider filing for bankruptcy. And that wasn't something that most of the politicians liked hearing, and the report was sort of pushed aside. But now they're back and they've recommended these three reforms.
MAUREEN CAVANAUGH: Now, as I said in the beginning, that there are reforms that are part and parcel of Proposition D, which is the half cent sales tax increase on the ballot next month. How are these reforms connected to the reforms in Prop D 6789.
KATIE ORR: Well, people at city hall made it very clear that these three reforms do not reflect the ballot language on proposition K. What we have on the ballot language a couple weeks ago circumstance what we have, the sales tax increase that is triggered by ten reforms that are clearly listed on the ballot. But these reforms are meant to complement Prop D, the task force said in its latest report, that the only way we can solve the structural budget deficit is to combine Proposition D, if it's passed, and these three reforms, and those two things together would help get us out of this mess. So certainly the council, considering them now, is a way to tell the public, hey, look, we're serious about this, we've adopted these reforms, that means you should be more comfortable going and voting if are this sales tax increase.
MAUREEN CAVANAUGH: Any idea if these particular reforms would on and be and be enacted by the City Council if indeed Prop D does not make it on the ballot?
KATIE ORR: Well, yes. The city has adopted these. So they have adopted these thee reforms and they can go ahead with them at any time that they choose, regardless of whether or not Proposition D passes. We should say though that they adopted them as a resolution, meaning that the city is not legally bound to follow them. So if in the future another city council decides that it doesn't want to follow these these reforms, it doesn't have to.
MAUREEN CAVANAUGH: I'm speaking with KPBS metro reporter, Katie Orr, and we're talking about some additional reforms approved by the San Diego City Council yesterday, over and above those that are linked to the half cent seams tax increase that's on the ballot next month. Now the chair of the businessman's task force, Vince Mudd, spoke at yesterday's council meeting and he made the point that he wanted the council to adopt these recommendations now before voters decided to Prop D. Why was that an important part of this.
KATIE ORR: Again, it's to show that the city is serious about financial reform, that they are willing to do something now and sort of it's like they see it as a promise to voters that, listen, we are making these additional reforms if you give us this extra money, maybe we can really do something to finally solve the city's budget deficits.
MAUREEN CAVANAUGH: And obviously the task force found something lacking in the reforms that are part and parcel of Proposition D. So what is what did they identify as not quite enough to get the city where it needs to be.
KATIE ORR: Well, the task force like many people who have criticized Proposition D say that the language in the ballot proposition, the reforms are pretty vague and ambiguous. They don't require any specific numbers from the city. For instance, they don't say the city will outsource the operation in Mira Mar. They say the city will look into the outsourcing of Mira Mar, which they have. So, you know, check that off the list. They don't say the city will implement managed competition. They say the city will create a managed competition guide, which they have now done. So they're not saying they will offer any promises where anything will actually be done, whereas that's three reforms have specific numbers attached of which was also controversial. The IBA said the Independent Budget Analyst, Andrea Tevlin, said she didn't know if the city should necessarily be tied to having to save $73 million a year. Maybe it should just be a goal; something to shoot for.
MAUREEN CAVANAUGH: One of the people who came out as a supporter of these additional reforms is Mayor Sanders. He called this a missing piece in the Prop D puzzle. Tell us a lot bit about that.
KATIE ORR: Well, he spoke to the council yesterday before they considered these reforms, and he said that this these reforms plus Proposition D presents a roadmap to people to get the city out of the financial troubles it's been in once and for all. The combination of reforms, cost cutting, new revenues are all things the city should be doing, he said he acknowledged it's not legally binding, these three reforms, but he called it a commitment to the voters a contract with the public that the city will do what it needs to do to fix this problem.
MAUREEN CAVANAUGH: Now is there any kind of trade off? In other words are the business leaders are basically saying, if you adopt these additional reforms, we will lend our full support to Proposition D or we will campaign for Proposition D or anything along those lines?
KATIE ORR: Well, two of the major business groups in the city, the regional chamber of commerce and the economic development corporation haven't said either way yet how they're going vote, whether or not they're going to support Proposition D. And they still aren't saying. The Regional Chamber of Commerce has a meeting this week to finally decide whether or not to support it. But a couple of weeks ago, the chamber heard from the mayor, and I believe it was Councilman DeMaio, either DeMaio or Faulkner, on pros and cons on this thing, on Proposition D, and the mayor asked for two weeks so he could get some more specific reforms put through to maybe sort of soothe their fears over Proposition D. And so now that these reforms have been in place, it might make them the chamber more inclined to support it, but there's definitely no guarantee that they will.
MAUREEN CAVANAUGH: And those fears that they have about Proposition D. Is that are they along the lines of what you're talking about? That the reforms that are tied to Proposition D are just too vague and that we're gonna see but, it just occurs to me now, if they if they'll enact the half cent sales tax without really reforming the the city budget. Is that what these business leaders are afraid of?
KATIE ORR: Yes, that's what they're worried about, that their businesses that make up the chamber, or, you know, these other groups will be saddled with another sales tax, because there's always the argument that people can go to other nearby cities that doesn't have this tax instead. So if they support this tax, are they really going to see substantial changes to the city that make its worth it for them? And I think they were afraid with these reforms, like we said, that they were too vague, that they didn't lay out any guarantees, that they wanted to see something more specific from the city, saying listen, this really is a way out of where we are now, and if you support this, it will get better.
MAUREEN CAVANAUGH: Now, the city's chief financial officer Jake Goldstone presented a new five year financial outlook for the city at the same meeting yesterday where they talked about these additional reforms, and they actually did vote to approve them. That five year financial outlook, that presentation, was one of the things that the task force asked for. Why did the chairman, Vince Mudd, want the mayor's office to present the five year financial outlook before voters had a chance to decide on Prop D?
KATIE ORR: Well, he wanted everyone to have a clear picture of what the city is looking at. He wanted them to incorporate the full amount of the retiree health care benefits, the unfunded liability we have there, also the pension costs. The city had been paying retiree health on a pay as you go basis and not looking at the whole picture, which is I believe it's around $2 billion. So they, you know, they wanted to incorporate everything into that five year outlook, Vince Mudd says, when you look at everything the city owes to to get rid of the structural budget deficit in the next few years, we're actually looking at a $900 million dollar bill. So he just wanted everything to be out there on the table, and people know exactly what the city is facing.
MAUREEN CAVANAUGH: We do have a caller on the line, Katie. Daniel is calling from Clairemont. Good morning, Daniel, and welcome to These Days.
NEW SPEAKER: Thank you so much, Maureen. And I didn't know anything about this issue, and it's great to hear about this issue, and the pension and the city council members and what they're getting and how they're getting a great deal on their perception. I'm the only person who sued the city against the pension, and the retirement fund in the late 90s before Diane sip I don't know came out, and we sued on a case that under California state constitution, that renumeration cannot happen after the fact, which means you cannot grandfather yourself in. And then the secondary thing is that elected officials never can be paid more than in benefits than somebody who's on public safety personnel.
MAUREEN CAVANAUGH: Daniel, thank you for the call. You know, Daniel is addressing specifically the amount of money that city workers get paid and pension reform. And that is part of what Proposition D looks at. And also what these new reforms that the council approved also touch on.
KATIE ORR: Yeah, and it's also one of the criticisms. Carl DeMaio was saying in this new five year outlook that he wasn't a big fan of it, because he said that it basically built in spending increases into the city budget because it incorporated the pension costs and the retiree healthcare costs, and he says, hey, listen, if we're going to look at these problems and try and reduce those costs they shouldn't be factored into the five year outlook because we might not necessarily have to pay all of those. So he is afraid by putting them in there, it's sort of like the city saying, okay, we're just gonna pay these and move on. You upon, of course, those are battles that have been going on for years with the perception, and now the city's starting to take on retiree healthcare, is it vested, is it in the? You know, it's the next big battle.
MAUREEN CAVANAUGH: Now, councilman Carl DeMaio is a critic of the Proposition D and I would imagine these additional reforms. Am I right on that?
KATIE ORR: Yeah, yes. For the most part, he you know, he said he appreciated that the a citizens' task force was presenting an idea, you know, for the city to get right back on the right financial track. But like I said, he is critical of the plan in that it incorporates the sales tax increase and that this five year outlook might incorporate additional spending.
MAUREEN CAVANAUGH: Another critic who spoke before the council yesterday was former city attorney Mike Aguirre. What was his what was the focus of his criticism.
KATIE ORR: Well, Mike Aguirre, he has been speaking a lot that he feels like the city is going down the wrong path and that maybe bankruptcy is a good option for the city.
MAUREEN CAVANAUGH: And also I think he made a very strong point about what you were mentioning, Katie, and that is the fact that this is not binding, that this is a promise that both the mayor and the city council are making but that has no real legal weight to it.
KATIE ORR: Right. It's just a resolution, and I as Carl DeMaio said in his comments yesterday, Bike to Work Week is a resolution, Take the Veg Pledge, eating more vegetables, is a resolution, but it's nothing that the city is obligated to follow. You know, it was 6 to 2, councilmen, DeMaio and Faulkner, voted against these reforms for that reason, and the others say no, no, you know, this is a show of good faith, we have promised we're going to do that, but the critics made the point as I said that the council's going to change inevitably down the line. There are going to be new people, and they may not feel the same way. And if they don't want to follow these resolutions, they don't have to.
MAUREEN CAVANAUGH: Finally on this, Katie, Vince Mudd, the chairman of the task force, challenged critics, opposed the plan and opposed to prop eight to come up with a different plan and present that plan to the public. Has there been any indication that there's another detailed financial reform plan that's gonna be presented by somebody in the text few weeks?
KATIE ORR: No. Well, no one has come out and said here, look at my plan, I'm going to have this press conference and we can do this instead of the task force plan. Buff to be fair over the past couple months and years, the critics like Kevin Faulkner and Carl DeMaio have come out with various studies and reforms that they feel like the city should take on when the Prop D was passed with these ten reforms, Faulkner and DeMaio came out with their reforms they think the city should do instead. So they have been there and presenting their own ideas but as far as a comprehensive financial plan, I don't believe that there had been one offered up like this. But who knows? You know, in the coming weeks there might not.
MAUREEN CAVANAUGH: Katie, thank you so much.
KATIE ORR: Thank you.
MAUREEN CAVANAUGH: I've been speaking with KPBS metro reporter, Katie Orr. If you have comments please go on line, KPBS.org/thesedays. Coming up, juvenile offenders in San Diego get a Jolt of rehabilitation. That's as These Days continues here on KPBS.