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San Diego Independent Budget Analyst Predicts City Deficits

Evening Edition

San Diego City Councilman Todd Gloria and Jay Goldstone, San Diego's chief operating officers, talk to KPBS.

Aired 11/20/12 on KPBS Midday Edition.


Todd Gloria, San Diego City Councilmember, District 3

Jay Goldstone, COO, City of San Diego


Aired 11/20/12 on KPBS News.

Mayor Jerry Sanders has been doling out rosy projections about the city's finances, including a balanced budget and even extra money for police, parks and libraries. But a report from the city's Independent Budget Analyst sings a very different tune.


Review of Mayor's Five-Year Financial Outlook for FY 2014-2018

Review of Mayor's Five-Year Financial Outlook for FY 2014-2018

Review of Mayor's Five-Year Financial Outlook for FY 2014-2018

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San Diego's Independent Budget Analyst projects deficits for the city over the next several years, conflicting with figures from Mayor Jerry Sanders that sees nothing but surpluses ahead.

Sanders' five-year budget outlook, released last month, called for a $4.9 million surplus for the next fiscal year, growing annually to $94.2 million by the 2018 fiscal year. It did not include general wage hikes for employees or increases in service levels, but financial officials acknowledged that uncertainties could unravel their estimates.

The IBA report listed several concerns that cut into the projected surpluses, including: Changes to redevelopment that could put the city's general fund on the hook for Petco Park and Convention Center debt service; investment losses by the San Diego City Employees Retirement System; initial costs of implementing voter-approved changes to retirement benefits; doubling of support for arts and culture; and more moderate growth of sales and property tax revenues.

According to city officials, it is unknown whether the state will stick San Diego with the redevelopment costs, but the retirement system losses and Proposition B implementation expenses were expected. Also, the City Council agreed to increase arts and culture support over the next several years, with Sanders' blessing.

"While the city's financial position has improved substantially over the past several years due to numerous reforms, it is far too early to celebrate," the authors of the report said.

They said city officials still needed to be "fiscally cautious." The worst case scenario from the IBA turns next year's surplus into a deficit of as much as $84.2 million.

The city’s chief operating officer Jay Goldstone said on KPBS Midday that he’s “surprised there is surprise” about this news. Goldstone said the mayor’s rosy picture in October was merely a projection, and he expected all along that other factors like redevelopment and pension costs could change things.

“There’s a lot of new information that comes out, we will know the actual pension number, that will have to be built into the budget, the city will pay the full pension payment for the coming year, and priorities will have to shift, the use of reserves may have to be considered,” Goldstone said.

The biggest bites would be from spending an extra $30.1 million on capital maintenance and $21.6 million to implement Proposition B, passed by voters in June.

City Councilman Todd Gloria told KPBS Midday the city knew about Prop B's cost and said it’s troubling this information was downplayed before the vote.

“I would argue that any person who voted for Proposition B, and I did not vote for it, did not know that it would actually cause our pension bill to increase, at least in the short term,” he said.

Instead of a huge surplus in five years, there would be a deficit of $43.1 million, according to the report.

"The mayor has said all along that these issues, which are largely out of the city's control, could pose financial challenges in the future," said Darren Pudgil, a spokesman for Sanders.

"That's why he has built up the city's reserves to $166 million, which is 14 percent of the city's budget -- well above the city's 8 percent reserve policy."

Mayor-elect Bob Filner and the City Council will be able to tap these funds should they need to, Pudgil said.

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Avatar for user 'laplayaheritage'

laplayaheritage | November 20, 2012 at 2:29 p.m. ― 4 years, 3 months ago

Linked above is the month-old October 19, 2012 letter from the State Department of Finance (DOF) to David Graham of the Mayor Sanders' Office and Oversight Board for the dissolution of the former CCDC Redevelopment Agency (RDA) assets including the Recognized Obligation Payment Schedule III (ROPS III).

The DOF letter states that a total of $54,354,465 in former RDA Tax Increment (TI) planned for projects mainly in downtown cannot used former RDA TI funding siting in a Trust Account. [$76,594,121 requested by San Diego - $22,239,656 allowable RPTTF by State DOF].

The dissaproved projects attached with the DOF letter include:
Item 168 North Embarcadero Visionary Plan (NEVP) $20.9 million.
Item 180 Ninth and Broadway Affordable Housing $20.2 million.
Item 183 Permanent Homeless Shelter $4.3 million.

And the $8.8 BILLION in Cooperation Agreements and Loans to the City including moving the Convention Center Expansion II and Petco Park debt from the City's General Fund to CCDC RDA.

Item 84 Convention Center Cooperation Agreement $224,070,688 Phase II Expansion.

Item 85 Ballpark Cooperation Agreement. Petco Park $226,349,913

How will the Port of San Diego pay for the NEVP improvements now that the $20.9 million has been denied by the State DOF using former RDA TI?

Oversight Board August 28, 2012 meeting. Item 1. ROP III approval.

City of San Diego IBA Reports that acknowledge the State DOF denial of Convention Center Phase II and Petco Park Debt. However, the IBA report did not itemized other denied projects including the NEVP currently in construction.

The attached IBA Report 12-48 Mayor's 5 year financial outlook FY2014-2018 was revised to include: "The impacts of pending State decisions regarding redevelopment dissolution; impacts of pension plan investment losses; and impacts of Proposition B and new GASB rules on the pension plan."

"Non-Discretionary Adjustments. 1. Redevelopment Impacts-

Figures represent annual payments of $11.3 million for Petco Park and payments for Convention Center Phase II ranging from $3.0 million in FY 2014 to $5.0 million in FY 2018, should these items continue to be denied by the California Department of Finance. If the State also exercises the “claw-back” provision, the General Fund would have to pay an additional $28.0 million for payments already made in FY 2012 and FY 2013. (See pages 26-31 for further discussion)."

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