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San Diego Independent Budget Analyst Predicts City Deficits

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

GUESTS:

Todd Gloria, San Diego City Councilmember, District 3

Jay Goldstone, COO, City of San Diego

Transcript

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.

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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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