Only Irresponsible Council Leads To Deep Red Budget, City Manager Says
Monday, November 26, 2012
San Diego would only go back deeply into the red in coming years if the City Council acts irresponsibly, which probably will not happen, the city's chief operating officer said today.
COO Jay Goldstone made the comment during a discussion of competing reports that say the city can look forward to five years of budget surpluses, or face steep deficits.
Mayor Jerry Sanders last month issued a five-year budget outlook that projected a $4.9 million surplus for the next fiscal year. That figure would grow to $94.2 million in fiscal 2018.
Last week, the city's Independent Budget Analyst reported that certain outstanding issues, in a worst-case scenario, could wipe out any hopes of surpluses -- and cause a deficit of around $84.2 million in the first year.
"This would require, however, that the City Council act irresponsibly by committing funds to programs that we can't afford,'' Goldstone told members of the panel. "Based on my seven years with the city, I don't see that happening.''
Among the uncertainties listed by the IBA were possible increases in employee retirement contributions following investment losses by the pension system, and costs associated with the end of redevelopment. Neither were included in the budget outlook released by the mayor's office, though city officials were aware of the potential pitfalls.
Goldstone said the five-year budget outlook is always based on the hard numbers known at the time. He also said most of the big numbers that make up the IBA's projection are discretionary -- subject to council approval.
Councilman Todd Gloria, who heads up the panel's Budget Committee, said the competing reports only mark the beginning of the discussion for the budgeting process.
"It would seem, in some ways, that the mayor's presentation is the best-case scenario, and the IBA's is the worst-case scenario, and as with most things, the answer is somewhere probably in between,'' Gloria said. "What we need to do as a council is prepare for all of those eventualities.''
Goldstone said in a radio interview last week that the city ended the last fiscal year on June 30 with $166 million in reserves and may have to tap into them. Additional money was set aside in the current fiscal year to deal with contingencies, he said.
Goldstone said the actual costs facing the city on some of the uncertainties should become known in the next few months.
The San Diego City Employees Retirement System is scheduled to inform the city of its required pension contribution in January.
The city should also soon learn the costs of implementing Proposition B, which was passed in June to reform the pension system, but also brings close to $22 million in upfront costs.
State decisions on redevelopment also could determine whether the city has to pay $14.3 million from its general fund for debt service on Petco Park and prior expansion of the Convention Center.
The City Council voted unanimously to accept the five-year budget outlook.
To view PDF documents, Download Acrobat Reader.