San Diego’s Mayor Proposes Fiscal Fixes

Mayor Jerry Sanders on Thursday unveiled a 121-point plan to address the criticisms in a scathing report that blamed financial mismanagement for the city’s $2-billion pension deficit.

Sanders said that he “enthusiastically” accepts all the recommendations in a recent $20-million audit of the city’s books by the New York-based risk management firm Kroll Inc.

Among the mayor’s suggestions are more outside auditors, stricter procedures for informing the public and City Council about financial problems, and more toughly worded codes of compliance for employees who deal with budget issues. The council will consider the ideas next month.

Sanders ruled out raising revenue to help whittle down the pension deficit or fix the increasing maintenance backlog.

“I want to be clear: I will not propose or support any tax increases,” he said. “I think that voters appropriately expect that government should be able to live within its means.”

To press for a tax increase, Sanders, a first-term Republican, would have had to defy his major supporters: the Republican Party, the Chamber of Commerce and the editorial page of the San Diego Union-Tribune. Sanders said that because of the pension controversy, “the public does not trust us enough to even try to have revenue increases.”

The dedication of San Diego voters to low taxes is well known. Even the wildfire that destroyed hundreds of luxury homes in late 2003 failed to persuade enough voters to approve a boost in the hotel-motel tax to increase the Fire Department budget.

A study done by the Center on Policy Initiatives, a local think tank, suggested that San Diego voters have grown accustomed to receiving city services at bargain prices.

The study found that, by one measure, the city raises less revenue per household than any of the other 10 largest cities in the state. San Diego is the only city among the 10, for example, that does not charge a fee for residential garbage pickup. The city’s building permit fees are also among the lowest in the state.

Taxing its citizens at the average rate of the 10 cities would put nearly $300 million a year into city coffers, the study concluded.

The study’s author, Murtaza H. Baxamusa, a senior planner at the institute and a lecturer at USC, said Thursday that he was not surprised Sanders avoided talking about revenues. “He has to talk to his political base, which is the same political base that did not want the city to raise revenue to pay for the pensions,” Baxamusa said.

“When you talk about raising revenues in San Diego, you’re talking about hoteliers and developers,” he said, “and the city is reluctant to do anything to disturb them.”

The city’s pension deficit is traced to pension increases granted after labor unions gained political power in the 1990s. At first, the added benefits were paid for by city investments in a rising stock market.

When the dot-com bubble burst, the city faced the prospect of having to make a large payment to keep the pension funds afloat. Instead, officials persuaded employees and the pension board to allow the city to avoid the payments in exchange for boosting pensions even more.

When the city admitted not telling the Wall Street bond market about the growing deficit, the U.S. attorney’s office and the Securities and Exchange Commission began investigations. San Diego’s credit rating plunged, and the city found itself unable to sell bonds.

At a news conference, Sanders said he hoped his 121-point plan convinces the credit agencies and SEC that San Diego deserves to be allowed to sell bonds, including pension bonds.

To cut the cost of government, Sanders has proposed a ballot measure to allow him to outsource city jobs to private companies. He suggested that doing so could lead to the elimination of hundreds of positions.

Sanders estimated the cost of implementing the 121 proposals at $45 million.

“I have often said that I can’t print money,” he said.