Fixing San Diego

Governing Staff Writer Alan Greenblatt has just returned from the scene of a municipal disaster. And I'm not talking about New Orleans. Rather, Alan has ...
by | September 8, 2005


Governing Staff Writer Alan Greenblatt has just returned from the scene of a municipal disaster. And I'm not talking about New Orleans.

Rather, Alan has been to San Diego. He's working on a story about the financial and political turmoil there. You may remember that Mayor Dick Murphy announced he would resign from office in April, not long after Time Magazine named him one of the nation's three worst mayors.  Alan's article is slated to run in Governing's November issue. I asked him what he's learned so far.

Christopher Swope: Remind me why San Diego is in such trouble.

Alan Greenblatt: The root of the problem is that political leaders wanted to spend more than they were taking in. They didn't have the revenue to offer city employees raises. So instead they offered increased pension benefits. Now San Diego's pension system is at least a billion and a half dollars short and there are legal questions as to whether there were improper conflicts of interest that led to overly generous payments.

Mayor Murphy stepped down as a result of this and other problems in July. Then his interim replacement, along with another city councilman, were convicted on unrelated corruption charges. So now there's a huge leadership void, awaiting the election of a new mayor in November.

CS: How's the mayoral race shaping up?

AG: Two candidates are left from the July primary. One is Donna Frye, a city coun Candidates cilwoman who actually got more votes than Murphy in last year's general election. But she was a write-in candidate and 5,000 of her votes were thrown out by a court. She got by far the most votes in the July primary, but not enough to avoid a runoff. The second-place place finisher w as Jerry Sanders, a former police chief who is now the consensus establishment candidate. He will have more money than Frye. The question is whether her grassroots support and her strength as a symbol of voter anger over the city's mess will allow her to prevail.

CS: Next year, San Diego is moving to a "strong mayor" system of governance. How will that affect the city's ability to clean up its financial problems?

AG: Clearly there's a leadership void right now. Whether a new mayor will solve the problems is the big question. So far, city officials have ganged up on each other, with accusations especially prominent between the city attorney and city manager. The hope is that having a new mayor with clean hands who has strong mayor powers will be able to take charge of the situation, be accountable, and get the city back on its feet.

The problem is that the strong mayor initiative gives new powers to the city council as well. So even though all eyes will be on the new mayor, he or she won't have much more authority than mayors had under the old system.

CS: What's the conflict between the city attorney and the city manager?

AG: The city attorney, Mike Aguirre, has been very aggressive and very public in looking at whether the city manager, his predecessors and the city council broke laws amidst their financial bungling. He has calle Aguirre d repeatedly for the current city manager, Lamont Ewell, to resign.

The city attorney is an elected post in San Diego and some people accuse Aguirre of mistaking himself for being the mayor in the midst of the leadership vacuum. He's very popular with the public, as he is the one person voicing their disgust at the situation. Even some of his detractors give him credit for bringing new information and abuses to light. But he is not a genteel character. Some people think his remarks have been beneath the dignity of his office, and other city officials say he's getting in the way of other investigations that are being more properly led by the Securities and Exchange Commission and the U.S. Attorney's office.

CS: What are the S.E.C. and U.S. Attorney looking into?

AG: The S.E.C. and the other federal investigators are clearly interested in using San Diego as a cautionary tale for other cities. Nothing that happened in San Diego hasn't happened elsewhere. It's just that they selected all the items from a checklist of bad decisions. The San Diego case may lead to more stringent requirements in pension management for all cities and more financial disclosure along the lines of a municipal Sarbanes-Oxley law.

CS: What sorts of decisions will the new mayor and council be faced with?

AG: The pension shortfall has meant that the city's own contributions to the system have gone from about $80 million to $160 million a year, and will rise above $200 million a year. That's a big increase in a city whose general fund budget is about $850 million and overall budget is about $2.5 billion.

Part of the fiscal problem is that the city fathers have been willing in recent years to shift money from special funds such as sewer and water over to general fund projects. At any rate, the city has about $3 billion worth of deferred maintenance on its books. Combine that with the new pension spending and you have a serious financial problem. And they won't be able to raise taxes, because in California local voters have to give two-thirds approval to any tax increase. San Diego has a traditionally low-tax culture, and there's certainly no mood today to give more booze to drunken sailors at City Hall.

Despite all the political problems, though, the local economy is doing pretty well. High-tech, bio-tech and real estate are all very healthy. City revenues last year went up by 10 percent just through economic growth. So there's some hope that the politicians will deal with their own problems in a way that doesn't muck up the rest of the city.