The Jerry Sanders Era: Financial Promises Mostly Kept

The Jerry Sanders Era: Financial Promises Mostly Kept

Photo by Sam Hodgson

Mayor Jerry Sanders delivers the final press conference of his administration.

 

One issue overwhelmed San Diego politics when voters elected Jerry Sanders in 2005: the city’s shoddy finances.

Our evaluation of Sanders’ time in office focuses on just that.

On the campaign trail and early in his tenure, Sanders made lots of promises about fixing fiscal problems. He would pay the city’s bills. He would streamline bureaucracy. He’d hold himself accountable.

We picked 13 of Sanders’ key promises to see if he kept them. We used a rating system to grade how well he delivered. The possible ratings: Kept, Partially Kept or Broken.

The results of our evaluation show that San Diego’s financial situation is undeniably in better shape now than when Sanders took office.

The city is making good on its retirement payments, improved its budget picture and put a series of embarrassing and costly financial investigations behind it. Instead of being the poster child for corrupt municipal government, San Diego is now called a model for various financial practices.

But the promises that Sanders didn’t deliver provide a window into challenges the city still faces. San Diegans have far too little information about the services their city provides. Infrastructure problems remain immense. Sanders’ actions related to the pension system also reveal an uncomfortable truth about the past pension deals at the center of the city’s fiscal woes: Rather than roll back those agreements, the city instead decided to swallow the bill. And that’s money the city can’t use to improve services it provides taxpayers.

The Promise: Complete financial investigations and return to the bond market.

Determination: Kept

When Sanders was elected, the city was in chaos. It had mounting pension obligations and was under a series of investigations for hiding that information from the public. San Diego had a backlog of incomplete audits and couldn’t borrow money on the public market.

Just before Sanders’ re-election in 2008 the city’s credit rating was restored, which allowed it to return to Wall Street. San Diego now regularly borrows money from the public market and has a stable credit rating.

The Promise: Pay the city’s full pension bill each year.

Determination: Kept

Before Sanders was elected, the city often paid the pension system less than its full bill. Doing so pushed the burden of past and current pension promises onto future taxpayers.

Sanders pledged to pay the entire amount owed each year. He did.

That promise, along with legal settlements, resulted in a whopping $1.7 billion paid to the pension fund since he took office, a half-billion more than it costs to run the city’s day-to-day operations for a year.

The Promise: Make the pension system 85 percent funded.

Determination: Broken

When Sanders took office, the pension system was 68.2 percent funded, meaning it had 68.2 percent of the funds needed to pay off its projected long-term debt. When Sanders leaves office, the pension system will be 68.5 percent funded.

How is that possible if Sanders dumped $1.7 billion into the system? His promise was done in by two factors. Courts upheld past pension underfunding deals, and Sanders abandoned or shunned other efforts to undo them. And the national recession battered the pension fund, which lost almost 20 percent of its value in one year.

If Sanders had wanted to meet his 85-percent-funded goal when he left office, he would have had to pay an additional $1.1 billion to the system this year.

The Promise: Force voter approval for any increase in pension benefits.

Determination: Kept

In 1996 and 2002, city leaders agreed to increase pension benefits for employees while shortchanging the system. They created huge long-term burdens at the same time the city was putting less money away to pay for them.

It took a whistleblower to reveal the extent of the deals. Voter approval for future pension increases was seen as a safeguard against such schemes.

Sanders accomplished this early in his term. Less than a year after he took office, voters approved a ballot measure that requires a public vote for any pension benefit increases until 2022. It passed with nearly 70 percent of the vote.

The Promise: Balance the city’s books without gimmicks.

Determination: Partially Kept

In April, Sanders announced he had resolved a problem that had dogged his entire tenure: The city fundamentally was set up to spend more money than it collected in taxes. When this happens, it’s called a structural budget deficit.

For the most recent budget, Sanders didn’t have to use any reserves, other one-time pots of money or accounting tricks to close a gap. The structural deficit was no more. In fact, Sanders said, the city now was projecting surpluses.

But since then, serious threats to the city’s financial stability have emerged. They include likely increased pension payments and possibly millions of dollars in debts shifted to the city’s books because of the end of the state’s urban renewal program. Sanders has also supported increased funding for the Police Department and the arts without putting enough money aside for them, according to the city’s independent budget analyst.

Sanders has stashed cash in reserves to address some of these debts. But the size and length of potential deficits — $49 million next year, for instance — are enough to deem this promise Partially Kept.

The Promise: Freeze salaries for all city employees until the city is financially stable.

Determination: Broken

Sanders, a former police chief, broke this pledge in his first term. He gave police officers across-the-board raises in 2007 and 2008, saying they were needed to recruit and retain cops.

Sanders also recently handed out some raises to nonunion department directors and other managers, saying their workload had increased.

The Promise: Replace the existing pension plan with lower benefits for new employees.

Determination: Kept

Sanders twice made major changes to pension benefits for new employees.

Starting in 2009, new hires received lower benefits as part of a deal Sanders negotiated with labor unions. Then this past year, Sanders sponsored a successful ballot initiative that gave all new hires except for police officers 401(k)s instead of guaranteed pensions.

Lower retirement benefits for new hires save little money in the short term, but are projected to save tens of millions of dollars a year in the long run.

The Promise: Pay the city’s full retiree health care bill.

Determination: Kept

Besides pensions, the city also offers health care coverage to retired employees. The city arguably underfunded this benefit more than its pension system. Sanders pledged finally to pay the full bill.

In 2011, Sanders reached a major deal with labor unions to cut the benefit for existing employees, something projected to save more than $700 million over the next quarter-century. The city also began paying its annual cost.

The Promise: Lay off up to 10 percent of city employees unless labor unions make money-saving concessions.

Determination: Kept

Sanders got labor concessions: He secured 6 percent pay cuts for all city workers in 2009 during the national economic downturn, which saved about $30 million.

And he reduced the size of the city’s workforce. The city currently has 10,119 positions on its books, a decrease of 11.4 percent over his term.

The Promise: Boost general reserves to 8 percent of city revenue by 2012 and increase other reserve accounts by 2014.

Determination: Partially Kept

The city’s main reserve account, its rainy day fund, had reached as low as 2.8 percent of its revenues when Sanders took office.

Sanders more than quintupled the money in that account and hit his 2012 target.

The mayor also wanted to significantly increase funding in the city’s reserves for legal claims and workers’ compensation by 2014. When the national recession hit, Sanders delayed making payments into those accounts. The city now plans to meet its funding targets by 2019.

Sanders achieved his most important reserve goal, but he missed others. We’ll call this promise Partially Kept.

The Promise: Allow private companies to compete against city workers to provide services and save $10 million a year.

Determination: Kept

Sanders sponsored a successful ballot measure in 2006 that allowed for competitive bidding and outsourcing of city services, known as managed competition.

It took a tortured four years of labor negotiations for the city to identify how the system would work. But since then the city has finished five competitions for services ranging from street sweeping to auto repair. City workers won them all, and saved $9.2 million a year. Five other processes now are in the pipeline.

The $9.2 million in savings plus the other services in the managed competition process are enough to call Sanders’ promise Kept.

The Promise: Reduce the city’s backlog of deferred infrastructure repairs.

Determination: Broken

When Sanders took office, the city didn’t know the cost of repairing its dilapidated streets, storm drains and buildings. The city finally put a price tag on the backlog — $840 million — during Sanders’ second term.

After years of spending delays, the city began devoting tens of millions of dollars toward repairs in Sanders’ second term. But it wasn’t enough. The backlog grew to $898 million, and the independent budget analyst and city auditor both recently warned it could go even higher.

The Promise: Establish report cards/performance measures for all city services.

Determination: Broken

Sanders promised that the public would be able to track the services the city provided. It didn’t happen.

He does publish some performance measures and did so sporadically throughout his term. But he abandoned them at various points. Information about key quality of life issues, such as police and fire response times, is incomplete and cumbersome to gather.

Liam Dillon is a news reporter for Voice of San Diego. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?

Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

Disclosure: Voice of San Diego members and supporters may be mentioned or have a stake in the stories we cover. For a complete list of our contributors, click here.

 

 

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Liam Dillon

Liam Dillon

Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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4 comments
George Ma
George Ma subscriber

What constitutes keeping a promise, crossing off a check list or actually improving something? So the City returned to the bond market, does that mean it is effectively running its finances or just meeting the basic standards to get approved for bonds?

georgema
georgema

What constitutes keeping a promise, crossing off a check list or actually improving something? So the City returned to the bond market, does that mean it is effectively running its finances or just meeting the basic standards to get approved for bonds?

Augmented Ballot
Augmented Ballot subscriber

Very tricky to assign precise numbers, sure, and a ton of work, but a sense should be possible. Without it the legacy is a bit of a black box and not all that instructive.

Augmented Ballot
Augmented Ballot

Very tricky to assign precise numbers, sure, and a ton of work, but a sense should be possible. Without it the legacy is a bit of a black box and not all that instructive.