Wednesday, February 23, 2005 | San Diego City Attorney Mike Aguirre lured reporters from their sloppy desks into the chilly storms early Tuesday evening to present his personal plan to promptly repair the city’s finances in his now-familiar press room. The plan was swiftly spiked by Mayor Dick Murphy, as expected.

“This is a very solvable problem and the only missing piece is we haven’t had leadership from the mayor and council,” Aguirre said, echoing the thoughts of a growing chorus of City Hall observers.

Aguirre’s outline calls for Murphy and the City Council to, among other things, conditionally accept the facts of his damning two-week-old investigation, cut a deal with the investigating Securities and Exchange Commission, send the pension plan into a court-appointed receivership and repeal sets of what he called illegal benefits granted to employees.

He called on the mayor and council to quit their personal attacks of him, admit their mistakes and begin adopting measures to end the nearly year-long standstill that has left the city’s finances and future frozen.

Murphy, who later that dark evening dragged many of the same reporters back to City Hall from their same sloppy desks through the same chilly storms, thought Aguirre’s ideas actually quite ridiculous.

Murphy’s View

Murphy cited two actions last week, the hiring of a new consultant to wrap up the long-delayed KPMG fiscal year 2003 audit and the council’s plan to scale back employee pay and benefits, as evidence that he and the council already had a plan to save the city. In fact, the city attorney endorsed both actions.

“I suggest Mr. Aguirre either play with the team or sit on the bench,” the former judge Murphy said.

Both pointed to the other’s actions to explain Fitch Rating’s downgrading of San Diego’s credit last week. Later, one city staffer suggested perhaps the two could just box it out, but that would likely give the stout Aguirre an unfair advantage, as he apparently boxed during his collegiate years. Murphy’s boxing prowess is unknown, though he seems like more of the tennis player.

Indeed, considering the dysfunctional relationship that’s torn the city leadership in two, it was unlikely from the start that the mayor and council would appreciate Aguirre’s recommendations. This only a week after it appeared the two sides were on the mend.

Aguirre’s Proposal

– Conditionally accept the facts behind his first two interim investigative reports, while not admitting they did anything wrong. The report accused Murphy and several other council members of violating securities laws for failing to disclose important information regarding the true state of the troubled pension plan to potential investors. Flatly, Murphy said the report is untrue, but didn’t provide specifics.

– Authorize the city attorney to negotiate a compromise with SEC, which is investigating the errors and omissions in the city’s financial disclosures. Aguirre said he has a positive working relationship with the SEC, and they would be willing to accept a compromise. Murphy said he’s never spoken with the SEC, which he leaves the city’s hired legal representation.

– Rescind what Aguirre said were hundreds of millions of dollars of benefits illegal under the City Charter, which states that all goods or services consumed in a year must be paid for in the same year. The mayor said this would only result in years of costly litigation.

– Direct the city attorney to take legal steps necessary to place the San Diego City Employees’ Retirement System in receivership, an action he said he will do with or without the council’s support in the coming weeks. Receivership would place the administration of the system in the hands of a court-appointed expert. Aguirre said he doesn’t have faith that the mayor’s new batch of appointed, volunteer trustees – to be announced soon and to take control of the system in April – will offer any great change from the previous board. (Sources say whistleblower Diann Shipione, who brought knowledge of the pension’s crippling deficit to the public, hasn’t been considered among the mayor’s seven appointees.)

– Adopt a resolution calling for the pension board to waive its attorney-client privilege in order to hand over documents to assist an independent auditor, the U.S. Attorney’s Office, the SEC and the City Attorney. Aguirre’s concerned that the documents will show a pension deficit larger than the stated $1.4 billion hole. The pension board voted 9-to-0 Friday against turning over the documents. Murphy said he’s already made this request, and expects his new board to revisit the decision.

– Adopt a resolution supporting Aguirre’s December attempt at asserting legal control over what he calls the “rogue” pension board. Murphy said the city attorney is simply asking the mayor and council to insert themselves in a feud between Aguirre and the pension board.

– Authorize the creation of a City Council Audit Committee and Pension Regulatory Commission to assure the current problems never happen again. Murphy said the law firm Vinson & Elkins was already hired to do this.

Donna Frye Responds

“For me, the biggest problem, and what seems to continue to hold us back is the fact that we just can’t seem to get the truth out. This has been an ongoing problem, and the denial out there is truly amazing. This culture we have, and I’ve seen it quite a bit in the last 2 and a half years, is to shoot the messenger,” said Frye. “That seems to be the new blood sport in San Diego.”

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