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Monday, June 06, 2005 | This is part one of a two-part column.
Ten years ago, it was the county of San Diego on the precipice of bankruptcy. Today its financial rating places the county among the nation’s most elite public entities: AA1.
During that decade, hard-minded reformers tore apart and reconstructed county government, borrowing management innovations from IBM and other blue-ribbon corporations. They renegotiated contracts with labor unions and vendors; a five-year labor contract was signed in 2000-2001.They discovered that county personnel, spread out in about 1,000 facilities, were using 14 different kinds of e-mail; with that, they set out to make their administration the first all-digital in the nation. They installed and enforced rules of instant transparency on each of 17,000 employees: Every error or mistake must be reported immediately, or threat of immediate discharge.
The glittering success of county reform offers a rare and reassuring precedent made more striking by the concurrent collapse of government at San Diego’s nearby City Hall. And the scars of the county’s fright make its administrators sympathetic to the city’s plight.
As the city eventually will begin to reform and rebuild, might administrators from the county offer counsel, assistance and perhaps loan administrators to the city?
“All they have to do is ask,” the county chief administrative officer, Walter Ekard, said in an interview.
That hasn’t happened yet, and is not likely to happen until the offending regime leaves office or is expelled. But the retired admiral Ronne Froman (now chief executive officer of the Red Cross here) has talked to Ekard, who believes county supervisors would approve such aid in the common interest of the region. Froman has committed to serve as chief of staff to mayoral candidate Jerry Sanders if he is elected mayor.
Such assistance from the county to the city would be unprecedented, but could be the first small step toward regional cooperation in other weighty matters requiring regional agreements: congestion, transportation, building codes, voter participation in government and the environment. San Diego is overripe for regional agreements. Its huge population sprawl, its port, its 17 cities, its border, its Navy and military population and tourism industry all cry out for policies in which the public can be heard as a single voice.
On the stern and unsparing New York Stock Exchange, CLD is the trading symbol for shares of preferred stock in the AA-rated County of San Diego. At the market’s close on Friday, shares sold at $25.75. In recent years of low-interest rates, County of San Diego shares have proved popular with small, conservative investors; the shares yield just under 6 percent. There have been no scary swings in CLD. In the past 12 months, its price has ranged between $24.51 and $26.59.
CLD stockholders obviously believe the county of San Diego is being run less like a political entity and more like a business corporation. The county holds the highest financial ratings allotted to such government entities. The role of CLD as a county symbol on the New York Stock Exchange is as a flagship indicator of a shrewd management creating both services and profits. The preferred stock is issued on the strength of pension obligations, on which the county pays 8.25 percent interest. At par, CLD yields 6 percent to investors. Ekard says: “There’s a 2.25 percent profit for the county right there. The taxpayers are happy, and Wall Street is happy.”
The contrast is stunning between the county of San Diego and the city of San Diego, with its headquarters less than a mile away. City government is in widely trumpeted chaos and disgrace. The litany of federal investigations, councilmen trials, firings, resignations and indictments has grown monotonous. Even Mayor Dick Murphy, a former Superior Court judge, is not considered immune.
Many recall that dreadful crisis 10 years ago when the County of San Diego had its own life-threatening crisis. Heavy investment in a trash landfill project at San Marcos had gone badly wrong. County in Chaos, a headline read. Bankruptcy loomed.
As I inquired into that era at the County Administration Building, a cloud crossed the face of Walter Ekard, chief administrative officer for the county. He sat in his spacious, ordered office in one of San Diego’s most stately buildings, looking out toward the bay. Ekard had been chief executive officer of the Rancho Santa Fe Corp. during that crisis, administering the government of an elite private community which, but for the necessity of roads, law enforcement and water, would prosper without additional government.
Following a bold first law of reform, county supervisors reached out to the corporate world and hired a shrewd young executive named Larry Prior. Then they assigned him unusual powers. Ekard calls Supervisor Paul Fordham “the father of the corporate model.”
“Within three months,” Ekard recalls, “Larry was getting it done. He hired me to help manage that recovery. I couldn’t have done what he did. He actually created a new culture in county government.”
Prior built a model corporate government within the county system, and Ekard has carried it on. Prior returned to the private sector and has since moved up with SAIC to become senior vice president for federal business.
Tomorrow, more solutions: How the county took itself apart and rebuilt on a corporate model.