Friday, June 17, 2005 | It’s a simple tune to follow, a mayoral campaign based essentially on one thing: financial overhaul.
But the backbeat of the financial plans clutched by many of the candidates for mayor of San Diego rely on a number of shaky assumptions that could turn today’s stern rhetoric into tomorrow’s bygone hopes.
What is certain is that the next mayor – in either success or failure – will have an indelible impact on a city seeped in all forms of investigation and a multi-billion dollar pension deficit. Less certain are the outcomes of a number of tactics suggested by the frontrunners.
On Thursday, five of the headline candidates for the July 26 mayoral election met for the first official debate, cementing the foundations of candidacies that swung into shape only weeks ago.
Each has their own niche: the self-financed CEO, the open government-minded and defiant councilwoman, the former police chief with turn-around experience, the financial restructure (bankruptcy) expert with the pension whistleblower wife, and the brash, pony-tailed, Harley-riding right-winger.
But however disparate the candidates’ personal backgrounds, most of their financial plans share a common ground.
Councilwoman Donna Frye, businessman Steve Francis, former police chief Jerry Sanders, Harley Davidson peddler Myke Shelby and taxpayer activist Richard Rider – who wasn’t invited to Thursday’s debate – all support asking a court to decide the legality of pension benefits granted between 1996 and 2002.
Such a legal challenge, currently being prepared by City Attorney Mike Aguirre, carries uncertain – and faraway – ends. He estimates the voiding of the benefits would knock about $700 million to $800 million off of the pension deficit, which is reported at $1.37 billion by the city. Some say it is substantially higher.
Aguirre and an outside legal firm hired by the city have both determined that the rounds of benefit increases, which doubled the city’s benefit expenses in a matter of six years, could be susceptible to a legal challenge because their creation may have violated a number of local and state laws.
Many current council members have shied away from endorsing the approach, with outside council advising them that a courtroom challenge would be costly, lengthy and risky. Others involved point to a lack of real precedent when trying to handicap the chances of the benefits being determined to be illegal.
“What concerns me is that I look at the fiscal plans of the mayoral candidates and most of them rest heavily on the notion that the ’96 benefits will be able to be rolled back. And I don’t think that that is sure enough that that should be part of anyone’s plan,” said April Boling, former chairwoman of the Pension Reform Committee.
The 2002 benefits are seen as more vulnerable than the others, especially since six current and former pension board members were charged with felony conflict-of-interest violations for their actions during the creation of the benefits. But even experts in the field hold differing opinions whether or not convictions of the pension trustees would immediately impact the entire benefit packages of all city employees.
Additionally, while the challenge made its way through the courts, it’s plausible the pension deficit will continue to grow, hastened by the potential loss of hundreds of millions of dollars in interest every year. A red-hot real estate market fueled a $40 million revenue increase in the city of San Diego for fiscal year 2006, a sum essentially consumed by increased payments into the pension system.
Despite the revenue bump, cuts in basic city services are proposed across the board for 2006. The city’s revenue stream is also heavily dependant on a robust real estate market. Any cooling in the market could take away new revenues being funneled to increased pension contributions.
A judgment “could take five years, it could take three years. And I don’t think we can build a plan around that,” said Sanders.
However, candidates such as Sanders and Frye have said that initiating a legal challenge is better than what the current leadership has done. In the meantime, the five candidates also call for renegotiating contracts with labor unions to lessen the pension burden.
That may not be such a tall task for two of the four primary labor unions. The San Diego Police Officers Association failed to ink a deal with the city this year, and had a one-year contract imposed upon them by the mayor and a majority of City Council members.
Their public safety counterparts, the Local 145 firefighters union, reached a one-year deal with the city – meaning both bargaining units will be forced back to the table right about the time the new mayor likely takes office in January.
The public safety unions will likely expect the city to raise taxes or increase revenues in some fashion to share the burden. Asking two-thirds of voters to approve a tax increase at a time of extreme voter distrust in local government will be a tough sell.
On the other hand, the two unions representing white- and blue-collar workers will be difficult to entice back to the table in the first place. Both groups finalized three-year contracts just this month and have spoke at great length of the sacrifices their members offered to the city. The new contracts included pay freezes and increased employee payments into the pension system.
“We’re not renegotiating anything,” said Judie Italiano, president of the white-collar Municipal Employees Association.
She said the three-year contract was secured to bring stability to her members, and said the city must now do their part in either selling public lands or raising taxes.
So what will force these unions back to the table?
Leadership, say Francis and Sanders and Shelby. The threat of losing jobs and privatizing city services, says Rider.
Frye is usually allied with the labor community, though her recent votes have left her in bad standing with the MEA. She hopes that by showing the unions that the pension deficit is actually larger than reported, she can coax them back to the negotiating table.
For her part, Frye doesn’t release her official financial plan until Saturday. The other candidates have all unveiled at least portions of their blueprints.
During Thursday’s debate, Francis said he would bring an initiative to the voters to roll back the benefits should the unions choose not to go the table – something voters don’t have authority to do.
Each candidate’s plans also include other measures aimed at streamlining the city government and stimulating economic growth, such as trimming bureaucracy, promoting business and pitting city departments against private business for contracts in a bid for privatizing some city services.
Such a move is likely restrained by the city charter and would take an amendment approved by a majority of voters.
But even if benefits were deemed illegal and the unions headed back to the table, one of the candidates says it still won’t be enough to reconcile the raft of problems San Diego faces – from ongoing federal investigations and environmental regulation troubles to a financial system badly in need of restructuring.
“I don’t believe any of these other approaches are going to be successful,” said attorney Pat Shea.
Both Shelby and Francis unequivocally reject Shea’s plan, which is to take the city through a Chapter 9 municipal bankruptcy. They paint the move as an admission of failure. The rest of the candidates have said it’s an option if all else fails.
Slowly, even some of those entrenched in the city’s establishment are beginning to wonder if the city can maintain its basic functions while paying down its pension deficit and planning for the future.
“It’s hard for me to look at how big the numbers are. How do you cut and tax your way out of it? And I haven’t found [the answer] yet,” said Johnnie Perkins, director of government relations for the firefighters union.
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