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Friday, July 01, 2005 | When Mayor Dick Murphy concluded his last City Council meeting as the body’s presiding officer Tuesday, he also wrapped up arguably the rockiest fiscal year the city of San Diego has ever witnessed.

By all accounts, San Diego in the past 12 months has witnessed a shift in the political tides and its long-praised financial credibility jarred, assuming the title of “Enron-by-the-Sea” in the national media in September.

Fittingly, the last few items decided by the council were the approval of nearly $5 million to pay bills to the accounting and law firms hired to clear up the city’s financial woes, which stem from a $1.37-billion-plus retirement fund deficit.

Federal and local authorities go into the new fiscal year, which begins today, with ongoing investigations into the city’s dealings with the embattled San Diego City Employees’ Retirement System. It is a topic that hogged headlines in fiscal year 2005 and promises to do so for the near future.

This year’s budget is $40 million larger than 2005’s – due to an infusion of property tax cash created by the white-hot real estate market – but includes a myriad of cuts to services like parks, libraries and a popular after-school program because of the significantly larger city payments to employees’ pensions and retiree health.

The city’s deferred maintenance of its sewage and road infrastructure is held up by its non-existent credit rating, suspended in September; 14 public properties are now collateral for the pension liability, according to the July settlement of Gleason v. SDCERS; a surfer-turned-activist-turned-councilwoman is currently leading a mayor’s race after the man she arguably garnered more votes than in November resigned in April; and some of the pension trustees were booted by voters in November, replaced by Murphy in February and handed criminal charges by the district attorney in May.

The Padres, however, end the fiscal year in first place.

“The only thing that hasn’t hit is locusts,” said Republican lobbyist John Dadian.

Others aren’t so lighthearted.

“The city is in the worst crisis of its history,” said George Mitrovich, president of the City Club of San Diego.

This time last year, the city was struggling to get a clear picture of what its financial outlook was, although the former pension board member Diann Shipione had first called attention to stormy seas many miles back, but San Diegans were still scratching their heads, unsure of what exactly was the matter.

In July the council signed off on the Gleason settlement, agreeing to a schedule of payments to the pension fund much larger than the officials had planned. However, the mayor’s Pension Reform Committee believed at the time the schedule was insufficient to pay down the fund’s looming shortfall, and many think it will allow the deficit to grow deeper.

In September, San Diegans began to get a better glimpse of what was going on with the city’s books.

The Pension Reform Committee released its final report, which included 17 recommendations for the city to follow. One was to make a $259 million lump payment, just to keep the fund from being dug a deeper hole. A $500 million-plus deficit was discovered in the retiree health care fund, the report added.

Days later, the Vinson & Elkins law firm, which was commissioned by the council to carry out a comprehensive investigation of its finances, issued a report that aimed to detail the fund’s mismanagement, “warts and all.” The report satisfied Murphy, who claimed the mismanagement predated his administration, however KPMG, the firm charged with auditing the city’s 2003 financial statements, said the investigation was insufficient and withheld the audits.

April Boling, chairwoman of the Pension Reform Committee, said the revelations made in the last year were the beginning of a period of pain the city will continue to undergo.

“It was like a volcanic eruption, and it’s still erupting,” she said in an interview Thursday.

The city’s financial struggles set the backdrop for a brewing political storm that led up to the November election. Frye, the environmentalist and maverick councilmember, tossed her beach visor into the ring, announcing her candidacy as a write-in five weeks before the election. In a paper-thin contest between two of the city’s most visible politicians, Frye edged the competition but lost on a technicality.

“There was sense of discontent, not to discount her unique qualities, but there was a discontent with the powers in this town,” said Donald Cohen, executive director of the Center on Policy Initiatives, a progressive think tank.

Her margin of victory was erased after courts decided that 5,000 of her votes were invalidated because the supporters did not shade in the corresponding oval on the ballot. Murphy was sworn in for a second term, but his moves thereafter were often met with contention: a port commissioner he appointed was forced to resign after making an inappropriate visit to Cuba; his list of pension appointees was noticeably missing Shipione, who was being hailed as a local heroine; and even a recommendation he made to name Shannon, Ireland a sister city was disputed when it was learned that Shannon was not a city at all, but rather a development corporation.

The kicker came in April when Time magazine named Murphy one of the three worst big city mayors in the nation. Murphy, surrounded by his family members and staff, resigned a week later.

Meanwhile, longtime civic agitator Mike Aguirre squeaked out enough votes to become city attorney, a post he has held very visibly since taking office. Aguirre has issued six interim reports that have laid out a case against officials, past and present, from the city, SDCERS and labor. He has called for the rolling back of benefits for city workers he believes were granted illegally, placing the management of SDCERS in a court-appointed receivership, and wished former and current members of the pension board “lengthy sentences” for their alleged wrongdoing.

“What has happened is that the pension plan has somewhat become a personal benefit slush fund for council members and for senior officials,” Aguirre told reporters in May.

His relationship with city officials has been less than stable. Several of his top deputy city attorneys have been dismissed from the office and members of the council and the city’s administration are frequently irked at his rhetoric, confrontational nature and his interim reports, which have been accused of delaying investigations.

“I suggest Mr. Aguirre either play with the team or sit on the bench,” Murphy said in February. Calls placed to Murphy’s office were not returned as of press time.

Aguirre himself admits that his demeanor is not the most cordial, but he and others believe his efforts are out forth with the honest aim of cleaning up the city’s financial mess.

“Michael Aguirre is not wrong on everything he says,” said Mitch Mitchell, vice president of public policy at the San Diego Regional Chamber of Commerce. “His style may always be problematic but his intentions are good.”

Aguirre’s not the only one with investigations right now. The District Attorney’s Office, the Securities and Exchange Commission, the U.S. Attorney’s Office, FBI, the city’s outside law firm and its independent audit committee are all peering in on city business.

Mitchell said the last year was “chaotic and concerning.” Businesses have noticed the structural pitfalls of the city and are leaving town, he said.

“We are not taking steps to keep companies like Intel, Capital One and [International Specialty Products],” Mitchell said, referring to the slew of companies that have announced their departure from San Diego. “This should be concerning for everybody, not just employees of these companies but also City Hall.”

The different spectrums of political thought point to the living wage law, which requires certain city contractors to pay workers $10 an hour with benefits or $12 without, as signs of change. Mitchell sees it as a sign that City Hall’s philosophy needs to change.

Cohen believes that the law’s passage – along with the grassroots support thrown toward Frye at the last minute are – examples of “the political foundation eroding.”

“The business community gets a lot of stuff, but they don’t have complete control anymore,” Cohen said. “Now there’s political diversity, there are different interests. I would classify that as the growing pains the city is going through.”

Those growing pains still remain. In November, the former pension trustees tried to have whistleblower Shipione arrested at a board meeting. Now her husband, Pat Shea, is running for mayor on one platform: taking the city to bankruptcy.

Whether it’s Shea or one of the other 10 candidates running in the July 26 special election, San Diego will accept a new mayor this fiscal year to inherit a place that could use some fixing.

And a strong leader, it seems, is on everybody’s wish list.

Boling thinks the city will start turning itself around once the strong-mayor form of government, approved by voters in November, takes shape in January.

“I think it’s going to take until the first of the year ’til we start digging out,” she said.

Dadian said the strong-mayor structure of government isn’t as important as who the mayor is.

“The city having a strong mayor as far as leadership is concerned is the only thing that will do it,” he said.

Please contact Evan McLaughlin directly at

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