Primary Closes, Runoff Begins Quickly

Thursday, July 28, 2005 | The everyday intrigue of San Diego politics emerged from the post-election fog yesterday, as the top two finishers in Tuesday’s mayoral election structured their first general election themes and City Attorney Mike Aguirre resumed his relentless assault on the city’s embattled pension system.

Former police chief Jerry Sanders and Councilwoman Donna Frye wasted little time in striking out differences between their candidacies on Wednesday, a day after the two candidates topped an 11-candidate field to advance to a Nov. 8 runoff election. Sanders sought to bunch Frye in with the city’s current struggles, whereas Frye made her case as the only candidate that has stood up to the current political establishment and made change.

“They talk about changing the system, but haven’t done anything about it,” Frye said.

Sanders, who finished with 27 percent of the vote to Frye’s 43 percent, latched Frye to the current council and decisions that have led to the city’s fiscal crisis – one that is highlighted by a pension deficit of at least $1.37 billion.

The former police chief attacked Frye’s record, two weeks after taking businessman Steve Francis to task for shifting the primary election’s tone to a negative one.

“For the last four years she has been a member of a City Council that has mismanaged the taxpayers’ money and lost the public’s trust,” said Sanders, whose campaign is centered on his experience revitalizing three troubled organizations: the Police Department, the United Way and the Red Cross.

He also called on Frye to join him in asking supporters to refrain from using independent expenditure committees to finance campaign material.

While candidates running for public office in the city of San Diego can only accept donations from individuals and a limit of $300 per person, companies and individuals can donate unlimited sums to independent expenditure committees. Through these committees, tens or hundreds of thousands of dollars can be poured into local elections by developers, unions and other interests.

For example, the San Diego County Democratic Party spent $84,503 in support of Frye in the primary election through Friday. The international union representing textile and hospitality workers, which is based in New York, and the San Diego-Imperial Counties Labor Council spent more than $30,000 combined to support the councilwoman.

Conversely, the San Diego County Republican Central Committee and developer Corky McMillin spent more than $90,000 using independent expenditures to support Francis.

No independent expenditures were made on behalf of Sanders, a Republican, in the primary election, according to documents on file with the City Clerk’s Office. Despite collecting nearly 40,000 less votes less than Frye, Sanders raised the most money in the primary election, drawing upon the support of the downtown establishment and other prominent local figures to build a sizable war chest. Francis spent more than $1.7 million of his own money.

“Let each of us speak for ourselves and be held accountable for what we say,” Sanders said.

Political observers saw the move as an early tactic to blunt the influence of Frye’s union support, affording Sanders the opportunity to highlight his offer later in the election when unions spend on behalf of Frye.

“It’s a classic framing strategy,” said Steve Erie, a political science professor at the University of California, San Diego. “You go negative and you demonize your opponent early on, especially when your opponent doesn’t have the resources or the money to respond.”

Frye refused to enter into Sanders’ proposed agreement. “I can’t talk with supporters or organizers and tell them to do things or not do things,” she said.

Sanders also challenged Frye on her votes to increase pension benefits before her much-referenced vote against pension underfunding. Frye was the only council member to vote against the underfunding portion of an agreement struck in which the pension board allowed the city to continue its historic underfunding of the pension system in exchange for increased benefits for city workers.

The deal is central to the pension deficit, as well as ongoing investigations being conducted by numerous federal and local investigatory bodies, including the FBI and U.S. Attorney’s Office.

“As a member of the City Council, [Frye’s] had two-and-a-half years since that first ‘no’ vote to offer a solution – to fix the problem – but she hasn’t done it,” Sanders said.

Both candidates share central themes in their financial plans, hoping to have a court decide if certain pension benefits were granted illegally and renegotiating labor contracts. Sanders advocates obtaining at least $200 million in pension obligation bonds once the city regains its credit rating in an attempt to stabilize the pension deficit.

Frye, who is often on the lonely end of 8-to-1 council votes, wants to put the pension system into a receivership. A receiver is a court-appointed expert brought in to handle mismanaged entities.

She brushed aside Sanders’ critique. “What, did they just hand him over the Francis’ playbook?” Frye said.

Francis repeatedly railed against the City Council during his unsuccessful campaign and launched attack ads in the last two weeks of the campaign claiming Frye and Sanders would raise taxes if elected.

City Attorney Continues Pension Shake-up

The city attorney said he wanted to stock the recently trustee-depleted retirement board with businessman Steve Francis, taxpayer activist Richard Rider, attorney Pat Shea and Shipione, the former pension trustee who first sounded the alarm on the fund’s beleaguered state. Francis, Rider and Shea all ran for mayor.

“I think every San Diegan knows, having gone through the election process that we did, that (they) would be excellent members of the board,” Aguirre said. “There is no reason why they shouldn’t be appointed.”

Shea and Shipione are husband and wife, and both are advisors to Aguirre.

Colleen Windsor, spokeswoman for Deputy Mayor Toni Atkins, said the council will probably not be able to schedule appointments to the pension board next week, but that taking up the issue is a priority. Four trustees have resigned this month.

Aguirre also wanted to call attention to the defined-contribution savings plans run by the city administration – not the retirement system – that San Diego’s municipal employees have enjoyed since the city withdrew from the Social Security system two decades ago. Since 1997, city workers have been able to use funds from these accounts, such as 401(k) and the Supplemental Pension Savings Plan, to purchase up to five years worth of “service” that is reflected in a retiree’s monthly pension check.

Aguirre said he was investigating the arrangement, alleging that money was transferred from the savings plans into the pension system in order to help offset an underfunding arrangement orchestrated a year earlier in Manager’s Proposal 1. Transferring funds was a bad deal for employees, Aguirre said, because he believes that moving money into a fund that is only 60-percent funded means that workers will only get 60 cents back for every dollar that is transferred.

He also called on firefighter union president Ron Saathoff, the city’s risk management director Bill Lopez, and San Diego City Employees’ Retirement System administrator Lawrence Grissom to step down from their posts on the board overseeing workers’ 401(k) and SPSP accounts. Saathoff faces criminal conflict-of-interest charges in Superior Court and Lopez and Grissom have been sued by Aguirre for alleged mismanagement.

Lopez and SDCERS operations manager Dave Arce said that an individual can voluntarily make the transfer. Lopez and pension trustee Bill Sheffler, a pension actuary by profession, also said that the benefits vested to retirees and city workers are guaranteed by the city, regardless of the plan’s current funding level. Furthermore, a deputy city attorney is assigned to oversee the legality of the SPSP panel.

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