Tuesday, October 18, 2005 | Suit yourself. The City Council did not approve covering the legal fees that will be racked up by former Mayor Dick Murphy and two recently convicted councilmen who stand to lose thousands of dollars in retirement income if a lawsuit filed by the city attorney prevails.
City Attorney Mike Aguirre sued Murphy and former Councilmen Michael Zucchet and Ralph Inzunza in September for participating in the approval of benefit increases and easier qualifying requirements for elected officials and other city employees that Aguirre believes were created illegally.
The city attorney alleges that the three former lawmakers have a conflict of interest when helping create the benefits because they all individually gained from them. Aguirre also claims that the benefits he is targeting are also illegal because a funding source was not identified for covering the new costs, which is mandated by the city charter and the state constitution.
If Aguirre successfully challenges the benefits at issue in the suit, they would lose the entirety of their pensions, valued annually at $49,560 and $13,441, respectively, a Voice of San Diego analysis shows. Inzunza’s pension would be reduced from $20,895 per year to $12,592, an analysis shows.
After considering two proposals by the city manager – one to direct Aguirre to dismiss the case altogether and the other to pay for their former colleagues’ legal defense – the council voted 4-to-2 to cover the fees. Five “yes” votes were needed to approve the proposal.
Before the council voted, the attorney representing Murphy, Zucchet and Inzunza said the “city’s obligation to provide a defense is mandatory.”
Deputy Mayor Toni Atkins and Councilmen Jim Madaffer, Scott Peters and Tony Young voted to pay for the defendants’ legal costs. Councilwoman Donna Frye and Councilman Brian Maienschein voted no.
Maienschein, after asking what the financial implications were for not agreeing to cover the legal costs, opposed making the payment because he said it was up to the court to decide whether the city should defend Murphy, Zucchet and Inzunza.
“Until that point, I’ve got to protect the taxpayers,” Maienschein said. “I have to do the right thing no matter who’s involved.”
Peters and Madaffer both expressed frustration with the city attorney’s assertion that he can bring litigation on behalf of the city without the council’s approval.
“This lawsuit will have a major budget impact on us,” Peters said. “Budgeting is in the purview of the City Council, so we should have a say in how our resources are used.”
Peters said his preference would have been to dismiss the lawsuit altogether.
“It may cost us more in legal fees than we would save if we were able to revoke all these benefits, which it’s not clear to me at all that we could do,” he said.
The city attorney has said for weeks that he would ignore any attempt by the council to drop the complaint.
Aguirre was not present at the hearing. The deputy city attorneys in attendance were unable to answer some of the council members’ questions about the lawsuit’s specifics, which the lawmakers found frustrating.
“We don’t get to hear what we need to hear. We’re getting incomplete information,” Maienschein said. “It’s putting us in a terrible situation.”
Read more on the benefits being challenged by Aguirre.
This land is CERS land? The City Council on Tuesday will decide whether to transfer city-owned properties such as Fairbanks Ranch Country Club and Sports Arena Village to the city’s embattled pension fund in order to settle a civil lawsuit aiming to recover money plaintiffs say are owed to the retirement system because of past underfunding.
Attorney Michael Conger, on behalf of former city employee William McGuigan, claims that using city-owned land that is otherwise undervalued and mismanaged to pay down about $130 million of the city’s $1.37 billion-plus pension fund is fiscally sound for the city and much deserved for the city’s retirees.
The nine parcels of land being proposed by Conger could only be used to pay for retirement benefits that are not being disputed in court by City Attorney Mike Aguirre, Conger said. Aguirre is contesting whether benefit enhancements created in 1996 and 2002, which he estimates to account for about $700 million of the deficit, are legal.
The city began to not fully fund the San Diego City Employees’ Retirement System in its 1996 pension agreement, known as Manager’s Proposal 1, and continued to underfund the system until this July, Conger said. He said he is confident that a court will make the same finding and that the city should use excess land to begin clearing it’s sizable pension debt instead of leveraging cash from the already starved day-to-day budget.
Ann Smith, an attorney for the 6,000-member Municipal Employees Association, told the council during a public comment period on Monday that accepting Conger’s proposal would show city workers that the council is serious about improving the pension fund’s fiscal health.
“I hope … that you will see the merit in an approach that gives you an opportunity to actually make good on your good-faith promise,” Smith said.
In its latest round of labor contracts, the city pledged to infuse a lump payment of $600 million into SDCERS by the 2008 fiscal year in addition to annual contributions that over that period total at least $500 million.
Aguirre said he would not immediately comment on the case.
McGuigan’s suit, which was filed in June, alleges that agreements to contribute to SDCERS a less-than-actuarially sound amount violates the state constitution and the City Charter. Conger, on behalf of city retiree Jim Gleason, won a settlement from SDCERS in 2004 that required the city to make compliant payments beginning this year.
The city contributed $163 million to the pension fund in July, compared with $130 million in the previous fiscal year. The increased payment forced the city to cut back on other general purpose expenditures, such as library hours, park maintenance and police community service officers. Next year’s payment is expected to top $200 million.
The nine parcels being proposed by Conger should be familiar to the council: They were used as collateral in the Gleason settlement and were released back to the city after the government paid this year’s pension bill. In addition to Fairbanks Ranch and Sports Arena Village, Conger proposes that the World Trade Center on Cortez Hill and undeveloped properties around town be transferred.
Holding onto the land is wasteful when they could be leveraged to help correct the city’s problems, he said.
“These properties are unnecessary real estate for the city,” Conger said. “The council should decide to make use of these mostly dilapidated properties than keeping them on the city’s rolls.”
SDCERS would be allowed to sell the transferred properties after two years, but the city would have the first opportunity to buy the real estate back.
Conger said he is confident that a court will find that the city must make up the city’s sizable debt to the San Diego City Employees’ Retirement System, and encouraged the city to embrace the settlement because it provides the government with more flexibility.
For example, if the city sold the land itself, the proceeds from the sale would have to be put in a fund restricted for capital projects. Transferring the land would enable the city to use the revenue to pay down its pension obligation and use the day-to-day dollars it would otherwise be required to spend on SDCERS for city services or other intended uses.
The land, if eventually sold to a private entity, could generate property tax dollars for the city on an annual basis. The approximately $130 million being proposed for the McGuigan case could produce about $250,000 per year for the city’s general fund, Conger estimated.
Councilman Scott Peters on Monday said that he had not seen Conger’s proposal, which was sent to the City Attorney’s Office Sept. 15, but that he would rather a discussion about transferring land be taken up in public rather than in closed session.
Who’s the Boss? The City Council on Monday approved the package of changes to San Diego’s municipal code and the council’s own procedural rules to accommodate the voter-approved switch to a strong-mayor form of governance, which will begin Jan. 1.
Under a strong-mayor structure, the mayor will no longer be a member of the City Council and will instead enjoy executive powers currently held by the city manager such as crafting an annual budget for council approval and holding the authority to hire and fire city employees. The changeover was affirmed when San Diegans approved Proposition F last year.
Instead of the mayor presiding over the City Council, a council president will be elected by his or her colleagues to serve a one-year term. The president will decide what proposals will be placed on the agenda. Five votes will be required to approve legislation, the same needed to override a veto by the mayor.
An independent budget analyst also will be created to provide the council with analysis of budgets proposed by the mayor. A citizen panel overseeing the strong-mayor transition told the council Monday that they were disheartened that council has not paid enough attention to the matter, and predicted that the nine-member office would not be staffed until late December at earliest.
Councilman Scott Peters, who chaired the council committee supervising the yearlong transition, said that he and two of his colleagues have been advertising for the independent budget analyst already.
The council also voted to bar any individual who served on a council staff or as a registered lobbyist in the last eight years from working in the Office of the Independent Budget Analyst. Councilman Brian Maienschein said he proposed the ban to prevent possible conflicts of interest and to encourage “bringing in new blood” to the city government.
The citizen panel also requested that a consultant be brought on to monitor the early stages of the transition next year and that a group be commissioned to study how the charter could be changed to better accommodate the incoming form of governance. Any change made to the City Charter must be approved by the voters.
Among the possible charter changes being hinted at by observers are to expand the council to nine or 11 seats to remedy the possible ties on votes, to change the term of the council president from one year to two, change the number of council votes to override a veto, and to give the mayor a permanent slot on the redevelopment agency.
The redevelopment agency is mandated by state law to consist of a jurisdiction’s legislators, which would exclude the mayor under a strong-mayor structure. The council approved Monday making the mayor the redevelopment agency’s executive director on a temporary basis until a more permanent solution can be worked out.
Library cost estimate overdue. An updated estimate for how much it will cost to construct the planned downtown library will be available in November after it was expected that the new forecast would have been ready last week.
The hired consultants from Turner Construction were not able to finish their estimate of how much it will cost to construct the 380,000-square-foot facility without detailed drawings, which were just completed last month.
Afshin Oskoui, deputy director of engineering and capital services, said that the new drawings provide the city with the “biddable set of plans” needed to solicit proposals from construction firms as well as attract private donors – the most crucial factor in financing the library.
Currently, the cost estimate for the proposed downtown library is $150 million, which was calculated almost three years ago. The Centre City Development Corp., the agency overseeing the redevelopment of downtown, has pledged to provide $80 million in addition to a $20 million state grant.
Former City Manager Bruce Herring, who resigned last month, set a September deadline to raise the $30 million in private donations that are needed to complete the project.
“We would not feel comfortable recommending that we go forward unless a critical mass of the private fundraising was raised before the construction contract was entered into in September,” Herring said in April.
Of the remaining funding gap, $3 million has already been raised from outside donors. The project’s boosters have said they remain optimistic despite not raising any private money for the project since March.
There has been some concern that the state grant money will disappear if the fundraising goal is not met quickly, but library grant administrators said that, despite the city’s political turmoil, they have found nothing to indicate that the project is not on track.
“We do expect them to work in a reasonably close timeframe, but there’s nothing in the act that shows a drop-dead date,” said Richard Hall, the state’s library bond act manager.
Read more about the proposed downtown library project.
– EVAN McLAUGHLIN, Voice Staff Writer
Please contact Evan McLaughlin directly at