The Morning Report
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The Plan: First, you’ll remember in my earlier blogs, I wondered for all of us if the Krolls’ long awaited analysis would roll out a “big happy beach party” report (like V& E), or would the Krolls have some stuff to it. You can call your own on that one. But, when Mayor Sanders and CFO Jay Goldstone rolled out their “we’re saved” plan last Thursday, there is no doubt it was a “big happy beach party motif.” We had palm trees, director’s chairs and the faint suggestion of an ocean horizon in the distance. It was totally cool! Whatever else Jerry Sanders is, he is comfortable with the props and I am genuinely impressed (no kidding) by that. No “serious, difficult stuff” this. I swear a beach ball would have looked right at home in the camera line. It’s very hard not to like this guy.
OK. Enough of that. Well, what can I say? Gosh, we’ve been waiting for it for so long, and now it’s here. The “Opportunity To Move The City Forward,” the mayor’s long awaited “solutions” to the financial crisis (38 pages single spaced) was formally issued to the press and vetted this past week at a televised “community forum.”
Couple of thoughts on just a few items:
- Pretty much a slammer for the Krolls’. Gonna do just about everything from their imaginarium. Not a lot of analysis on the why of each specific item, or how (or if) each item moves our ball down the field.
- Lots of new employees and systems. Lots of positions with the name “auditor” in them. Everybody will report to everybody else and ultimately to the mayor. Will that make a difference? Let’s stop here a sec. Take what you think about the present mayor out of the equation for a second. Would the bureaucracy of all these folks have made any difference whatsoever if they previously existed and were employed by prior mayors? The pension scram was uncovered by a part time, volunteer pension trustee representing the general public, having no access to all the new auditors, systems and hoop-la that we are going to bring in to solve the problem. And, the city hated it and her. I mean, given what you know now about all phony baloney that was directed from city offices, including the mayor’s – well, just think about it.
- My hit is that the Krolls’ have rolled this elaborate scaffolding in to prop up the crumbling foundations of our local government. They don’t trust our folks in government to be able to do the job. Sort of like those “flying buttresses” on the outside of all the old cathedrals in Europe. They actually hold those things up. This architecture is needed because the Krolls concluded they can’t trust local city government to do the job, with or without a report. We wouldn’t need the elaborate scaffolding, or its large and forever-after cost, if the people in government would do the job right, and with principles, or leave. The Kroll’s can’t say such things or their careers in the “consulting” business are over. But, you know that’s really what’s needed.
- I think the new uber-auditor should be elected, unless Solomon will agree to appoint that person for us. That person should owe no one in government for the job or the office. And, the penalty for not keeping financial records in consistent and regular order should be massively severe. If these folks are appointed, they will just have to be “cooperative” and “collaborative” with whomever appointed them and/or those involved in the appointment process. You can’t change that. Look how the PRC pulled the timing of the release of their report to facilitate the ballpark bonds. Real world stuff.
- Gonna buy some new computer stuff. I like buying new stuff.
- I think my favorite was to give the City Council two weeks instead of two days to review bond offerings. I suppose that could be part of the problem. Another good suggestion could have been, don’t do any more illegal pension debt “backloading” deals, especially when you are warned in writing by law firms or in person by pension trustees. I didn’t see that in the report.
- Mayor thinks the roll out of all this “structuring” will cost about Forty Five Million Dollars which the city will get from its “reserves.” You’ll recall these “reserves” were recently beefed up just a smidgen because the rating agencies noted that San Diego had virtually no reserves and that tended to make the city look broke. Now, the reserves we put in to beef up the “reserve account” will be spent on the new stuff. No more reserves. Solve that later, I guess.
- Oh, the (reliable) rumor was that the cost of implementing the recommendations was actually calculated inside the house at about Ninety Million Dollars until two days before the rollout. Seems, the $90 mill was hard to find, so it wound up at $45 mill.
- I hate to be a pill about this, but with what we have spent so far on the Krolls, the V & E’s, the KPMG’s, all the battalions of lawyers and consultants and etcs., and now the (at least) $45 million for the new positions and stuff, I put the load for all this at a bit over one hundred million dollars. That’s so far. And, we haven’t started to do any of the deals to address the money side of the problem. Is this working out for all of you? [At the sparsely attended “community forum” nobody asked any questions about the money. That was weird. Where’s Clara Peller when we needed her to ask, “Where’s the beef?”]
- That brings me to the oddest part of all this. There was no discussion of where (how much) money the city needs to pay for any of its monster debts. Wasn’t that what we really wanted to know?
- The rest of it, I’m not sure if we need. But, I’d let them keep the computers.
The Audits: There’s a new time line for the audits: 2003 by October 27; 2004 by November 22; and 2005 by February 16, 2007. I’m betting those dates “slip.”
Labor Talks: Matt Hall at the U-T had another interesting article this week (is it just me, or is his stuff getting a lot better?).The mayor has committed to whack 500 jobs. Given the prior reductions and the promise to not hit the safety departments (in fact the mayor now talks of pay increases for police and fire), it’s some bad news for the other unions. The MEA sees this posture as a “declar[ation of] war.” There is no real money to give the raises, and even pretend to be paying the annual pension contribution, even under the phony Gleason settlement schedule. The Krolls lobed in a prediction that the City will loose its challenge to the illegal pension benefits, even though they agree they are illegal. This drive-by opinion gives the city even less bargaining leverage over its unions (did I ever mention that the city has little leverage outside Chapter 9? As they say in New York – “you got nuthin!”) The unions want Sanders to support new taxes (duh?). Sanders held his position on no new taxes or other revenues from the public. But wait.
As reported by Andy Donohue in voiceofsandiego.org:
…Sanders dispelled any talk of tax increases – at least for the time being – saying the public wouldn’t support such a measure until trust in City Hall is regained….
I think the cost of benefits that we provide to our employees combined with the costs of the services that we provide to our citizens are unsustainable,” Sanders said. “It’s simply not realistic to believe that we can continue to operate in this kind of chaotic budgetary environment. We end up doing nothing right.
…The Mayor’s Office promised the release of a five-year budget plan in spring that will chart out more specifics in cuts and layoffs.
OK, here’s where this may be going. Basically, everything will be slashed until a crisis occurs (no, I don’t know what that will be) and compels the public to vote through new taxes to respond to the crisis. Why, because there will be no money to address the crisis otherwise. And, that’s because, without an adjustment of the massive debt ball down – which won’t happen because it’s politically off the table all cash coming into this city will be unable to keep up with just the pension contribution demands. You wait and see. It’s coming. It’s taxes.
Voice Blogs: The voiceofsandiego.org Café San Diego had some cool stuff. The items by Ottilie on the pilfering of the Mission Bay Park money were very compelling. Portends things to come. Every public service for the public will be looted to back fill the un-fillable deficit black hole. That’s just how it’s gonna be. Carolyn Chase’s land use stuff was also good and interesting. Bruce Reznik’s stuff on water reuse is one of the biggest issues we insist on ignoring. I recall during the mayoral campaign this question on a Hedgecock debate. I responded we should choose the option that gets us the best quality water. No one knew what to do with that answer. But, it’s true. In La Jolla we have animals that get into water holds and die. They treat the water with bleach to decompose and disinfect the dead thing that eventually washes through the taps. RA doesn’t sound that bad by comparison. I also like Don Cohen’s idea for a debate on the employee compensation/retirement benefit issue. Don’t know the exact numbers but suspect the average city worker is not what is driving the girth of the black hole of the deficit. Not all are average.
Pension Board: I don’t normally watch their show anymore, but I caught a tidbit in passing that was worth a thought. Along with the many nationally recognized past irregularities visible in higher relief, the Pension System has apparently not been complying with the IRS. I am not a tax-geek and don’t follow that stuff, but I though it amusing in the presentation yesterday by the tax lawyers from “Ice Miller” (got to be the winner of the coolest law firm name), when they reported that in the comprehensive review being done by the regional big dog for the IRS in Seattle, they were advised that no resolution with sdCERS would occur until the reform package was personally approved by the Commissioner of the IRS. Not, a commissioner of the IRS. The Commissioner of the entire IRS. That would be Mark W. Everson. Wonder how often that happens?
– PAT SHEA