Thursday, Aug. 31, 2006 | Ignored and despised by the City Council majority during his first year in office, San Diego City Attorney Mike Aguirre has enjoyed an important ally in Mayor Jerry Sanders since the mayor began his tenure last winter.

Sanders initially supported several of Aguirre’s initiatives.

But Sanders’ enthusiastic endorsement of Kroll Inc.’s plan to reform the city’s financial practices, which some say affords the mayor the heftiest role in creating new layers of authority at City Hall, has driven a wedge between the two city officials.

“It’s a definite mistake,” said Aguirre. “It’s the biggest mistake he’s made since he’s been mayor.”

The city’s response to the Kroll report appears to have cut the deepest divide so far between the two officials, both of whom have tried to fly the banners of reform in different manners. In addition, the City Council – which has had a cordial, but not cozy familiarity with Sanders and a chilly relationship with Aguirre – seems poised to also challenge the Kroll proposals.

The proposals at the heart of the dispute offer a new set of rungs to the city’s leadership ladder. In his 121-step plan, Sanders sided with Kroll’s methods for staffing the new positions – an auditor general, an audit committee and a monitor. Aguirre and the council have varying ideas about their authority in appointing and overseeing these new officials.

The debate has the potential to stir up turmoil at a time that the Kroll consultants recommended consensus in order to navigate the city back into the good graces with Wall Street, where it has been shut out for nearly two years, as well as regulators at the Securities and Exchange Commission.

Sanders acknowledged that, conservatively, his plan will take seven months to complete, but he is asking the council to adopt the concepts of his plan as soon as possible. By formulating a vision early, the city can follow one pathway to reforming the fiscal practices that have endangered the city legally and financially, he said.

“The hard part, which I intend to do wholeheartedly and begin immediately, is to implement all these things as we start moving forward,” Sanders said at a town hall meeting last Thursday. “I fervently believe that now is the time to act.”

At the town hall and the press conference he held earlier that day, Sanders thanked Council President Scott Peters for his anticipated support. Peters arranged for the council to weigh the mayor’s plan two weeks earlier than scheduled, calling his colleagues back to the dais for a special Sept. 6 meeting. The council will cut its summer recess one week short in order to start early on the proposals.

Peters maintains that he supports the mayor, but wants more information on the appointment of the individuals. The council’s independent budget analyst, Andrea Tevlin, said the mayor has too much sway in the appointment of key positions, and encouraged a more thorough debate.

Aguirre took a bolder tack, holding a press conference immediately after Sanders unveiled his proposal to stress his displeasure. This prompted the mayor to work general references to “obstructionists” into his town hall speech later that evening.

“I will not hesitate to speak out if I think anybody is holding up the implementation of any of these reform measures,” he said.

After Aguirre released his own remediation plan Tuesday, Sanders’ spokesman followed suit, criticizing Aguirre’s plan as “political statements” that amounted to little more than a power grab for him.

The point of contention, which will likely play out more publicly at next Wednesday’s council meeting, appears to focus on the delegation of new powers under Kroll’s proposed plan for fixing the city’s financial reporting structure.

Naming the New Faces

Under the Kroll plan, the city should hire a monitor and an auditor general, and create a three-person audit committee. These layers of oversight don’t currently exist; how to fill the positions has become a matter of contention.

Kroll has requested that the city separate the City Auditor & Comptroller’s Office so that the auditor is independent from the financial reporting office that it inspects. Sanders agrees, and wants the ability to nominate an auditor, subject to the City Council’s confirmation. Under the mayor’s plan, the auditor would be hired for a 10-year term and could only be fired by a three-quarters vote of the council or a two-thirds decision of an audit committee.

Sanders wants the audit committee to consist of one councilmember and two of his own appointees. This panel will be responsible for the city’s financial reporting.

Further, Sanders has endorsed Kroll’s suggestion to hire a monitor at the cost of up to $4 million over the next three years. The monitor would oversee the remediation effort and report back to the SEC, which has been probing the city since 2004. The mayor would nominate the monitor, subject to the council’s approval. A former SEC official or securities law expert is expected to land the job.

Aguirre is adamantly opposed to the creation of a monitor, saying he has been serving as the intermediary between the city and the SEC. He said that the monitor’s watchdog role would only be necessary if criminal actions occurred, which he believes council members committed though the Kroll report found them to be merely negligent.

“If the council members need to be monitored, then maybe we need new council members,” Aguirre said.

The city attorney’s 21-point plan includes that theme as well as some that he touted before: rolling back future pension benefits he believes are illegal; allowing the City Attorney’s Office to serve the pension system as its chief legal advisor; and requiring city officials to fend for themselves in the SEC investigation while settling on behalf of the city.

With regards to the new positions, he believes that any political appointee will be beholden to the official who appointed them. As a result, he recommends that the auditor general be elected. The audit committee, Aguirre said, should be comprised of the elected auditor, one council member and the independent budget analyst.

When asked why the independent budget analyst, a council-appointed position, should be included in spite his suspicions of appointees, Aguirre argued in favor of allowing more sway to a council that he has needled during his tenure.

“The IBA would be appointed, but the council has that right,” he said.

Tevlin also weighed in on the appointment of new faces. She expressed concern that, under Sanders’ plan, the mayor had too much authority in the appointment of the auditor general and the audit committee, which she called the “audit organization.”

“The greatest risk of undue influence stems from City management, since all of the financial reporting functions and organizational controls, on which the audit organization is to perform its auditing functions, resides with management,” she stated in a report released Wednesday.

Tevlin explored different means for selecting an auditor general, either through an election or from the appointment of the audit committee, but she sides with the mayor’s proposal. Regarding the audit committee, Tevlin said that panel should consist of two council appointees and one council member.

Peters, one of Tevlin’s eight supervisors, said he also has concerns about the formation of an audit committee or about rushing the process.

Whereas Aguirre in typical fashion made his objections very public, Peters – similarly typical of him – said he will save his questions for next Wednesday’s meeting.

In the meantime, Peters has enjoyed the company of the mayor, who invited Peters to unveil the plan together last week. Aguirre, who normally accompanies the mayor on such announcements, was relegated to his own press conference.

Please contact Evan McLaughlin directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.

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