Sanders Faces Big Test

Monday, Nov. 13, 2006 | Fresh off an Election Day victory that included the overwhelming passage of his business-friendly privatization measure, Mayor Jerry Sanders would appear to solidly hold the favor of both voters and the business community that supported him.

But consistent grumblings from a cadre of Sanders’ supporters in the business community over the mayor’s handling of city finances in his first year have come to a boil as he prepares to unroll a five-year financial plan Tuesday to manage a debt-ridden city government.

A number of business leaders who expected quick and decisive action from a Sanders administration say they are looking to this week’s announcement as the true illustration of whether this Mayor’s Office intends to forthrightly attack the city’s dire financial problems or simply paper over them like administrations past.

“We were willing to give him the benefit of doubt even though he really didn’t make that many tough calls first time out,” said Ben Haddad, chairman of the San Diego Regional Chamber of Commerce’s public policy committee. “The expectation is that he will step up to the plate the next time out.”

Sanders released his first budget in the spring, accompanied by much fanfare from his office. It included a plan to cope with the pension deficit, estimated at $1.4 billion, and other budget sore spots through a $674 million borrowing package.

Advertised as a tough, honest budget, it provided no cuts in services, even after the borrowing plan was put on hold. And Sanders and his deputies downplayed the financial troubles faced by the city in the days leading up to the budget’s release. That disillusioned some Sanders supporters in the business community who believed tough cuts and candor were necessary to help the public understand the severity of City Hall’s financial troubles.

“If he doesn’t produce quickly, he’s going to look like another Dick Murphy,” said one business leader, who requested anonymity so he could speak more candidly.

Said another: “It’s a mathematical equation. No matter what you try to do to sprinkle dust on it, the numbers still don’t add up.”

Those business leaders, who comprise a powerful block of mayoral supporters, said the release of the five-year financial plan presents Sanders with another opportunity to honestly address a budget gap and debt load that some still believe could drive the city to bankruptcy.

“It’s absolutely a chance to do it differently,” said the second business leader.

Others are more forgiving. They say the mayor had little time to install his people, understand the problem and put together a stellar budget between his election in November and the budget’s release in April.

“I think he’s doing fine,” said April Boling, former chairwoman of the Pension Reform Committee.

“By the time he had his arms around it, the whole budget cycle was over,” she said. “So we really are seeing him in action in a budget cycle for the first time this year. I’m not willing to give him a grade until we see what happens with this budget cycle.”

Sanders is scheduled Tuesday and Wednesday to roll out his five-year plan. The mayor plans to describe the scope of the city’s “massive debt” and break it down into eight main categories, including a few debts that hover right around a billion or more dollars each, such as the pension deficit, retiree health care obligations and deferred maintenance to city property.

The mayor is also slated to lay out proposed solutions, although the Mayor’s Office had said earlier in the month that the plan won’t include specific cuts or revenue increases to pay down the city’s debts.

The release of the report represents Sanders’ second crack at proposing the solution that he was elected to bring to City Hall. And it will be watched by an increasingly pessimistic crowd familiar with bottom lines.

“They will know whether or not it’s a real path to a balanced budget, or whether it’s a broken mirror,” Haddad said of the business community. “He has had the time now with his team in place, so there are high expectations.”

Voters elected Sanders a year ago on a promise to bring financial stability and political calm to a City Hall wracked with deficits and dysfunction. The mayor has most noticeably delivered a sense of peace to city government after more than a year of resignations, criminal charges and all-out political war.

Today, with Sanders in office, City Attorney Mike Aguirre is much more likely to compromise on issues with the mayor, or, at least keep his dissatisfaction quiet rather than broadcast it during a press conference.

Yet for the increased calm, the same financial stresses that dominated last year’s mayoral campaign remain. Without the wild headlines of past years, the city’s financial woes no longer remain as fresh in the public eye.

The mayor has begun a streamlining process known as business process reengineering that examines individual departments for inefficiencies.

He also won voter approval on two ballot measures last week. Sanders calls them “tools of reform,” but also acknowledges that they are only pieces in a larger reform package. Indeed, in the long-run, the two measures passed by voters Tuesday have the potential to be money-savers, however, they will have little impact on the city’s multi-billion deficits.

Beginning next year, the mayor hopes to begin putting some city services up for bid. If outside firms are chosen and workers laid off, it’s a process that could slightly ease the city’s mounting payroll burdens.

Without access to capitol markets, city officials were able to put together a creative financing package to infuse $100 million in loans into the system during Sanders’ tenure, although it’s unclear how much money that will truly save the city in the long term.

But many are still looking to this week to see the comprehensive financial plan that offers tangible strategies for paying down San Diego’s debts.

Boling estimates the city’s upcoming budget gap at $125 million, due to increased attention to pension obligations, deferred maintenance and other budget burdens, such as a pay increase to white collar workers that was back-loaded onto the final year of three-year labor contracts. The estimated gap would be more than 10 percent of this year’s current budget total.

“He is going to have to say how much he thinks he can cover through BPR, managed competition and service cuts and if that isn’t all of it – and I don’t think it will be enough – he’s going to have to step up and say how he’s going to fill it,” Boling said.

When Sanders announced a plan to follow consultants’ recommendations and restructure the financial reporting system at City Hall, he promised a major reevaluation of the size of city government and what services it can actually provide.

The mayor has said he is open to any solution to plug the gap – except tax increases. With a number of tax rates that dip well below the average for California’s big cities, even some in the business community question the efficacy of that pledge.

“Jerry’s made a big mistake by saying no new taxes,” one business leader said.

The situation has left some pessimistic that the solution can be hatched in-house.

“The large group of business people that I hang out with have started coming to the same conclusion more and more, and that is that the city’s going to end up in bankruptcy,” said the businessman.

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