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With the payment of a slew of new attorney and auditing bills ready to be approved Monday by the City Council, the city of San Diego faces the prospect of having to dig into its emergency reserves for all such expenses for the remainder of fiscal year 2007.

The $10 million public liability fund typically used for such legal and consultant expenses has already run dry for the fiscal year that began July 1, forcing the city to reach into its already-depleted emergency reserves for the second straight year to fund hired help in connection with its fiscal crisis.

Extended engagements for two auditing firms working on the city’s long-delayed financial statements and additional legal bills for pension-related and other lawsuits will, if approved by council, drain $3.97 million from the city’s emergency reserves, according to a memo released today by Independent Budget Analyst Andrea Tevlin.

“There’s no choice,” she said.

The city’s depleted reserves have been one of its key financial worries. Reserves are used as a primary indicator of a municipality’s financial health by and have been listed as a top priority by both Tevlin and Mayor Jerry Sanders.

The city’s reserves are currently at 4.8 percent and would dip to 4.5 percent if the City Council approves the payments.

Additionally, auditor KPMG has revised its request and asked for $2.2 million – $400,000 higher than the figure reported by the Mayor’s Office on Thursday. (For a full account of the additional auditor expenses, click here.)

In a memo to the mayor and council, KPMG today estimated that its audit should be completed by Dec. 22.

Last fiscal year, the city had to repeatedly dip into its reserves as fees from lawyers, consultants and auditors continued rack up.

So will the city be forced to turn to its reserves again this year for similar bills that may crop up in the future? “Yes, in all likelihood,” Tevlin said.

ANDREW DONOHUE

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