Friday, Dec. 15, 2006 | The silver bullet for the city of San Diego’s pension problems turned out to be a blank.

For those of you who had hoped that a resolution of the city’s financial troubles could be simple and painless, minus the burden of scaled back services, bankruptcy or tax increases, Thursday wasn’t your day.

With City Attorney Mike Aguirre’s legacy lawsuit seriously shrunken by a judge Thursday, so too are the wishes that the city’s financial demons could be slain by the stroke of a judge’s pen. Instead, the $1.4 billion deficit that has been the source of so much political scandal, embarrassment and opportunity will likely have to be dealt with the old-fashioned way: with cash.

To be sure, an appeal will follow. Aguirre himself never expected to exorcise every one of the $900 million in benefits from city workers without paying for at least some new, downsized level of employee pensions. And the city has more problems than just the pension system.

But at least, for the time being, the landmark case that figured heavily in the financial plans of nearly every mayoral candidate last year is left largely toothless. The judge’s decision also shadows the political legacy of a political animal: Aguirre – someone who could have built a future mayoral campaign on a major pension-busting legal victory.

On Thursday, Aguirre continued to say that the city was headed to bankruptcy or “a point of ruination” if the benefits are not voided. And he continued to portray the battle as something bigger than just the lawsuit: “Our entire integrity as a community is on the line.”

The city attorney appears to have been done in, in part, by the decisions of previous city leaders.

In inspecting the two pension deals at hand, Superior Court Judge Jeffrey Barton encountered a pair of legal settlements – struck in 2000 and 2004 – that blocked the city from reaching back and undoing its employees’ benefits. Those settlements were overseen by Aguirre’s predecessor, Casey Gwinn. In those two instances, the judge said, the city had its chances to go after the benefits.

“Despite the creative use of [legal] principles and the excellent presentation of the case at trial by the City, previous inconsistent positions taken by the City before the filing of the cross-complain raise significant obstacles to the City’s current effort to undo the remaining pension benefits,” Barton wrote.

Additionally, the judge noted that a lion’s share of the challenged benefits, created in a 1996 pension deal, couldn’t be ruled illegal because they were validated by a later labor contract in 1998 agreed to by city leaders.

AUDIO: Andrew Donohue on the ruling

The decision leaves Mayor Jerry Sanders grappling with a budget deficit forecasted to reach in the hundreds of millions of dollars annually in the coming years. In preparing his five-year plan last month, the mayor didn’t count on a victory by the city attorney. Under that plan, the mayor foresees an $87 million gap in the upcoming budget year, which he plans to manage largely by eliminating positions. But he has yet to come up with a way to bridge a final $24 million gap.

His job wasn’t made any easier by Barton’s ruling. And finding a way to pay for that extra gap means politically tough – and potentially damaging – decisions such as cutting pool and library hours, park maintenance or allowing police officers to go another year without a raise. The mayor, for the time being, has pushed aside any talk of tax increases and bankruptcy. He remained mum Thursday.

Aguirre’s loss comes in the wake of two major legal victories on what had been consistent legal losers for the city – the Mount Soledad Cross and the Roque de la Fuente litigation. But it is likely to overshadow both of them, as the pension case has been central to city politics for more than a year and gained admirers from as far away as the editorial board of the Wall Street Journal. It has been the focus of Aguirre’s high-profile two years in office.

The judge’s decision is also the latest in a series of setbacks in the three pieces of major pension-related litigation that sprouted after the fallout from the 2002 pension deal. The district attorney’s corruption case against six former pension trustees has been sent for review to an appeals court before it can head to trial and a federal judge this week continued to express skepticism toward the U.S. attorney’s similar case against five former pension officials.

But Barton’s decision didn’t actually rule on the “legality” of the benefits, as the judge himself pointed out in his ruling. It focused on the procedural impact of previous actions by the city, noting that the city already had an opportunity to address the alleged wrongs.

Aguirre’s contention, that pension trustees acted improperly and violated conflict-of-interest laws in crafting the deal, hasn’t yet reached a judge or jury.

“Like any party before the court, the City’s past inconsistent positions, or failure to act when there was a legal duty to do so, can impair the ability to proceed in the current litigation,” Barton wrote.

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

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