The Morning Report
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Tuesday, February 06, 2007 | Mayor Dick Murphy and City Council members heard a somber assessment of the city of San Diego’s fiscal year 2006 budget projections this week, as staff contemplated an estimated $38 million to $50 million budget gap — one that will partially be healed by cuts in jobs and services totaling $18 million to $20 million. One of the main factors, staff noted, of the budget imbalance: a $30 million increase in the city’s annual contribution to its pension plan.
Here’s the catch: Even if the city were to make this budgeted $160 million payment, it still wouldn’t be enough to keep it from further aggravating the pension plan’s already-crippling $1.37 billion pension deficit.
“This is digging the hole deeper,” said April Boling, an accountant and chairwoman of the mayor’s Pension Reform Committee.
The payment, in fact, should be closer to $200 million if the city wants to break even, said Boling. She said the move indicates to her that the city isn’t implementing the pension reform commission’s recommendations, which she believes are essential to righting the city’s sinking ship.
The problem in the city’s math is that it doesn’t take into account a couple of tricky items called contingent benefits, which were once extras given by the city during good times that now are legal rights for retirees. Contingent benefits can be obscure on the balance sheet, but are essentially paid for out of annual earnings that are supposed to be going directly into the $3.6 billion dollar San Diego City Employees’ Retirement System fund.
“It’s the same old thing,” Boling said.
Recommendation number four of the Pension Reform Committee, which the City Council approved in September and directed the manager to implement, calls to include the costs of these contingent benefits in the city’s annual payment. If not paid annually, the amount owed for the benefits accrues an 8 percent interest.
Through a spokeswoman, Lamont Ewell said the city was making payments based upon what voters approved in 2004 and on actuarial settings. “We’re not going to get into the debate with April over this and that,” the spokeswoman said.
He said the payment is $158 to $160 million. “We’re obligated to make that payment and the city will,” his spokeswoman said.
“That’s smoke and mirrors,” Boling said, anticipating the city’s reply.
By Bowling’s estimates, if the city were to keep its pension plan from dropping further into a debt that has already led to a legal and financial crisis, the payment would have to increase by about $40 million. This could more than double the budget hole of an already painful budget season.
The key will be to see what the mayor and council due come budget time, when they have ultimate say over what money goes where. But in the meantime, what will it take for folks to understand what the city’s appointed pension-healer is saying?
“A whack in the head with a two-by-four? I don’t know,” said City Councilwoman Donna Frye. “This is not difficult math unless you make it difficult.”
ipayFreely. The City Council will consider Monday renaming the San Diego Sports Arena in Midway to the ipayOne Center.
ipayOne is an online real estate mortgage company based in Carlsbad. According to its Web site, it rents 13,000 square feet of office space and employs more than 70 real estate professionals. The site says that in March 2004, the company introduced a revolutionary new way of buying and selling real estate by only charging a 1 percent commission.
Under the terms, the stadium’s operator, the Ernie Hahn-run Arena Group 2000, will collect $200,000 in the first year; $500,000 in the second year; $600,000 in the third, fourth and fifth years; and $500,000 every year after that. The minimum term of the contract is five years.
The city, which owns the property the arena is built on, would collect 10 percent, according to city documents.
Hold on. Two pension-related lawsuits were put on hold Thursday at the request of the city’s hired accounting guru Lynn Turner. Earlier in the week Turner said the looming suits were slowing the long-delayed release of the fiscal year 2006 audit.
Without the certified audit, the city is essentially in paralysis, unable to raise cash for long-term projects and shifting around existing funds to complete others. The issue has most affected state and federally-mandated water and sewer projects, as well as the construction of libraries and fire stations.
One lawsuit, filed by the San Diego County Taxpayers Association against SDCERS, seeks to undue all retirement benefits granted in 2002 to city employees on the grounds that the pension board members who approved the increases also benefited from them personally. The suit alleges that this violates the state’s conflict-of-interest law.
The second suit was filed by the pension board against City Attorney Mike Aguirre in an attempt to block him from asserting legal control over the embattled pension board. The suit also attempts to retrieve documents that Aguirre had seized from board members.
The failure of the pension board to turn over documents to auditor KPMG has been cited as one of the other factors holding up the release of the audit.
I say city attorney, you say… Several times during a Tuesday hearing of the City Council, Turner incorrectly pronounced Aguirre’s name “AH-gwire.”
After letting it go numerous times, the city attorney interrupted: “In the interest of full disclosure, it’s ‘Ah-GEAR-y.’”
— By ANDREW DONOHUE, Voice Political Writer
Please contact Andrew Donohue directly at