The Morning Report
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Tuesday, February 06, 2007 | By ANDREW DONOHUE
Mayoral candidate Jerry Sanders offered a list of suggestions for increasing the city of San Diego’s cash flow Thursday that included using city real estate as collateral on loans to pay down the multi-billion dollar pension deficit.
Hard numbers were sparse in the third installment of the former police chief’s financial recovery plan, though he said the city could add tens of millions of dollars in annual revenue by revaluating everyday city policies on such things as the enforcement of business licenses, recovery of unpaid water bills and office space leases.
“When a budget is out of balance, there are really only two possible solutions. Either income must increase or expenditures must decrease,” Sanders said.
The previous two chapters of his plan focused on cutting $10 million from the city budget by trimming management positions and renegotiating freshly-signed labor pacts.
The sale of public property is being considered by some council members and pushed by union officials as one way to generate revenue for a pension system with a deficit estimated to be between $1.37 billion and $2 billion.
The deficit was brought about largely by increased benefits and a decade-long city practice of annually paying less than was required into the system.
Instead of selling land, Sanders called for using city property as collateral for loans to go toward paying down the pension deficit. The loans would be spread out over 30 years, for example, and paid off annually from the city’s general fund budget.
“It would come out of the city budget, but you’re also reducing your payment into the pension plan,” he said.
If the city were to default on its loan payments, it would lose the land.
For all of his suggestions, Sanders didn’t offer any solid savings numbers or specific examples of problems with existing city policies that he would like to change.
He said the council and city manager need to reduce the cost of the office space it rents.
“There are numerous opportunities to consolidate and/or relocate city services and department operations with the goal of reducing costs in private buildings,” the proposal reads.
Sanders said: “I know there are leases out there, I don’t know how often the city goes back and relooks at them.”
Jack Farris, city deputy director of real estate assets, said the city’s office space leases are all long-term, but that they plan to consolidate many of them as part of an ongoing plan to redevelop the San Diego Concourse building adjacent City Hall.
Sanders also suggested the city adopt a program ensuring that all businesses are licensed instead of increasing the cost for business license fees, something that has been talked about lately as a possible way to increase revenues.
The city currently charges $34 annually to license a business with less than $1 million annual gross revenue. A recent report put out by the Center on Policy Initiatives, a progressive think tank, found that San Diego’s fee is one-fifth of the average for California’s ten largest cities. It determined that the city could raise $60.9 million annually by increasing its fee to the big-city average.
Money owed on unpaid traffic tickets and water and sewer bills could be captured through a tax refund intercept program, Sanders said. The state has had such a program in place since 1975, taking outstanding debts owed to governments from the tax refund of the debtors.
“The amount owed to the city is enormous,” the proposal states.
Sanders also supported restructuring the way the city distributes its community development block grants, which are federal funds that typically go toward infrastructure projects. He accused City Council members of using some of the funds for pet political projects and proposed putting the distribution of such funds under one roof. Currently, council members are each given an allotment to distribute in their districts.
He also supported a recent proposal by the Lodging Industry Association to establish a hotel business improvement district, which would allow hotels to collect a room tax to be used exclusively on tourism promotion.
Sanders said it was difficult to quantify the savings of his plan because of unanswered questions surrounding the true state of the city’s finances and long-delayed fiscal year 2003 and 2004 audits.
For that and other reasons, Sanders said it was illogical for any of his opponents to brush aside any possible solutions.
“Given the magnitude of the city’s financial problems, any candidate who tells voters he’s taking options off the table — such as no new taxes or fees or no consideration of bankruptcy under any circumstances — is insulting the intelligence of his or her constituents,” he said.
Earlier this week on the campaign trail, businessman Steve Francis began airing a 60-second television spot on local stations and cable networks. Francis, the wealthy founder of AMN Healthcare, Inc., has infused at least $500,000 of his own money into the race and is reportedly willing to put down between $2 million and $3 million for the campaign.
The spot will run for 12 days and cost $455,000.
He is scheduled to officially announce his financial plan today at a morning press conference, although the advertisement hints that Francis supports a legal challenge to pension benefits granted between 1996 and 2002, cutting council budgets by 20 percent, no new taxes and no bankruptcy.
Councilwoman Donna Frye also plans to unveil today a plan to promote solar energy as a way to increase economic development. She will be joined by executives from the solar energy industry.
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