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Tuesday, February 06, 2007 | UCAN Rebound from Federal Charges

Former City Councilman Michael Zucchet has found quick employment after being acquitted last week on seven of nine felony corruption convictions.

The consumer watchdog Utility Consumers’ Action Network announced today that it would bring Zucchet on as an economic analyst and project manager. Before entering local politics, the former councilman worked as a renewable energy economist with the Department of Energy.

UCAN Executive Director Michael Shames and Zucchet have a press conference scheduled for 4:30 p.m. today.

Zucchet was indicted in August 2003 alongside two fellow city councilmen for participating in a scheme to overturn the strip-club regulations in exchange for campaign contributions.

He was found guilty in July, but a federal judge threw out seven of the nine convictions last week during a sentencing hearing. A new trial will be set for the remaining two charges; U.S. Attorney Carol Lam hasn’t indicated if she plans on appealing the judge’s reversal.

Former City Councilman Ralph Inzunza was sentenced to 21 months in prison during last week’s hearing, and lobbyist for a strip club owner was sentenced to three years. The third charged councilman, Charles Lewis, died of liver failure suddenly before trial.

— ANDREW DONOHUE

Another One Sues the Trust

The city of San Diego and its troubled pension system are again the subject of legal action because of the 2002 agreement that has precipitated the pension fund’s demise.

Plaintiffs’ attorney Michael Conger has filed a class-action lawsuit on behalf of retired city workers seeking as much as $700 million for the pension system. In the court filing, Conger argues that pension board trustees breached their fiduciary duties to retirees by entering into an agreement that allowed the city to avoid a lump-sum payment into its pension system in exchange for increased benefits for city employees.

Conger also fingers the city as an accomplice in the deal.

Because of the deal and one like it in 1996, the pension system faces a deficit of more than $1.37 billion and is the subject of numerous local and federal investigations.

Conger has carved out a niche handling pension litigation and was successful last year in forcing the city to amend the payment structure created by the 2002 deal. Now, the city is forced to contribute more money annually into its pension system.

The suit filed this week seeks the funds that the city would have had to pay into the system had it not entered into the 2002 deal.

“Whether the city wants to or not, it will fully fund its pension system,” Conger said.

— ANDREW DONOHUE

Fire Warning Extended to Saturday

The National Weather Service extended a red flag fire warning through Saturday evening because of the period of windy and dry conditions that was forecasted to end Thursday has been apparently prolonged.

Because of low relative humidity, warm temperatures and gusty Santa Ana winds, the weather service on Tuesday issued a warning that conditions in the region made San Diego County and other parts of Southern California vulnerable to wildfires. A fire broke out in Ventura County early Friday morning, charring more than 1,400 acres.

— EVAN McLAUGHLIN

Judge’s Pension Bond Bombshell

In a ruling that, if upheld, may scuttle the plans of some San Diego leaders, a judge in Sacramento has determined that issuing pension obligation bonds without voter approval is not legal.

On Tuesday, Judge Raymond M. Cadel from the Sacramento County Superior Court ruled that the state of California could not issue $550 million in pension obligation bonds without first asking citizens to approve the bonds.

He based his decision on Article 16 of the California Constitution, which prohibits public entities from issuing bonds without voter approval with certain specific exceptions.

Cadel ruled tentatively in October that pension obligation bonds do not meet any of those exceptions. He made that ruling final Tuesday.

Although pension obligation bonds have been issued for many years by various California municipalities, the idea that they can be issued without voter approval has never been upheld by a court. Lawyers for the state argued that they can issue pension obligation bonds without voter approval because they are merely refinancing a debt obligation “imposed by law.”

But Cadel ruled that the constitution does not exempt such transactions.

“And no reported appellate cases have found that such an exemption exists,” Cadel wrote.

Though the city of San Diego is currently unable to access the bond market at all, officials have initiated plans to issue up to $600 million in pension obligation bonds over the next three years in order to help pay down a more than $1.37 billion deficit in the city’s retirement system.

The county of San Diego, on the other hand, has successfully issued pension obligation bonds twice over the last three years. The county owes $1.27 billion to Wall Street investors who purchased the bonds. The county also has a separate deficit in its pension system of $1.2 billion. The county did not seek voter approval before issuing the bonds.

Read a Voice of San Diego story about the county’s reliance on pension obligation bonds.

— SCOTT LEWIS

Retirees: Don’t Take Our Health!

Retired employees of the county of San Diego have suggested that the county’s pension system revert to a shorter timeline to pay off its $1.2 billion shortfall.

The retirees, worried that the pension system’s worsening health will cost them health care benefits, said in a letter to the administrator of the county pension system that they would recommend the county pay the debt down over 10 years rather than the 20-year “amortization schedule” currently in use.

Such a move would put a massive burden on the county’s operating budget.

The county has determined that it is not obligated to pay for the health care of its retirees. And the county’s pension system considered a proposal in September that would have cut off funding for the health care needs of retirees. In turn, the pension system would have been able to save more money to pay off its growing deficit.

That proposal was rejected and county retirement officials asked groups like the retirees to suggest alternatives by which the county’s pension fund could recover without cutting health benefits.

The pensioners hope the county’s pension system continues the practice of funding health care, hence their proposal to pay off the debt using larger payments from the county. Read a four-part series on the county’s pension situation published by Voice of San Diego in August.

SCOTT LEWIS

Chargers Proposal to Be Debated on KPBS TV

The Chargers designs for a new stadium and development on city land in Mission Valley will be debated Wednesday night on KPBS. Mark Fabiani, the team’s special counsel, will speak on behalf of the Chargers. Former City Councilman Bruce Henderson, an outspoken critic of publicly funded sports facilities, will counter Fabiani.

The “Full Focus” program is scheduled to run at 6:30 p.m. and 11 p.m. It will also air again on Thursday at 12:30 p.m.

— ANDREW DONOHUE

Easy T-Day B/C of E-mail

The audit committee investigating allegations of wrongdoing at City Hall won’t likely be working again until mid-December, a partner said Wednesday.

Officials from Kroll, Inc., the firm staffing the audit committee, said last month that glitches in data collecting procedures had stalled the investigation. They have since essentially stopped their work, which is essential to the city’s return to fiscal creditability, until the technical issues are worked out.

The firm has essentially run out of funds to complete its investigation, said partner Troy Dahlberg. It will return to ask the City Council for several millions more to complete its work, but the firm must provide an updated timeline and budget for its project before asking for the additional funds.

“I’m kind of in a weird spot where I don’t have a lot of funds but I can’t get approval until I know what the future costs maybe,” Dahlberg said.

And there’s another problem. Dahlberg doesn’t expect to have a good cost estimate until mid-December. By that time, the council will already be a few cookie-tins deep into its holiday vacation. The last council meeting before the New Year is scheduled for Dec. 6.

So, unless the council calls a special meeting or works out a financing plan, the renaissance of the audit committee’s work could hang over into 2006.

— ANDREW DONOHUE

Fortune Mag: Stay Classy, San Diego!

The new Fortune magazine borrows a line from the comedy favorite “Anchorman” this month to introduce national readers to the skinny on what’s shaking in little-ol’ distraught San Diego.

The article reads the same way nearly every national news piece about our fair city does. It talks about San Diego’s idyllic weather and location, and then ponders how on Earth such a municipal travesty could visit a city so superficially blessed. Unlike other articles, this one appears to understand that the answer can be found in the question.

Oh, and Fortune magazine also appears to have a “This Just In” section, where the article on San Diego can be found. Voice asserts that it thought up the idea for the name of its section independently of Fortune. Its unsophisticated staff members acknowledge they can’t understand all the fancy financial talk and therefore don’t pick it up.

— ANDREW DONOHUE

County Owes Taxpayers

The San Diego County Grand Jury released a report Wednesday saying much of what the County treasurer and tax collector has been saying himself for months: that many San Diego County residents have paid more property tax than they needed to.

Now the only question is whether the tax collector has been working hard enough to refund that money.

“The Grand Jury’s investigation revealed that the treasurer/tax collector’s department does not have adequate policies and procedures for processing refunds,” the Grand Jury’s report states.

Treasurer and Tax Collector Dan McAllister has repeatedly announced over the last several months efforts to return an estimated $2.4 million to property owners who for various reasons paid too much in taxes between 1996 and 2002.

As of last week, the McAllister had issued refunds of approximately $760,000

In an interview, McAllister said Wednesday that he welcomed the Grand Jury’s report.

“We welcome an extra set of eyes looking at what we’re doing,” McAllister said.

McAllister said he expected to have a new and clearer set of policies for ensuring that refunds reach overcharged taxpayers by January.

The Grand Jury agreed that he was moving swiftly to refund taxes over-collected in the years between 1996 and 2002

But the county collected nearly $6.2 million too much in the years since, which must also be refunded, the Grand Jury report states.

— SCOTT LEWIS

California Doesn’t Respect Its Elders, Part IV

The Los Angeles Times finished its four-part investigation into conservators, the court-appointed overseers of the state’s oldest and most vulnerable citizens. The investigation found a system with little state oversight that allowed elders to be swindled and bamboozled. San Diego cases are cited in the four-part piece.

— ANDREW DONOHUE

This Day in San Diego History: The Pension Deal

On this day in San Diego history, the board of the now-troubled pension system voted to approve the Manager’s Proposal 2 deal now at the heart of a number of federal and local investigations.

The pension board, by a vote of 10 to 2, approved a deal in 2002 that allowed the city to avoid an immediate lump-sum payment into its pension system. The deal restructured the city’s payments into a pension system that was losing money, pushing the greater financial burden out to future years.

At the same time, the city granted increased pension benefit increases to its employee labor unions. The benefit enhancements were only to go into effect if the pension board, populated largely by labor reps and upper city management reps, approved the payment relief.

The deal, and a similar one like it in 1996, are largely blamed for the $1.37 billion pension deficit that threatens to dominate city budgets for years to come. The FBI, U.S. Attorney’s Office, District Attorney’s Office and the Securities and Exchange Commission are all investigating related matters.

The City Council — with the exception of City Councilwoman Donna Frye — approved the deal on Nov. 18, 2002, the same day it approved the new central library. Because of the city’s political and fiscal problems, the future of the library plan remains in jeopardy.

— ANDREW DONOHUE

California Doesn’t Respect Its Elders, Part III

The Los Angeles Times continued today with the third installment of its four-part investigation into the state’s handling of conservators. The paper has found a cottage industry with little government oversight that has allowed the state’s oldest or most needy residents to be constrained and swindled by unlicensed professionals.

Some of the more egregious cases cited in the investigation took place in San Diego.

— ANDREW DONOHUE

Frye Thanks Supporters, Quotes Douglass

City Councilwoman Donna Frye sent a message to her supporters this weekend thanking them for their efforts in her bid for mayor, which ended Tuesday when voters chose Jerry Sanders.

“Dear Friends,

Thank you all so much for your incredible dedication to our year-long mayoral campaign! You have renewed my hope and optimism for the future of our city. I know how many of you took time away from your family and friends to work on our campaign, and I am grateful for your generous contribution of time and money.

“While we did not make it to the mayor’s office, we did make history in San Diego by showing the public a new kind of government and a new kind of politics. We have successfully made open, honest and ethical government the central platform in city elections. We have shown that San Diegans are committed to real change and want a government that puts the public interest first.

“This is only the beginning, however. Real change takes patience, dedication, commitment and sacrifice. I ask that you stay involved and engaged as we continue our work to reform City Hall and stop the politics-as-usual.

“Thank you again for all of your love, hard work and support.”

She then closed the letter with a quote from abolitionist orator and writer Frederick A. Douglass:

“If there is no struggle, there is no progress. Those who profess to favor freedom and yet deprecate agitation are men who want crops without plowing up the ground. They want rain without thunder and lightning. They want the ocean without the awful roar of its many waters. This struggle may be a moral one; or it may be a physical one; and it may be both moral and physical; but it must be a struggle. Power concedes nothing without a demand. It never did and it never will.”

— ANDREW DONOHUE

City Lands New Cop Chopper

The San Diego City Council approved on Monday spending $11.3 million over seven years for four new police helicopters, replacing the police department’s existing fleet.

The American Eurocopter “Astar” choppers will be acquired on a lease-purchase program and the order will be delivered on a monthly basis beginning next June.

The helicopters, which are expected to endure about 15 years of service, will be affixed with forward-looking infrared systems, can carry evacuees from a disaster scene, and will be able to hold a 250-gallon bucket of water for firefighting.

Revenue generated from the sale of the city’s current choppers will be used to cover the first year’s payment. The police department’s existing set of flyers are between 12 and 38 years old. All have problems with corrosion, decaying paint, wear-and-tear on the interior and metal fatigue, Executive Assistant Chief Bill Maheu said.

— VOICE STAFF AND WIRE REPORTS

Red Flag Issued for Fire Weather

The National Weather Service issued a Red Flag warning effective Tuesday morning, stating that dry conditions and gusty Santa Ana winds put the Southern California region and the San Diego County valley and mountain areas in particular at risk for a fire.

“These meteorological conditions … coupled with the rapid drying and warming over the preceding five days will contribute to extreme fire growth,” the weather service’s statement said.

The warning is effective from 10 a.m. on Tuesday to 6 p.m. on Thursday, but will be revised tomorrow morning.

— EVAN McLAUGHLIN

California Doesn’t Respect Its Elders

In an eye-opening investigation on how California cares for its elders, the Los Angeles Times on Sunday and Monday published the first two parts of a four-part series on conservators — court-appointed caregivers.

The series touches on a few San Diego cases, and Monday’s installment starts off with a local case.

— ANDREW DONOHUE

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