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A grand compromise facilitated in the last month by San Diego Mayor Jerry Sanders to solve the city of San Diego’s unceasing budget woes never developed into a formal plan, breaking down this week because it contained that one toxic word in San Diego — taxes.

The discussions aimed to have something for everyone: Labor concessions for those who argue the city hasn’t slashed enough expenses following its pension scandal and new revenues for those who say San Diego’s been trying to get by on the cheap.

But no official proposal emerged before talks blew up.

Sanders killed a half-cent sales tax increase, a centerpiece in the talks, on Monday following two weeks of intense criticism from his typical political allies. The mayor didn’t work publicly to save the deal, or even acknowledge its existence, after word leaked that he was negotiating with City Council members and interest groups about putting an increase before voters in November as part of the package.

Regardless, never before has Sanders come as close to proposing a tax increase in his five years in office, nor had he endorsed the idea of a comprehensive package deal. His office did not respond to a request to comment for this story.

Discussions on the wide-ranging plan were underway when a coalition of Republican and pro-business interests began fulminating against the tax increase, culminating in a press conference Monday afternoon. The mayor announced hours later that he didn’t support a “purported sales tax increase.”

Lorena Gonzalez, the area’s top labor leader, blamed the coalition for sabotaging talks before the mayor had reached a compromise.

“We continue to be here at the table,” Gonzalez said. “Blame should be placed on those people who went out and killed an idea before they even knew what the idea was.”

Coalition members continued to denounce the tax increase as a deal breaker. Republican City Councilman Kevin Faulconer said a tax increase couldn’t be part of any current recovery effort. San Diego County Taxpayers Association President and CEO Lani Lutar said labor wasn’t willing to bend enough on key issues to make an increase palatable.

The mayor-led negotiations came as the city faced an Aug. 6 deadline to place any measure on November’s ballot. A sales tax increase requires voter approval and estimates projected a half-cent increase to 9.25 percent could raise $103 million annually. November is the last regularly scheduled election before Sanders’s self-imposed June 2011 deadline to propose a plan to end the city’s annual budget gaps.

Next year’s deficit is currently estimated at $73 million, though most City Hall watchers believe the figure will be higher, perhaps closer to $90 million. The city has faced a budget deficit every year since 2003, according to the city’s Office of the Independent Budget Analyst.

No formal proposal to bridge the gap ever materialized during the month-long discussions, Gonzalez said. She said she was willing to deal on labor concessions but local conservative and pro-business interests acted prematurely.

Gonzalez held particular scorn for Faulconer, who she accused of leaking so that a sales tax increase was part of the conversation. Faulconer typically is seen as the council’s moderate Republican compared to the more hard-line Carl DeMaio.

But political opportunism motivated Faulconer, Gonzalez contended, saying that Faulconer was planning a mayoral run in 2012. She compared Faulconer to DeMaio, a labor scourge.

“Kevin Faulconer now is Carl DeMaio-lite,” she said. “Maybe he feels like that will help him get a Republican nomination for mayor, but in the long run all he’s done is a disservice to his community by not being part of this discussion.”

Faulconer denied that he leaked the sales tax idea and said he was never in any talks that involved an increased sales tax. Instead, he said he learned about the sales tax idea through whispers on the council floor and in public.

He said he spoke out against a tax increase not for political reasons, but because he couldn’t support raising taxes in this economic climate and without financial reforms coming first.

“I’ve been opposed to raising sales taxes and I remain opposed to raising sales taxes,” Faulconer said.

Sanders was not only talking to organized labor about a reform package, but also the business community, Lutar said.

Lutar said she knew of multiple meetings between the Mayor’s Office and area business leaders to discuss a tax increase as part of a larger reform effort. But she was unaware that any plan was finished. For her part, she said she had at least a half-dozen conversations with the Mayor’s Office where she expressed her opposition to the tax increase.

The only major concessions labor offered were to privatize the city’s landfill and not to oppose further outsourcing of the city’s information technology services, Lutar said.

Labor compromises on the primary issues advocated by her coalition either were marginal or non-existent, Lutar said. The coalition wants broader outsourcing efforts known as managed competition and further trims to pension and retiree health care benefits.

She considered landfill privatization and information technology outsourcing ideas the city should embrace regardless of labor support if they save money.

Further, she was critical that negotiations on a reform package began so close to August’s ballot deadline.

“If you’re trying to garner coalition support for something as controversial today as a tax increase, you have to plan at least six months out,” Lutar said. “I think what we saw happen over the last couple weeks were the consequences of that.”

Gonzalez said discussions with the mayor included more than just landfill privatization and information technology outsourcing. Further pension and retiree health care reform and managed competition all were on the table, she said.

“I’m not going to negotiate through the media, but [Lutar’s] absolutely wrong if she says they were the only two things that were offered up by the mayor as a solution,” Gonzalez said.

Gonzalez also praised Sanders for his willingness to negotiate, calling him “the last of the reasonable Republicans.”

“I think that the mayor acted responsibly in trying to create a pathway for a reform package,” she said.

Despite the failure to cobble support for a comprehensive financial reform package, these ideas aren’t dead, said Councilman Tony Young, chairman of the city’s Budget and Finance Committee.

A package that includes further cost cuts and new revenues is the only way the city will emerge from its financial crisis, Young said. He declined to comment on any discussions over the failed proposal, but said the proposal’s failure showed the importance of the mayor and council together presenting a series of options to the public.

“It has to be comprehensive and a united front,” Young said. “It’s not going to be Tony Young. Tony Young doesn’t have enough juice in this city to say this is what we’re going to do.”

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org and follow him on Twitter: twitter.com/dillonliam.

Dagny Salas

Dagny Salas was web editor at Voice of San Diego from 2010 to 2013. She was an investigative fellow at VOSD from 2009 to 2010.

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