In the most consequential financial decision for San Diego in recent memory, voters decided overwhelmingly the city should fix its financial problems without any new taxes.

Proposition D, a sales tax/financial reform ballot measure, trailed 63 percent to 37 percent as of midnight.

The outcome registered as a stunning defeat for Mayor Jerry Sanders, Councilwoman Donna Frye, and the city’s labor and legacy business organizations. Since the city’s financial crisis came to a head six years ago, a coalition had never united on a rescue plan. This one combined a series of 10 mostly pension and privatization-related reforms with a temporary half-cent sales tax increase.

But supporters conceded that on the campaign’s central issue — trust — they failed.

“I think the mood of the electorate is one that they’re very distrustful of everybody right now,” Sanders said. “I don’t think that with the economy the way it is and with the effects of the recession that people were willing to think about a sales tax no matter how small it actually was.”

Focus now turns to Prop. D’s opponents, Republican Councilmen Kevin Faulconer and Carl DeMaio. Within seconds of the absentee results being released, DeMaio issued a statement saying he would release a comprehensive reform package — without cuts to police and fire services — on Friday. DeMaio also pledged to reduce city pension costs by 20 percent over the next five years.

Faulconer said outsourcing and pension reforms need to happen anyway, something he’s argued throughout the campaign.

“It’s not rocket science,” Faulconer said. “It’s what we know we need to do.”

The No on D campaign had a simple message: Don’t raise taxes in a recession.

Their campaign attempted to arouse anger over large annual pension payouts to city retirees and highlighted examples of alleged waste in government.

Their arguments resonated with some voters in a city that is famously anti-tax.

Matt Brinker, 49, a commercial banker from Hillcrest, said he had watched city repair crews take too long to fix a broken sidewalk recently.

“I know if you hired a private contractor, they wouldn’t send nine employees and nine individual trucks, and it wouldn’t take them that long,” Brinker said. “I’ve got to believe there’s a lot more efficiency they can wring out of the city before raising taxes.”

Prop. D’s failure belied the substantial effort that went into its creation.

Over a whirlwind month in the summer, Sanders went from floating a sales tax increase to denying a tax hike plan ever existed to embracing the plan once the council had passed it.

During the campaign, Sanders became Prop. D’s most visible supporter. It’s his answer to the problem he was elected to solve five years ago: the city’s unending budget deficits. And without it, draconian cuts to city services including layoffs of police officers and firefighters were in the offing, he argued.

By supporting the tax increase, Sanders joined forces with Frye, his opponent in the 2005 mayor’s race. Frye lost that race in part because she backed a tax hike.

Frye, who will leave the council in December, said she didn’t regret the effort.

“People are angry and frustrated and they want a solution,” Frye said. “They’re tired of being asked to do any more. I understand that.”

The union of Sanders and Frye began an unlikely coalition of interests that supported Prop. D. The city’s labor unions jumped on board immediately, but business leaders were wary of the measure.

In September, a group of Sanders’ business confidants released a report excoriating Prop. D for its lack of guaranteed reform. The ballot measure’s official financial analysis estimates the city could save between $626,000 and $85.5 million a year by completing Prop. D’s budget cuts, a huge gulf.

But Prop. D supporters embraced the report, and City Council passed a resolution pledging it would average $73 million in budgets cuts over the next 10 years. Following the council’s decision, San Diego’s legacy business groups, the Chamber of Commerce and Economic Development Corp., fell in line behind Prop. D.

The Yes on D campaign held their fractious coalition together throughout the fall. But there were signs that not everyone was on the same page.

Prop. D opponents had at least a three week head start on their campaign as the Yes on D campaign burned through an early shakeup in its political consultants. In October, Sanders also backed stealth state legislation to funnel $6 billion in property taxes downtown and help finance a new Chargers stadium, angering Frye and other council allies.

Supporters didn’t attract significant cash. Tom Shepard, a Yes on D consultant, estimated the campaign had raised about $600,000.

That’s just over the amount raised this summer for the campaign to make the city’s strong mayor form of government permanent. That campaign had no funded opposition and wasn’t a tax increase.

“When you’re seeking a yes vote, you’ve got a heavy burden,” Shepard said. “When it’s a tax increase, it’s even heavier.”

In the end, the Yes campaign had two weeks of a television advertisement and sent one piece of campaign mail.

“It’s not enough,” Shepard said.

Please contact Liam Dillon directly at or 619.550.5663 and follow him on Twitter:

Liam Dillon was formerly a senior reporter and assistant editor for Voice of San Diego. He led VOSD’s investigations and wrote about how regular people...

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