A confidential legal opinion casts doubt on a plan to erase more than $9 million from the city of San Diego’s ongoing budget deficit.
The private opinion, obtained by voiceofsandiego.org, directly contradicts a public opinion from City Attorney Jan Goldsmith that the city legally can transfer a previous Convention Center expansion’s $9.2 million in annual bond payments from the city’s day-to-day operating budget to its downtown redevelopment agency.
At least four City Council members want to transfer the debt payments to the downtown redevelopment agency, the Centre City Development Corp. The transfer would save the city money that could pay for increased fire, police and other general services at the expense of downtown redevelopment.
The city has a $53 million deficit projected next year, and further cuts could continue to reduce services battered by a decade of budget gaps.
The council members relied on Goldsmith’s opinion to make their request.
But Mayor Jerry Sanders and former CCDC head Fred Maas have been skeptical that the transfer could happen legally. Maas has referred explicitly to this confidential opinion to justify his position but the details of it had yet to be made public.
The opinion, dated June 9 from the city’s outside redevelopment attorneys, says, ” … there is no authority under the [California redevelopment law] to expend Agency funds to allocate funds towards the payment of debt service for the Convention Center expansion bond.”
The confidential opinion’s conflict with Goldsmith’s advice also highlights questions about the selective publication of legal opinions on hot-button city issues. Goldsmith released his opinion in late November, meaning city leaders already had the opposing view for more than five months.
Transferring bond debt from the day-to-day budget to downtown redevelopment might sound familiar. In 2009, the City Council shifted the $11.3 million annual payment for Petco Park to CCDC for five years.
But the prior Convention Center expansion is different in a crucial way. Unlike Petco, the city never considered the Convention Center expansion a redevelopment project, making it much more difficult to pay for it with those dollars.
Goldsmith defended his view that the Convention Center debt transfer was possible. Goldsmith said the private opinion, written by the Los Angeles-based redevelopment counsel Murray Kane and Ted Ballmer, was incorrect and biased.
“It’s incomplete,” Goldsmith said. “He did not review the law.”
Kane wrote that the city must determine retroactively there’s no other way for it to pay off the debt and that the expansion improves downtown neighborhoods.
Those formal legal conclusions, Kane wrote, would be respectively “difficult to support” and “unlikely.” The city has been using its day-to-day budget to pay the debt for more than 10 years and the expanded center already has assisted in eliminating downtown blight.
Goldsmith disagreed. His opinion showed how the agency could reimburse the city for the bond payments. By definition, Goldsmith said, a reimbursement agreement implies that there was another way of paying for the project. Requiring a finding that there isn’t doesn’t make sense, he said.
“That’s illogical and the law does not require something that’s totally illogical,” Goldsmith said.
Still, Goldsmith said that a reimbursement agreement doesn’t allow the redevelopment agency to pay for just anything. The city should argue, he said, that the expanded center helped eliminate blight downtown and that the city’s deficits have put more of a squeeze on its budget than contemplated when the city issued bonds for the expansion in 1998. A reimbursement agreement appears to allow for these kinds of retroactive findings, he said.
If Kane’s opinion hadn’t been leaked, public debate over the merits of both legal positions couldn’t happen. Sanders and the City Council can wave the attorney-client privilege on the Kane opinion, but they haven’t.
Goldsmith said he didn’t care if Kane’s analysis was public. But he said the public didn’t lose out by not seeing Kane’s view. The city attorney incorporated Kane’s theory, which Goldsmith said was based on the impact to the redevelopment agency, not the city at large, into his opinion.
“That evaluation should be considered and that’s why we included it within ours to be honest,” Goldsmith said. “When we see something that’s not clear we get both sides of it and see what is a better argument.”
Kane’s opinion does allow for the downtown agency to assume the Convention Center’s existing debt if the center expands again, as is now being discussed.
Sanders hasn’t announced a fundraising plan for the proposed $710 million new expansion, but telegraphed last week that he’s targeting downtown redevelopment funds to shoulder some of the burden.
The previous Convention Center expansion cost $216 million and opened in 2001. The city’s annual Convention Center bond payments are scheduled to increase to $13.7 million in 2015 when the Unified Port of San Diego’s $4.5 million yearly subsidy expires. The bonds will be paid off in 2028.
Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.