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Fifteen months ago, a task force of local business leaders concluded the city of San Diego’s finances were in “crisis.”
Since then, the task force has spent hundreds of hours looking deeper into the city’s fiscal situation. It’s held weekly four-hour meetings since last December, poured over financial statements and interviewed city, union and business leaders.
The first sentence in a summary of its latest findings released Wednesday? “San Diego has a fiscal crisis.”
“The question is, are we the only ones that realize we’re in a crisis?” said Vince Mudd, the task force’s leader and chairman of the San Diego Regional Chamber of Commerce. “I mean, maybe you have to say it twice.”
A lot and not much has happened since Mudd released his first report in December 2009, one that recommended bankruptcy unless the city got its fiscal house in order. The city’s budget deficits now stretch back a decade. Mudd estimates the current deficit, including money to repair the city’s deteriorating streets and sidewalks, to be $130 million — or more than double Mayor Jerry Sanders’ official estimate. Voters in November overwhelmingly rejected Proposition D, a sales tax increase and financial reform ballot measure, an idea that Mudd’s group blessed as a way out of the city’s financial morass.
Since then, little has happened to alleviate the city’s systemic financial woes. Mudd’s report casts blame far and wide, even going so far as to call out former Mayor Pete Wilson for failing to provide a way to pay for retiree medical benefits when he overhauled the plan in the early 1980s.
Like everyone else in the past six years, the report cites San Diego’s pension underfunding scandals as the greatest source of the city’s problems. But current city leaders don’t escape unscathed. The report criticizes as disturbing their “seeming absence of a sense of urgency” after Prop. D’s failure.
“ACTION IS REQUIRED NOW,” the report screams.
The report comes at the request of Sanders, who asked Mudd to analyze financial plans released in the wake of Prop. D’s defeat. Mudd’s first report discussed the whole of the city’s finances and his second examined the cuts needed to put the city’s budget in the black if it increased its sales tax. This one provides many more specific reforms and options for savings than either of the previous reports. But like both prior efforts, it argues the city’s budget gaps are really budget chasms.
Mudd wants action by May, putting the onus for significant financial reform on the mayor and City Council. The council should pass a budget that cuts $86 million without any one-time savings or deferrals, and put together a plan that covers the additional cost of financing $600 million to fix broken streets, storm drains and other assets. This is a departure from Sanders, who recognizes the city has a massive maintenance backlog but doesn’t count it as part of the deficit. Further, the report says the council should hire an actuary to study a series of pension reforms that could yield further savings.
As part of that package, Mudd essentially endorsed half of Councilman Carl DeMaio’s financial plan, which relies on competitive bidding and retirement benefit and wage cuts for the majority of city employees. Most elements of DeMaio’s plan that Mudd discarded were those that couldn’t be implemented this year or the mayor or council already have shelved. Mudd said the reforms in DeMaio’s plan could save $41.5 million next year.
But more of these now-Mudd endorsed solutions look like they have run out of time. A major item is the elimination of extra pay nearly all city firefighters receive for having an emergency medical certification. Cutting the pay will save the city $4.8 million, DeMaio contends.
The city is negotiating a new contract with its firefighters union, and union president Frank De Clercq said he expects to reach a deal by the beginning of April. Sanders’ office, which leads labor negotiations, hasn’t asked to eliminate firefighters’ emergency medical pay or decrease salaries by the same amount, De Clercq said. And the union won’t agree to it.
“It’s not going to be there now,” De Clercq said.
Told De Clercq’s comments, Mudd said that if the city won’t cut the emergency medical pay it will have to find the savings somewhere else.
Regardless, there isn’t much time before certain deadlines hit. By April 1, the city has to reach agreement or be deadlocked with labor groups on reforming the city’s retiree health care benefit, a plan that faces a $1.4 billion deficit that the city doesn’t fully fund each year. Mudd wants current city employees to contribute equally toward that benefit, a move he believes will reduce the annual payment to the current funding level.
Also, by April 15, Sanders has to unveil a budget.
That proposal might be the mayor’s last chance at making meaningful changes. Though Sanders has promised he will end the city’s ongoing deficits by the time he leaves office in 2012, Mudd is skeptical that major reforms can happen in a year that will have a wide-open mayoral election and at least five council seats up for grabs.
“The indictment is all of us because we let it happen,” Mudd said. “If we let it happen again, 2012 is going to have some amazing initiatives on the ballot.”
Correction: This story incorrectly stated whom Mudd wanted to contribute equally to retiree health benefits. It has been updated to say that he wants current city employees to do so. We regret the error.