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San Diego Mayor Jerry Sanders and other backers of a temporary sales tax hike made a promise last summer. We’ll make 10 major financial reforms, they said, before we raise your taxes.
Together, the moves will end the city’s decade-long series of budget deficits.
Voters rejected the plan in November, meaning there wasn’t any new money. After that, Sanders recommitted to the 10 financial reforms attached to the ballot measure.
But so far there isn’t much savings, either.
The mayor has completed seven reforms, including three that need a final signoff from City Council. The savings? About $1.5 million.
The number represents just a smidgen of the money needed to close a budget gap officially estimated at $56.7 million. It looks even worse when compared to the $85.5 million in annual savings backers argued the ballot measure could achieve.
But perhaps most importantly, the number shows how little immediate savings the city can count on from major fiscal reform proposals — even those that promised to be part of the answer to the city’s problems.
“I think what it says is that quite possibly the savings would not be available as quickly as some would like and maybe as quickly as some would say,” Council President Tony Young said in an interview. “That’s something that as a council and as a mayor I think we should think about.”
Thoughts like these are especially relevant this week when Sanders must release next year’s budget proposal, which must close the $56.7 million deficit.
Sanders’ office did not respond to request for comment for this story. But city finance officials have said they’ll balance the budget using the same methods that have bridged the gaps that have appeared every year for a decade: consolidating departments, one-time solutions and service cuts.
To be sure, many of the reforms included in the ballot measure, known as Proposition D, needed to go beyond what was required to generate significant savings. Four out of five dollars were supposed to come from outsourcing city services and cutting retiree health care costs. Outsourcing processes are underway for the city’s publishing, vehicle maintenance and information technology services. Negotiations on cutting retiree health care costs are expected to reach a conclusion this month.
The city still could see savings come close to $85.5 million a year if it’s able to curb costs through outsourcing and reducing retiree health care obligations. It just isn’t guaranteed and could take a while to happen.
The results of two reforms show that savings isn’t a sure thing. A long-awaited study on the city’s Deferred Retirement Option Plan revealed the controversial pension benefit cost the city money, but not enough to force changes. Under Prop. D, no further action would have been required.
Also, in February the mayor abandoned a proposal to privatize the city’s Miramar Landfill, which had been projected to save $10 million a year.
The city spent $800,000 in consultants, not to mention numerous hours of staff time, on the DROP study and landfill privatization. No matter the promise of examining both, they’ve added to the deficit instead of helping fix it.
“There is no way with any certainty we could say that some of these things could achieve any results,” said Andrea Tevlin, the city’s independent budget analyst.
“It’s not as easy as some people see as pushing a button,” she added.
Take outsourcing, for example.
The city is competitively bidding its vehicle maintenance services, a process that began in January. It could take until October before the mayor could recommend that a private company take over the service. That decision would be subject to labor negotiations before the city could outsource.
Newly elected City Councilwoman Lorie Zapf expressed frustration at the pace of reform. She’s pushed for the city to ramp up outsourcing plans.
“What is taking so long?” Zapf said. “For goodness sake, if any business operated at this snail’s pace, you’d never make it. Gosh.”
Sometimes, though, speed is a problem. The city’s plans to privatize Miramar Landfill ran into numerous complications related to environmental liability and negotiations with the U.S. Navy, which owns the land. Internal emails showed that city staffers were concerned that the landfill deal was moving too fast to handle its complexities.
One big idea whose time has come: Retiree health care. Two years of labor talks on retiree health care are expected to conclude this month. City chief operating officer Jay Goldstone estimated during the Prop. D campaign that the city could save $42 million a year by cutting those costs.
But even that massive effort might not be much help to the city’s day-to-day budget. Currently, the city has $1.4 billion in unfunded retiree health care obligations and it doesn’t pay the full amount needed each year to keep up with those long-term costs. This reform would help ease a crushing liability, but not reduce the amount the city needs to pay to fund it annually.
“The lesson really is to keep looking at everything as early as possible,” Tevlin said. “And keep plugging away at them.”