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Mayor Bob Filner stood before news cameras Wednesday to provide what he called a reality check.

“There are problems in our budget I want to make clear to the citizens of San Diego,” he said, standing before a chart that outlined a budget shortfall of up to $37 million next year. A rosier scenario called for up to a $4.9 million surplus, the figure former Mayor Jerry Sanders included in his most recent budget outlook.

Both projections largely rest on two key expenses set to hit the city’s day-to-day budget: an increased pension burden and loan payments that had been expected to come from the city’s now-dissolved Redevelopment Agency.

Another voter initiative, Proposition A, could also hamper the city’s ability to invest in water, sewer and road projects depending on whether the state enforces a conflicting law.

Sanders’ budget estimate didn’t incorporate these potential costs but what Filner said shouldn’t come as a surprise.

A November report by the Office of the Independent Budget Analyst suggested these dynamics and other costs that hadn’t been factored into Sanders’ budget projections could add up to as much an $84.2 million budget deficit next year.

Still, the conversation marks a change in tone for Filner, who said before he was elected that it’s time for the city “to add, not subtract” when it comes to city services.

Filner’s comments Wednesday were one of his first public acknowledgements that budget woes could complicate that vision.

Here are a few key takeaways from Filner’s press conference:

The new mayor’s priorities could change.

On the campaign trail, Filner shared his vision for for improved infrastructure, community plans and public safety services. All will cost lots of money.

He said Wednesday those plans may need some adjustments but couldn’t immediately provide specifics.

“Obviously the budget is a constraint on all policies,” he said. “I would hope my priorities would not change. It depends on how deep this deficit may or may not be. “

Some of the city’s biggest bills aren’t under its control.

A court will ultimately decide whether Prop. B, which would give most new city staffers 401(k) plans instead of pensions, completely goes into effect. If Filner implements a pensionable pay freeze, the initiative is projected to save the city cash in the long run but could require the city to pay off more than $2 billion in pension debt more quickly than it would otherwise.

That will likely mean a $27 million bill next year, said Chief Operating Officer Jay Goldstone, who appeared with Filner Wednesday.

The city is bracing for another pension bill too.

The city’s retirement system assumes a 7.5 percent return on investment over the long term. The return turned out to be 0.9 percent this year and the city’s operating fund will need to cover the majority of the extra cost. Goldstone projects an $8 million to $10 million bill above its current estimate for next year.

State officials largely dictate the city’s bills in other areas.

The state eliminated redevelopment agencies in San Diego and elsewhere to balance its budget.

That left the city with a $13.8 million loan payment for Petco Park and the convention center, an amount that wasn’t factored into Sanders’ budget projections. The debt payments will increase in coming years.

Late Tuesday, the state Department of Finance notified San Diego officials some projects originally planned to be bolstered by redevelopment funds won’t get $4.8 billion the city had expected.

A fire station, an affordable housing project and homeless shelter were among those planned developments.

The city is also awaiting another related decision that could have a greater impact on its day-to-day budget. The state Controller’s Office will soon say whether the state can charge the city for previous redevelopment expenditures.

The city estimates that bill, known as a “claw back,” could be up to $28 million.

Then there’s Prop. A, a voter initiative that banned union-friendly project labor agreements. State officials have yet to say how they will enforce a conflicting state law that would make the city ineligible for state construction grants due to its ban on those pacts. (For more background, check out this June post.)

We outlined other potential budget pitfalls in a recent review of Sanders’ budget outlook.

“I’m not sure whether to call them land mines or time bombs but there are several things that can go off in the next month or two that will severely or critically alter the budget projections,” Filner said.

The budget message is changing.

As our Liam Dillon noted earlier this year, many newly elected officials come into office pledging to invest in popular programs and projects only to revise their promises after taking a closer look at the budget.

But Filner focused on other topics in his earliest days as San Diego mayor.

He also didn’t explain one major budget reality on the campaign trail: The city will need to come up with new revenue or cuts to balance the budget, pay those pension bills and deliver on infrastructure promises.

Now Filner is hedging.

The worst-case scenario would complicate his ability to deliver on campaign promises.

“What I’m trying to say is that the expectations of a balanced budget, which would allow us then to make some gains in certain services that have been lost over the last five years, may not be realized,” Filner said. “I don’t want expectations to be too high based on the previous statements of a balanced budget, therefore library hours and rec center hours and potholes will be filled at a faster rate.”

Lisa Halverstadt is a reporter at Voice of San Diego. Know of something she should check out? You can contact her directly at lisa.halverstadt@voiceofsandiego.org or 619.325.0528.

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Disclosure: Voice of San Diego members and supporters may be mentioned or have a stake in the stories we cover. For a complete list of our contributors, click here.

Lisa Halverstadt

Lisa is a senior investigative reporter who digs into some of San Diego's biggest challenges including homelessness, city real estate debacles, the region's...

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