With the budget stink growing riper and riper by the day, City Hall toilers may soon have another fiscal headache on their hands. Insiders say Mayor Flip Murphy is on the warpath again, this time considering the sale of bonds to cover the city's money morass.
These insiders note the irony of such an idea. As one snickers: "When Flipper finally got off his buttsky and agreed to issue bonds to fund the [downtown] ballpark project, he and city staff made such a mess of it that the city bonds went out paying 7.5 percent tax-free interest-meanwhile, most cities were paying 3 percent."
Murphy is like the rest of his colleagues on the dais-and most of us, for that matter-who understand little of the nuances that make the world of finance tick. But it doesn't take too much brain matter to figure out that "negotiating" with one underwriter, one bond-insurance company and one investment-banking firm-as the city did on the ballpark-will not result in favorable treatment or admirable rates.
One need only point to state Treasurer Phil Angelides, who has made practice of issuing billions of dollars in bonds to pay off debt. The Los Angeles Times has laid into the Democrat for getting bids from "only" 10 firms, suggesting he is interested only in giving business to his friends, not seeking the best deal by pitting underwriting firms against each other. Instead, the Times thinks Angelides should be shopping around at the state's more than 20 qualified firms.
So, back to Flip, who is known to rely heavily on city staff. As the City Council continues to pick through the citizen-hot-button budget cuts, like library funding, the mayor may be thinking on a grander scale-of delusion, that is.
Says one cynic: "It is a bit scary if [Murphy] decides to sell bonds. And if he does, the same team that brought you [the ballpark bonds] will be selling the new ones."
If it's true that the city's pension fund could be more than $2 billion in the tank six years from now, how does a city the size of San Diego crawl out of the hole? Well, some insiders think it's no coinky-dink that city leaders appear to glaze over or shuffle their feet when such deficits enter the conversation.
The county of San Diego, which had its own pension-underfunding problem a while back, avoided a trip before local voters by selling bonds on Wall Street, complete with Supervisor Ron Roberts banging the gavel at the end of the day's trading. Some insiders suggest the city might try this tactic.
Of course, there are as many types of bonds out there as there are flavors of Lifesavers-general obligation bonds, lease revenue bonds, tax increment bonds, and on and on. Cities like San Diego love lease-revenue bonds because they don't require voter approval-and in our case, that's two-thirds voter approval.
So how to pay back the bonds? The opium of the bond world, the insiders say, is the mother of all revenue generators-the sales tax. Every political persuasion is hoping for a piece of that pie, meaning the November 2004 ballot could be awash in sales-tax fishing expeditions.
Locally, kingpins from the San Diego Association of Governments are thinking about making a play for renewing its half-cent cut during next year's election rather than waiting another two years when its share runs out in 2006. SANDAG, which uses the money for roads, could be competing with the city for the same money, the insiders note.
So, theoretically, Mayor Flip could be running for re-election-if he stays in-at the same time he has to be selling voters on the need to approve some city-saving bond measure. Not a pretty position to be in, considering the mayor's understanding of time constraints.
Where there's smoke...
In the thicket of legal machinations swirling around former Port Commissioner David Malcolm, toss in this:
Bryan Vess, a downtown attorney representing the rejected developers who wanted to turn Brown Field into a cargo-only airfield, has depositions from three mucky-mucks connected to the private State Route 125 toll road in the South Bay who allege Malcolm wasn't just cutting consulting deals with Duke Energy while on the Port Commission.
Malcolm, who pleaded guilty late last month to one whole count of bypassing California's conflict-of-interest law, made a similar deal with California Transportation Ventures, which will build and operate the toll road, according to the depositions.
Kent Olsen, who was president of CTV from 1994 until last year, said in the deposition that "we had an agreement that he [Malcolm] would get a chance to sell some of the bonds if we went tax exempt."
In exchange, Olsen said Malcolm would help with "introductions and-and, you know, influence with the local entities."
The deal, which Vess said dated back five years, never materialized because the developers decided against tax-exempt bonds, but he said nevertheless the three "all testified... that there was a contract, that the contract provided these services, that Malcolm in fact performed these services for them, including traveling to Sacramento."
Malcolm, in his deposition, denied all the allegations, Vess said. Malcolm is set for sentencing in the Duke thing on May 29.