Vocabulary word for the day: Amortize. What does it mean? To gradually get rid of something, like a debt. In city-finance speak, amortizing the pension debt has become priority No. 1, but what's it going to take to make a estimated $1.7 billion liability go poof?
Anatomy of amortization: Let's say you have credit-card debt. The amount of money you owe is known as the "principal." Each month you don't pay off that debt, the principal accrues interest. If you're smart, each month you'll pay enough to cover the interest and chip away at the principal. For now, the city's put itself on a 30-year schedule (or, 30-year amortization plan) to pay off the pension debt. The first scheduled payment, $163 million, comes due July 1. That might seem like a lot of money-roughly 20 percent of the city's general-fund budget-but is it enough?
April Boling, head of the city's defunct Pension Reform Committee, says no. "What they're paying in 2005 [$130 million] and 2006 [$163 million] isn't even akin to paying the minimum on your credit card," she said. Based on her calculations, the city should be paying $202 million in 2006-nearly $40 million more than they plan to.
The year of reckoning-Prop G, the November 2004 ballot measure passed by voters, told city officials they have 15 years to wipe out the pension debt (or, a 15-year amortization schedule). Good news: Prop G doesn't kick in until 2009, giving the city "five years to get their house in order," said Boling-in other words, five years to come up with some creative, workable ways to pay back that money without hacking away at city services. Bad news: That first payment in 2009 will be around $204 million; the second payment, in 2010, is expected to be $223 million, according to city documents. That first payment in 2009 is roughly $44 million more than what the city plans to pay this year, next year and the following year.
Where's all that money going to come from? In an ideal world, pension obligation bonds would cover practically the entire annual payment, or $200 million a year. Problem: Bonds are great when interest rates are low-lower than the interest the pension debt is accruing-but Boling fears that by the time the city is able to issue bonds, interest rates will be too high. The city can't go down the bond road for the time being, anyway, because that would require a clean audit of its finances, and, thanks to its mismanagement, the city hasn't had one of those since 2002.
Some ugly realities
So, barring help from pension bonds, the most recent city budget explores every nook and cranny for possible revenue. For example:
* Taking a dip at one of the public pools around town will cost you $5 come July 1-a $3 increase. But if each San Diegan hits the pool 245 times during the nine months pools are open, that would take care of the pension deficit right there. So, that's pretty close to once a day for every man, woman and child in San Diego. We'll be the Land of the Prune People.
* Few things in life are free, and come July 1, Balboa Park's Botanical Garden will cease to be one of them-$2 admission for adults, $1 for seniors and kids. If roughly 750 million adults visit the Botanical Garden next year, that would wipe away the entire pension debt. That's 234 times the number of people who visit the San Diego Zoo each year, so let's ratchet up those marketing efforts.
* There's a saying that goes something like, "You're only as smart as your local library." Well, kiss 21 library staff positions goodbye. Compounding that, money that goes to purchase new books and other library-type stuff has been cut by 40 percent during the last two years.
* See an increase in graffiti and vandalism? That's because the contract with a graffiti-removal service has been cut by 40 percent.
* Twenty-four new parks and recreation facilities are slated to open next year. Guess what: According to the city budget report, they'll open "without funding for any additional staff and support."
* Been to Mission Valley lately? Notice all the condos creeping up the hills? For now, a temporary Mission Valley fire station is on hold for lack of funds.
* Only 49 percent of San Diego's paved roads are in "acceptable condition." That means the other 51 percent are considered "unacceptable"? How 'bout floating an $800 million infrastructure bond like city officials have been saying they'd like to do? Oh, that's right-we can't issue bonds. The good news: maneuvering your car around potholes improves hand-eye coordination and generally makes you a more alert driver. And think of all the business for tire companies and car-alignment experts.
* The roads are only part of $600 million worth of desperately needed upgrades to the city infrastructure. Let's hope those sewer pipes hold.