Moments after Mayor Jerry Sanders finished up his prepared remarks about his proposed budget plan at a news conference last Friday and turned the podium over to Chief Financial Officer Jay Goldstone to discuss the details, a wall clock in the 13th floor press room at City Hall came crashing down, prompting all heads to swing and exposing a gaping hole in the wall.
Before Goldstone recomposed himself, mayoral spokesperson Fred Sainz muttered, "Deferred maintenance."
In spite of its jarring nature, it was really a lovely metaphor for life at City Hall these days. If not for Goldstone's surprised reaction, one might have thought the mayor's team planned it as a gimmick to illustrate what they've been telling us-that the chickens of the inept and corrupt past administrations have come home to roost, and that Sanders represents an about-face in the right direction.
But, increasingly, Sanders is coming under fire for proposing a plan that smells an awful lot like the past. First, some members of the press said it (not the Union-Tribune's editorial board, which continues to support Sanders, the U-T's endorsed mayoral candidate). Then, on Monday, the Voice of San Diego published an op-ed piece by Diann Shipione, now famous as the "pension whistleblower," that charged Sanders with downplaying the amount of money the city owes to the pension fund and pushing today's debt off into the future. She says a pension actuary's opinion that the city owes $162 million in the next fiscal year should be more like $374 million.
Now comes City Attorney Mike Aguirre, who has largely supported Sanders' proposed policies. On Wednesday, April 19, the day this issue hits the streets, Aguirre will release an opinion that calls Sanders' plan to borrow hundreds of millions of dollars to help pay down the pension debt legally and practically unsound. Aguirre believes the borrowing plan must be approved by the voters. Sanders could bypass the voters if the borrowing were paying off legally required financial obligations. But, he opines, if the city is challenging the legality of pension benefits that the bonds would fund, Sanders can't make the finding that the obligations are required by law. He also believes that pension obligation bonds are not supposed to be used to shore up an operating-budget shortfall, which he believes the mayor's plan attempts to do.
From a practical standpoint, Aguirre says, pension bonds are typically used when interest rates are much lower than the pension system's anticipated rate of return on investments (Sanders' plan works only if the investment returns can cover the cost of the interest on the bonds and then some). Finally, echoing Shipione's comments, Aguirre thinks Sanders' proposal to hire an independent actuary after implementing a plan based on the pension system's actuary's numbers-which Sanders must believe are suspect, or why else would he solicit a second opinion?-is like saying, "Ready. Fire. Aim."
While Aguirre is careful not to attack Sanders' intentions, it looks like the honeymoon might be over.
For his part, Sanders maintains that an enormous debt was handed to him, and he's simply proposing a smart way to restructure it and make it more manageable. He says he's been told by the city's outside bond counsel that his plan is legal. However, we have yet to see that in writing.
Even under the rosiest analysis, the plan is precariously perched. If interest rates rise at all, the scheme will have to be abandoned. And if Aguirre's right, it's not legal to begin with. And if Shipione's right, the plan won't cover the true amount of money the city owes the pension system. (Interestingly, Sainz did not return CityBeat's call requesting a mayoral rebuttal to Shipione's opinion.) And what if the city doesn't get its long-delayed financial audits done this year? Sanders told CityBeat he's certain the audits will get done but declined to say what his confidence is based on. And where's the fallback proposal? Shouldn't there be a Plan B in the event any of these obstacles thwart Sanders' idea?
Look, we don't claim to know as much about finance as Jay Goldstone. Maybe this is the best way to manage the debt. But we're beginning to believe Sanders is desperately trying to avoid harsh realities.
At his news conference, CityBeat asked the mayor if it's safe to say he has three choices: borrow a ton of money, raise taxes or go bankrupt. (The U-T's Matt Hall added one more: sell real estate.) Sanders said he doesn't like to think of it that way. And he said new taxes are not an option.
Raising taxes to extricate the city from this mess wouldn't be politically smart, but the mess is partly caused by the fact that San Diego doesn't raise enough money to cover its costs, and we're going to have to face that reality sooner or later.