Mayor Sanders’ $12 million budget surplus projection did not account for looming realities.
On Tuesday night, newly elected Mayor of San Diego Bob Filner stood up before a nearly packed Balboa Theater to give his very first State of the City address. Initially it was my intention to do a writeup of the speech itself and move on. But there were a couple of things that bothered me…..well, one thing that bothered me, but another thing that really intrigued me. And it was that intrigue that caused me to hold off in order to do more research.
What bothered me was that the speech was mostly a rehashing of his campaign talking points. There wasn’t a whole lot new there, just a repetition of campaign promises to pay more attention to San Diego’s outlying neighborhoods and not be so downtown centric, as mayors of recent past have been wont to do (although we do have a pretty nice downtown because of it, so there’s that). But really, what more could we expect? As the man himself said, he’s only been in office for six weeks. There hasn’t been a whole lot of time to truly make any kind of lasting mark.
Can’t really blame the man, then, for not having a whole lot new to tell us.
He did break some news, though, announcing that the Chargers notified him that they will not be exercising their escape clause at the end of February (the team is allowed, per its lease, a one month window each year until the lease expiration in 2020 to exercise an out clause and move the team to another city, the only penalty being that the team must pay off any outstanding balance on the lease revenue bonds the city issued for the 1997 expansion of Qualcomm Stadium).
The team also notified the mayor that they will not be participating in the application process set up by the NFL for teams expressing interest in relocating to Los Angeles. Which is good news to San Diegans (like me) who don’t want to see the team flee.
Filner also appears to have taken my advice when he struck a surprisingly conciliatory tone and pledged to work diligently to find a way to build a new stadium that “provides a net benefit for taxpayers.”
“I commit to you tonight to do everything I can to make sure that our Bolts don’t bolt!” he said.
That sounds a lot better and is sure to work a whole lot better than vilifying the team’s “billionaire owners.” It’s an encouraging sign that real progress and ultimately a resolution is within sight.
The thing that really caught my attention, though, and what really got me thinking was Filner’s assessment of the city’s finances. He likened the city to a patient who has overcome a serious illness. “We’ve all paid a high price for the hubris of our predecessors.”
Last year Jerry Sanders stood in front of the cameras and gave us a bit of great news: After years of crippling budget deficits, the City of San Diego would be running a $12 million budget surplus in 2014. Our problems are solved! All Hail Jerry Sanders, the savior of San Diego!
Filner, on Tuesday night, took the wind right out of those sails. He said those projected budget surpluses could actually be as much as a $40 million budget deficit, despite all of the austerity measures enacted during the Sanders administration.
Yeah, sure, we’ve heard all this before from Filner. But this was different. This was no longer a campaign talking point or rhetoric. He’s now the mayor, and this was the State of the City Address. This was for real.
Although he never mentioned Sanders by name, he accused his predecessor of some shady accounting tricks in order to protect his mayoral legacy; of fudging the numbers so that he could say he left behind the first budget surplus in recent memory. Filner accused Sanders of deliberately misleading San Diego taxpayers.
Now I won’t go so far as to say there was a deliberate, massive conspiracy to deceive, but there are clearly some things that Sanders did not account for in his final budget as mayor. And technically he wasn’t wrong, because according to current law at the time the budget was issued it was reasonable to assume his numbers were right. If you were going strictly by current law at the time. It’s a little like splitting hairs, but there you have it.
And that’s the problem: There were some assumptions that could have and should have been made in anticipation of changes that were about to happen. At the time Prop B was still just a proposition, but it was crushing it in the polls and was pretty sure to pass; it did, with 60% of the vote. But Sanders’ budget didn’t account for the changes that would immediately result from the passage of Prop B.
According to a report issued in December by the Independent Budget Analyst, the changes brought about by Prop B will bring $21.6 million in additional pension costs for San Diego in the 2014 fiscal year (the one we’re about to begin in six months), with that number declining in the subsequent four years (from $17.7 million in FY 2015 to $5.6 million in 2018). That alone turns Sanders’ $12 million of black ink red by over $9 million.
Then there’s the loss of redevelopment funds, which will require the city to make an $11.3 million payment on Petco Park and another $3 million on the Convention Center expansion. So that’s a total thus far of $23 million worth of deficit the city is facing. $30 million if you use the initial surplus figures issued earlier by the Sanders administration of $4.9 million.
It gets worse from there……potentially much worse. For example, funding for “deferred capital”—deferred maintenance on city buildings, streets, and storm drains. Instead of preventing further deterioration of our city’s infrastructure, the City Council implemented a plan that would spread out the original proposed maintenance schedule over five years, determining that an annual 5-10 percent deterioration of city assets was acceptable. Never mind that the more you allow something to deteriorate, the more it costs to repair. So we save some money in the budget, but much needed street repairs get put off.
There is also a shortfall in funding for the police academy. It is well known that the San Diego Police Department has for years been hemorrhaging officers and has been unable to keep up with the losses. The budget calls for funding to train an additional 20 recruits per year. But the funding allocated will not cover the costs of the new recruits.
The new budget realities could also affect the additional library hours that were restored last year by Mayor Sanders. And the “Penny for the Arts Blueprint” that restored funding to arts and culture programs to what the IBA called 2002 levels could be in jeopardy. The blueprint was adopted by the City Council last October, but the budget doesn’t include funding for it. I suppose it was assumed that the projected budget surplus would cover it, but since there’s no budget surplus, there presumably cannot be any additional funding for the arts as planned.
So it’s pretty obvious that Sanders at the very least misled the San Diego taxpayers, even if he didn’t outright lie to them (us).
There are some projections of increased revenues from transient occupancy taxes (more tourism), and the increase in property tax receipts will help with the dissolution of the redevelopment agencies—money that would go to the RDA’s will now get redistributed back to the city or county where it was generated……after the state gets its cut, of course (I’ll dig more into the state budget stuff next week). And property values are increasing at a more rapid rate in San Diego than in most other places around the country, so that will help. But there are some areas of expenditures that the budget either doesn’t account for or simply kicks the can down the road, so to speak.
So yeah, the patient is still very, very sick, and it doesn’t look like we’ll see a full recovery any time soon. And while it’s easy—and just–to skewer Sanders for fudging the numbers the way he did, we should also remember the mess that he inherited. To continue the Filner metaphor, this was a city on life support. It was barely hanging on by a thread. So we do have to credit the now ex-mayor for bringing it back from the near dead. And in my mind, at least, it was unreasonable to have expected him to be able to achieve a full recovery during his tenure—especially when you consider the onset of the Great Recession—any more than it was fair to expect President Obama to fix the national economy in just four years.
Sanders should have been honest with us instead of painting a rosy picture, and for that he deserves our scorn. But the truth is that San Diego is still in a much better place than it was when Sanders took office. But there’s still a lot more to do. Filner, like his predecessor, has inherited a mess to clean up.
Image Source: Screenshot from San Diego State of the City Address