San Diego In late 1992, San Diego mayor Susan Golding proclaimed in her inaugural address that San Diego would be "the most business-friendly city in America," as well as "the first great city of the 21st Century."
We're barely into the 21st Century, and San Diego is flat broke. It is so business-friendly that it has adopted the accounting techniques and moral standards of today's best-known businesses: Enron, Tyco, WorldCom, and San Diego's Peregrine Systems.
For more than a decade, the city shamelessly cooked the books -- and not only to cover up the pension mess currently being investigated by federal authorities. In striving to be business-friendly, city government broke and bent laws to accommodate any project that a developer proposed -- sweetened, of course, with handouts for pols casting aye votes. The result is traffic jams, a culture of deceit, looming cuts in government services, and a long-neglected infrastructure.
Environmentalists wanting to preserve green space are routinely hoodwinked by politicians and bureaucrats wallowing in cash. Now, to get out of pension purgatory, the city will sell or encumber land even more rapidly. This almost certainly means that already-dwindling open space will be replaced by tract homes and industrial parks, as traffic, infrastructure, and government service woes intensify.
This was the city that boasted of its astute management, completely duping Wall Street. Last fall's fires proved that the city wasn't efficient: it was cheap, as well as corrupt -- neglecting safety and infrastructural needs while handing huge subsidies to corporate welfare queens.
All this time, San Diego was said to be under the weak-mayor/strong-manager system. Make that despotic-mayor/conniving-manager, during most of the post-1992 era, and weak-mayor/weaker-manager in recent times. Last week, the pitiable city manager, Michael Uberuaga, resigned, branded as the villain. But in 1998, Uberuaga, trying to avoid a Chargers-like fleecing, was trying to come up with a respectable deal with the Padres. He hired negotiators. But Larry Lucchino and John Moores wanted the negotiators booted out. Golding and the council agreed. They went into closed sessions; the Padres got a ballpark and 26 city blocks. Taxpayers got lynched.
Eventually, so did Uberuaga. After the retirement announcement, critics said he had deliberately misled the city council on woefully inadequate fire equipment. But city hall was a sea of mendacity long before Uberuaga arrived. Scott Barnett, former head of the San Diego County Taxpayers Association, now a consultant, is the expert on San Diego's phony accounting.
For years, San Diego has been selling off land to balance its budgets. It has diverted funds from the sewer and water systems to the general fund and then instituted sewer and water fees. It has used onetime revenues to fund ongoing expenditures.
"In the 1998 budget year, Uberuaga, brand-new as city manager, did a remarkable thing, extraordinary in the annals of San Diego budgeting. He told the truth. The draft budget showed the use of onetime revenues, talked about land sales, talked about low emergency reserves," recalls Barnett. "This was the spring before the ballpark vote. The story is that the mayor went ballistic." In the final budget, "the charts and graphs and statements about the problems were miraculously excised, pulled out."
While the city was claiming it didn't have a deficit, in fact the structural deficit -- the realistic one -- was $40 million then. Barnett told Uberuaga that the city could eliminate that structural deficit by instituting a one-year spending freeze. The taxpayers association publicly advocated it. "The city council ignored it, increased salaries and benefits and hired more employees, launched programs, continued on the fantasy budgeting" that Barnett says had been "perfected" under former manager Jack McGrory.
In 1996, when McGrory was manager, Barnett was poring over the budget. Puzzled, he went to Patricia Frazier, now deputy city manager. "I said I was looking for the Republican convention in the budget, and she said it was not there. She said that, 'They told us not to keep track,' " recalls Barnett. "I was astounded. My God. She was telling me the truth. The [expenditure] number for the Republican convention was $23 million to $26 million. It was not in the budget."
Not long after that came the controversy over the Chargers' 60,000-seat guarantee. "Frazier put together honest cash-flow assessments," recalls Barnett. "She had items projecting the cost of the ticket guarantee. When it came to the council approving, the line on the ticket guarantee was excised. Jack [McGrory] said Susan [Golding] didn't want it in there."
The problem with the budget is that "hardly anybody on the council reads it," says Barnett. Hence, bureaucrats sneak in spending, switch money from one account to another, and the like. The council finally approves the deceit-filled document retroactively. "If they did that on Wall Street, they would be in jail, or at least audited," says Barnett.
He considers the pension scandal "a self-made comet that could destroy San Diego," but he never followed the pension accounting fraud. Diann Shipione, a member of the pension board, has done so. Last September, she challenged misrepresentations in a sewer-bond offering and the city pulled it -- later admitting that it has been issuing delusional bond prospectuses since 1996.
Nonetheless, the diddling continues. This month, the city settled a lawsuit which charged that deliberate pension-system underfunding was illegal. But the city was back to its old tricks, says Shipione. There were multiple ruses. For example, under earlier projections, certain debt was to have been paid off in 2021. "They re-amortized it for a new 30-year period," thus shoving the payment even further into the future. Using another bizarre amortization schedule, "the debt is never paid off. The deficits grow," she says. "People in office want to retire and get out before the consequences have to be faced."
To cover the huge pension liability, the city may have to sell even more real estate. It posted $500 million worth as collateral in the pension lawsuit agreement. The big question is: what real estate goes? "A lot of environmentally oriented people such as myself are concerned that they might well sell off open space -- parks, preserves," says Tom Leech, co-author of an upcoming book, Outdoors San Diego: Hiking, Biking and Camping.