San Diego 'Mother, this town is so corrupt/ May I probe why it rots?"/ "Yes, my darling daughter/ But don't connect the dots."
The City of San Diego has paid more than $30 million to consultants like Navigant, Vinson and Elkins, and Kroll, and they all followed instructions: smudge the facts, skirt the trail, hide the bodies so we can keep the establishment's lackeys in their government posts. In short:
Don't connect the dots.
But the consultants couldn't erase all the clues. I have had the opportunity to view some things these firms ignored -- probably deliberately. It's clear San Diego's corruption is not confined to city hall. It's deeply embedded in the business community, mainstream media, and the courts. To wit:
The Kroll report added some detail to what was already known: between 1995 and 2004, the City had been subsidizing large industrial wastewater customers. Residential ratepayers were overcharged to accommodate business. Then-mayor Dick Murphy said he didn't want to harm industry by establishing honest rates. In pulling this $120 million scam on consumers, the City was defying state and federal laws, and knew it. The state told the City that if the practice continued, it could lose $266 million in government grants and loans. The delays in implementing equitable sewer rates "resulted directly from pressure on the Council by industrial users," particularly Kelco (ISP Alginates), said Kroll. "The City Council intentionally delayed implementing a compliant rate structure out of concern for Kelco."
But let's connect some dots that Kroll ignored. Current council president Scott Peters served on one committee that handled sewer and water issues and was named to former mayor Dick Murphy's Clean Water Task Force. So whom did Kelco hire to make its case? The law firm of Opper and Varco, that's who. Until Peters got elected in 2000, the firm had been named Peters and Varco. Both Peters and the firm claim that he had no direct or indirect financial interest in Opper and Varco at the time of the Kelco lobbying. "The matter should be investigated," says City Attorney Mike Aguirre.
On February 9, 2004, lawyer Linda C. Beresford of Opper and Varco sent a nine-page memo to Kelco, asserting that the City's rate structure was not out of compliance with the Clean Water Act or state requirements, no matter what anybody said. Kelco should continue trying to press its case with the State Water Resources Control Board, the key agency in the matter, she said. Right around that time, the City was forced to admit that it had not been telling potential bond investors about its huge pension deficit. At that point, Councilmember Donna Frye experienced an epiphany: had the City, she wondered, warned possible bond buyers that it might have to pay back $266 million in grants and loans? It had not. This put city hall under the gun. So despite pressure from industry, the council in mid-2004 voted unanimously to raise industrial rates and lower residential rates.
But the corporate-welfare-obsessed council still wanted to help Kelco pay its new, higher sewage bills. In a no-bid contract, it hired a consultant to see if Kelco could solve the problem through sewage engineering. Then it inked a mutual confidentiality agreement with Kelco so no one would know what was afoot.
That approach didn't work, so the City tried financial engineering: it considered, in effect, making Kelco a $36 million loan, forgiving half of it, and then permitting the company to repay the rest over 25 years. To make up for the loss of revenue, the City would delay construction of a South Bay plant and an environmental lab. Mercifully, an outside lawyer pointed out that such a caper would continue to punish residential ratepayers -- just what council had voted to prohibit.
Don't connect the dots.
And the media? The Kroll report notes that Frye "made efforts to have this [the corrupt sewage-billing practices] brought to the public's attention." It uses similar language in another place and in still another says Frye objected to "shrouding the City's lack of compliance in secrecy."
But in an editorial about the Kroll report on August 17, the Union-Tribune said that Frye did not take "action to inform the public about the illegality." Then it ran her picture with the caption, "Donna Frye voted against illegal sewage rates but kept the public in the dark."
It appears to have been a deliberate lie, similar to the ongoing smears of Aguirre. The newspaper wants to keep a corrupt establishment and City government in the saddle.
Don't connect the dots. Erase them.
Then there are the ballpark bonds of 2002. The Kroll report concluded that Murphy's Blue Ribbon Committee report on city finances -- containing warning signs of the pension deficit -- was held up from fall of 2001 until after the ballpark bonds went to market in February 2002. This means the City knew the devastating pension information should have been included in bond prospectuses. It was deliberately withheld -- from the ballpark bonds and subsequent bonds. That's a crime.
But Kroll neglected to give the big picture. In 1998, the citizenry had voted to subsidize a ballpark on the promise that it would be self-financing. Padres majority owner John Moores vowed to make sure that new hotels and retailers would throw off enough taxes to cover the interest on the bonds. The ballot proposition had a key provision: the mix of buildings could be "fine-tuned," but if the mix was changed significantly, the public would vote again.
Then in late 2001, the city council relieved Moores of building 66 percent of the office buildings he'd promised and 33 percent of the retail establishments. He would not have to build 850 promised hotel rooms. Shelving the Campbell Shipyard Hotel would result in $7.4 million of lost hotel tax revenue. Hardly fine-tuning. The council said it was okay to replace these tax-generating structures with condos, apartments, and lofts. Whatever taxes such residences throw off are always eaten up by infrastructure and services costs. The city would lose a bundle in tax revenue, argued retired law professor Robert Simmons, who went to court.