On November 20, we got stood up by Andrea Tevlin, the independent budget analyst who reports to the council. She had agreed to do an interview at 2:00 p.m., but she called beforehand to tell us she was busy. Her alibi reminded us of that old song, “Makin’ Whoopee.” The wife is sitting at home and suspects her husband is cheating on her. Goes the song, “He says he’s busy. But she says, ‘Is he?’ ” That’s how we feel. It’s not that Tevlin was too busy to talk with us. It’s that she knew the economic situation had changed drastically; things were far worse than anybody but City Attorney Mike Aguirre and the Reader were admitting.
Tevlin’s bosses, the councilmembers, were looking the other way, with the exception of Donna Frye. Mayor Jerry Sanders and chief operating officer Jay Goldstone were sticking their heads in the sand, as usual. So was David Wescoe, chief executive of the pension system. We suspect that Tevlin, who has been around government for decades, knew that city hall was in denial. There was no way she could answer our questions. So she was “busy.”
But was she? Let’s take a look at some numbers. On November 12, Joe Esuchanko, the City’s consulting actuary, revealed that on October 31, the unfunded liability of the pension fund was $2.8 billion. The system was about 58 percent funded at that time. Realistically, the City would have to plunk $85 million more into the pension fund for the current fiscal year than the $162 million it plans to ante up.
On October 31, the Standard & Poor’s 500, the best index of U.S. stocks, had closed at 968.75. Reminder: that date was when the unfunded liability was $2.8 billion and the fund was 58 percent funded. But on November 20, the supposed day of our interview, the S&P 500 ended up at 752.44 — more than 200 points lower and the lowest closing since 1997.
So on November 20, the pension unfunded liability was almost certainly above $3 billion, and the San Diego City Employees’ Retirement System was probably only 55 percent funded, if that. Stocks, both domestic and foreign, make up more than 50 percent of the fund’s portfolio.
The long and the short of it is that on November 20, the City was thoroughly broke. Busted.
We suspect that Tevlin knew it and had no idea what she would say to us. On the day before our scheduled interview, the Dow Jones Industrial Average had plunged below 8000. It had been above 14,000 last year. It closed at 7552 on the day of our scheduled interview. On October 31, it had closed at 9325.
The market rallied after November 20, but we don’t know anybody who believes it will come roaring out of this bear market. The City remains busted.
Only the day before our scheduled meeting, Wescoe had assured the city council in mellifluous tones that there was no reason to panic, even though by definition the market this fall has been in a full-fledged panic. Then, in rasping voice, Wescoe had complained that Aguirre, who is alarmed at the market’s tanking, was just using scare tactics. Councilmember/simpletons, such as Jim Madaffer, had used the same soothing words only a week earlier to explain that there are ups and downs and we are in a down period. Madaffer apparently doesn’t know that the consensus of economists is now that the recession will be deep and last at least a year; stock market analysts say historically extreme volatility will continue and the bear will be around for a long time.
Sanders has said that the current budget deficit is a mere $43 million. He proposes to close it by taking such baby steps as closing seven libraries and nine recreation centers, cutting down the number of recruits going to police and fire academies, and giving the pink slip to about 100 employees. The public is howling about the libraries and rec centers, and councilmembers — along with Tevlin — are sympathetic to their plaints. Tevlin has proposed some minor moves, such as furloughs for employees. Sanders, playing the macho cop, says she is procrastinating. Actually, Sanders and Goldstone are procrastinating: they are grossly underestimating the City’s short-term deficit — and probably the shortfall out to 2014.
So that’s exactly what we planned to ask you, Ms. Tevlin: Given the stock market realities, aren’t you, the mayor, and the mayor’s acolytes whistling past the graveyard? Instead of closing libraries and furloughing employees, shouldn’t you be thinking of taking major actions, such as entirely shutting down the Centre City Development Corporation and the Southeastern Economic Development Corporation? And not because they produce so many juicy scandals but because their usefulness has come to an end. And if we can’t shut down Centre City, can we at least ask it to pay the City the $100 million it owes?
With downtown condos empty, residential development foundering, and commercial building showing signs of weakness, can’t there be more cuts in the Development Services Department? We realize that the general fund provides only a part of that department’s support, but can’t it still be cut more? And that chopping of only 100 heads: shouldn’t the guillotine be much busier? Can’t retirees take over many City jobs on a volunteer, no-pay basis? Can we squeeze more money out of parking and franchise fees? Isn’t it time for aggressive outsourcing of City jobs? Don’t San Diegans have to face facts: is it time to think of higher taxes?
Would it be possible to sell Petco Park? Simply defaulting on the bonds and letting the bondholders take it over would present complications should the City try to go back into the bond market. On the other hand, going bankrupt — a practical solution that Aguirre says should be considered — would upset creditors too. We planned to ask you, Andrea, if a Chapter 9 bankruptcy reorganization is in the City’s future. Sanders says it is out of the question. The head of General Motors says he won’t take his company in either, but he may have no choice.