On February 14, Andrea Tevlin, independent budget analyst who works for the council, said in a study that the City has a structural deficit, or one that is “marked by persistence,” with expenditures exceeding revenues year after year. To balance the budget, the City utilizes one-time fixes such as selling land, snatching tobacco-settlement revenues from the library, and using general fund reserves. “One-time revenues should not be used to fund ongoing expenditures,” says Tevlin. Without reform, “municipal services will continue to erode,” she says. Tevlin’s study is a public document that rating agencies and investors can access.
The stark absence of competence and ethics got San Diego into this mess. Retired banker Davis is still concerned about both. He worries that in lining up a bond sale, “the City would have to agree to large up-front fees and an extended lock-in period [a guarantee of a certain interest rate for a long period] before a refinancing would be allowed.”
All told, says Davis, “Entering the market seems a logical move as soon as the City has its ducks in a row and can borrow.” But how long will it be before those quackers queue up? “I sat through Mayor Murphy’s sale of ballpark bonds to Merrill Lynch [the interest rate was an astonishing 7.5 percent on insured bonds], and while I’m no longer sitting around the campfire with city staff, I sense a similar debacle when the City does again enter the market.”