Aguirre says a federal judge from outside San Diego could be brought in for the case, and a popular figure such as former mayor Pete Wilson “could lead the City through the bankruptcy process.” It was clear at least seven years ago that San Diego could not meet its pension obligations, but the political process has failed to deal with the excessive benefits.
“The bankruptcy court can abrogate a contract,” says a noted San Diego attorney. “When you get in front of a state court and an argument is being made that if a law is applied as written there will be terrible consequences, judges routinely say that you have to go across the street to bankruptcy court. The state court is not set up to fix enormous financial problems with lots of stakeholders.”
What about stigma? “The whole city was built on bankruptcy,” says McGrath, noting that the ability to reorganize financially helped spur development of Clairemont, Fairbanks Ranch, Otay Mesa, Linda Vista, Black Mountain Ranch, and dozens of other locations. “Reorganizations work. They shift debt around.” A bankruptcy reorganization is the way to save the City of San Diego.