Suppose a deeply depressed mayor of an insolvent city comes to psychoanalyst Sigmund Freud and laments that he has had to cut back on fire and police services, close recreation centers, slash library hours, and defer maintenance in neighborhoods whose infrastructure was already rotting. The people hate him. But in the next breath, the mayor exults that he has made a secret arrangement so his bankrupt city can give $700 million to its professional football team. So the people now love him.
Would Freud have the mayor committed to an asylum? Or have the citizens committed?
Actually, this seeming lunacy can be described by a phenomenon that the late economist Milton Friedman used to point to: the concentration of benefit and the diffusion of cost. That is, the person who wants a handout has a lot to gain. But the people who oppose it will only lose a little bit over a long period.
This is San Diego’s problem. There are three big power groups. City employees want to protect their outsize pensions. So they will scream loudly and vote in heavy numbers. Twenty percent of football followers are raging fanatics. So the politicians know that the fans will make a lot of noise and vote in big numbers.
Third, the real estate establishment doles out money to the politicians and gets its way. The classic case may have been the Naval Training Center, which the federal government gave to San Diego. In 1997, a distinguished committee decided to choose among five developers, settling on a subsidiary of Miami’s Lennar Corporation, which had experience converting military bases. But local developer Corky McMillin showered money on local politicians and got the job. McMillin made lavish promises — but the final document was radically changed. Nobody read it. The place turned into a traffic-clogging housing center.
And there’s the Centre City Development Corporation (CCDC), which bullies the Redevelopment Agency (city council) to push projects downtown. “CCDC captures the redevelopment money for downtown,” says Steve Erie, professor of political science at the University of California San Diego. The latest caper, which Erie calls “shameful,” was a late-night, secretive deal in the legislature permitting Centre City to boost substantially the cap on tax-increment funding it can spend on downtown redevelopment. Reason: to finance a publicly funded stadium for the Chargers. “To keep the Chargers here, the money is coming right out of services, schools, and governments. No other California city has something like CCDC. It has outlived its usefulness.”
San Diego’s battle is “services versus subsidies for developers, services versus subsidies for pro sports, and services versus pension benefits,” says former city attorney Mike Aguirre.
The media are part of the pro sports problem, says Erik Bruvold of the National University System Institute for Policy Research. “I know there is supposed to be an iron curtain between business and editorial, [but] it takes an extraordinary [newspaper] owner to say that we won’t pimp for a team.”
“This city doesn’t have a watchdog for the public interest,” says Norma Damashek, past president of the League of Women Voters. San Francisco’s military base, the Presidio, was almost entirely turned over to the citizenry, and not business. San Diego’s Naval Training Center went to a developer. “San Francisco is a city that belongs to the people, not to the big interests, as in San Diego.”
So there you have it, Dr. Freud. A councilmember knows that going against the Chargers will lead to defeat at the polls. As will trying to impose sanity on pensions. And the councilmember thumbing his or her nose at real estate developers may run out of financial support quickly. The unions representing city workers will battle anyone trying to reform pensions. And construction unions always support downtown projects, including publicly subsidized sports palaces.
Is a political solution possible? Ideas are floating about. Mayor Jerry Sanders wants to eliminate pension plans for new employees and replace them with 401(k)-like savings plans. He calls the idea “radical,” but the private sector has been doing it for years. Councilmember Carl DeMaio offers a “Roadmap to Recovery” that would cut pension benefits, freeze pay, and slash retiree health-care benefits for current employees.
There are several problems with DeMaio’s plan. One is that it depends greatly on cooperation from city employees. Good luck with that. And much of DeMaio’s plan depends on achieving savings through managed competition, or having the private sector bid against the government on certain projects. “The benefits of managed competition are highly exaggerated,” says Erie. In particular, managed competition will only work in a city that has a good record of riding herd on contracts. San Diego’s record is dismal. The experience at the Naval Training Center suggests that these contracts will go to big political donors.
A commission headed by advertising executive Bob Nelson recommends charging consumers for trash pickup, selling corporate naming rights for such things as lifeguard towers, privatizing municipal airports and golf courses, increasing business taxes, and leasing the profitable Miramar Landfill.
“San Diego has the lowest business taxes of California cities,” says Erie. Raising them could bring almost $100 million a year. “But outsourcing golf courses and airports doesn’t fundamentally address the issue. We have systematically underfunded services relative to other California cities.”
There is some optimism. Aguirre notes that the business establishment was divided on the projected Proposition D tax increase. By opposing Proposition D, the Republican Party, Lincoln Club, and San Diego County Taxpayers Association turned on its normal allies, the San Diego Regional Economic Development Corporation, the San Diego Regional Chamber of Commerce, and the mayor’s office. There are signs of a realization that, as Aguirre puts it, “If you destroy the city, what’s the point of building condos nobody can buy?”
Political activist Mel Shapiro is bullish on the workability of DeMaio’s plan: “I hate to say I admire a Republican, because I am a Democrat, but DeMaio is a bright guy,” says Shapiro.
But Damashek worries that community planning groups may be eliminated or emasculated. She is also concerned that a proposed conservancy running Balboa Park will lead to nearby hotels or other commercial enterprises. The process of redistricting the city for an added council seat may create an impenetrable conservative majority. “DeMaio and the mayor want to get certain things all taken care of before the City goes to bankruptcy court,” says Damashek.
“City employees can work 20 or 30 years, retire with 90 percent of their income, and live 30 more years. Those numbers don’t work,” but many councilmembers don’t understand that, says Bruvold. “I fear the current leadership is counting the days until the problems are on somebody else’s watch.”