Sanders: San Diego on road to fiscal recovery
By Elizabeth Marie Himchak
Eliminating the city’s structural deficit, making San Diego business friendly, expanding San Diego Convention Center and resolving the Chargers’ stadium situation are what Mayor Jerry Sanders told Rancho Bernardans he plans to focus on during his last 18 months in office.
“We’ve been making up ground in the last five years (on the budget deficit),” Sanders said. “It has been a community effort.
“We’ve received tremendous support from you in everything we’ve done,” he added. “I have 18 months left and we’ve still got a ways to go in closing that gap.”
Sanders spoke on Tuesday to about 150 at a combined Conservative Order for Good Government and Rancho Bernardo Business Association luncheon at the Country Club of Rancho Bernardo.
According to Sanders, San Diego is ahead of many other major cities — such as San Jose — in getting out of its financial difficulties.
“We’re moving out (of this) while other cities … throughout the U.S. (are entering),” he said. “It is fortunate we went into it first, even though it was very painful.”
He also said the national recession has helped San Diego in its recovery because “it forced everybody to be more reasonable and rethink the way we were doing things. It started to turn the conversation.”
He highlighted recent successes, including passage of a city budget last week that while including cuts, were not as severe as first projected. One is the restoration of all eight “browned out” fire stations starting July 1, instead of in two phases six months apart.
“This is excellent news for Rancho Bernardo,” Sanders said.
He also said city tax revenues are starting to rise, transient occupancy tax “is up quite dramatically” and “sales tax is up … but we’re cautiously projecting that.”
Sanders also mentioned initial financial benefits from the start of managed competition — something voters approved back in 2006, but not implemented until recently. He projects at least a 10 percent savings when fully implemented in the coming years.
Managed competition, along with changes to retiree health care and pension reform will be the keys to the city resolving a structural deficit that he said got its start 30 years ago due to San Diego having a city manager form of government and the City Council deciding in 1996 and 2002 to under fund the pension system while increasing employee benefits.
“(That decision) makes no sense whatsoever,” he said. “(But) earnings were masking (the problem being created).”
Whoever succeeds Sanders when he is termed-out in December 2012 will inherit a city financially poised for rebuilding, he said.
The new mayor and City Council “can start rebuilding city services the way the community wants, such as more library hours and street (repairs),” he said.
Some of the savings, Sanders said, will come through an overhauled retiree health care program, that he said “is sacred to every government agency.”
The unfunded liability — due to a pay-as-you-go formula — means this year the city will pay $58 million, but by 2015 faced a projected $100 million bill.
“It is something the city couldn’t afford anymore,” he said.
With defined benefits and retirees paying part of the costs, Sanders said the city can save $744 million over 25 years.
“It will be the largest saved by the city and we’ll see a lot of other cities go into this exact system,” he said.
As for the pension reform initiative Sanders and City Councilman Carl DeMaio are promoting for the June 2012 ballot, Sanders asked those present to join in the signature drive required to get it on the ballot.
While gathering signatures will cost the city $300,000, Sanders said that is a better method to get the initiative on the ballot. If passed, it eliminates defined benefits and institutes a 401(k) style pension system. If placed on the ballot by the City Council, it requires union negotiations and its features will be significantly different.
Police are omitted from the plan, he explained, because they are likely to leave San Diego for other cities since all offer defined benefits. Firefighters are included, he said, because San Diego has no shortage of applicants. The same can be said for all other city positions.
“We will save literally hundreds of millions over a 25-year period,” Sanders said. “We’ll reduce the unfunded liability by half.”
As for San Diego’s economy, Sanders said “we’re starting to see an uptick and unemployment is now in the single digits, and below that in the state.”
Sanders said he is hearing good news from companies, such as Hewlett-Packard (which he visited in Rancho Bernardo last Friday) and those focused on clean technology.
“San Diego is one of the leaders in the country in clean technology,” Sanders said, explaining that from “a handful” of such companies a few years prior, there are now 750.
Also growing in the region are craft breweries, which now number more in San Diego County than anywhere else in the country, he said.
The city has improved its efforts in enticing entrepreneurs by helping with permitting and other issues, he added.
As for the convention center’s expansion, Sanders said that is “critically important to San Diego.
“It amazes me that Rancho Bernardo gets (its importance) better than anybody else,” he said, explaining how the center’s space limitations are forcing the city to turn away a year’s worth of business and soon will lose some of its largest conventions if not expanded.
Sanders said 75 percent of expansion costs will be covered by hotels, with downtown restaurants and shops also taxing themselves. The city would pay a limited amount, as would the port.
“(Expansion) would create 6,000 brand new jobs and increase hotel nights by 657,000 per year, which will have a huge economic impact on the city,” he said.
Through TOT, Sanders said $16 million in new revenue per year would be generated, adding to the $30 million raised annually.
The stadium is something Sanders said he is still working on, but to be viable, a new stadium must be used for more than about 18 games per year (Chargers, Aztecs and bowl games combined).
“A stadium can do the same to boost downtown that Petco Park did for the Gaslamp,” Sanders said.
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