Honest Government Matters - 2009 - 1st Quarter

Socialism for city workers - busted capitalism for the rest of us.
03/27/09
by Pat Flannery

The above graph is like watching two trains on a collision course. What will happen when, not if, the two lines cross? The answer is: nothing. The Unfunded Actuarial Liability (UAL) of the City's pension fund will be greater than the Market Value of its Assets, that's all. If the trend continues, will the pension fund be bankrupt? No - the San Diego taxpayer is on the hook for all city pensions, no matter how outrageous the whole system may become.

Read the Gleason Agreement. It is the 2005 court settlement of a class action suit that nullified the 2002 Manager's Proposal II (MP-2) which in turn had replaced the 1997 Manager's Proposal I (MP-I). The Gleason "Settlement Class" was all San Diego City employees no longer with the City at April 6, 2004 and entitled to pension benefits.

The 1996 and 2002 Manager Agreements, allowing the City to pay less than the actuarially calculated contribution, were nullified by court order in 2005. The City henceforth agreed to pay an annual  "Contribution Amount" as determined by the pension actuary, but by far, the most important "Gleason" agreement was the removal of a previously-agreed lower limit for the City's UAL of 82.2%. When reached, that lower limit would "trigger" additional contributions from the City. That safeguard was abandoned.

There is now no floor to the UAL. There is no limit to the amount of Unfunded Actuarial Liability for which the San Diego taxpayer may become liable. The pension fund could end up owning the entire assets of the City.

But are we not amortizing this debt? Are we not paying it off over 20 years? No. The Pension Board continues to find more creative ways to avoid true amortization. I have been trying to find ways to explain this to San Diegans.

Last week I wrote a blog explaining why we are kidding ourselves if we believe we can amortize the UAL as it grows. We are not even paying down the accumulated deficit set at $1.2 billion on June 30, 2007. At the ballot box in 2006 we solemnly promised  to pay off that deficit. We promised to throw away our pension credit card. The Pension Board has not done so.

Unless the Mayor can persuade the City's 10,575 employees that it is in their best interests to confront this pension bubble, we may be heading for class warfare in America's Finest city. San Diegans are being required to pay for a bloated city workforce with bloated benefits that require service cuts, asset sales and fee increases. A backlash is inevitable. Why wait until it happens? Has Mayor Sanders the leadership qualities to avoid it?

The City already has an unpaid balance of $195 million on its Net Pension Obligation (NPO) account, i.e. its accumulated unpaid ARC, apart altogether from the UAL. The interest on unpaid ARC alone is $15 million per year. That Interest is being added to the unpaid balance each year without any upper limit. It would be over $300 million right now but for the "Tobacco Settlement" securitization proceeds. That money was not paid into the Pension Fund, it was used to reduce the unpaid ARC.

Sooner or later San Diego's retirees and its taxpayers will clash. Smoke-and-mirror accounting will eventually fail to hide the truth. The outrage of the population will be in direct proportion to the lies it has been told.

The Mayor and the city unions have a narrow window of mere weeks to forge a new civic contract. It has to be in place by June 30, 2009. Here is what I wrote on June 21, 2005. It is as true today as it was back then - our City employees have outrageously over-benefited themselves.

No section of a civil population, anywhere, can expect to enjoy the employment privileges currently in place for San Diego's municipal workers. You can't have socialism for city workers and a failed market system for the taxpayers. It pits 10,575 city workers against 1,300,000 taxpayers. My money is on the taxpayers, ultimately they hold the purse strings.

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San Diego really is a police state. 03/26/09
by Pat Flannery

I recently got dramatic proof of this shortly after joining a team of young journalists at San Diego News Network, SDNN, a new online news journal. I was supposed to become its political analyst and columnist. I was looking forward to probing the underbelly of San Diego politics with young idealistic journalists. Unfortunately it was not to be.

Unbelievably, the Mayor, through his Police Chief, refused them press credentials until they "prove themselves". He has put them on a six months probation! After six months of reporting the news to his satisfaction, he may extend press credentials to them. SDNN acquiesced. I quietly withdrew.

In a way, I am not surprised. I was already aware of the control the Mayor and the police have over the local media. They are used to it. There has been only one real training ground for print journalists in San Diego for decades and that has been the Copley press. Many Mayoral and City Council staff are ex-UT people, all nurtured in the same symbiotic coziness. They tear up anybody, like Mike Aguirre, who will not be cozy with them.

What surprised me was how quickly these young SDNN people, barely out of journalism school, accepted it all. How are San Diegans ever going to learn the truth about their city government if the police department, directly under the Mayor's control, licenses all who may ask questions at city press conferences? Should a journalist be foolish enough to displease somebody important at City Hall (e.g. by asking "impertinent" questions) an editor will quickly assign somebody else to kiss up to the offended potentate.

New ownership at the U-T will not bring change and SDNN is not about to challenge the established order. That became painfully obvious this week. The faceless manipulators at City Hall will still exert their enormous power.

As I said, this is not new. A good example of how journalists become pawns of City Hall is what happened at South Eastern Development Corporation (SEDC) last year. Will Carless, a journalist with Voice of San Diego, in answering a question from Tom Fudge on the KPBS radio program "These Days" in June 2008, revealed how it works. Fudge asked Carless why he started investigating certain bonus payments paid to SEDC's President, Carolyn Smith. Carless revealed that he had received an insider tip.

Voice of San Diego then put Carless on the story full time for months. He doggedly pursued what were undoubtedly unauthorized payments to Smith, who was subsequently fired in disgrace. But was that the whole story? I doubt it. I had uncovered a dubious land deal involving SEDC's chairman, "Chip" Owen and Jim Waring, the Mayor's land use Czar at the time.

For all the months the Voice of San Diego doggedly pursued the Carolyn Smith story they just as doggedly refused to pursue the Owen/Waring land deal story, despite my urging them to do so. Read my July 2008 blog explaining this dubious land deal. Surely it too warranted investigation. But it was easier for the Voice to look where it was told to look and claim credit for having "discovered" a story. They have since denied receiving a tip. Listen again to the full KPBS tape - Carless clearly admits receiving a tip.

So, my 2008 predictions seem to be coming true in 2009: the Mayor recently announced (and the City Attorney reversed himself in order to agree) that SEDC and CCDC should be retained, with the Mayor having the power to hire and fire the heads of both corporations. That's what the Carolyn Smith investigation was all about. Somebody wanted rid of her. Her position was too valuable and she had become too independent of City Hall.

Wherever that Voice of San Diego tip came from, it was well placed. The plan worked. Carolyn Smith is gone. Media investigations into shady land deals by insider developers do not happen and two very lucrative city jobs are at the disposal of the Mayor - for faithful services rendered.

When the police license the media, you have a police state.

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Understanding the growing Pension Deficit. 03/20/09
by Pat Flannery

In view of the seriousness of the pension problem the Mayor's office has begun issuing Monthly Pension Updates. Here is the latest one for March 2009. It purports to explain "the impact changes in SDCERS plan assets are having on the City's Pension Plan and the potential budget implications". It estimates an impact of between $27.4 million and $84 million to the Normal Cost component of the Annual Required Contribution (ARC). Unfortunately it does not deal with the impact to the Amortization Component. Therefore I will try to estimate that missing impact.

In May 2007 the SDCERS Board reset amortization schedules for the various components of its unfunded liability or deficit. It determined that its deficit as of June 30, 2007 was $1,183,463,462. The Board then decided to amortize that amount over a period of 20 years and to amortize any future year's losses over a period of 15 years. That means that there will be a separate amortization schedule for each year's addition to the deficit.

The Mayor reports the pension unfunded liability at February 28, 2009 as $2,254,000,000. That means that it grew by $1,070,536,538 since June '07. For simplicity we will treat the additional deficit as if it all happened this year and set up one 15 year amortization schedule starting July 1, 2010.

Now we have two amortization schedules going, one for $1,183,463,462 over 20 years at 8% per annum and another for $1,070,536,538 over 15 years at 7.75%; the assumed rate of return was recently reduced to 7.75%.

Go to this free online amortization calculator and enter the first amount, $1,183,463,462 together with its interest rate of 8% and a period of 20 years. You will get an annual payment of $120,538,367 ($94,677,076 interest and $25,861,290 principal).

Now enter the second amount, $1,070,536,538 together with its interest rate of 7.75% and a period of 15 years. You will get an annual payment of $123,167,633 ($82,966,581 interest and $40,201,051 principal).

Add the two together and you get $243 million.That is an estimate of the Amortization Component of the FY2011 ARC, payable July 1, 2010.

The Mayor estimates that the Normal Cost for FY2011, payable July 1, 2010, will increase by between $27.4 million and $84 million over the $60.5 million payable on July 1, 2009 for FY2010. That means that the FY2011 Normal Cost alone could be between $87.9 million and $144.5 million.

Add the two components together, the Amortization Component and the Normal Cost Component, and you get a total required payment of between $330.9 million and$387.5 million for FY2011, payable July 1, 2010.

Will the Mayor make that full payment? Probably not. He is not doing so now! His total pension payment this July 1, 2009 will be $154 million. That means he is paying only $93.5 million of the primary amortization schedule of $120,538,367, not quite making its interest payment of $94,677,076.

The fact that the Mayor's latest "Pension Update" did not even mention the Amortization Component does not bode well for how he will handle the problem. He will probably deny the full amortization requirement and roll a large part of it into the growing financial cancer that is the pension debt.

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The Mayor diverts even more money to the Zoo. Why? 03/19/09
by Pat Flannery

It may come as a shock to many San Diegans that in addition to providing the Zoo with free rent in Balboa Park, the City imposes a special levy of up to two cents on every $100 of assessed property valuation in San Diego, in order to provide the Zoo with a subsidy now approaching $10 million per year.

Here is the Mayor's 2009 Budget showing the subsidy he actually set aside for 2009: $9,679,780. Here is the relevant City Charter Section 77a. It provides for "two cents ($0.02) on each one hundred dollars ($100.00) of the assessed valuation of their real and personal property .... exclusively for the maintenance in Balboa Park of zoological exhibits".

It appears that the City is assessing one-half cent per $100 rather than the charter-allowed two cents. That is still almost $10 million per year. It means that if you own a condo in Mission Valley worth $350,000 you are currently paying $17.50 each year to the Zoo whether you ever go there or not.

Now look at the latest IRS filing by the Zoo (2005) showing a surplus of $20,137,165 for that year. You and I contributed $7,202,404 of that "surplus". See the Zoo's revenue statement, page 41 of its full 54 page IRS return (I am surprised they have not filed an IRS Form 990 since 2005).

Yesterday Sanders emailed Todd Gloria informing him that he intends to divert monies appropriated by the City Council to repair a controversial pergola in Marston Heights near Balboa Park, to the repair of a storm drain associated with the Zoo parking lot. Gloria wanted the money diverted to a different Balboa Park non-profit - to repair the roof of the Museum of Man.

Here is the 2009 Budget Item, approved by the City Council, appropriating $350,000 for the Myrtle Way Pergola reconstruction. Now it will go to the already over-benefited Zoological Society. Why is Sanders so protective of the Zoo's special privileges? Is the budget preference he displayed in this case part of a wider preference for more privatization in Balboa Park?

The immediate question is: what does "exclusively for the maintenance in Balboa Park of zoological exhibits" mean? Does this special Zoo tax not cover the maintenance of the storm drain emanating from the Zoo's parking lot? Surely the tax levy covers everything associated with hosting the Zoo in Balboa Park. Is it not enough that it occupies one of the most valuable pieces of real estate in the city for ZERO rent (see its expense statement), that we give it a $9.6 million subsidy and it shows a profit of $20 million?

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DeMaio is the lone wolf for City efficiency before fee increases. 03/16/09
by Pat Flannery

The City's Financial Management drafted a User Fee Policy and presented it to the Budget and Finance Committee on February 25, 2009, who added the sentence: "Revisions to the fees shall incorporate savings from efficiency reforms. Departments shall include these efficiency savings in their cost analysis to determine fees." The vote was Young-yea, Gloria-yea, DeMaio-yea, Faulconer-not present, Emerald-not present.

The User Fee Policy then came to the full Council on March 10, 2009 for its approval. It was put on the Consent Agenda but Todd Gloria pulled it for amendment.

Despite having voted for it as a member of the Budget and Finance Committee, he now wanted to delete the part that required the City to identify efficiencies that might lower costs before increasing user fees.

This new User Fee Policy provides for full cost recovery, including staff time, without any limitation on how much staff time can be charged to any particular service. Topping the list of the MEA's current proposal (page 2) is "Increasing User Fees". So it is obvious where Gloria is coming from. He is leading the charge for the unions who want to featherbed their city salaries with increased user fees to the citizens.

DeMaio, on the other hand, wanted a clause in there that might at least require the Mayor to offer something to City Council showing whether or not he had looked for any "efficiency savings". Mary Lewis his CFO made it clear that the Mayor's office was comfortable with such a requirement. But she did not exactly insist upon it. Despite having been elected on a "Reform City Hall" platform, Sanders has been dragging his feet on outsourcing or any reform that might pit him against the unions. Ms. Lewis was being very careful not to be seen as too supportive of DeMaio's efficiency crusade.

DeMaio described setting service fees without a proper effort to achieve efficiency as an "inefficiency tax". He wants to see real reform. He wants the Mayor to run a lean City organization with fees set accordingly. He said if we "set our fees based on a bloated organization, inherently we are overcharging San Diego taxpayers" - that is classic featherbedding.

Now watch Gloria's disingenuous attempt to infer that indentifying efficiencies would somehow undermine the Mayor's attempt to implement Managed Competition. Mary Lewis disagreed, but only mildly.

Yet Gloria remained "comfortable" with his motion. He insisted that the offending sentence must be removed. He urged his colleagues to support him - they knew he was speaking for the unions

Before the vote DeMaio eloquently repeated his case for efficiency before setting fees. He reminded Gloria that he had voted for an efficiency requirement at the Budget Committee. But obviously Gloria had a visit from the union godfathers and Todd is too canny (and too ambitious a politician) to argue with union heavyweights like Judie Italiano or Ron Saathoff.

Interestingly Donna Frye had little patience with DeMaio's attempts to impose any efficiency requirement before any fee increases. She felt quite confident that city staff could be relied upon to do everything possible to make sure that any fee increases would include all the efficiencies that could be reasonably expected of them. She abruptly called for the vote.

Faulconer supported DeMaio, but only mildly. Perhaps he and Ms. Lewis, being closer to the Mayor, know that confronting the unions is not part of Sanders' real agenda. They know that lip service is all that is required.

As the Russians used to joke under the communist system: "the government pretends to pay us and we pretend to work". So it is in San Diego: Sanders pretends to argue with the unions and the unions pretend to argue back.

The maestro for this elaborate farce, as it was with Dick Murphy in 2005, is the City's highly paid San Francisco labor attorney, David Kay.

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San Diego City Council and the People's Business 03/12/09
by Pat Flannery

I have done an in-depth analysis into all the votes cast by the current City Council since it was sworn in on December 8, 2008 to March 3, 2009. I compiled a list of action items and their corresponding votes and was surprised by what it revealed (my list does not include the Consent Agenda or items "proclaiming" something or other).

I discovered that 80% of the 136 action items that came before the City Council during that period were disposed of by a unanimous vote. Of the other 20% almost all the Nay votes came from Sherri Lightner and Donna Frye and they were mainly on land use issues. I will be publishing a breakdown of each Councilmember's vote in the near future.

Here is a list of the 109 Council action items approved unanimously between December 9, 2008 and March 3, 2009. And here is a list of the 27 contested actions. A click on any one item will take you to the full Agenda for that day, then scroll down to that particular item.

How did the City Council form a consensus on such a large percentage of its Docketed items? Did it all occur in the Council Chamber? Or was a consensus formed before hearing public testimony and before Council discussion? How a legislative body reaches its decisions is a very important public matter. In California it is governed by the Brown Act, whose preamble states:

"Public commissions, boards, councils and other legislative bodies of local government agencies exist to aid in the conduct of the people’s business. The people do not yield their sovereignty to the bodies that serve them. The people insist on remaining informed to retain control over the legislative bodies they have created."

Are the people of San Diego "informed" and "in control" of the legislative body they created called their City Council? The rare citizen who gets invited into a Councilmember's office on the 10th Floor of City Hall may leave with a question in their mind about how the "people's business" is conducted on that corridor of power. They were far more likely to encounter a lobbyist than a fellow citizen within that high octane office space. Try getting in there without an appointment, unless of course you are a well known lobbyist or a union boss.

It is within the confines of that cloistered space that decisions about the people's business are reached, long before each item reaches the Council Chamber on the 12th Floor. The entire City Council membership and staff are crammed together into that small space, where they can practically shout across the corridor to each other through open doors, making a mockery of the Brown Act. But apparently they like it that way.

In most cases Councilmember opinions are known, item by item, before public discussion takes place at a Council Meeting. That is why in the past three months only 27 items ended up registering even one Nay vote and only one item actually failed: a proposed amendment to the Permanent Rules of Council that would have reduced from four to three the number of Council signatures required to overrule the Council President and put an item on the Council Agenda.

The Council Presidency is currently held by District 8's Ben Hueso. Ben ran in a 2005 primary resulting in a 2006 runoff to complete disgraced Ralph Inzunza's Council term. Hueso won the seat and got re-elected to a full term in the same year 2006. His average vote in those three elections was 7,285; the highest being 7,994 in the 2006 runoff. With a mere 7,994 votes he is now essentially running the City. If such power is to be given to one person, perhaps it should become a citywide elected office. Right now a person whose highest popular vote was 7,994 has total control over the Council Agenda. That used to be the prerogative of an elected Mayor.

These are urgent "good governance" issues that need to be addressed by the citizens. So long as representatives of special interests like unions, developers and contractors, many of whom are ex-city employees, are the dominant influences in Councilmember's offices, behind a cordon of security, in close proximity to each other, the citizens do not have control over the legislative body they created. These eight Council Offices need to be dispersed out into the Council Districts. This love nest for lobbyists and Councilmembers needs to be broken up.

It is the role of the media to counteract such influences by monitoring how the "People's Business" is done. I will continue to analyze how current arrangements are working out. I will try to discern how Council decisions are made, on a case by case basis. I will be particularly interested in the extent to which special interests are influencing our government.

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Our Lady of Peace loses, but will sue for religious discrimination. 03/04/09
by Pat Flannery

Yesterday the City Council voted 5-3 to uphold a citizens' appeal against the expansion of Our Lady of Peace (OLP) Academy.

OLP needed the City Council to deny the appeal and approve an Environmental Impact Report (EIR) associated with its development permit already approved by the Planning Commission.

But without the Council's affirmative approval of the EIR, allowing the demolition of three historic houses, the development permit is no good.

Before the vote, knowing the likely outcome, Hueso deliberately set the City up for a religious discrimination lawsuit by Our Lady of Peace in Federal Court. He carefully read into the record all the stipulations OLP will need when writing their complaint. He was obviously coached by Alexandra Kelly, attorney for the Catholic Diocese and spokesperson for OLP (unless Ben is well versed in Federal Law, particularly as it relates to religious institutions).

Before you watch the video of Hueso condemning his own City under the Religious Land Use and Institutionalized Persons Act (RLUIPA), read about this Act, passed by Congress on July 27, 2000. It says in relevant part:

"No government shall impose or implement a land use regulation in a manner that imposes a substantial burden on the religious exercise of a person, including a religious assembly or institution, unless the government can demonstrate that imposition of the burden on that person, assembly or institution

• (a) is in furtherance of a compelling governmental interest; and

• (b) is the least restrictive means of furthering that compelling governmental interest."

Now watch the video and you will understand why Hueso said what he said for the record. He set it up so that the nuns can claim that the City discriminated against them by imposing a "substantial burden" not imposed on other land use applicants, simply because they are a religious institution. That is what the City did according to Hueso and he described exactly how the City did it. Count the number of times he used the word "burden" and how many times he glanced at the notes in front of him, no doubt written by the OLP lawyers. 

It would appear that the nuns and the Catholic Diocese knew all along that the City Council would never grant their application to demolish these three historic houses. Therefore they planned on RLUIPA from the start and Hueso was in on it. That is why OLP was so intransigent. Now it is the City of San Diego vs. the Catholic Church in Federal Court. Nice one Ben. And DeMaio did hand stands trying to support Hueso and his Church.

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Goldsmith makes Sanders an errand boy for the Council. 02/28/09
by Pat Flannery

"If no agreement is reached at an impasse meeting, impasses shall then be resolved by a determination by the ... City Council after a hearing on the merits of the dispute." So says Section VII B of City Council Policy 300-06.

That Policy needs to be "harmonized" with Article XV of the City Charter, which by a vote of the people on November 2, 2004 changed the City's governance from a City Manager form of government to a Strong Mayor form of government. The key is: how do you "harmonize" these two?

First, a little history: Council Policy 300-06 was enacted on October 10, 1971. It was amended several times, the last on November 14, 2005 adding Section XI that prevents management from negotiating any pension benefit enhancements "until the City Council has been appraised of, and had an opportunity to discuss, the cost and impact that the proposed benefit enhancements would have on any unfunded accrued actuarial liability."

Then along comes Proposition F and the Strong Mayor form of government adding Article XV to the City Charter on January 1, 2006. Does the City Council really retain its right to "resolve" any impasse between the unions and the new Strong Mayor? What was the legislative intent of Prop F? As a ballot measure its "intent" was the intent of the people. Does the Mayor get to make the City's last best and final offer or does the City Council?

According to Jan Goldsmith's Memorandum of Law dated January 26, 2009, the City Council still has the last word. Council Policy trumps the City Charter. He says that is the law! He simply ignores the will of the people.

On Page 2 Goldsmith admits that "Council Policy 300-06 ..... must be harmonized with Article XV of the Charter". However he also says, in the same breath, that these two are "not inconsistent". It is a fundamental principle of logic that two contradictory statements cannot be true at the same time. One does not need to "harmonize" what is "not inconsistent".

Goldsmith seems to be stretching logic in order to reach a legal conclusion he was asked to reach. Council Policy 300-06 and Article XV of the City Charter are either "consistent" or they are not. Somebody wanted him to declare them "consistent", but Goldsmith knew they still need "harmonizing".

Anybody who knows anything about San Diego politics knows that it was never the intent of the voters, who approved the change to a Strong Mayor, to relegate the Mayor to a mere messenger boy for the City Council. Yet that is exactly what Jan Goldsmith's "harmonizing" of Council Policy 300-06 with Article XV of the City Charter would do. He would "harmonize" the intent of Prop F right out of existence! And he says that is the law!

He should have followed the general advise he gave in his press release "The important advice is to follow what the law says and not what you may want it to say". Unfortunately Goldsmith chose what he wants it to say.

What puzzles me is why Sanders is not protesting this from the rooftops. Was he part of the huddle that concocted this plan? It is such a transparent union play. Unless Sanders protests this usurpation of his power, and does it soon, we will have no alternative but to conclude that he was in on all of it.

In order to ensure compliance with the Meyers-Milias-Brown Act (MMBA) which requires cities to have an impasse procedure and to follow it, as discussed in this August 22, 2008 unfair practices judgment against San Diego, Sanders should negotiate a change to Council Policy 300-06 with the unions. And he should do it in a  meet-and-confer separate from wage negotiations. It should give him the final word, as Prop F intended.

Then he needs to take it before the City Council. If it goes to impasse with the unions, the Council can "resolve" the issue according to its old powers.

If the Council agrees with Goldsmith and downgrades the Strong Mayor's powers by formally retaining its right to make the City's last best and final offer to the unions, using the Mayor as its messenger boy, so be it. But the Council will face the rage of the electorate, its true boss, not the unions.

Sanders' alternative is to do nothing and roll over for the unions, as a majority of the City Council and the City Attorney are presently doing. It is therefore ironic that the only thing standing between us and a total takeover by the city unions is Jerry Sanders, a long time city union member himself.

Nor is it very comforting to reflect on the fact that the City unions heavily backed Jan Goldsmith for City Attorney. These unions, through Goldsmith, are now seeking to take advantage of the fact that Council Policy 300-06 was not changed post Prop F. But did it need to be? Does Proposition F not trump any mere City Council Policy? Council Policy 300-06 and Article XV of the City Charter simply need to be read together. Such a reading produces a clear impasse procedure that complies with MMBA - the Mayor makes the last best and final offer because he is the Prop F Strong Mayor.

For further history on this issue read my blog dated January 31, 2009 and my blog dated December 1, 2008. We are perilously close to total control by the city unions. The present wage "negotiations" appear to be a farce.

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Actuary warns: $100 million pension increase next year. 02/25/09
by Pat Flannery

The difference between City Councilmembers who behave like "staffers" and those who behave like "legislators" was clear on Monday when David Wescoe presented his update on the San Diego City Employees’ Retirement System (SDCERS) to the City Council. Carl DeMaio asked the tough questions on behalf of taxpayers while Todd Gloria acted like Wescoe's lawyer. Click on each picture to view the video.

DeMaio thought that Wescoe characterizing the expected June 2009 valuation of the City's pension assets as "challenging", was the understatement of the year. It is on that valuation that the 2010 payment will be based. This year we got away with a payment based on an asset valuation dated June 30, 2008.

DeMaio then turned to the actuary, Gene Kalwarski of Cheiron, who confirmed DeMaio's worst fears: yes, the pension cost could go up by $100 million next year unless, as DeMaio put it, we have a market miracle.  And that $100 million increase is based on last year's market prices! Yet, none of this seemed to phase Mr. Wescoe who apparently believes in miracles.

Mr. DeMaio pointed out that over one quarter of Wescoe's staff earn more than $100,000. He requested that Wescoe present a plan to the City to cut his admin costs by 10% to 15%, as is being asked of all City departments.

Todd Gloria then came to Wescoe's rescue. Each  point Mr. DeMaio had made, Gloria demolished. Is there a little tension between these two? Or is Gloria just a doctrinaire defender of public pensions no matter what? His questioning of Wescoe was like an attorney questioning his own client to make him look good. I was very surprised at the blatancy of Gloria's deference to Wescoe.
 

Wescoe then lectured the Council, telling them that they were mere "politicians", against whom the California Constitution protects all public pensions. It was another example of what those in power think of those who pay their salaries, the lowly taxpayer.

I think Wescoe may have gotten a little carried away at this point (he is essentially a corporate PR guy). He went on to misrepresent to Ms. Frye how his administration costs are absorbed into the pension system.

He actually told Ms. Frye: "when the ARC is calculated, the administrative expenses are apportioned between our three plan sponsors, the City, the Port and the Airport, and a portion of an ARC payment would include expenses for administrative overhead and management of the trust fund assets". That is a totally false statement. An Annual Required Contribution (ARC) does NOT "include expenses for administrative overhead and management".

The truth is that the $15.8 million for his Administrative Expenses plus the $24 million for his Investment Management Services, were funded out of the UAAL, i.e. they were added to the unfunded liability. As stated on page 76 of the 2008 CAFR, the "administrative expenses are deducted from plan assets". It is hard to believe that Mr. Wescoe would make such a blatantly false statement to the City Council, but he did. Watch the video.

City Attorney Jan Goldsmith weighed in with another important question: how much is SDCERS paying for outside attorneys to sue the City, i.e. suing its own plan sponsor? Wescoe answered that it was "more than $1 million". For one year? To sue the City?

Goldsmith then wanted to know if the possibility of SDCERS winning a big monetary settlement against the City, perhaps millions of dollars (regarding the City's alleged past underfunding of the pension system) was reflected anywhere in the actuarial estimates. Wescoe's answer was that it was not.

The amazing thing is that not one line of this important City Council meeting was reported in the U-T, or anywhere else that I have been able to discover. We were officially told by the actuary that we may have an increase of $100 million in our pension costs next year, surely that warranted at least a paragraph in the U-T.

We were also officially told by its Administrator/CEO David Wescoe, that our City's pension system (SDCERS) charged $40 million to administer a trust fund that added approximately $1 billion to its unfunded liability. We were then essentially told to shut up and pay up. Watch that video again.

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The City and Hillel lose their court battle with the citizens. 02/18/09
by Pat Flannery

The California Appellate Court today published its Judgment regarding San Diego Superior Court Judge Linda Quinn's trial court decision in the matter of a disputed development permit for a Hillel Jewish student center in a residential neighborhood of La Jolla near UCSD.

The Appellate Court not only upheld Judge Quinn's finding, that the City needed to conduct (unspecified) "further proceedings" pursuant to CEQA, it modified that judgment with a new finding that went much further:

"there is also evidence creating a fair argument that the Project may have significant impacts on traffic and parking, biological resources and aesthetics and community character. This evidence requires the preparation of an EIR relating to such impacts rather than a mere reconsideration of whether additional mitigation measures are appropriate."

The Appellate Court comments confirm what those who have followed this case know only too well, that there was massive favoritism by City officials for this particular applicant. It is a totally inadequate location for a student center, little more than a traffic island. It consists of a 15,341 square foot triangular segment of land that remained after street construction.

Hillel wants to build a one-story 12,100 square foot student center, with a 17,000 square foot underground parking facility. The City is facilitating them by vacating public rights-of-way over approximately 21,000 of adjacent land. That is a gift of public assets. It is beyond outrageous.

Beginning on page 24, Judge McIntyre reveals that the City actually coached Hillel on how to get around certain "Biological Impacts". The City suppressed the first biological impact report and suggested alternative contents that would allow it to make a "no significant impact" finding.

Hillel's biological consultant, RECON Environmental Inc., did rewrite its first report, eliminating most of the City's concerns. But with one exception. It still contained this: "the loss of an active raptor nest by removal of a tree or the abandonment of an active nest due to construction activity would be considered a significant impact." Undeterred, the City hired an outside contractor to remove four eucalyptus trees on the project site under the guise of widening La Jolla Village Drive. It simply got rid of the trees!

Following the lower courts adverse decision, with the approval of then City Attorney Mike Aguirre, the City advised Hillel to submit a duplicate application, while the City was appealing Judge Quinn's decision! That sounded like contempt of the law to me. I protested it to Aguirre at the time. He said he had no problem about going ahead with a duplicate application and had given DSD the all clear. They were ignoring Judge Quinn's ruling.

Hillel quickly got its duplicate application before the City Council, sans the raptor problem. City staff hurried to get it processed before the old Council dissolved. Up until his last day in office, Scott Peters aided by Karen Huemann of Mike Aguirre's office, hustled to get it through City Council. They were tripped up by a simple publishing error. Here's what happened:

I wrote: "Peters understands that land use entitlements, like pension benefits, are difficult to roll back once granted. Granting illegal entitlements has been the hallmark of Peters' eight year career on City Council. He hopes to pull off one last giveaway on Friday." He called a Special Meeting of City Council for his last day in office, just to pass this Item.

Heumann bent over backwards to accommodate him by coaching DSD on how to amend the already posted notice regarding the right-of-way vacation. DSD over-printed on it the later Special Meeting of City Council called for that Friday, December 5, 2008. Watch her on video

On Friday, Aguirre seemed to have a last minute change of heart. He overruled his deputy, Karen Heumann. The Item was "sent back" to DSD. Heumann was frantic to get the job done for Hillel before she departed the City. She knew that Jan Goldsmith was not going to retain her.

Now it is up to the new City Council and the new City Attorney. The City has removed the trees and can do a new EIR without worrying about raptors. Or can it? Will the new City Attorney, a former judge himself, take to heart what two judges have said? And there is still the traffic and parking issue. Read what the judge had to say about that, starting on page 15. The Appellate Court concluded that "there is a fair argument that the Project may have significant impacts on traffic and parking."

Will the hard-headed proponents of this project now go away and find a more appropriate site for their student center? They have put the affected citizens through enough. People should not have to go to court to force their city government to obey the law. Thank goodness some very fine La Jolla citizens did exactly that. Council President Hueso should not defy the courts again by re-docketing the illegal Item that was mercifully continued on December 5, 2008. Nor should City Attorney Jan Goldsmith allow it.

What would be the City's position today had Karen Heumann won her fight to get this flawed project approved before she, Scott Peters and Mike Aguirre left the City? It seems to me the City had a narrow escape on that very last day of these three people's involvement with City government.

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Jan Goldsmith seems to be trying. Let's give him a chance. 02/13/09
by Pat Flannery

It is nice to be able to report something positive from City Hall for a change. Here is the first edition of City Attorney Jan Goldsmith's monthly Newsletter.

In his introductory remarks Goldsmith says: "Our purpose is to keep you apprised of some of our work and discuss new laws". That sounds like he understands his role as serving the people while being the corporate lawyer of the City of San Diego. After all, the people are the beneficial owners of the municipal corporation known as the City of San Diego. Therefore, by protecting the City's corporate interests he is protecting the interests of its citizens.

On his web site, which is starting to take shape and give an indication of his thinking, he starts off with a link to the City Charter section dealing with the role of the City Attorney, Section 40. He has organized his Office into three divisions corresponding to his three Charter-defined roles and added what he calls "community-based legal work on behalf of the City of San Diego".

This fourth division will involve "consumer protection enforcement, code enforcement and neighborhood prosecution units". Dedicating more City legal resources to neighborhood code enforcement will be a very welcome development in San Diego. I cannot think of anything more likely to build badly needed neighborhood trust than a proactive City Attorney's office.

The fact that Goldsmith hired an experienced consumer fraud prosecutor from the District Attorney's office, Tricia Pummill, to head up this important division suggests he is serious about clamping down on consumer fraud (e.g. unlicensed contractors) and doing neighborhood code enforcement.

I was surprised to learn from his web site that he will "prosecute criminal misdemeanors and infractions committed within the City limits and in Poway". I didn't know we did Poway. I hope he has an adequate cost recovery arrangement with the City of Poway. I would have thought Poway would have turned to the District Attorney for that. Strange.

It is encouraging to see that he has a link to the City Clerk's Public Records Request page. He seems to be encouraging citizens to ask questions of their city government. I hope that when (not if) we have problems getting public information out of sections of the City government, we can appeal to our City Attorney Jan Goldsmith. It would be a great opportunity for him to show his good faith and his dedication to the law not politics.

I supported Aguirre, but who knows, Goldsmith could turn out OK yet.

P.S. Mr. Goldsmith emailed me this evening and explained: "Our office has handled Poway misdemeanors for many years by agreement with the DA’s office in exchange for the DA’s office handling San Ysidro misdemeanors."

In a city full of characters that not even Hollywood could invent, Steve Peace takes our zaniness to a whole new level. As a former State Senator he is much in demand as a Sacramento lobbyist. He was recently hired as "a senior policy advisor" to Brownstein Hyatt Farber Schreck, a large lobbying law firm. That is on top of being "a senior policy advisor" to local developer John Moores and his royal court. I thought court-jesters existed only in merry old England, to entertain kings like Henry VIII between wives.

Steve's latest "jest" for the San Diego court is the launch of "Destination Lindberg". This promises to be a knee-slapper to rival his 1978 Attack of the Killer Tomatoes, in which he co-starred and also co-wrote. He seems to have a long-standing fetish about airplanes. In the film he was the nutty tomato-fighting Wilbur Finletter who wore an open parachute everywhere.

At the launch of a 25-year-anniversary "Tomatoes" DVD, State Senator Peace as he was at the time, was shown walking into the California Senate with an open parachute on his back. This guy definitely has a sense of humor. But he needed more than a parachute to rid himself of his title as "the father of deregulation". The Electricity Deregulation Bill, which he wrote as State Senator, did not turn out too well, as we all know from the rolling blackouts of 2001. Maybe he should stick to writing comedy scripts.

But this "Destination Lindberg" thing is really a hoot. It is so crazy it makes "Attack of the Killer Tomatoes" appear boring. Casting director Jerry Sanders said he assembled the best and the brightest to write it. Apart from Steve Peace and Alan Bersin I think he also cast the San Diego Chicken.

Or maybe this is just another spin-off of "Tomatoes", like the animated TV cartoon of 1990. In it, San Diego became San Zucchini and the mayor was a klutzy airhead named Mayor Earwax, who appointed Steve Peace's old character, Wilbur Finletter, Sheriff in an episode entitled "The Gang That Couldn't Squirt Straight". Here, look at the characters. Isn't it straight out of real life San Diego? Check out Dr. Putrid T. Gangreen.

Here is a picture of what can only be called "Peace's Folly". Can't you just imagine Steve running around his imaginary airport creation, goggles and open parachute, shouting "tomatoes"? The trouble is our Mayor Earwax is taking him seriously. Sanders long ago lost the ability to distinguish between reality and make-believe. Yesterday, shovel in hand, he got on an airplane to Washington DC to cadge $4 billion dollars for his "shovel ready" fantasy.

Mayor Earwax and his developer friends are ready to bond and spend between $4 and $12 billion on Steve Peace's "Destination Nuthouse", but will not even entertain the idea of building a secondary sewage treatment plant for the approximately 200 million gallons of raw sewage we dump in the Pacific Ocean every day.

No wonder Hollywood loves us. We are zanier than anything they were ever able to come up with. Between the image of a San Diego State Senator wandering around the State Capitol with an open parachute strapped to his back and the image of a San Diego Mayor wandering around Washington DC with a shovel in one hand and a tin cup in the other, we take the Oscar.

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The 2009 Budget: you are not getting the whole story. 02/07/09
by Pat Flannery

Below is a series of graphs I prepared from the Mayor's published 2009 Budget. All the Mayor and City Council will discuss with the public is the General Fund, where most of the public services come from. You even get to pick which of your favorite essential services you would like them to cut.

The General Fund is only 38% of what the City spends. Therefore 62% of the City's spending is hidden from the public. And that does not include the Redevelopment Agency, which in turn includes CCDC and SEDC. Redevelopment is a "city within a city" and CCDC and SEDC are "cities within a city, within a city". Yet they are not on the budget-cutting agenda.

Huge amounts of money sloshes backward and forward between a myriad of "Funds", making it impossible for the public to track or monitor "cost-recovery", if any. We have no idea how each fund's shortfall or surplus is dealt with. They all magically balance. It was by manipulating these "Funds" that old Jack McGrory was able to work his famous funding magic.

Sanders is a product of those good old days and likes it the way it is. McGrory was able to fund the entire 1996 Republican Convention without ever opening an account for it. Not one penny of its cost appeared on the City's books. Sanders was the McGrory/Golding Police Chief, managing the biggest single departmental budget in the City. He knows the ropes.

Sanders still does not publish anything remotely resembling a Revenue and Expense Statement for each "Fund". That would reveal too much. For example, it might reveal that the $11.3 million CCDC "repayment" I wrote about on January 21, 2009, is being recycled back to Petco Park and the Convention Center (which I know to be the truth of it) through the $90.1 million Special Promotional Programs Fund (TOT Fund).

Please  study the pie charts below, then ask your Councilmember where the money comes from and how it is spent for each of these "Funds". Most of them don't know and don't care. Let them know that you care.

Total City Expenditure - $3,127.4 million

Enterprise Funds - $876 million

Internal Services - $137.5 million

Capital Improvements - $587 million

Special Revenue Funds - $276.6 million

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Water, sewage and politics - 2010 elections already in play. 02/04/09
by Pat Flannery

I have received numerous emails from concerned environmentalists as well as emails from representatives of Coastkeeper and Surfrider. These two organizations deny advocating Indirect Potable Reuse (IPR) as the only solution to the sewage treatment and ocean outfall problem.

Well, it sure seems that way to me from reading Gonzalez' Memorandum and from watching Bruce Resnick's and Donny Frye's comments at City Council on January 27, 2009. They are no longer pushing for a secondary treatment sewage plant. A Section 301(h) 5-year waiver is only breathing space to get it done. And this is definitely the last waiver.

Florida on the other hand now "requires that all facilities that discharge domestic wastewater through ocean outfalls achieve, at a minimum, 60 percent reuse of the facility’s actual annual flow by December 31, 2025, and prohibits discharge through ocean outfalls beyond that date, unless as a backup to the functioning reuse system". And they have no waiver.

Florida wisely recognizes that reuse will never fully eliminate the need for secondary treatment plants and certainly not within five years, as our local experts are suggesting. Gonzalez, Resnick and Frye clearly think that IPR is the magic answer that will eliminate secondary sewage treatment.

Saying we don't need to build a secondary sewage treatment plant because we are going to reuse all our water is like saying we don't need the Miramar landfill because we are going to recycle all our trash. We need to build a sewage treatment plant now for the same reason we have a landfill now. We don't need a feasibility study to tell us what we already know.

San Diegans voted 67% for a questionable $2.1 billion school bond but use the ocean as their toilet. I believe they would vote an increase in their water rates to act as a civilized community. As has been proven in other environmental areas, adding cost results in more conservation. Building a secondary treatment plant would see a significant reduction in water use.

Gonzalez says on page 10 of his Memorandum that upgrading the Point Loma secondary plant may at some point "become entirely moot". He goes on: "Surfrider, Coastkeeper, and Sierra Club in San Diego believe the future of sewage treatment is IPR". What could be clearer than that?

Bruce Resnick of Coastkeeper, said that "we should move beyond the debate about secondary treatment". His goal, he said, is that in five years "we will all be standing together with no waiver application and a long term strategy to eliminate all discharge into our ocean". Watch the video

Donna Frye agreed and noted that right now we "treat sewage and dump it" when instead we should "treat the water and reuse it". This will "potentially allow us to meet secondary treatment standards" and is the "best possible way to deal with our sewage" she said. Watch the video .

They all seem to be singing from the same hymn book. I had not intended to drag Donna Frye into this fray as all the other City Councilors, with the notable exception of Carl DeMaio, voted for the $2 million Feasibility Study. But having been challenged by Marco Gonzalez and others, as to their true position, I decided to let the videos speak for themselves.

It is clear to any interested observer that Frye, Gonzalez and Resnick, who came to prominence in public life as clean water advocates, have shifted their long-held positions. Or perhaps surfers no longer get sick from contaminated water. For some reason these three have fallen in love with Indirect Potable Reuse (IPR) as the cure-all for both our water and sewage problems i.e. they have merged water supply with sewage disposal.

I repeat here what I wrote to one of the email correspondents: "The important point is that the people are not misled into believing that they don’t have to worry about a secondary treatment plant. The solution is part IPR and part secondary ...... we need both. Pretending that the need to dump in the ocean will go away is environmentally irresponsible." We will always need a secondary treatment plant just as we will always need a landfill.

I strongly believe that an unholy coalition has been forged between the one-time clean water advocates and powerful City pension interests. The 900 lb secondary sewage treatment gorilla is being made to magically disappear to make room for the 2000 lb pension gorilla. We cannot afford a sewage treatment plant and the city pension. So the 2010 elections come into play. New alliances are being formed. Water, sewage and politics are in the mix.

Marco Gonzalez, attorney for Surfrider and Coastkeeper, emailed this Memorandum to "Environmental Community Activists" today. It is dated January 30, 2009, two days after the City Council approved a: "Cooperative Agreement with San Diego Coastkeeper and Surfrider Foundation for the Study of Feasibility of Diverting Wastewater from Point Loma Wastewater Treatment Plant through Increased Wastewater Recycling", at its January 27, 2009 meeting.

This Resolution is city-speak for the unpleasant truth that Surfrider and Coastkeeper have sold out the environmental community. In the process they extracted $2 million from the cash-strapped City for a phony study of a phony solution to a real problem: secondary treatment of city wastewater.

Why the sellout? - to secure first place at the public bond window for the city's pension deficit - Pension Obligation Bonds (POBs), the unions' Holy Grail. If San Diegans knew the truth, that building a secondary sewage treatment plant is unavoidable and that the likelihood of yet another waiver is nil, the idea of Pension Obligation Bonds would be an impossible sell.

The convoluted and spurious argument for Indirect Potable Reuse (IPR), or toilet-to-tap as its detractors prefer to call it, so painfully attempted by Marco in his Memorandum, is bogus in the extreme. He actually expects us to believe that "toilet-to-tap" will suddenly become so accepted and so wildly successful that not even a trickle of sewage need be dumped in the ocean by the time the next waiver application comes around.

To add insult to injury the compliant City Council, with the exception of Carl DeMaio, authorized $2 million of our much needed money to "study" this insulting proposition. It suggests the unions have got their POB deal.

A proposed ordinance that would indemnify approximately 600 members of Community Planning Groups (CPG) throughout the city was introduced at City Council on November 24, 2008 and approved following an extensive public hearing. It was docketed for final adoption on December 9, 2008 but was "pulled" by the new City Attorney Jan Goldsmith for further study.

It reappeared on yesterday's Council docket as Item 200. The City Attorney made his reservations known in this Memo, which was circulated to City Councilmembers on Friday, January 9, 2009. The Memo refers to the original CPG Indemnification Ordinance dated April 25, 1988.

Mr. Goldsmith saw some "red flags":

• the ordinance would indemnify (temporarily) untrained CPG members and (always) include non-members on sub-committees;

• requiring the City Attorney to "defend" rather than "provide for the defense of" members would preclude the retention of outside counsel and create conflict of interests for the City Attorney;

• the ordinance would extend coverage to former members (this is known as a "tail" in insurance coverage terms);

• the City Attorney is required to complete a "thorough investigation" for eligibility of coverage within the 30 day period for answering a complaint, which may not be enough time;

• the proposal to require the City to defend and indemnify each CPG member on each and every complaint filed, regardless of the allegations, may invite predatory lawsuits and exorbitant claims;

• the proposed ordinance would provide CPG members with a greater level of indemnity than the City provides its own employees and is more than the law requires.

Here is an edited video of the City Attorney's remarks explaining his legal advice to the City Council. He was obviously very persuasive because the vote was unanimous to send the whole ordinance back for further work between the City Attorney and the CPGs.

"1. Pay back more than $1.8 million plus any applicable interest to HUD from nonfederal funds for CDBG project costs determined to be ineligible.

2. Provide supporting documentation for unsupported redevelopment project activities or reimburse its program more than $11 million from nonfederal funds.