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DeMaio's roadmap goes on to enumerate several aspirational reforms that are very impressive on paper but short on how they are to be implemented. Every San Diegan knows that even the smallest pension concession will have to be "pried from the cold dead hand" of the unions, as Charlton Heston famously put it regarding gun control. DeMaio has ruled out bankruptcy. How then does he hope to do the prying?

Is Aguirre right? Is bankruptcy the only way? Mike has recently reintroduced himself to the public as the apostle of bankruptcy.

Unfortunately bankruptcy is a very blunt instrument that would probably do irreparable damage to the city's image as a tourist destination and to its borrowing capability. In other words the cure would be worse than the disease. Even as a cure it is far from certain that it would have any effect on the pension debt. However, it would be an attorney's gravy train.

There is another way to wrestle with that (figurative) cold dead hand of the unions. It is called the "Net Pension Obligation" (NPO) account in the City's books. Read a blog I did on this interesting subject on April 7, 2009. The NPO is not actually a City account but rather a "calculation". It is how the City keeps track of and discloses its actuarial "net pension obligation". It was not even required until GASP 27 became effective in 1998. Here is the GASP 27 Note in the City's 2008 CAFR. It shows that the unpaid balance of the ARC as of June 2008 was $173 million. That is all that is required.

This minimal requirement of a mere "GASP 27 Note" in the CAFR each year is positive proof that the retirees cannot enforce payment. The ARC is not a bill. As further proof, SDCERS does not even enter it into their books. Back in April 2009 I had SDCERS confirm in writing that neither the ARC nor any unpaid balance (NPO) are ever shown in the Pension Fund's books. The ARC is simply an "actuarial" liability. The above $173 million is not shown as owing by the City on SDCERS' books.

To further underline this fact that the ARC is merely an "actuarial" liability, consider the nature of that portion of the ARC that purports to amortize the "Unfunded Actuarial Accrued Liability" (UAAL). The UAAL is based upon assumed life expectancies and other actuarial assumptions. You cannot "amortize" an assumption. We can stop paying it at any time. Yet it is currently a substantial part of our annual pension payment. The reason: Mayor Sanders is our First Retiree not our First Citizen.

The fact is that the unions and retirees can only call us nasty names or have Ann Smith stomp her dainty little foot before City Council, if we simply "make a note" of the Annual Required Contribution (ARC) each year and pay what we can (rather like Counilmember-elect Lori Zapf's loan modification "strategic default" on her mortgage. It worked for her).

The citizens of San Diego need to know that there is an alternative to the nuclear option of filing Chapter 9 municipal bankruptcy. We can simply pay what we can each year and "keep a note" of our growing pension obligation, a sort of "loan modification". We are already doing just that in the NPO account. We can always catch up when the economy improves or if we receive a windfall, just as we did with the $103 million 2006 Tobacco Settlement. But to continue the home mortgage analogy, there is an inevitable "short sale" in the retirees' future.

The citizens of San Diego need to know that there is no limit to how much the NPO can grow without paying a dime. Unfortunately the current Mayor is the last person that will ever tell them that because he is totally conflicted on this issue. He retired at age 49 receiving a grossly inflated illegal pension for the rest of his life. In his 25th and final year the police pension "multiplier" was increased from 2.5 to 3. Instead of receiving a pension based on 2.5 times (final year's salary) for 24 years, plus 3 times for his 25th year, he receives 3 times for all 25 years. His 24 year retroactive payment is therefore illegal under the California Constitution. No wonder he hates Aguirre.

The citizens of San Diego need to know that no power on earth can force them to either pay taxes or sell any asset to pay a debt.  Anybody doing business with an American city (including an employee) is assumed to know that. A municipal corporation is not subject to the same laws as a commercial corporation. That is a powerful tool in "negotiating" away illegal pension benefits. A city can simply refuse to pay them and its assets cannot be seized.

When SDCERS runs out of money (it currently has assets of several billion dollars) and the unions are ready to do business, maybe, just maybe the Sovereign People will talk to them through a negotiated ballot measure. In the meantime the People made it perfectly clear in Prop D that it's priorities are city services not illegal pension benefits.

Unfortunately DeMaio's quixotic "Roadmap to Recovery" is no better than Aguirre's legal map to nowhere. Both are "sound and fury signifying nothing". So long as "First Retiree" Sanders holds the Mayor's Office there will be no reform of city pensions.

DeMaio should have written: "Until the city reforms its pension gets rid of Sanders, no tax increase will be big enough…no service cut will be deep enough…to satisfy the skyrocketing debt service on the city’s pension system".

The immediate budget solutions are there. We just need a Mayor and City Council that will take them. As for the City's credit rating, the days of easy municipal bonds are over. The world is facing a "sovereign debt" crisis. The collapse of the municipal bond market is the next financial meltdown. It will be bigger and more devastating than the mortgage crisis because the municipal bond bubble is even bigger than the mortgage bubble.

We don't need a bankruptcy judge. Our financial chickens have come home to roost all on their own. The problem is that public sector retirees have not even begun to understand their situation - how are they going to live if the citizens refuse to pay? That stark reality is beginning to emerge in sovereign countries around the world, resulting in civil disturbances.

Leadership, not denial, is what is urgently needed. So far all we have seen in San Diego is the latter. By refusing to pay illegal pension benefits the City of San Diego may actually improve its credit rating. It may even become known as "America's Smartest City".
 

Seduced by the word "discuss" and taking my video camera so that I could study the Mayor's proposals and the citizens' reactions, I attended his first "town hall meeting" at the University City High School Media Center at 6:00 PM. I was not at all prepared for what I heard and saw.

It was like the "shock and awe" that preceded the U.S. invasions of Iraq and Afghanistan or a pre-game Haka by New Zealand's All Blacks rugby team. I could almost hear Sanders and his top officials whooping the ancient Māori war cry of "Ka Mate! Ka Mate! Ka ora! Ka ora! Hae-haea! Ha!" as do the All Blacks to terrify their foes before a rugby encounter.

But for Sanders & Co. this is no game. This is a declaration of war on any and every citizen who might complain about taxes or other measures to pay for city pensions. That became abundantly clear throughout the evening. These people will sell off everything this city owns to pay for their personal pensions, parks, golf courses, whatever. This is only the beginning.

Sanders started by enumerating the cuts he claims to have made since taking office and in so doing made a startling admission: "The layoff of 50 vacant firefighter positions is the reason we have the rolling brownouts". Vacant positions! There was no real reason for the brownouts! It was sheer political terrorism!

A little Mira Mesa boy had to die so that Sanders could demonstrate his raw political power. The brownouts are totally unnecessary. It was clear that he meant exactly that. This is a totally ruthless man. I remembered how as SWAT Commander on July 18, 1984, for over an hour he withheld the "green light" to kill the shooter at San Ysidro, while over a dozen children died. SWAT Commander Sanders wanted to be present to take credit on TV. To disprove that widely believed charge he could easily release the police tapes of that day. He never has.

Now he was dismissing any charge that his proposed cuts are mere scare tactics: "A scare tactic is something you are doing because you don't intend to do it". I believed him. Prop D is only part of it. Whether it passes or not he intends to make whatever cuts are necessary to pay for his pension. And the entire city staff fully  support him. They have always known he is one of them.

CEO Jay Goldstone took over and dropped a marker for the five department heads - they were to lay blame exclusively on the revenue side of the Budget. There was to be no question of administrative inefficiencies.

Goldstone all but admitted what everybody knows, that these "town hall meetings" are campaign rallies for Prop D: "The City Council has placed on the ballot a temporary half-cent sales tax that could generate $102 million. If that passes it could help eliminate the need for some of these potential cuts as well as begin the restoration of services".

The message was clear: vote Yes on Prop D or people will die.

Police Chief Lansdowne delivered his swaggering contribution with manly vigor. Wearing a sidearm and more badges and stars than Panama's dictator Manuel Noriega in his heyday, he laid his control of our personal safety clearly on the line. Our lives are in his hands.

"In order to maintain some police services in the city" he would eliminate only 160 sworn police positions, close only two of his ten Divisions, eliminate only 36 civilian positions, "5 of whom would be 911 dispatchers", eliminate two DNA lab people, "who are central to our ability to do our job", close police store fronts, eliminate the abandoned vehicle unit and close the multi-cultural center, "that is central to our ability" to build a relationship with "a first generation (of immigrants) who come without a built-in trust for public safety". Was he suggesting that they may now revert to their "native" savagery?

He said he wanted to "put it really succinctly". He certainly did, about as succinctly as a blow to the head from his night stick. He finished by saying that he was "here to answer all our questions", which of course he was not. He was here to demonstrate his raw power over us. This was becoming truly scary. These guys are in deadly earnest.

Next up was the Fire Chief, Javier Mainar. He reminded us of the dangers to our personal safety in his current brownout policy. He offered no explanation as to why. I guess he figured we already knew. He simply announced his intention to add 5 more engines to his brownout for a total of 13 engines, representing 22% of the City's entire fire protection resources. 

In case we didn't get it, he made it very personal for us: "minutes make a big difference in your survivability". Now that's personal. Like the police chief he was making it perfectly clear that they have the power of life and death over all of us. Then he ratcheted up the fear rhetoric by warning that his next 5 brownout engines will "impact single engine fire stations".

By deliberately choosing 5 single-engine stations he showed his chilling power to deprive 5 communities of 100% of their fire protection! Dripping with calculated cynicism he described how he had coined a new word for this cruel power - he calls it a "blackout". What could be clearer?

For his finale he announced that he will (arbitrarily) take the "second helicopter completely out of service". He gave no reason why. How did we give these guys such power?

I am still reeling from the reality of what three men, Sanders, Lansdowne and Mainer can do to us. Like generals in a savage war, they are willing to sacrifice our lives to achieve their personal goals. Nobody should doubt their power. Like generals, they don't think like you and I.

Speaking for the lifeguard service, he outlined a litany of cuts that will leave San Diego beaches little better than the coast of Baja. What will this do to our tourism industry? They may as well keep on going south.

At this point one citizen had enough. The Fire Chief had posed what he thought would be a rhetorical question: "is this a scare tactic?" Yes, came an immediate reply from the floor. "You said there are no other options, there are a lot of other options" cried the frustrated heckler, for which he received mild audience applause. Manier said "why don't you let me finish". Amazingly the heckler politely said "go ahead".

Mainer resumed with his prepared coups de grâce: "Folks, it's eventually going to catch up to you; it's not a matter of if somebody dies as a result of public safety, it's a matter of when it's going to happen". No wonder he wanted to finish. Again, amazingly, the heckler kept quiet. Mainer then obscenely predicted that he would be going before the City Council's Public Safety and Neighborhood Services Committee "a lot more often answering whether deaths were the result of brownouts". Unbelievable!

San Diegans are such a docile lot. Those present just sat silently through this arrogant tirade from their own fire chief. I can't imagine it happening anywhere else in the world, at least not in so-called developed countries.

Park & Recreation Director Stacey LoMedico was next with a well-prepared litany of "59 individual proposed reductions" that will decimate our city parks. Grim-faced, she listed several permanent closings: 9 recreation centers, 2 visitor centers, 2 gymnasiums, all pools (except for one in Mira Mesa on which the City has a long-term lease with the community College District), 5 after-school playgrounds and 12 teen centers, affecting she said, 600 to 750 children per day.

She went on to enumerate service reductions that would impact the City's therapeutic services (for people with mental and physical disabilities), reductions in senior citizen services including the permanent closing of one senior citizen center, the closing of Mission Trails Regional Park overnight camp ground, reduction of hours at Balboa Park's Balboa Club and the Santa Fe Room. Lastly she said she will eliminate 6 Park Ranger positions.

This, she emphasized, "was just a small list of the 59 proposals". One wondered if it would not have been easier to list what services remain. If she was told by Sanders to "make it hurt" she sure did her job.

Library Director Deborah Barrow then took the podium to offer a similar list of draconian cuts representing she said, 24% of all library services. She would achieve this by the permanent closing of 2, yet to be decided, libraries and severely cutting opening hours across the board. She would institute "roving blackouts" by moving library staff from one library to another on alternate days. This she said, will result in most libraries being open about every other day.

Barrow's predecessor as Library Director now gets $227,249 annual retirement benefits and will cost the City $6,084,998 if she lives the average life span for an American woman, more if she lives longer.

Finally, the Deputy Chief Operating Officer of Public Works Dave Jarrell, announced that he "will be doing almost 10,000 less (sic) pothole repairs across the city". Again, if he was told to "make it hurt", he was pressing all the right buttons.

He told us he will "do 1,400 less (Jarrell needs an English lesson on the use of "less" and "fewer") streetlight repairs", eliminate all weed abatement on city streets, eliminate all non-emergency tree trimming and even reduce those caused by emergencies such as storms. He would do "700 less sidewalk repairs". I think I actually saw him smile as he announced that "there will be a lot more broken sidewalks out there".

This was getting almost unbearable, but he droned on about doing "less street signs and traffic markings", reducing street sweeping to "the minimum amount required by law" i.e. "from once a month to once a year for 80% of the streets"; he will delay community plan updates, "stop refuse collection for 15,000 residents who live on private streets".

What was that? Rich folks in gated communities were getting free pick up? Who knew! They will now have to hire poor people to empty their well-filled trash cans. Apparently 6,500 lucky private companies have also been getting their trash picked up at our expense.

Goldstone took the microphone from Jarrell but before handing it back to Sanders, he darkly offered: "this is very close to the reality we will be seeing in the coming months". He wanted to make sure that we had gotten the message. I think we had, at least I had.

Sanders then got to pick the written questions he would answer and those he would not. To my surprise he picked mine. It read "Apart from Scott Kessler, how many full time employees were let go for budgetary reasons as distinct from the elimination of unfilled budgetary positions?".

In reading it out he omitted the part about Scott Kessler, perhaps because Kessler has sued him for wrongful dismissal and a judge has decided that Sanders will have to face him in court. Don Bauder of the The Reader is the only journalist who has been covering the case. It now appears that J.W. August of Channel 10 has secured the Judge's permission to air video of Sanders being deposed in the case. That may explain why Sanders showed great irritation with J.W. at a recent unrelated press conference.

Unfortunately Sanders answered my question with: "I don't know that answer". I doubt that he has ever laid off a single city employee purely for budgetary reasons. He keeps it as a sword hanging over everybody's head while publicly he waffles on and on about all the unfilled positions he has eliminated, as he did throughout his 2008 re-election campaign.

He has gotten away with this deception so far. Perhaps we will learn more when we see his Kessler deposition, if he doesn't fsettle the case at our expense beforehand.

Then the heckler was back. I have put it on YouTube. It shows the real Sanders, the hard man behind the smile. My video clip also includes him answering a pension question that allowed him to hammer home the central theme of these "town hall meetings": that city pensions are beyond the reach of us citizens and we must pay up by taxation. Thus he has made it a civil war between the citizens and the city employees.

Sanders, who retired from the City at the age of 49 with a pension of over $90,000, most of which was retroactive and therefore illegal whether the courts agree or not, is just another city retiree protecting his personal pension.

This is probably the real reason why he ran for Mayor. He may well be the only person in San Diego who both fully understood the danger to his pension and had the political ability to take defensive action. Nobody can deny his mastery of politics, how he cleverly crafted a coalition of support between city unions and developers. Frye never had a chance.

To Mayor Sanders, the citizens are just a bunch of hecklers like the one in the video, who can either shut up or leave town. But Prop D may yet unmask him. It may prompt a sufficient number of angry citizens to call for real town hall meetings, to discuss the real problem - the sheer illegality, the sheer unfairness and the budgetary un-sustainability of Sanders' pension and that of hundreds of other retired city millionaires.

This deadly game of chicken has hardly begun. A civilian population is slow to rouse, but once aroused, it packs an awesome power. If I were Sanders & Co I would tread very carefully. It has yet to be decided who may be forced to leave town.
 

The U-T Dream Team then concluded its reverie with "We have come to accept that this proposition, flawed as it is, is the best opportunity for real reform". Ah yes, "Reform". That heady religion for which Sanders raised over $1 million, the Messiah-ship of which got him elected Mayor - twice! His Promised Land of "Reform" is the core belief on which all his followers' dreams are based. His faithful dare not abandon it or they will surely commence enjoying the amenities of Hades.

But it must be getting harder and harder to stay on the straight and narrow, even for the most steadfast Sanders believers like the U-T editorial board. His promises are wearing awful thin. Is he a prophet or a con-man? Maybe he is "speaking in tongues" or about the after-life.

In this life however, the U-T Dream is only a dream, a "wet dream". When they awake from their Sanders-induced slumber, they will realize that their carnal bliss was all but a dream, a pleasant dream, but a dream nevertheless.

Hopefully the people are wide awake this time. We will know on November 2. They have been seduced by the siren call of Sanders' "Reform" promise before. Surely this time they will see it for what it is - as empty as his promise not to raise taxes.
 

The core provision of Section 7 is: "Notwithstanding any other law to the contrary or any redevelopment plan previously adopted by the City of San Diego .....the dollar limit on the receipt of tax increment for the Centre City Redevelopment Project is eliminated ". This means that as regards CCDC revenue, the powers of the San Diego City Council, sitting as the Redevelopment Agency, are forever preempted.

At City Council on Tuesday, President Hueso opened the defense of the Sanders move by parroting what was to emerge as a well coordinated line from each developer lobbyist: "don't look this gift horse in the mouth".

But is it a "gift horse" or a "Trojan horse"?

In Homer's epic story of the destruction of Troy it was an elite group of Greek soldiers who sprang forth from the Wooden Horse and opened the gates of Troy for the main Greek army who then destroyed the city. Was it an elite group of Spanos lawyers that concocted SB 863? Was it our own misguided King Priam, Mayor Sanders, who opened the city gates for them? If so they will destroy San Diego as surely as the Greeks destroyed Troy.

The primary mission of any city is to provide municipal services through taxation. First claim on this taxation has now been ceded to the Spanos family. They and an army of mercenary politicians, led by a smiling Jerry Sanders, have deified "public entertainment" in the form of a $1 billion Chargers Stadium and dare to call it "public infrastructure".

A downtown stadium would rob the General Fund to the extent that San Diegans would drive through potholed streets to get to it, they would forego police and fire protection in their neighborhoods and sacrifice their children's education to pay for it. To this end, Sanders secretly arranged for the unlimited diversion of downtown tax revenue away from our schools and city services into the pockets of politically powerful developers.

Neither the citizens nor City Council were given any say in the matter. It was a breathtaking power grab. This alarming reality sparked an acrimonious debate at City Council on Tuesday. It gave us a rare glimpse into the ugly political underpinnings of San Diego politics. Jagged political rocks were exposed as during an unusually low tide.

It started when Donna Frye used Councilmember Non-Agenda Public Comment to seek a two-thirds vote of the City Council for "an exemption to notice" under the Brown Act to place an emergency motion on the Docket for immediate consideration. Her stated motion was to send the Governor a letter of opposition requesting that he veto SB 863.

Faulconer and Young voted to kill the motion as, sadly, Marti Emerald was at that very moment "tucking in" her husband in a hospice. But Marti bravely attended the afternoon session and made one of the most memorable contributions to San Diego civic life I have ever seen.

Ironically, the City Council revisited the CCDC revenue cap issue following a 4-4 failure to approve a Homeless Emergency Winter Shelter. Faulconer, DeMaio, Young and Hueso had voted down the homeless shelter. Hueso's fear was that "the news would get out that San Diego was providing free housing for people". They preferred unlimited tax revenue diversion to CCDC for the benefit of downtown developers.

Councilmember DeMaio started by pointing out that the Mayor is the Executive Director of the Redevelopment Agency and is appointed by the City Council sitting as the Redevelopment Agency. What bothered DeMaio was not raising the cap, but, by advocating and secretly guiding SB 863 through Sacramento, Sanders had ignored and disobeyed the legislative body, the Redevelopment Agency. DeMaio found that "outrageous and unprecedented".

Councilmember Emerald went further and called it a "firing offense". The people had been betrayed, she said. Choking back emotion as she thanked her colleagues for excusing her while she "tucked in her husband" at the local hospice in the morning, she complained of those "who snuck around behind our backs ... to sneak this piece of legislation through as part of the State Budget", adding that it was "all about building a football stadium".

Councilmember Faulconer followed, saying that he is a strong supporter of lifting the CCDC tax revenue cap because he believes that public investment spurs private investment. While he was "not pleased" with what took place in Sacramento he could not support overturning it.

Tony Young openly welcomed Sanders midnight ride to Sacramento because he felt it would "expedite the process"! It would save the City $500,000 he said. He challenged the City Attorney Jan Goldsmith, to say that there was anything illegal about the midnight coup. He said that they do it all the time and that it was fine with him. The Building Industry Association has invested wisely in Tony since 2002. He has never let it  down.

Goldsmith said that he had only learned of this legislation on Friday when he read a report online and that his office was not consulted.  He added that he would "have liked to have been consulted in advance" because he could see several potential legal problems such as the "single issue rule". Young was showing signs of being sorry he had asked and tried to cut Goldsmith off, but Goldsmith managed to make his point.

Hueso offered to support Frye's motion "for discussion purposes only" warning that it did not imply that he would vote one way or another. Those of us who watch Hueso closely, recognized that he was perching himself firmly on the fence on this one. It only remained to see how he would succeed in actually ducking the vote. We soon found out.

Frye's initial motion for immediate docketing was passed 6-2 with Faulconer and Young voting No. She then made her motion to send a letter to the Governor disapproving the cap waiver legislation. DeMaio seconded it. Frye assured Young that far from saving the City $500,000, it would cost the City plenty because there would undoubtedly be lawsuits.

She urged her Council colleagues to keep their word to the public and stick to the promised process. She warned those who liked what Sanders had done, that someday they would find themselves in her position if they allowed his latest usurpation of their powers to stand.

DeMaio then made a very good point: "what do we do if the Governor signs the legislation?" It showed how clearly he thinks on his feet, not merely obeying instructions from special interests as others do.

In response, Hueso donned the flimsy mantle of defender of the City against lawsuits. The State, he claimed, had accepted sole liability by unilaterally lifting the CCDC cap. He challenged Goldsmith to say he was wrong. Jan countered that if, upon studying SB 863, his office found that it was legally flawed, the City would be required to follow Redevelopment Law as it was before SB 863. That drove Hueso crazy.

He tried to brow beat Goldsmith into giving the "right" legal advise but Jan was unmoved. The ultimate politician, Hueso then tried to turn defeat to advantage by pretending he was now totally confused and unable to make up his mind which way to vote.  Nice move. Running for the State Assembly he has campaign contributors on both sides of the cap issue and desperately needed to punt. What an unprincipled menace he will become at State level if he is elected in November to the 79th Assembly District.

Next came one of the most memorable moments in the history of the Council Chamber - Marti Emerald grilling CCDC's Frank Alessi. CFO Alessi had the misfortune of being the senior CCDC official in the Chamber. Fred Maas was in Syracuse NY. She started by telling Alessi that she would have great difficulty believing anything he or his staff ever told her again.

The Mayor's staff had by now abandoned the room, leaving Alessi no choice but to "Take the Fifth". He kept saying "I don't have an answer to that question". He admitted to having heard of the Sacramento caper about two weeks earlier. Emerald asked him if he was instructed by the Mayor to keep it a secret. He declined to answer. Marti wanted to know "who hatched this idea and why it was kept from us"?

Finally, Emerald said "if you are not willing to answer our questions, somebody will and we will have to have some serious discussions down the road about the future of this agency, serious discussions". You could cut the tension.

Then a parade of special interest lobbyists repeated the clearly agree-upon "gift horse" theme. Mike Aguirre challenged the Mayor to come up to the Chamber and face the City Council. Aguirre told Hueso that far from shifting legal liability to the State, the Mayor, by his involvement in this midnight coup, had made the City liable for undermining its elected legislative body.

From his uncomfortable perch on the fence, Hueso waffled on about what he could and could not support. DeMaio saw an opening. To accommodate Hueso he would split the motion into two parts, to be voted upon separately. DeMaio saw that a letter to the Governor would fail so he decided to move against the Mayor in a different way.

Hueso saw the trap and suddenly called a two minute break. He had obeyed the lobbyists' instructions to the letter, but their game plan was now unraveling. I noticed that he delayed to collect all his paperwork before leaving the Chair. That was a sure sign that he was not coming back for the vote. His true allegiance was laid bare in the low tide of money politics. Like Young, he has remained a faithful puppet of the special interests that control him.

Councilmember Faulconer now took the Chair. DeMaio resumed explaining his amendment that apparently had spooked Hueso. DeMaio would require City staff to do what they had been instructed to do before the Mayor's coup. He wanted a staff study of the effects on the General Fund of lifting the tax increment cap. He wanted it in the form of a written report to the Agency.

In his eagerness to serve his builder/developer bosses, Young then flat out lied about redevelopment dollars. He repeated the old lie that if the City does not divert property taxes to the Redevelopment Agency, those dollars, instead of going to the General Fund and Schools, go to other cities such as Los Angeles and San Francisco. Young has shamefully inherited that Madaffer/BIA lying mantra.

Those familiar with Todd Gloria's campaign contribution lists would not have to ask how he was going to vote. Like Hueso, Young and Faulconer he is tied hand and foot by builder/developer dollars. He is just a little more silver-tongued about hiding it. His clever mantra is always the legal requirement of redevelopment to build affordable housing, while knowing that the developers are allowed to get away without fulfilling that obligation.

Gloria was the swing vote in not sending a letter to the Governor opposing SB 863. Faulconer and Young had already made their intentions clear. The four Yes votes of Lightner, DeMaio, Frye and Emerald fell short. By ducking the vote at the last moment, Hueso had ensured the measure's defeat while being able to claim to be both for and against it, depending on which of his campaign contributors he is speaking to. Hueso is the quintessential politician.

The second part of Frye's motion is what will make Tuesday historic. In view of Alessi's evasiveness, she amended her motion to require that, within thirty days, CCDC's Executive Director Fred Maas must "appear before this body to answer any and all questions related to how this event occurred" and she wants his written report to the Redevelopment Agency.

DeMaio cleverly added (and Frye agreed) that in addition to a written report from Fred Maas of CCDC, the Executive Director of the Redevelopment Agency itself, i.e. Jerry Sanders, also submit a written report to the Redevelopment Agency and appear before that body within thirty days. Amazingly that motion carried unanimously. I can imagine the scene in Sanders' office as they all sat glued to City TV. No doubt Sanders dropped the "F" bomb liberally.

He will now need the collective skills of his expansive team of ex-UT spinmeisters. Alex Roth in particular will be tested. Roth mercilessly pursued Mike Aguirre while he was in possession of a powerful U-T reporter's pen. Sanders rewarded him with a well-paid City job. Aguirre will relish the opportunity of a more level playing field. For good reason, Aguirre detests Roth almost as much as he detests Sanders.

To return to the ancient Troy analogy, Sanders has now been summoned before the legislative body to give an account of himself. Other than the Hector vs. Achilles epic battle to the death before the walls of Troy, there is nothing I would rather witness than Sanders facing Marti Emerald.

While I doubt that Marti will drag the dead body of Sanders behind her chariot around the walls of the city, as the victorious Achilles did with the slain Hector at Troy, I intend to have my video camera in the Chamber on that historic day to record it for the ages.

It will be "Homeric".
 

Have you ever had a sickening feeling that someone is lying to you but you can't quite put your finger on how they are doing it? That's how some members of the City Council must be feeling regarding the Mayor's contentious $185 million "lease-lease" bond issue - those who are not in on the lie, that is.

At Tuesday's adoption hearing Carl DeMaio expressed frustration at Chief Financial Officer Mary Lewis and Debt Management Director Lakshmi Kommi. He then changed his vote to a "No" from the "Yes" he cast on March 9, 2010 at its introduction. It now has two votes against it. It will need 6 votes on April 26/27 to approve its Preliminary Official Statement (POS), the final step before issuance.

I am hoping that either Sherri Lightner, Tony Young or Marti Emerald will yet take the moral high road on this deeply flawed refinance deal and say "No" to the Mayor and his Wall Street cronies.

Here is the big lie that is being told to the City Council by Mary Lewis and Lakshmi Kommi: they keep saying that the City is obligated to take out  the Bank of America's $103 million 2009 loan by June 2010 (they prefer to use "refund" rather than "refinance").

I am not sure that even Carl DeMaio gets the cunning of what Lewis and Kommi are doing to him, but at least, unlike most of his colleagues, he actually cares. He keeps asking Lewis and Kommi for an economic justification for refinancing a 5.2% interest rate to a 5.7%, as required by City policy. In response, Lewis and Kommi draw a distinction between an "economic" refunding and a "non-economic" refunding. A "non-economic" funding would be a bit like a "force" in baseball.

But has this (financial) batter, the City, really become a (financially) forced runner? I did a thorough examination of the paperwork to test the Lewis/Kommi contention, that the City really has no choice but to "take out" B of A's $103 million loan with another lender. If so, Lewis and Kommi would be right, the refinance would not be an "economic refunding", it would be a "force play". If not, Lewis and Kommi are lying.

Here is the Independent Budget Analyst's (IBA) Report from when this bond was first introduced on April 1, 2008 (the irony of that date will not be lost on anybody who watched the Item being heard at City Hall on Tuesday and this - more about that incident later).

Note that on page 4 of the IBA Report, its author, Jeff Kawar, wrote:

"The 2008A Bonds (it started out as 2008A but because of a delay it became 2009A) have been structured with a two-tiered pricing that establishes a fixed rate for the first two years (estimated to be approximately 3.46%) and, if necessary, resets the fixed rate for years 3 through 10 at 2.25% above a specified Bank of America cost of funds rate. If the fixed rate for years 3 through 10 were to have been reset earlier this month, it would have been approximately 4.45%".

In his Conclusion, on page 5, he wrote:

"The proposed 2008A Bonds are effectively a two-year financing with a firm obligation to refund or re-price the debt in June of 2010".

Here is an Executive Summary given to City Council on April 1, 2008 by Lewis and Kommi themselves. They confirm the above IBA Report.

On page one they wrote:

"Therefore, instead of fixing an interest rate for the full 10 year borrowing term which would be higher than for a borrowing term for 2 years, working with the Purchaser, a two-tier pricing (described below) was structured: a lower fixed interest rate (based on a 2-year index plus fixed spread) for the first two year period and if the City is unable to refund the 2008A Bonds by 2010, a higher interest rate (based on an 8-year index plus fixed spread) for years 3-10."

But Lewis and Kommi are now telling the City Council that the City is obligated to "take out" Bank of America in June 2010 with another lender, while in 2008 they told the City Council exactly the opposite, that all the City was obligated to do was reset the loan with Bank of America.
 

Were they lying then or are they lying now? Here you see them repeatedly telling the City Council that the City has an obligation to "take out" Bank of America with a new loan on the open bond market. Unless they were lying in 2008 the truth is that the City negotiated a low "teaser" rate for the first 2 years of a 10-year loan with Bank of America, which is still good.

In June 2010 the loan automatically resets to a slightly higher fixed rate for the remaining 8 years, until 2019. That rate is currently 5.2%. Not a bad deal, better than what they can get on the open bond market right now. We are NOT being forced to go to the open market for another 8 years.

Yet Sanders wants to wipe out this bought-and-paid-for $103 million loan, fixed at 5.2% for 8 years. He wants to refinance it at 5.7%. Why? He wants to pay Wall Street $1.8 million in fees for the privilege. If we cannot get one more City Councilmember to oppose this madness on April 26 we deserve what we get from City Hall. Surely one of the other six will join DeMaio and Frye to defeat this obscene waste of public money.

So, why on earth is Sanders pushing this $185 million "bond-doggle"? His CFO assured City Council that he doesn't need to do it for budget reasons. Nor can he do it for policy reasons as this "refunding" would not comply with the City's strict policy requiring an "economic saving". The proposed "take out" refunding would increase the interest rate by a half percent, not decrease it. That is a huge Good Government issue - it is a disgraceful waste of public money.

Lewis has told City Council that this is not being done to save the City a short term $3 million in annual debt service (principle and interest). Besides, only the interest portion of that $3 million "savings" would be charged to the General Fund, the principle on these type loans is charged to various capital funds. It seems Sanders wants this "refunding" deal pretty badly and Lewis is willing to lie for him to get it. Why?

First he tells us that he has no choice but to incur $100 million extra long term interest on the $103 million B of A loan, for virtually no short term gain. Then he tells us that, as part of this $185 million, he wants to refinance the Qualcomm loan, which according to Lewis: "As of the date of this report, the outstanding principal amount of the bonds is $54,670,000 and the final maturity is February 1, 2027." It has 17 years to run. As with the B of A loan, he is inventing bogus reasons to pay it off.

Maybe he is just a sucker for slick Wall Street salesmen, but my guess is that it is something else, like an elaborate smoke-screen to free the Chargers from their Qualcomm bond debt. The B of A loan is merely cover.

Debt-free the Chargers would get a clean bill of health from the NFL to go wherever they please. Remember, they are governed by their NFL franchise - they will go wherever the NFL want them.

What's in it for Sanders? A nice job with the NFL? They would be very grateful to him if what they really want is for the Chargers to go to LA.

Sanders likes those Red Cross, United Way, type of jobs, where he doesn't have to go to work every day. With the NFL he could have an apartment in New York, near Wall Street, near where his wife comes from. Our Jerry is no fool
 

The City Council has docketed its final approval of the $185 million "lease-lease" bond issue for this Tuesday as Item 50 on the Consent Agenda. That's right the "Consent" Agenda. I intend to go down and "pull" this Item from the Consent Agenda so that Council Members may reconsider.

The San Diego Municipal Code reads as follows:

"No real property belonging to the City shall be leased except in pursuance of a resolution passed by a majority vote of all members of the Council, which shall contain the following:
(1) The reason for leasing such real estate;
(2) A description of the real estate to be leased;
(3) A statement of the market value of such real estate as appraised by an independent fee appraiser or City staff."

Here is the Resolution the City Council is being asked to approve. It does not fulfill basic legal requirements for leasing City property.

The Municipal Code does not allow the City Council to merely approve: “All actions heretofore taken by any officers, employees or agents of the City with respect to: (i) the issuance, delivery, or sale of the Series 2010A Bonds; (ii) the Purchase Agreement or any of the documents authorized in the Bond Ordinance, are hereby approved, confirmed and ratified”.

The Municipal Code does not allow the City Council to merely approve: “The form and content of the Site Lease, pursuant to which the City leases the Leased Property to the Authority” .

The San Diego Municipal Code requires the above specific approvals by the City Council as a condition precedent of a Master Site Lease.

Here is what the Master Site Lease says:

“WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Site Lease do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Site Lease.”

Unfortunately all of the required conditions precedent have not been fulfilled. Therefore the Resolution and the Master Site Lease are inadequate and any bonds issued pursuant to that Resolution would be null and void.
 

Last Tuesday, March 9, 2009, San Diego City staff from the Debt Management Department and from our City Attorney's office acted as salespeople for J. P. Morgan, Bank of America Merrill Lynch and other Wall Street moneylenders, arguing before City Council for a bogus financial instrument called a municipal "lease-lease" that would put the worst excesses of the real estate borrowing bubble to shame.

Is this Wall Street's next raid on our pocket books? Now that they have drowned the nation's homeowners in debt are they turning to our municipalities? It sure looks that way. Consider what they did to San Diego on Tuesday.

Exactly one day after the City cashiered its $1.8 million SEC-imposed "Independent Consultant", popularly known as the SEC Monitor, the Mayor's staff, armed with suitably crafted advice from the City Attorney's office, all but shouted down the City Council to get a phony "lease revenue bond" of $185 million approved.

Watch as Deputy City Attorney Tim Fitzpatrick shows his impatience with Councilmember Donna Frye for daring to express concern about the legality of this form of municipal financing. Obviously it was all well planned in advance with the City Council expected to act as a mere rubber stamp, which unfortunately it did.

Council President Hueso ended Council discussion with his characteristic smirk and sneer, this time at his colleague Councilmember Frye. He turned to Fitzpatrick after the vote and said: "That means that we all agree with you Sir".

What will we do when Donna Frye is no longer there to challenge this groupthink? Faulconer will probably replace Hueso and so it will go on. Who will challenge these "cost of issuance" corporate leeches with their $357,000 bond counsel fees and $55,000 each to three rating agencies for a total "cost of issuance" of $1.9 million? This, to refinance $105 million of our current debt, bearing interest at 5.2%, up to 5.63%. Which one of them would do such a private refinance? Certainly not Lakshmi Kommi.

Lakshmi Kommi is the City's Debt Manager. We pay her and senior Deputy City Attorney Jim Fitzpatrick big salaries and Cadillac pensions so that they can strip us of our power and deliver us bound and gagged to the moneylenders of Wall Street.

Watch Kommi and her Debt Management staff clearly admit that the interest on the new $185 million will be 5.63% while we have 8 years remaining on our present $105 million loan contract with Bank of America at 5.2%.

Councilmember DeMaio asked the right question clarifying the lower interest rate on the $105 million being refinanced but still voted for the refinance at a higher rate. Classic Groupthink. He was afraid to disagree with the crowd for fear of getting mocked, as Council President Hueso mocked Councilmember Frye for her vote at the end.

I did a thorough analysis of the paperwork presented to City Council by City staff. I discovered that the City Attorney did not draft and did not present a City Council Resolution, as required by law, authorizing all leases of City land according to San Diego Municipal Code §22.090.

Watch Deputy City Attorney Tim Fitzpatrick explain how he thinks he fulfilled his role as legal advisor to the Debt Management Department. He lists the authorizations in the only Resolution presented to the City Council. It lacks any mention of the specific properties that are the subject of the Master Site Lease as required by the San Diego Municipal Code, together with three required findings by the City Council as follows:

(1) The reason for leasing such real estate;
(2) A description of the real estate to be leased;
(3) A statement of the market value of such real estate as appraised by an independent fee appraiser or City staff.

I called Mr. Fitzpatrick today and asked him if he was aware of San Diego Municipal Code §22.090. He was not. Amazing!

I suggested that because of his oversight City Management may have to reintroduce the Item to City Council. He shunted me off to Gina Coburn, Communications Director for the Office of the City Attorney. He probably thought he could fob me off with the usual tripe they feed reporters. That is why I became an independent blogger. I do not want to join the media's own "groupthink".

So the City Councilmembers may get another chance to properly evaluate what they were clearly railroaded into approving on March 9, 2009.

Watch bond counsel Bob Olson explain this "technique" by which cities can borrow money from Wall Street based upon bogus revenue created out of thin air by these cities renting their police stations back to themselves.

But he assures us that everybody is doing it so it is ok. It reminds me of when everybody was refinancing their home with Wall Street  twice a year at 110% of its value and that was ok.

Watch him explain with a straight face how this bogus bond makes "this type of financing not constitute indebtedness within the meaning of the California Constitution or the City Charter." And "because it is not indebtedness" he assures us, "it does not require a vote of the citizens for the City to enter into the transaction."

Our City is paying Wall Street lawyers, in this case Bob Olson, $357,000 to teach it how to tax its citizens against their will. Remember a fee is something I agree to pay, a tax is something I am forced to pay.

The question in my mind is: are the staff involved saps or are they in on this? How could such senior people stoop to sell us such forgeries? How could a senior Deputy City Attorney like Tim Fitzpatrick not know about the City Municipal Code governing the leasing of property when that is exactly the area of law on which he advises the City?

Did Wall Street want an open ended authority so it can add and subtract lease properties at will? Was that why Fitzpatrick "forgot" to seek specific approval, property by property, for each lease?

This guy is the most senior financial attorney Jan Goldsmith has got. Jan admits that finance is his weak area so he has to rely on Deputy Fitzpatrick, who represents the City Attorney on the Disclosure Practices Working Group (DPWG), the most important City organ with regard to public bond issuance.

All I know is that if we do not chase these Wall Street bandits away from our city gates right now, they will hollow out our city like they did the country of Greece and are now pressuring the European Union to bail it out of its Wall Street debt. That was the plan.

Wall Street already owns, for the next 50 years, just about every source of public income Greece can produce. They own the entire revenue at Athens airport and just about every source of revenue in that city including its parking meters. Are American cities next?

Now that they have utterly destroyed our once legitimate mortgage-backed securities market, our primary source of real estate finance for years, the Wall Street bandits are zeroing in on what they have dubbed "sovereign debt" i.e. any debt that is created directly by a government, local or national, and backed directly by tax payers.

They destroyed real estate financing and brought about the current recession by corrupting the management and staff of large real estate brokerage firms, title companies and appraisers. Are they now corrupting the management and staff of our municipal  agencies?

We know they own Washington. Tim Geithner is living proof of that. How many state and local officials do they own? To Wall Street, bribery is a legitimate business expense. That's how they ensnared Greece. I hope that last week's City Council vote was mere stupidity on the part of our local officials, not something else.

We will soon know - when this matter comes before City Council for final approval. Will Hueso sneer at Donna Frye again?
 

There is not one mention of Managed Competition in either the BPR Report or the BPR Ordinance. That is important because nothing in the BPR Ordinance required consultation with unions, while Managed Competition required "meet and confer" consultation with the unions. So, the unions set about to create a link. If they could do so they could use California labor laws to impose a veto on BPR. And so it turned out. The whole reform movement has been stalled for over 3 years. As I predicted, the unions used Prop C to strangle BPR at birth and Sanders was not up to the job of countering them. Deep down he was still one of them.

He did not have the foresight or management skills to see it coming. BPR made him the Strong Mayor voters intended, but he allowed the unions to take it right back from him. He was a better politician than City manager. Managed Competition was hailed by his supporters as a hit on the unions. It brought in huge right wing political contributions for his campaign. But that is all it did.

Here is a video of how the unions and their political allies have left Sanders looking like an incompetent bumbler. They are now firmly in charge of "Reform".

Watch how the unions have linked BPR to Managed Competition. As a result the Mayor's entire "Reform City Hall" movement is dying on the vine.

More importantly the taxpayers are stuck with the bill. Sanders allowed the City's employees to acquire a veto. They have taken ownership of the reform process he was elected to implement. They call any ideas for efficiencies and economies their "trade secrets". Instead of a Strong Mayor form of government we got a Strong Union form of government. Sanders handed it to them on a plate.
 

Why locate a "Central Library" in this part of town? Because John Moores wants to enhance the attractiveness of the East Village to which he has been given sole development rights by the City of San Diego. Moores agreed to Project Labor Agreements (PLAs) to get his Ballpark built, now the labor unions are pushing to give his development district a Library.

Even the union-controlled School Board has offered to chip in $20 million of its precious Prop-S bond money to help build this "Moores Folly". Its over-compliant legal counsel wrote a convoluted, contradictory legal opinion purporting to justify the pre-payment of 40 years rent on two upper floors for an un-wanted Charter School. This so-called pre-paid rent is nothing more than a cash gift to Moores and is totally inconsistent with any school needs. It is a repeat of the infamous Ballpark deal, a diversion of public money for private use - but with jobs for union labor.

What makes it even worse is that the School Board is behaving like it has the $20 million sitting in its bank account. In its rush to serve a union-friendly developer, it wants to borrow $20 million using "zero coupon" bond financing, the most expensive form of borrowing imaginable.

"Zero coupon" means that a bond issuer pays no interest over a  period of years with principle and accrued interest-on-interest payable at the end. Most Prop-S bond borrowing will be done using this method. The School District has no other choice because the prior Prop MM bonds will not be paid off until 2029 and there are legal limits on annual bond servicing payments in the form of a maximum percentage of assessed valuation (AV). In the case of Prop MM it is $66.67 per $100,000 AV and $60.00 per $100,000 AV for Prop-S.

Thus, Prop MM bond servicing crowds out Prop-S bond servicing until 2029. Even then, because of the annual servicing cap, it is heavily deferred until 2044. The final payment in that year is almost a half billion dollars, mainly interest-on-interest. It may be much worse because this payment schedule is predicated on assessed valuations going up by 5% year-on-year, the reverse of what we know is happening. The truth is that Prop-S bonds are little better than junk bonds, a very poor way to finance school repair, let alone a "Moores Folly" Library.

Borrowing $20 million in these circumstances is like an indulgent parent, who is broke, putting $20,000 on a credit card at 20% in order to buy a wastrel son a sports car he will surely wreck his first night out on the town. If the School Board approves this folly today, it will rank as one of the worst examples of corrupt government in San Diego's sorry history.