Image: MisleadingStatement: “All told, we will leave the next mayor with a combined surplus of nearly $120 million over the next five years,” Mayor Jerry Sanders said in an April press release. “That’s money that can be used for more library hours and to hire more police officers and firefighters.”

Determination: Misleading

Analysis: Outgoing Mayor Jerry Sanders seems to be leaving on a high note.

The mayor has repeatedly said he’s proud to have helped steady the city’s once-teetering financial status.

His latest budget outlook, detailed in a late October report, predicted the city will see $199.4 million in surpluses in the next five years.


We Stand Up for You. Will You Stand Up for Us?

A report released Monday by the Office of the Independent Budget Analyst painted a far less rosy picture of the city’s budget, estimating that some expenses Sanders didn’t factor into his projection could actually leave the city with deficits in coming years.

That report says the city could see as much as an $84.2 million shortfall for next year; Sanders’ office projected $4.9 million in extra funds.

The report’s conclusions are in stark contrast with Sanders’ statements during a spring press conference where he celebrated the end of the city’s budget crisis.

“It’s over as of today,” Sanders said at the time. “I’m declaring. I decree.”

Sanders suggested the city would see $119 million in surpluses from 2013 through 2017.

The budget analyst was less optimistic. We zeroed in on a few key areas where the analyses varied.

Mandatory Spending

• Sanders assumes the city Redevelopment Agency would cover $13.8 million in loan payments for Petco Park and the convention center, but the agency has been eliminated.

That means the city’s day-to-day budget may be hit with the $13.8 million, and as much as $16.3 million in annual payments in the next five years.

• The budget analyst’s report also pointed to additional pension costs not included in Sanders’ estimates, some of which are known and some that remain unclear.

As our Liam Dillon noted in August, the city’s pension system earned only 0.3 percent on its investments last year, short of the 7.5 percent that the city’s retirement system assumed. The outlook has since improved slightly but the Independent Budget Analyst’s report said the city could see as much as a $6 million budget deficit in its program this year, and up to a $22.7 million shortfall by 2018 if the multiple variables don’t end up favoring the city.

And then there’s the cost associated with Proposition B, which gives most new city staffers 401(k) retirement plans instead of pensions, and aims to put a five-year freeze on employees’ pensionable pay.

Back in May, former Voice of San Diego reporter Keegan Kyle explained that the citizen initiative could save the city money in the long run but is expected to require the city to pay more than $2 billion in pension debt more quickly than it would have otherwise.

The Independent Budget Analyst said that could cost as much as $21.6 million next year.

Optional Spending

• Streets and other city infrastructure are getting worse. Dillon addressed that issue in a recent radio appearance.

Last year, city staffers presented options for dealing with an estimated hundreds of millions of dollars in necessary improvements. The City Council ultimately approved a five-year plan to slow deterioration.

The mayor’s budget forecast didn’t include the potential for more infrastructure spending.

If the city wants to stop all deterioration, it would need to spend $30.1 million next year, according to the budget analyst’s report.

• The mayor’s five-year forecast showed full funding for four police academies with 35 recruits over the next five years.

That’s an increase from the 30 recruits per academy that were initially planned.

The budget analyst’s report found that funding shortfalls will complicate the new plan because police department vacancies won’t offset the added police recruits, an approach that worked for the city this year.

Adding five recruits to each police academy will exceed the available budget for sworn police employees and require an additional $7.7 million in funding for next year alone, according the analyst’s report.

• The City Council recently approved a hike in funding for the city’s Commission for Arts and Culture that was not included in the mayor’s budget.

The commission, which relies on hotel tax revenues to assist local arts groups, will incrementally receive more funding in the next four years. The “Penny for the Arts” plan assumes hotel tax hauls will increase but that arts spending will remain flat, allowing hotel tax surpluses to flow into the general fund.

The budget analyst’s report added in the planned arts funding and estimated a $3.8 million budget deficit for next year and as much as a $10 million shortfall by 2017 and 2018.

Added up, the outlined items are likely to thwart Sanders’ assurance of future surpluses.

So why did Sanders say otherwise earlier this year? It’s fair to assume he was aware additional bills might be coming.

Many of these issues, including the pension and redevelopment expenses, were known when the mayor called his press conference in April.

In fact, Chief Operating Officer Jay Goldstone kicked off a Tuesday interview on KPBS’s “Midday Edition” by saying that no one should be shocked by the budget analyst’s suggestion of possible budget deficits.

“First of all, I’m a little surprised that this is a surprise among your listeners and the media,” he said.

Goldstone also said the Sanders administration included “known quantities” in its budget outlook.

For example, Goldstone said, the city won’t get a final update on its pension burden until early next year and the approval of Prop. B changed the rules of the game.

Goldstone also noted the $166 million available in the city’s reserve account that could be used to pay any larger-than-expected bills.

He said there’s enough money to cover potential year-over-year deficits from increased pension or redevelopment costs but the Independent Budget Analyst’s long-term estimates exceed the amount available to the city during the same period.

Sure, incoming Mayor Bob Filner and the City Council can use that money, known as a rainy-day fund, for unplanned expenses, but the Independent Budget Analyst and others have warned that drawing from it could increase the city’s borrowing costs.

The bottom line: We can’t predict the future and we don’t typically label projections false for that reason. But Sanders’ statements fail to account for expenses he could have — and should have — seen coming. Any discussion of surpluses should have included a mention of bills that might come due, even if they weren’t a certainty.

That’s why we’re labeling Sanders’ statement misleading.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

Correction: An earlier version of this story incorrectly stated a possible impact of Proposition B. The measure aims to put a five-year freeze on city staffers’ pensionable pay.

Lisa Halverstadt is a reporter at Voice of San Diego. Know of something she should check out? You can contact her directly at lisa.halverstadt@voiceofsandiego.org or 619.325.0528.

Reporter Liam Dillon contributed.

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Disclosure: Voice of San Diego members and supporters may be mentioned or have a stake in the stories we cover. For a complete list of our contributors, click here.

    This article relates to: Corrections, Fact Check, Government, News

    Written by Lisa Halverstadt

    Lisa writes about San Diego city and county governments. She welcomes story tips and questions. Contact her directly at lisa@vosd.org or 619.325.0528.

    30 comments
    Jim Jones
    Jim Jones subscriber

    Yet they pale in comparison to the cost of bloated public union excess.

    Jim Jones
    Jim Jones

    Yet they pale in comparison to the cost of bloated public union excess.

    David Cohen
    David Cohen subscriber

    The Sanders PR deceptions will haunt us for years.

    fryefan
    fryefan

    The Sanders PR deceptions will haunt us for years.

    Don Wood
    Don Wood subscriber

    The last two dozen city budget projections put out by Sander's office have had effective shelf lives of about 30 days before the facts got in the way. Why should this one be any different. Watch the UT try to paint Sanders as a saint on his way out of office. Wait a month and see what Filner and the new city council find when they dig not the mess Sanders has left the city.

    Don Wood
    Don Wood

    The last two dozen city budget projections put out by Sander's office have had effective shelf lives of about 30 days before the facts got in the way. Why should this one be any different. Watch the UT try to paint Sanders as a saint on his way out of office. Wait a month and see what Filner and the new city council find when they dig not the mess Sanders has left the city.

    Mark Giffin
    Mark Giffin subscribermember

    Wash, rinse, repeat. Just like any penny stock scam

    mgland
    mgland

    Wash, rinse, repeat. Just like any penny stock scam

    Bill Bradshaw
    Bill Bradshaw subscribermember

    Mgland, I don't know whether your "LOL" was aimed at my bringing up pension obligation bonds, but if it was, let me clarify my inadequate comment. I think they are a terrible idea, but our new Hizzoner doesn't. He brought it up during the campaign, and I predict he will do so again. "When" is the only question. With a council majority and the city turning increasingly liberal, all systems appear to be "go'.

    toulon
    toulon

    Mgland, I don't know whether your "LOL" was aimed at my bringing up pension obligation bonds, but if it was, let me clarify my inadequate comment. I think they are a terrible idea, but our new Hizzoner doesn't. He brought it up during the campaign, and I predict he will do so again. "When" is the only question. With a council majority and the city turning increasingly liberal, all systems appear to be "go'.

    Mark Giffin
    Mark Giffin subscribermember

    Voters are apparently on board with the double down approach.

    mgland
    mgland

    Voters are apparently on board with the double down approach.

    aardvark6
    aardvark6

    The fantasy world of Jerry Sanders.

    Bill Bradshaw
    Bill Bradshaw subscribermember

    Pension obligation bonds, anyone?

    toulon
    toulon

    Pension obligation bonds, anyone?

    Edward Teyssier
    Edward Teyssier subscriber

    It would be interesting to have an analysis as to whether the City's finances are better or worse than they were when Sanders first took office.

    Edwardtlp
    Edwardtlp

    It would be interesting to have an analysis as to whether the City's finances are better or worse than they were when Sanders first took office.

    Lisa Halverstadt
    Lisa Halverstadt author

    Thanks for pointing this out.I should have referred to a freeze on pensionable pay, which is what I was really trying to describe in that sentence. We've updated the story to better clarify that.

    lisahalverstadt
    lisahalverstadt

    Thanks for pointing this out.I should have referred to a freeze on pensionable pay, which is what I was really trying to describe in that sentence. We've updated the story to better clarify that.

    Edward Teyssier
    Edward Teyssier subscriber

    Sanders missed his calling...he really is a comedian, and the jokes have been on us.

    Edwardtlp
    Edwardtlp

    Sanders missed his calling...he really is a comedian, and the jokes have been on us.

    Chris Brewster
    Chris Brewster subscribermember

    Analysis: The pension system does not assume a 7.5% return each year. It maintains a long-term goal of this return. According to the “investment goals” enumerated in the San Diego City Employees Retirement System’s Investment Policy Statement: “SDCERS should earn, on a long-term average basis, a rate of return equal to or in excess of SDCERS’ actuarial investment return assumption." Further: "SDCERS should seek to earn a return in excess of its policy benchmark over the long term.” No reputable investor assumes a fixed annual rate of return. (See: Madoff, Bernie.)

    B Chris Brewster
    B Chris Brewster

    Analysis: The pension system does not assume a 7.5% return each year. It maintains a long-term goal of this return. According to the “investment goals” enumerated in the San Diego City Employees Retirement System’s Investment Policy Statement: “SDCERS should earn, on a long-term average basis, a rate of return equal to or in excess of SDCERS’ actuarial investment return assumption." Further: "SDCERS should seek to earn a return in excess of its policy benchmark over the long term.” No reputable investor assumes a fixed annual rate of return. (See: Madoff, Bernie.)

    Kevin Swanson
    Kevin Swanson subscriber

    Is the Sky Falling? Let us hope not. However, as this and other independent voices have raised the alarm about the crumbling infrastructure state, the roads, water supply, sewage system, and energy structure are having bills come due.

    SanDiego2015
    SanDiego2015

    Is the Sky Falling? Let us hope not. However, as this and other independent voices have raised the alarm about the crumbling infrastructure state, the roads, water supply, sewage system, and energy structure are having bills come due.

    Michael Aguirre
    Michael Aguirre subscriber

    From his perch at the Chamber Sanders can rein non-stop criticism on the new administration left with the ordeal of trying to clean up the mess Sanders left behind. As Pres. Obama faced harsh attack from the Republicans as he tried to clean up the Bush mess so too will the new Mayor face harsh critique from the discredited establishment through their spokes person Sanders, while the new mayor works to to clean up the Sanders mess. There is one stark difference. Bush had the good sense to leave the public stage while Sanders remains high profile. Sanders seems to covet a Valdamir Putin-like role where he seeks to govern the city indirectly through an obliging press.

    MichaelAguirre
    MichaelAguirre

    From his perch at the Chamber Sanders can rein non-stop criticism on the new administration left with the ordeal of trying to clean up the mess Sanders left behind. As Pres. Obama faced harsh attack from the Republicans as he tried to clean up the Bush mess so too will the new Mayor face harsh critique from the discredited establishment through their spokes person Sanders, while the new mayor works to to clean up the Sanders mess. There is one stark difference. Bush had the good sense to leave the public stage while Sanders remains high profile. Sanders seems to covet a Valdamir Putin-like role where he seeks to govern the city indirectly through an obliging press.

    danny miranda
    danny miranda subscriber

    lisa, you wrote that prop b "aims to put a five-year freeze on pension payments for current employees." i don't recall reading that in the text for prop b. i do remember talk of a five year pay freeze (added to no pay raises for several years already). can you clear this up?

    dmir
    dmir

    lisa, you wrote that prop b "aims to put a five-year freeze on pension payments for current employees." i don't recall reading that in the text for prop b. i do remember talk of a five year pay freeze (added to no pay raises for several years already). can you clear this up?