In the face of cataclysmic events on the other side of the globe, we feel like helpless onlookers. By contrast, San Diego’s financial crisis is small potatoes. But keep this in mind: here at home we’re not just onlookers. And we’re far from helpless about problems in our own backyard. We have the ability to go mano-a-mano with San Diego’s political and fiscal affairs and shape their outcome.
Our own private earth-shaker. It wasn’t so long ago that talking about the big C was a no-no in polite circles. Nowadays in San Diego the forbidden word is the big B -- BANKRUPTCY. Dare to whisper it and poof! you’re a pariah – ridiculed and banished from every movers-and-shakers club in town. Don't even think about it, say the big bosses.
Bankruptcy is not a dirty word. In fact, it could prove to be (like our sea, sand, and sun) a blessing. One thing’s for sure: San Diego’s financial predicament now hangs like an albatross on private and public interests, alike. It’s time for deniers, delayers, deceivers, politicians, and political hopefuls to back off. What do we need? A no-holds-barred public conversation about municipal bankruptcy. When do we need it? Now.
It's not the remedy that's dangerous, it's the disease. And the clock is ticking. Within the next couple of months the Mayor and City Council will slash city spending by upward of $75M (give or take millions), for the purpose of balancing our annual budget for the fiscal year 2012.
City officials will rehash a now-familiar litany of cost-cutting measures: raising fees, axing employee salaries and pensions, selling off city property, juggling numbers, and reducing services to the bone. This year's hatchet job comes on the heels of two years of bloodletting that already cut more than $200M worth of public services and jobs in the process of balancing previous budgets.
It’s a vampire saga. Apparently, city officials don't want to alarm the public by disclosing their little secret -- that a multi-billion dollar monster has first dibs on the city's bankbook, aka General Fund, and that balancing the budget does not make it go away. Neither does fiddling with new kinds of pension plans. Nor giving away city services to private corporations.
Specifically, we've got a $3.5B debt (give or take a few billions) that the city owes in back payments to our pension system. Each year, city officials quietly transfer mega-millions from the General Fund into the pension pot. This year’s installment is $232M, next year’s will be $255M, then $300M, and in fifteen years the projected payment is $500M.
Problem is, there's not enough in our General Fund to keep paying off such a massive pension deficit and also cover basic city needs. The Mayor said public safety (fire, police) will be sacrificed. Ditto for neighborhood parks and libraries. You know the miserable state of our streets. And we still haven't seen that long-overdue city audit. (Is there not enough money to pay for getting it done? Is the money-juggling too unspeakable for public or bond market consumption?)
It boils down to this: our city is insolvent. Even if we mash ourselves flat enough to produce a budget this time, we won't be able to pay our bills a month afterwards. That's the definition of insolvency.
To save itself from further harm and degradation, an insolvent city can petition for bankruptcy. There's not a single corporate lawyer with any standing or integrity who would recommend otherwise for his/her corporate client when confronting financials like ours. San Diego is a municipal corporation.
Bankruptcy is a rational and practical process that can produce positive and humane results. Is bankruptcy is the right choice for San Diego? We need energetic leaders with brains and guts to step forward and get the public conversation going. Any takers?
Coming next: the ABCs of municipal bankruptcy -- who, what, when, why, how.