July 23, 2005

San Diego electing mayor amid City Hall chaos

By Marty Graham

SAN DIEGO (Reuters) - San Diego voters go to the polls on
Tuesday to decide if a surf shop owner, a former police chief
or a businessman will be the new mayor amid turmoil caused by
the near collapse of the city pension fund and the criminal
conviction of an interim mayor.

Dick Murphy, a Republican, stepped down July 15 as mayor of
the seventh-largest U.S. city in the wake of a financial crisis
that prompted Time magazine to name him one of the three worst
big U.S. city mayors.

Days later, the interim mayor and a second city councilmen
were convicted of conspiracy, extortion and wire fraud for
accepting campaign contributions from a strip club that wanted
a city ban on lap dancing rescinded.

The next mayor faces an uphill struggle to undo the damage
to the reputation of business-friendly San Diego, once widely
seen as a model for municipal governance.

With a population of nearly 1.3 million, San Diego is a
longtime Navy town but its economy diversified in the 1990s as
it attracted telecom and bio-tech companies.

With 11 candidates on the ballot for the special election,
City Councilmember Donna Frye is the front runner, garnering
about 44 percent support in the latest polls.

Co-owner of a surf shop with her husband, surfing legend
Skip Frye, she won more votes than Murphy as a write-in mayoral
candidate last November but thousands of ballots were
disqualified because voters wrote in her name but did not
blacken the bubble next to it.

An old-time liberal and community activist, Frye won over
voters by saying she would not vote on things she did not
understand. If elected, she would be San Diego's first
Democratic mayor in 20 years.

Former police chief and American Red Cross chapter chief
Jerry Sanders and businessman Steve Francis, once a Nevada
politician, are in a heated battle for second place. Both are

"The candidates have similar platforms: Some form of
receivership for the pension fund, some combination of
borrowing money, cutting services, cutting pensions, cutting
pay and tax increases to make up the deficits," said Thad
Kousser, who teaches political science at the University of
California, San Diego.

"They aren't going into a job that's full of hope for the
future, they're trying to make things less awful," he said.

If no candidate wins 50 percent of the vote, there will be
a runoff between the top two vote-getters.


San Diego's biggest problems are financial. The pension
fund faces an unfunded liability of at least $1.7 billion. The
city also has a budget deficit of at least $25 million and has
seen its credit rating downgraded because of incomplete audits
for fiscal years 2003 and 2004.

The city is being investigated by the Securities and
Exchange Commission and federal prosecutors over the failure to
disclose the looming deficit when the city sold bonds.

Meanwhile, six current and former trustees of the city
pension fund have pleaded not guilty to felony conflict of
interest charges linked to decisions about funding the
retirement system. Three other trustees have resigned.

Both Frye and attorney Patrick Shea, who is tied for third
in the polls, have urged the city to consider some form of

But opponents, including second place candidate Sanders, as
well as the San Diego Regional Chamber of Commerce, oppose
bankruptcy. They are seeking tighter control of the city's
finances and renegotiating labor contracts to cut costs.

(Reporting by Marty Graham in San Diego)