San Diego mayor-elect focuses on financial stability

By Marty Graham

SAN DIEGO (Reuters) – San Diego mayor elect Jerry Sanders
on Friday pledged to bring transparency to the city’s troubled
finances in the midst of government probes and a $1.7 billion
city pension fund shortfall.

But bankruptcy will remain on the table until labor
negotiations with city unions wrap up, Sanders said in an
interview. He added that he aims for city employees to make
major concessions given the city’s wobbly finances.

Since winning office on Tuesday, Sanders has promised to
take tough measures to address the financial woes facing San
Diego, once a model of municipal governance that some analysts
say has become an “Enron by the sea.”

Former Mayor Dick Murphy left office in July as the city’s
financial troubles mounted, resigning after Time magazine named
him one of the worst big U.S. city mayors. City Councilman
Michael Zucchet stepped in, then resigned days later after
being convicted of conspiracy and wire fraud. A federal judge
overturned Zucchet’s conviction and acquitted him on Thursday.

The U.S. Securities and Exchange Commission and the U.S.
Attorney’s Office have been investigating the city’s pension
fund debacle since February 2004, and the San Diego County
district attorney has charged six former city employees with
felony conflict of interest for allegedly letting the city
defer payments to the fund while increasing pension benefits,
including their own.

“On election day, San Diegans chose a new path for the
city, one that will lead to financial stability, transparent
decision-making, and a restoration of public trust in city
government,” Sanders said in an interview.

“The cultural reform at City Hall will start immediately,
the day I take office,” Sanders added.

Wall Street analysts welcomed his determination but said
they will wait and see if Sanders can put affairs in order at
San Diego’s City Hall – and they continue to demand the city
produce overdue fiscal audits for 2003 and 2004.

San Diego has been shut out of the debt market because its
finances are a mess and it has yet to make public the audits.

“They’ve got a mayor and that’s good,” said Amy Doppelt, a
bond analyst at Fitch Ratings. “We still need to see audits and
to know that their financial culture has changed.”

Additionally, talk of having San Diego declare bankruptcy
must end before the city’s standing in the debt market
improves, Doppelt said.

City employees learned on Thursday that Sanders, a
Republican and former city policy chief, intends to freeze
their wages for the next four years.

His new chief of staff, retired U.S. Navy Admiral Ronne
Froman, told reporters that if city workers are looking for
raises, they should quit and look for jobs elsewhere.

Sanders, who assumes office on December 5, has said
previously that he plants to fire 100 middle managers on the
city payroll and require city employees to take unpaid
furloughs and pay more for benefits.

He has also he wants to push their retirement age to 60
from 55 and close the city’s pension plan to future hires. The
future hires would be offered retirement packages similar to
those in the private sector.

(Reporting by Marty Graham in San Diego)