San Diego City Wire

A recent report states San Diego is in dire shape financially and the COVID-19 pandemic is not at fault.

That’s the assessment of a report from Truth in Accounting, a conservative nonprofit organization, which states that its mission “is to compel governments to produce financial reports that are understandable, reliable, transparent and correct.”

Truth in Accounting, in its Fiscal State of the Cities, released Jan. 26, ranked San Diego 40th out of 75 large cities based on its 2019 audited financial report, earning it a grade of C. San Diego also was listed among 62 cities that will face fiscal challenges when the pandemic is passed.

“This report shows that San Diego went into the coronavirus pandemic in mediocre fiscal health, and it will probably come out of the crisis worse,” Truth in Accounting said. “San Diego’s elected officials have repeatedly made financial decisions that have left the city with a debt burden of $2.1 billion. That burden equates to $4,700 for every city taxpayer. San Diego’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years.

“Of the $11 billion in retirement benefits promised, the city has not funded $2.7 billion in pension and $462.3 million in retiree health care benefits,” the report noted. “San Diego did not have enough money set aside to weather the current pandemic and fluctuations in the market. The city is expected to lose some revenue as a result of the pandemic.”

The future is not very promising, according to the study.

“The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but San Diego’s overall debt will most likely increase,” the report said.

Former San Diego City Councilman Carl DeMaio said this is an accurate representation of the city’s financial woes.

“It’s absolutely accurate,” DeMaio told San Diego City Wire. “The city of San Diego continues to face insolvency, significant financial challenges.”

In 2010 he was the author of the "Roadmap to Recovery Plan," which laid out a schedule to balance the city’s budget without tax hikes, saving taxpayers billions of dollars while seeking to improve city services.

In 2012 DeMaio was the driving force behind Proposition B, “Amendments to the San Diego City Charter Affecting Retirement Benefits,” which reduced city costs for employee pension costs. Voters approved it by a 2-1 margin.

“My top priority has always been fixing the city’s financial problems and saving the neighborhood services that are critical to our quality of life. My focus for the short-term is keeping core city services running, while getting city leaders to finally confront and solve the long-term financial crisis facing our city,” DeMaio told San Diego Gay, Lesbian, Bisexual, Transgender News in 2010. “It is my hope that the ‘Roadmap to Recovery’ can serve as a starting point for that discussion → with more ideas needed from the public to make sure the plan work for all of our neighborhoods.”

He tried to set an example, trimming $600,000 from his own budget during his four years in office, turning down a pension benefit and all perks that other elected officials accepted.

DeMaio, however, said the accomplishments of a decade ago were wasted. This was in part, he said, because then-Mayor Kevin Faulconer did not have the political will to follow through, caving to government unions on higher salaries and benefits while going on a “hiring spree” to increase the size of government.

“He claims to be a reformer, but he’s actually quite the opposite,” DeMaio said. “Now San Diego is running a structural budget deficit and has now abandoned pension reform.”

DeMaio said the city dropped the legal defense for the citizens’ initiative for pension reform in June. Indeed, Faulconer approved salary hikes drove up the city’s deficit by $55 million. He allowed employees to spike their pensions by obtaining higher salaries before they retire and was responsible for a “perfect fiscal storm” that did more damage to the city than the pandemic did.

Faulconer had an opportunity to continue financial reforms set in place from 2010-12 but chose not to do so, DeMaio said, adding, “He paid it lip service publicly, but behind closed doors, he gutted it.” 

Faulconer, who left office in December, has announced his intentions to seek the Republican nomination for governor. He must bear a great deal of the responsibility for the city’s poor fiscal condition, according to DeMaio.

“Absolutely," DeMaio said. "Because California is going to face the same fiscal crisis and it is facing the same fiscal challenges. Faulconer has shown he will claim he will fix it, but he will actually exacerbate it.”

DeMaio, who built, ran and later sold successful businesses, has been chairman of Reform California, a grassroots organization that advocates for transparency and accountability reforms in state and local government. He also sponsored and supported campaigns against numerous tax hikes, since 2004. It was originally known as San Diego Citizens for Accountable Government. He currently hosts a radio talk show on KOGO.

He was elected to the San Diego City Council in 2008. DeMaio was the first openly gay man elected to the council, setting a record for the largest margin of victory for a non-incumbent candidate to that point. 

As he left office in 2012, the San Diego Union Tribune said he had served the city well.

“DeMaio has a record of getting things done — the right things,” the paper wrote in endorsing him for mayor.

DeMaio lost that race to Bob Filner, a Democratic congressman for two decades before becoming mayor of San Diego. It was a short-lived triumph, as he resigned in disgrace August 2013 after multiple reports emerged of sexual harassment. Filner later pleaded guilty to false imprisonment and battery and received three years' probation. He also was barred from seeking public office again.

Filner's departure opened the door for Faulconer, who served as mayor from 2013-20. DeMaio was the Republican nominee for California’s 52nd District U.S. House seat in 2014, losing a narrow race. He once again sought a seat in Congress in 2020, but did not qualify for the runoff election for the 50th District seat.