Wanted: an experienced CFO to fill a challenging position in San Diego, the seventh-largest city in the U.S. Must be willing to work grueling hours on miserly government pay to close $1.4 billion pension gap, improve near-junk credit rating and find $2 billion for infrastructure investments (raising taxes not an option).
That is the candid job description for the superman or woman whom the city’s newly sworn-in Republican mayor, Jerry Sanders, is desperately seeking to sweep the Augean stable that is San Diego’s pension mess (Institutional Investor, March 2005).
“I want to have a strong person to help with pension issues -- ideally, someone with private sector experience who has dealt with Wall Street and the bond market,” says the 55-year-old former police chief. “I’m just glad that I was somewhat careful in what I promised during the campaign. This is going to require some sacrifice, and it’s not popular.”
Say this for the job -- it’s no temp position. Fixing San Diego’s finances will take years. Sanders plans to shave tens of millions of dollars of pension liabilities by freezing municipal workers’ salaries until the city’s budget is stabilized. And he has threatened to ax 10 percent of the workforce. Two of the city’s four unions, however, have said that they’re not coming back to the bargaining table.
To help plug San Diego’s pension funding gap, Sanders has endorsed a city council plan to issue $600 million in pension benefit obligation bonds over three years. Possible securitization streams include income from the 1998 tobacco settlement and, ironically, city employees’ contributions to the pension system.
Nothing can happen, though, until the city completes its financial audits, which haven’t been updated since fiscal 2002, owing in part to investigations by the SEC, FBI and the U.S. Attorney’s Office. The feds are probing alleged misstatements in a sewer bond prospectus and self-dealing by pension board members, who have denied charges that they broke state conflict-of-interest laws by voting to underfund the retirement system while boosting benefits that they themselves were due to collect.
Sanders doesn’t expect to have audited financials until spring. Until then, he concedes, “we’re flying blind.”
