The young and still-untamed St. Augustine supposedly said it: “Oh God, make me chaste, but not yet.” That should be the City of San Diego’s slogan. In February of 2008, independent budget analyst Andrea Tevlin, who works for the city council, outlined San Diego’s chronic structural budget deficit affliction — year after year, expenditures outrunning revenue, and the budget balanced through onetime fixes that just kick the problem down the road.
Late last year, the Citizens’ Fiscal Sustainability Task Force, made up of establishment members appointed by Mayor Jerry Sanders, warned that the City’s fiscal outlook was “very dire,” but San Diego could avoid bankruptcy if, among many things, it jettisoned the “onetime fixes” that led to the City “living beyond its means.”
But around the same time, Tevlin gave her stamp of approval on the mayor’s proposed budget for fiscal 2011, which begins July 1 of this year. She reported on December 4 that the mayor was using $96.5 million of those supposedly poisonous onetime solutions to close a $179 million deficit. In late March, there was still a $45 million shortfall.
The onetime fixes range from delaying installation of sprinklers at city hall to taking money from the library improvement fund and plunking it in the ailing general fund. “I don’t like onetime solutions,” says Councilmember Donna Frye. “Until there are structural changes and long-term solutions, there aren’t a lot of options. We are running out of options.”
Now let’s shift abruptly from St. Augustine to 19th-century railroad baron William H. Vanderbilt, who was anything but a saint. He thundered in 1883, “The public be damned!” That should be San Diego’s second slogan. Politicians are damned if they vote to cut services and damned if they suggest that revenues may have to go up. Result: progress is dammed, the citizenry damned.
“Everybody has to take a hit if we really want to solve this,” says Frye.
So true. I talked with several San Diegans — some liberal, some conservative. I found that liberals are willing to live with service and wage/fringe cuts, and conservatives will accept tax increases. Everybody agrees that what’s needed is a dialogue: “We have to have a conversation with the citizens about the things they get and whether those things are affordable,” says Erik Bruvold, president of the National University System Institute for Policy Research. “We subsidize the Torrey Pines golf course and therefore don’t maximize revenue potential. Do we want to spend millions every year on the ‘nice-to-haves’? But the City almost never has those kinds of harder conversations.”
San Diegans have been talking for more than seven years about the double-dipping deferred retirement option plan (DROP), by which City employees get double their pay in their last five years and retire with both a lump sum and monthly paycheck. “We’re finally getting around to make a determination if DROP is cost neutral,” groans Frye, who has been pushing for an answer for years. She doubts that the public will vote for tax increases until the excessive pensions are reined in.
“We’re on the verge of a catastrophic failure of the street system,” says former councilmember Bruce Henderson. “The people getting screwed are those who can’t afford to put $150 into realigning their car every time it hits a pothole.” He has often fought tax increases, but he would approve of a jump in the transient occupancy tax (TOT, the hotel tax) from 10.5 to 13.5 percent, with the money going to the general fund. (Currently, by law, the rate can be no higher than the 13.5 percent average of a group of 15 major cities including Atlanta, San Francisco, and Las Vegas.) He could also see an increase in the property transfer tax (a tax on real estate that is sold) going on the ballot, along with a utility user tax.
Vlad Kogan, who is getting his Ph.D. in political science at the University of California San Diego, says a colleague has statistically plotted San Diego’s aversion to taxes. Between 1995 and 2008, City of San Diego voters considered 3 tax increases. None passed. Meanwhile, eight other large California cities voted on 37 tax increases and 22 passed. This information will go into a book coming out next year, Paradise Plundered: Fiscal Crisis and Growth Challenges in San Diego, by UCSD political science professor Steve Erie, Kogan, and Scott MacKenzie of the University of California Davis.
Kogan says utility user taxes (on such things as electricity, telephone, gas, water, sewer, garbage, or cable TV) would make sense in San Diego if they were structured so that they would not be regressive or punishing to those of lower income. San Diego has no utility taxes, although 150 California cities and 4 counties have such taxes, ranging from 1 to 11 percent, according to a study by independent budget analyst Tevlin. Kogan would also favor an increase in San Diego’s very low transient occupancy tax: “It’s not clear that people think about transient occupancy taxes when making travel plans,” he says. “I’m not convinced it would have a big economic impact,” although the hotel-motel industry would no doubt scream that it would.
In 1919, San Diego voted for free trash services for citizens. Tevlin estimates that if the City were to recover its costs for trash, recycling, and greenery services, it could put $34 million in the general fund and $15.7 million in the recycling fund. Kogan thinks that charging for trash collection would be positive if it were adjusted so it was not regressive.
Scott Barnett, president of TaxpayersAdvocate.org, also thinks it makes sense to repeal the 1919 act. “It was passed when there were pig farms in Mission Valley,” he says. “To say it is anachronistic is using a kind word.” He points out that owners of single-family homes get the privilege — not those living in large multifamily communities. Thus, it would be easier to repeal the ordinance, and it would take only a 50 percent vote. “But the council would never have the guts to put it on the ballot.”
He likes the idea of raising the transient occupancy tax if it were done for a specific purpose, such as to finance the convention center expansion. An increase in the sales tax (now 8.75 percent) would raise a lot of money, says Barnett, but could also meet resistance.
Bruvold thinks the City should look at a gross receipts tax, or a tax on businesses based on the revenue they generate within the jurisdiction, instead of on the number of employees they have (San Diego’s current system). San Francisco, Los Angeles, and Oakland bring in much more money from business taxes than San Diego, Tevlin points out.
Henderson favors moves that would have to be made at a higher legal level. For example, if casino gambling were allowed statewide in establishments other than those owned by Native Americans, municipalities would rake in juicy tax revenue. Similarly, if drugs were legalized nationally, “That would create a huge source of revenue for states and municipalities,” he says. Also, there should be a national value added tax, or tax on each stage of manufacture or distribution. “Among other things, this would be the best way to tax internet sales,” he says. And that would be a matter of fairness as well as a great source of revenue.
But at the federal, state, and local levels, “Special-interest politics will not allow us to deal rationally with the problem,” he says. The public is damned.