Will Blog for Food: San Diego: A Tale of Two Cities Part II

We have blogged before about the two entities running San Diego. On the one hand we have the elected Mayor and City Council who are presiding over a virtually bankrupt city which hasn't been able to borrow money in the bond market since 2004 because of a suspended credit rating. On the other hand we have the unelected City Centre Development Corporation (CCDC) which has overseen the redevelopment and revitalization of downtown including the building of scores of new condos and office projects, the new ballpark, and new parks and amenities of various sorts.

Why is there such a disparity? Because the CCDC is comprised of a small number of highly paid, highly motivated professionals - architects and urban planners - who have various tools (including eminent domain as a last resort) which enable them to get the job done. On the other hand, the "city" is a vast bureaucracy including a Police Department, Fire Department, Transportation Department, Parks Department, Water and Sewer Department comprised of unionized municipal employees who in conjunction with not fully accountable public officials have placed self-interest and not the public interest first resulting in various scandals such as the current pension debacle in which the Pension Board conspired with city officials to underfund the pension fund.

A case in point is the new main library designed by architect Rob Wellington Quigley and Tucker Sadler. This was a pet project of former mayor Dick Murphy. It was one of Murphy's 10 points when he assumed office in December 2000 with a promising agenda to improve San Diego's civic life. When San Diego "city" finances went into a nosedive, Murphy proposed a creative way to pay for the new library - hit the CCDC up for it. The CCDC is funded by a percentage of the increased taxes due to redevelopment. In other words if a high rise replaces a flophouse, the property taxes go up accordingly. The CCDC gets a percentage of the increase. Consequently, due to the fantastic amount of redevelopment, the CCDC has plenty of money. Luckily, there is a firewall between CCDC and "city" finances.

The city seems to care less about husbanding its financial assets than it does in using them for political purposes. On a small scale the collusion between lobbyists, powerful financial interests and politicians looking to curry favor with campaign contributors mirrors what goes on at the national level with the interests of the average taxpayer not counting for much. On the other hand the CCDC does look out for the interests of the average citizen by being concerned about issues like parks, architectural values and good urban planning. It's impact on the taxpayers is nil except from the rising inflow to city coffers due to the increased value of downtown real estate. As such it represents a salutary effect. No one would argue that, as a high rise represents an increase in value over the flophouse it replaced, the owner of the high rise should not pay property taxes commensurate with its value.

Originally, the new library was estimated to cost $149.5 million, and Murphy originally announced in his State of the City address that he would ask the CCDC to pay two-thirds of the cost for building the library on Park Boulevard at J Street. Murphy asked the CCDC for $100 million to build the library. No money from the San Diego city general fund would be available since the city was broke. In addition $20 million was to come from a state grant and $30 million from private donors. We have a few local billionaires who probably would be glad to contribute. However, the CCDC choked on being hit up for $100 million offering $80 million instead, still a considerable sum of money.

This is an excerpt from an editorial which appeared in the San Diego Union December 7, 2005 entitled "Rescuing the Library":

"It is encouraging that Mayor Jerry Sanders, a hard-nosed realist when it comes to the city's fiscal crisis, recognizes the importance of a new central library and pledges to support it, with one stipulation. That is that no general fund money be used in its construction. The general fund pays for police and fire protection, trash collection, parks and other city services, and it currently is being devoured by escalating pension costs.

Sanders' practical approach is unavoidable, but it imposes an even greater challenge on private individuals to rescue this vital project. Here are the numbers:

A signature building designed by San Diego architect Rob Wellington Quigley, rising nine stories and encompassing nearly 500,000 square-feet overlooking the bay, will cost $185 million, if construction begins next July as planned. That is up from the 2003 estimate of $149.5 million, due largely to a $28.5 million jump in construction costs caused by the delayed start of construction. Time is money. And on a project of this scale, another postponement in the construction schedule would drive the cost significantly higher.

At present, the Centre City Development Corp., the redevelopment agency for downtown, has pledged $80 million in "tax increment" funds toward the library. These are additional revenues generated by new development downtown and they cannot be spent, thank heaven, to bail out the troubled retirement system or on other general fund purposes. On top of CCDC's contribution, the city has a $20 million state grant, which will be forfeited if library construction does not begin soon.

This leaves a gaping hole of $85 million to be filled by private donors – a huge but certainly attainable goal in the country's seventh-largest city. One potential way to ease the demands on philanthropy is for CCDC to boost its contribution to $100 million, which was the amount former mayor Dick Murphy proposed. Given the boom in CCDC revenues, the agency certainly can afford to contribute $100 million.

This still would leave, however, $65 million to be raised from individuals. Needless to say, a relatively small number of San Diegans are potential sources for this kind of money. (The city's first public library was built a century ago with an indispensable $50,000 grant from Andrew Carnegie.) Rarely in San Diego's history has such a crucial project depended on so few. Without their support, this glimmer of civic achievement will be blotted out by the dark clouds of San Diego's financial crisis.

The CCDC to the rescue. While the "city" is embroiled in pension debacles and fiscal crises of various sorts, the CCDC is carrying the ball in order to make San Diego a world class city. What lessons can be drawn from this puzzling conundrum? An agency of the city has more money than the city itself or what we thought of as the city!? And note this: the CCDC's money is based on an increment of the increased taxes due to increased real estate values. Who do you think gets the lion's share of the increased taxes? You guessed it. The broke city itself where the gusher of money coming in goes right down a rat hole. Maybe the CCDC should replace the "city" as the "city of San Diego" for all intents and purposes. It recently floated a $109 million triple A rated bond something the "city" doesn't have a prayer of doing. Fiscal responsibility has not been the "city's" strong suit. Maybe San Diego should outsource it's personnel needs or even privatize them. Could private contractors do a better job of policing, fire fighting, providing water and sewers etc? Why not? Perhaps an agency professionally staffed like the CCDC could oversee the contracting of these functions thus getting the "city" out of the business of managing a huge unionized bureaucracy with assorted personnel problems. Already the Downtown San Diego Partnership has taken over the "Clean and Safe" functions of the city. If we dismantled the bureaucracy and deunionized the city we all might be better off.

Why shouldn't the city be run like a successful corporation? Most corporations are deunionized and debureaucratized these days. They are getting out of the pension and health care business. I believe health care should be provided on the national level to every citizen like it is in most other advanced industrialized countries. I'm for means testing it like it is in the new Massachusetts plan. I'm for means testing social security as well. Why shouldn't rich people, at least, pay their own way. I think unions are passe. "Benefits" should come via the national government or perhaps from state governments. They should be for all not just union members.

The back office work could be outsourced to Bangalore replacing hundreds of overpaid municipal employees by underpaid young Indians eager for work. Why is the CCDC a success? Because it's not in the personnel business. It doesn't have to deal with all kinds of "benefits" like pension plans and health care. This is what is bankrupting the city. I say let the city go bankrupt, and then let something like the CCDC take over as the city. A few highly paid, highly dedicated professionals overseeing a bunch of private contractors who wouldn't hesitate to outsource most of the work.

Pat Flannery calls Nancy Graham, president of the CCDC, San Diego's "unelected mayor." But he misses the point. Ms. Graham was selected based on her merit, not on her ability to attract campaign contributions. Flannery is upset that the CCDC is building fire stations. He doesn't get it. Those amenities are not strictly for private use. They are for the general public like any other park or fire station. He thinks the city is being run by real estate developers. However, there is probably more democratic input from local citizens into the decision making process of the CCDC than there is into the decisions of the politically elected mayor and councilmen and women.

There is also a group called the Centre City Advisory Committee, CCAC, that advises the CCDC. These folks are elected from the various districts of downtown, and, as one so elected and having served a term, I can attest that the real estate developers have to pass muster with the CCAC before any decision is made by the CCDC. The whole process has a large component of democratic input since it is ongoing and not just a periodic election. The CCAC does not have veto power over the CCDC but exerts considerable influence. Every project carried forward by the CCDC is reviewed. In addition the recommendations of the CCDC have to pass muster with the city council before they can be put into effect. Far from being run by a cabal of real estate developers, the CCDC, CCAC and city council working in conjunction have proven that great things can be done using a different model than the municipal employee bureaucracy cum elected politicians model which is currently mired in so much controversy and debt.