SAN FRANCISCO - The San Diego City Council yesterday voted not to hire lawyers to explore a Chapter 9 bankruptcy filing.
City attorney Michael Aguirre, who lost his bid for reelection on Nov. 4, called for a closed-session council hearing on his recommendation that the city hire a team of bankruptcy lawyers from Orrick, Herrington & Sutcliffe LLP to explore a Chapter 9 bankruptcy filing in response to a growing pension deficit.
Orrick represents Vallejo, Calif., in its bankruptcy case.
"San Diego finds itself in the same position as General Motors, Bear Stearns, Lehman Brothers, Fannie Mae, and Freddie Mac," Aguirre said at a press conference Monday. "Our liabilities far exceed our assets."
Aguirre has spent his time in office campaigning against financial corruption and suing to reduce public pension obligations that he says were granted illegally.
Like other public pension funds, the San Diego City Employees Retirement System has suffered steep losses in the current economic downturn. San Diego's actuary revealed earlier this month that the pension deficit has grown to $2.8 billion as of Oct. 31 from $1.2 billion at the end of fiscal 2007.
San Diego was sanctioned by the Securities and Exchange Commission in 2006 for failing to disclose its pension gap when it issued bonds in 2002 and 2003, and five top administrators have been charged with fraud in the case.
The city, California's second largest, has since revamped its financial management and disclosure practices. It plans to return to the public bond market in January for the first time in more than four years.
A spokesman for Mayor Jerry Sanders dismissed Aguirre's proposal as "grandstanding." He said the attorney's measure lacked support of either the council or the mayor.
"Unfortunately, we have a city attorney who, in his waning days in office, is trying to make hay," said the spokesman, Darren Pudgil.
Vallejo declared bankruptcy on May 23, creating the biggest municipal bankruptcy since Orange County in 1994. The San Francisco Bay Area city of 117,000 says it can no longer afford generous salaries and benefits owed to public safety workers.