SAN FRANCISCO — San Diego Mayor Jerry Sanders said California’s second-most populous city has no need for Chapter 9 bankruptcy in an op-ed article published in the San Diego Union-Tribune Sunday.
He rejected calls by some local political activists to consider bankruptcy if labor unions refuse to accept reduced retiree health care and pension benefits.
In December, Sanders and the City Council closed a $179 million budget gap for fiscal 2010 and 2011 with a combination of $82.6 million in ongoing structural budget cuts — slashing 530 jobs — and $96.5 million of one-time solutions. The use of one-time fixes, like spending fund balances, prompted calls for the city to address its long-term structural budget deficit or declare bankruptcy.
“For too long, progress in closing San Diego’s structural budget deficit has been sidetracked by a disinformation campaign that contends, against all evidence, that the city would be better off if it filed for bankruptcy,” Sanders wrote. “That’s baloney.”
Many California municipalities have faced questions about bankruptcy since the city of Vallejo sought Chapter 9 protection in May 2008. With services being slashed to balance budgets to match sharply declining revenues, some constituents have pushed bankruptcy as a way to escape what they see as overly generous benefit packages for public workers.
Fitch Ratings last week said that it is taking local bankruptcy discussions seriously, calling them a “grave credit concern.” The agency said it would review the ratings of any municipality where elected officials are actively considering bankruptcy.
Sanders’ Sunday op-ed was his second high-profile rejection of bankruptcy, echoing shorter remarks in his state of the city speech last month.
San Diego suffered a municipal disclosure scandal over undisclosed retiree health and pension liabilities in the middle of the last decade, which cost the city access to the public municipal bond market for about five years. Sanders has made fiscal reform one of his top priorities as mayor and helped engineer the city’s return to the public market last year.
The Republican mayor last month promised to address the long-term structural budget deficit over the next year and a half. Sanders has cut more than 1,000 city positions since taking office in 2005 and pushed public employee unions to accept less-generous pension benefits for new workers.
“The truth is, talk of bankruptcy impedes progress on real substantive pension reform, and it poisons the climate for thoughtful solutions to our structural deficit,” Sanders wrote.
His article argued that a bankruptcy filing would waste hundreds of millions of dollars without freeing the city from the obligation to pay pension benefits, which are protected under California’s constitution.
