San Diego’s decade-long budget travails may be nearing an end

SAN DIEGO — Its official motto is “America’s Finest City,” but for the last decade this sunny municipality at the bottom of California has earned an unflattering reputation for fiscal foolishness.

Those days may well be coming to an end, however.

On Wednesday, the city’s first “strong” mayor, Jerry Sanders, reported that San Diego was looking at a balanced budget for next year and a $119-million surplus over the next five. “We seem to be miles ahead of other cities,” Sanders told reporters at a budget unveiling.

The city’s $1.1-billion general fund budget for next year contains an 11% reserve, Sanders said, with no new service reductions. The spending plan also provides enough money to restore some of the cuts made to libraries and parks and to fill potholes in 60 miles of streets, he said.

If the city has indeed made a comeback, it hasn’t been easy. Each budget season has brought service cutbacks, hardball contract negotiations, layoffs and even talk of bankruptcy. Wages have been cut, retiree healthcare reduced and a less generous pension plan adopted for new hires.

“We are certainly not providing the level of service we did in 2003,” Sanders said, noting that the city has cut between 1,600 and 1,800 jobs in the last five years, mostly through attrition.

In June, voters will be asked to endorse a measure to provide less generous 401(k) plans for new employees, except for police.

Elected in 2005 to replace Dick Murphy, who resigned amid criticism of his handling of the city’s fiscal problems, Sanders is the first mayor given much stronger authority under a voter-approved change to the City Charter. He has worked within a city zeitgeist that is strongly opposed to tax increases. In 2010, Sanders asked voters for a half-cent boost in the sales tax rate; the measure was soundly defeated.

San Diego got into budgetary trouble long before its peers, mostly for reasons involving risky fiscal decisions and lack of candor with Wall Street about bond sales. On Wednesday, Sanders said the city’s experience in dealing with those problems has allowed it to emerge from financial chaos sooner than other cities in California. In comparison, Los Angeles is now looking at a deficit of $220 million for the next fiscal year and major layoffs and cuts.

“We were the canary in the coal mine,” Sanders said.

Asked to proffer advice to mayors in Los Angeles, San Jose and San Francisco, Sanders said that pension levels promised in more prosperous times are no longer sustainable.

“They’re having to come to grips with the realities of today,” Sanders said.

Of course, only time will tell whether San Diego has indeed escaped its fiscal quagmire.

Steve Erie, professor of political science at UC San Diego and coauthor of “Paradise Plundered: Fiscal Crisis and Governance Failures in San Diego,” said the city’s problems will persist as long as it continues to spend considerably less per capita on services than other big cities and politicians are reluctant to challenge voters to pay more.

“Over the next five years, we’ll be millions of dollars short of maintaining, let alone fixing, our inadequate roads,” Erie said. “With a growing surplus of potholes, it will be ‘happy days are here again,’ for tire-and-wheel alignment dealers.”

Councilman Carl DeMaio, a leading candidate to succeed the termed-out Sanders, said the mayor’s budget is balanced only by omitting $50 million in infrastructure repairs. He has proposed more outsourcing of city jobs, among other measures.

Sanders, basking in praise from three councilmen in attendance at his news conference, dismissed DeMaio as someone whose “entire platform is doom and gloom.”

tony.perry@latimes.com