May 28, 2006

After Scandals, Usually Sunny San Diegans Wonder if City Has Hit Bottom

SAN DIEGO — Last summer, shortly after former Mayor Dick Murphy resigned in the depths of San Diego's legal, political and financial crisis, city officials quietly removed the boosterish slogan "America's Finest City" from the city's Web site.

Jerry Sanders, the former San Diego chief of police who became mayor in December, restored the upbeat motto as one of his first official acts, even as the investigations, indictments and deficits continued to pour forth.

"What were we supposed to say?" the mayor asked with a weary laugh in a recent interview. "We're in the top third?"

Mr. Sanders has somehow maintained his sense of humor after six months in one of the toughest municipal offices in America. San Diego, once a model of prosperity and competent governance, is reeling under a seemingly endless series of blows.

In the past 18 months, San Diegans have witnessed City Council members on trial for taking bribes from a strip club operator, other officials facing charges of enriching themselves by manipulating the city's pension funds and Wall Street refusing to underwrite any borrowing by the city because it cannot provide credible financial statements.

The city has had two nasty mayoral elections since 2004, and the city attorney is essentially at war with the City Council and the pension fund board. And perhaps most frightening to many residents, the once-inexorable rise in real estate values has leveled off, and prices may be starting to drop.

"It's all the fun I hoped for," said Mr. Sanders, 55. "And maybe a little bit more."

Many here are wondering if San Diego has hit bottom, or if worse is yet to come.

"This is no doubt the darkest period in San Diego's history," said Malin Burnham, who made a fortune in real estate and who has devoted the last 20 years to philanthropic projects and building the city's image. "We have seen three or four years of turmoil, but I think it's all correctable and it's being corrected."

That is what the optimistic Mr. Sanders would like the 1.2 million residents of this seaside metropolis to believe.

He delivered a series of unusually blunt messages when he took office in December. In his inaugural address he said: "Our city government is broken. There's no other way to put it." He cataloged the city's ills and the sometimes criminal actions that had caused them and said, "Those days have come to an end."

A month later, in his State of the City address, Mr. Sanders said San Diego faced the most serious financial, organizational and ethical crisis in its history. "As best I can tell," he said, "the operating philosophy around City Hall involved one of these three words: delay, deny or deceive."

Even the most jaded cheered this rare burst of candor.

Scott Lewis, executive editor of the Voice of San Diego, a feisty year-old Internet newspaper (, said he and his skeptical colleagues thought that San Diego might have emerged from its dark alley.

"He gave an amazing speech, and there was a collective sigh of relief around the city," Mr. Lewis said. "Some of the gloom lifted."

But he said that in recent months Mr. Sanders had softened his candid assessment of the city and had begun to ally himself with the boosters and business leaders who for years had concealed the city's problems under a haze of sunny salesmanship.

"The creeping tendency of the past — to paint a rosy picture — has returned," Mr. Lewis said. "There's a nationwide advertising campaign under way, but not a single fundamental reform has taken place."

Michael J. Aguirre, the city attorney, believes the city has a long way to go to clean up its politics and get its books in order. He said that the city pension fund deficit was closer to $2 billion than to the official figure of $1.4 billion, and that the fund for health care benefits for city retirees was an additional $1 billion in the red. He is not quite ready to declare San Diego financially bankrupt, but he said it long ago went into legal and ethical receivership.

"When it comes to violations of the law, they're so plentiful," Mr. Aguirre said, referring to allegations of illegal pension benefits and the bribery charges against the three members of the City Council. "It's like salmon season in Alaska."

Eight former city officials are awaiting trial on charges that they concealed the granting of large increases in pension benefits for themselves and other city employees while pushing a plan to permit the pension plan to operate at a substantial deficit.

In an unrelated matter labeled "Strippergate," one City Council member was convicted last summer of accepting bribes to help the owner of a topless bar get the city's no-touching rule lifted. Another Council member's conviction was overturned. A third councilman died before his case came to trial.

A number of state and federal investigations into the city's finances and politics continue.

Mayor Sanders said he believed that the city had seen its worst days. "It was every bit as bad as I thought when I took office," he said. "But I do think the problems can be solved.

"It's a painful process," he added.

He said that he took some comfort from the fact that many other large American cities were facing similar financial problems because of pension obligations, backlogs of expensive infrastructure needs and the rising cost of health care for city workers and retirees. He agreed with some analysts who describe San Diego as the canary in the coal mine of American cities. Its fate will point the way for dozens of others, Mr. Sanders said.

Pat Shea, a lawyer who ran for mayor last year, said Mr. Sanders should take little solace from other cities' troubles. San Diego has descended further and faster than any other big American city and has not shown the political will to confront its problems, he said.

"I sense a weariness among the people of San Diego," Mr. Shea said.