Paradise Plundered: Fiscal Crisis and Governance Failures in San Diego - Softcover

Erie, Steven

Softcover

ISBN 10: 0804756031 ISBN 13: 9780804756037

Publisher: Stanford University Press, 2011

Synopsis

The early 21st century has not been kind to California's reputation for good government. But the Golden State's governance flaws reflect worrisome national trends with origins in the 1970s and 1980s. Growing voter distrust with government, a demand for services but not taxes to pay for them, a sharp decline in enlightened leadership and effective civic watchdogs, and dysfunctional political institutions have all contributed to the current governance malaise.

Until recently, San Diego, California―America's 8th largest city―seemed immune to such systematic governance disorders. This sunny beach town entered the 1990s proclaiming to be "America's Finest City," but in a few short years its reputation went from "Futureville" to "Enron-by-the-Sea." In this eye-opening and telling narrative, Steven P. Erie, Vladimir Kogan, and Scott A. MacKenzie mix policy analysis, political theory, and history to explore and explain the unintended but largely predictable failures of governance in San Diego.

Using untapped primary sources―interviews with key decision makers and public documents―and benchmarking San Diego with other leading California cities, Paradise Plundered examines critical dimensions of San Diego's governance failure: a multi-billion dollar pension deficit; a chronic budget deficit; inadequate city services and infrastructure; grandiose planning initiatives divorced from dire fiscal realities; an insulated downtown redevelopment program plagued by poorly-crafted public-private partnerships; and, for the metropolitan region, inadequate airport and port facilities, a severe underinvestment in firefighting capacity despite destructive wildfires, and heightened Mexican border security concerns.

Far from a sunny story of paradise and prosperity, this account takes stock of an important but understudied city, its failed civic leadership, and poorly performing institutions, policymaking, and planning. Though the extent of these failures may place San Diego in a league of its own, other cities are experiencing similar challenges and political changes. As such, this tale of civic woe offers valuable lessons for urban scholars, practitioners, and general readers concerned about the future of their own cities.

About this title

About the Author

Steven P. Erie is a Professor of Political Science and Director of the Urban Studies and Planning Program, University of California, San Diego. He is the author of Rainbow's End: Irish Americans and the Dilemmas of Urban Machine Politics (1998), Globalizing L.A.: Trade, Infrastructure, and Regional Development (Stanford, 2004), and Beyond 'Chinatown': The Metropolitan Water District, Growth, and the Environment in Southern California (Stanford, 2006). Vladimir Kogan is a Ph.D. candidate in the Department of Political Science at the University of California, San Diego. Scott A. MacKenzie is Assistant Professor of Political Science at the University of California, Davis.

Excerpt. © Reprinted by permission. All rights reserved.

PARADISE PLUNDERED

Fiscal Crisis and Governance Failures in San DiegoBy Steven P. Erie Vladimir Kogan Scott A. MacKenzie

STANFORD UNIVERSITY PRESS

Copyright © 2011 Board of Trustees of the Leland Stanford Junior University
All right reserved.
ISBN: 978-0-8047-5603-7

Contents

List of Tables and Figures........................................................................ixPreface...........................................................................................xiii1 America's Finest City?..........................................................................32 Never, Never La-La Land: Growth and Governance Challenges, 1800s–1990.....................263 Paradise Insolvent: From Pension Scandal to Fiscal Crisis.......................................614 Paradise Impoverished: Underfunded Public Services..............................................1015 Eyes Wide Shut: Grandiose Plans for America's Finest City.......................................1406 Redevelopment, San Diego Style: The Limits of Public-Private Partnerships.......................1767 Regional and Binational Infrastructure: Governance Challenges and Failures......................2158 Paradise Ungoverned.............................................................................248Notes.............................................................................................283Index.............................................................................................329

Chapter One

America's Finest City?

Welcome to San Diego, California's second largest city, where blue skies keep watch over 70 miles of beaches and a gentle Mediterranean climate means paradise every day. —San Diego Convention and Visitors Bureau, Neighborhood Guide

In the popular imagination, San Diego is a sunny seaside paradise. Touted as one of the nation's top leisure-vacation destinations, San Diego aggressively markets itself for an idyllic climate, pristine beaches, a dazzling array of world-class tourist attractions, beachfront resorts and luxury spas, and a vibrant downtown district. Although "the beach is a way of life," golf is "serious business" here, with more than ninety courses offering stunning ocean views, desert sun, or mountain vistas. Local boosters trumpet the "immense options" for business—such as an innovative high-tech industry—as well as pleasure in a place that proudly proclaims itself "America's Finest City."

Yet there is a grim and increasingly visible civic reality to San Diego not depicted in slick marketing brochures. It consists of a chronic municipal fiscal crisis, exacerbated in recent years by a pension scandal and multibillion-dollar pension deficit; severely underfunded public services and infrastructure; grandiose plans for big-ticket civic projects divorced from straitened fiscal realities; and a privatized downtown and bay front, the product of poorly crafted and inadequately monitored public-private redevelopment partnerships underwritten by hundreds of millions of dollars of public investment. Paradise, it appears, has been plundered.

The result of San Diego's civic mismanagement is the making of an American Potemkin village—an impressive privatized facade with a dark public-sector underbelly—featuring a gleaming new downtown and bevy of tourist attractions but saddled with billion-dollar pension liabilities and deficient public services. With civic energies and resources focused on building downtown "legacy projects," such as a new city hall, a central library, an expanded convention center, and possibly a new football stadium, pressing neighborhood improvements and regional initiatives, ranging from improved fire protection to a new airport, have faltered. The appearance of prosperity well serves the interests of the remnants of a once-potent local growth machine, which includes real estate developers, professional sports team owners, the tourist industry, organized labor, public agencies, business groups, and self-interested politicians seeking legacy projects and reelection.

San Diego's civic woes have tangled roots. As far back as the 1970s, the city was an early and eager advocate of limiting taxes and living beyond its means. City officials raided the pension and other revenue streams to pay for big-ticket items while providing a semblance of public services that tax-averse residents demanded but did not want to pay for. At the same time, voter-approved initiatives at the state level, the culmination of a nationwide tax revolt, erected crippling barriers to local governments' ability to raise new revenues. These changes also empowered small but impassioned minorities to block future efforts to raise taxes, thus exacerbating the tenuous financial position of cities like San Diego. To go along with its "free lunch" political culture, San Diego scores unexpectedly low on social capital metrics, with residents displaying low levels of trust in local government and high levels of political ignorance and apathy. As a former local reporter observed, "To win over San Diegans, you have to let them sit back and do nothing and then congratulate them for doing it." Low social capital makes collective action and public monitoring of government performance more difficult.

At the elite level, the capacity to resolve civic challenges diminished as the old business leadership faltered and San Diego became a quintessential branch-plant town. New policy entrepreneurs on the scene have pursued self-interested, single-issue agendas. They include professional sports team owners, real estate developers, and public-sector unions. Aiding and abetting the new policy entrepreneurs are semiautonomous "shadow governments," such as the Centre City Development Corporation, which oversees redevelopment efforts downtown, and the San Diego City Employees' Retirement System, which manages local pension funds. Another factor contributing to weakened civic capacity has been a sharp decline in the monitoring and effectiveness of civic watchdogs, ranging from the local media to good-government groups. Though hardly unique among the nation's big cities in terms of these troubling civic trend lines, San Diego has been a leader of the pack.

Paradise Plundered dissects San Diego's fiscal crisis and related governance challenges and considers their root causes and likely consequences. In doing so, we hope to provide cautionary lessons for the many communities that are now emulating "the San Diego way." In explaining local government's performance lapses and failures, we emphasize three broad explanatory factors: (1) civic leadership and capacity, (2) political culture, and (3) political institutions. The primary focus is on the City of San Diego and its policy making during the period from 1990 to 2010. We analyze five policy spheres that together encompass the exercise of the city's primary public powers, each with distinct governance arrangements: the city's pension system, municipal finance, public service and infrastructure provision, planning, and redevelopment. We also examine how the city's past has shaped the present, regional and binational infrastructure and governance challenges facing the border metropolis, and prospects for the future. Throughout, we benchmark San Diego with other large cities, particularly in California.

From Futureville to the Most Screwed-Up City in America

After the North American Free-Trade Agreement, the Mexican connection is bound to grow. That and other changes—economic, demographic, cultural—are transforming a place which used to have a reputation as a sleepy navy town, a California cul-de-sac with a great climate and a nice zoo. Nowadays, San Diego can tout itself, without sounding ridiculous, as "the first great city of the 21st century." —"Futureville," Economist, 1996

Most folks probably have certain images in mind when they think of San Diego. A gentle breeze blowing off the Pacific.... Well-fed folks lining up putts on country-club greens. Money oozing from the wireless and biotech juggernauts up and down the coast. How, then, to square this idyllic vision ... with the scandals that have sprouted in California's second-largest city faster than wildflowers after a desert rain? There's so much slime in this town that civic leader George Mitrovitch, president of the City Club of San Diego, calls it "the most screwed-up city in America."

—"Stay Classy, San Diego! It's Wealthy, Sunny, Beautiful—and Possibly the Most Dysfunctional Big City in America," Fortune, 2005

Modern San Diego came of age during and after World War II. In the postwar era, the defense industry brought growth and prosperity, but it collapsed when the Cold War ended, sending unemployment soaring. San Diego embraced the widely held mantra that low taxes, low debt, a small public sector, and business-friendly regulations are the most crucial factors for attracting new businesses and keeping local industries globally competitive. This formula appeared to work. By the late 1990s, San Diego had reinvented itself, with new high-tech industry and foreign trade joining real estate and tourism as pillars of a diverse and apparently healthy economy. In a study of regional innovation, the urban scholar Richard Florida rated San Diego the nation's third-best "creative class" city on the basis of a new model of urban economic development tapping technology, talent, and tolerance.

Beneath the accolades, however, serious problems were festering: woefully underfunded public services and infrastructure, a large and growing low-wage service sector, inadequate schools, and one of the nation's least affordable housing stocks. San Diego's public sector was undernourished and overburdened. Relative to its size (1.3 million residents), the city's police and fire departments ranked among the nation's smallest. Their equipment was aging and deficient. During the disastrous 2003 Cedar Fire, which killed fifteen people and destroyed more than two thousand homes, San Diego firefighters had no helicopters to help contain the conflagration.

In the 1990s, as San Diego recovered from defense cutbacks and a deep recession, the city doubled down, joining other cities in the competition for convention traffic, Super Bowls, and giveaways to professional sports team owners. Raiding pension funds swollen by the bull market of the 1990s was one of the few ways San Diego could pay for big-ticket items like the 1996 Republican national convention and balance its books without raising taxes. Despite San Diego's relatively low tax burden, the T word remains anathema to residents in this military and retirement mecca. This has resulted in little money for public services and basic infrastructure improvements essential to a sound economy. After public pensions were boosted, many blamed organized labor for the city's financial woes.

Having plugged its immediate budget deficit with money meant for municipal pensions, San Diego's elected officials chose to lavish scarce public resources on downtown redevelopment and professional sports stadiums. The capstone project of San Diego's "Downtown Renaissance," which paired the Petco Park baseball stadium for the Padres with ancillary development in the once-moribund East Village, has been widely hailed as a public-private partnership worthy of emulation. This and other projects, their proponents argued, would spur private investment downtown and create new jobs, affordable housing, and public improvements. Critics, however, have pointed to the city's inability to conduct meaningful oversight and to extract public benefits from its substantial investments in downtown and bay-front redevelopment.

California's other big cities appeared to be better prepared to cope fiscally. After Proposition 13 passed in 1978, many cities raised new revenues by imposing utility-users' taxes, increasing business taxes, and charging higher user fees. The Los Angeles Department of Water and Power, for example, found "surplus" revenue to balance the city's budget. Had San Diego emulated these cities, its General Fund revenues would have been much higher, capable of financing essential services and infrastructure without raiding its pension funds. Instead, San Diego became a poster child for the state's tax revolt and the penurious effects of Proposition 13's fiscal straitjacketing of local government. With the onset of the 2008 recession, even fiscally creative cities like Los Angeles faced yawning budget gaps and growing demands from some residents to scale back pensions. In San Diego, the downturn brought the city to the verge of bankruptcy.

Civic Meltdown

The irony is that, before 2003, San Diego was lauded as one of the nation's best-governed cities and held up as a model for the new millennium with its low-tax, business-friendly government; its downtown renaissance; and its environmentally sensitive planning. On the eve of the 1996 Republican national convention, San Diego was praised by Economist as "Futureville" for its vibrant high-tech economy; rapidly growing Mexican trade; and lean, efficient municipal government, with the lowest ratio of city employees to population among the nation's fifty biggest cities. The urbanist Joel Kotkin hailed San Diego as an exemplar of a "'Republican' form of urban governance ... that could make [the GOP] a majority party well into the next century":

[P]rivate-sector activism constitutes a critical component of making smaller and less expensive government work.... This political model, first developed by Republican Progressives in the early 20th century, adapts the best private-sector accounting and hiring practices to city government. Such governments tend to see themselves as a utility that serves the public rather than as a vehicle for political patronage and redistribution of wealth.

Kotkin also claimed that San Diego "has benefited from what it fortunately does not have: no vast municipal welfare state, no entrenched urban underclass, no powerful municipal employee unions to skew spending priorities, and no industrial union tradition to make its labor force rigid." Evidently, San Diego's Republican progressive political tradition had shallow roots. Even as Kotkin was celebrating the city's center-right consensus, the city was already having trouble managing newly assertive public-employee unions.

Within a few short years of these sunny prognostications, San Diego earned national notoriety as one of the most ineptly managed cities, with a brink-of-bankruptcy pension deficit, multiple bribery and corruption scandals, resignations of key city officials, and charges of gross fire-safety unpreparedness in the wake of major wildfires destroying thousands of homes. San Diego's metamorphosis from civic archetype to national laughing stock was swift. By 2004, as the city's pension scandal unfolded, the New York Times proclaimed that "Sunny San Diego Finds Itself Being Viewed as a Kind of Enron-by-the-Sea," and Governing magazine called the city "Paradise Insolvent." In 2005, with corruption scandals erupting amid civic turmoil, Fortune called San Diego "possibly the most dysfunctional big city in America." The Washington Post reported "a serious vacuum of power" in a "former beacon of good government now dimmed by federal corruption probes, deep deficits and election controversies."

According to the Los Angeles Times, "one local television station ... banned use of San Diego's longtime slogan—'America's Finest City'—until further notice, deeming it too 'arrogant and cynical' for a municipality in the throes of national humiliation. The leading local newspaper raised the editorial question: 'Can San Diego sink any lower in the eyes of the world?'" "If you want to study municipal failure," San Diego City Attorney Mike Aguirre observed, "you can't do better than come here."

Mounting Challenges

By 2010, a sizable $2.1 billion unfunded pension liability—projected to increase to $2.6 billion by 2015—placed San Diego's shaky municipal finances in dubious company with once-bankrupt Orange County and once nearly bankrupt New York City. Ballooning pension payments were severely straining General Fund outlays for critical public services like fire protection, police, parks, streets, and libraries. Long considered a model "reform" city, early-twenty-first-century San Diego, according to the Chicago Tribune, exceeded political machine– era Chicago in the number of local public officials indicted for or convicted of bribery and corruption. Randy "Duke" Cunningham, a local congressman, was convicted in one of Capitol Hill's worst bribery scandals in recent history. Three city council members were indicted for accepting illegal payments from a strip club owner and were forced to resign. Ongoing criminal investigations into the pension debacle led to the indictment of several members of the city's retirement board. In the face of scandal and investigations, city hall became a revolving door, with the mayor, city manager, and auditor-controller all abruptly resigning.

In the wake of these calamitous events, it was apparent that civic priorities were misplaced. With strong, local antitax sentiment and seemingly feckless political leadership, vital public services remained under-funded and impoverished. Despite experiencing disastrous wildfires in 2003 and 2007, the city had barely two-thirds of the fire stations needed to meet national accreditation standards. Its aging water and sewer infrastructure required billions of dollars in replacement pipes and upgrades. Instead, San Diego continued to seek waivers from the Federal Clean Water Act while dumping millions of gallons of partially treated wastewater into the Pacific Ocean. With key public officials opposed or sitting on the sidelines, voters rejected plans to build a new airport to relieve congested Lindbergh Field. The town's major newspaper even labeled San Diego "America's Cheapest City," chiding residents for their love of public services but hatred of higher taxes, both of which contributed to the financial chaos. With no new revenues and growing pension outlays, San Diego faced a chronic, long-term, structural-deficit budget crisis.

(Continues...)

Excerpted from PARADISE PLUNDEREDby Steven P. Erie Vladimir Kogan Scott A. MacKenzie Copyright © 2011 by Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of STANFORD UNIVERSITY PRESS. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Edition details

• Publisher: Stanford University Press
• Publication date: 2011
• Language: English
• ISBN 10: 0804756031
• ISBN 13: 9780804756037
• Binding: Paperback
• Edition number: 1
• Number of pages: 360