Pension, redevelopment decisions costly for city: San Diego could take $41M hit 121912

SAN DIEGO - The city of San Diego's budget could take a $41 million hit next year because of separate decisions made this week by the board that oversees the city of San Diego's employee retirement system and the state Department of Finance, Mayor Bob Filner and Chief Operating Officer Jay Goldstone said Wednesday.

The San Diego City Employees Retirement System directors decided to budget about $27 million in upfront costs for Proposition B for the coming fiscal year, which starts July 1. City officials had hoped to defer increased annual contributions to the pension system for another year.

Two-thirds of voters approved Proposition B in June in anticipation of the city saving hundreds of millions of dollars through 2040. But pension system changes will cost the city more than it will save for the first four years or so, according to Goldstone.

The state's elimination of property-tax funded redevelopment agencies will cost the city's general fund about $11 million a year in debt service for Petco Park and about $3 million annually in bond repayments for a previous expansion of the San Diego Convention Center.

Those costs were previously borne by the Centre City Development Corp., the downtown redevelopment agency.

The state Department of Finance will decide how any remaining redevelopment funds are spent, preventing the city from using redevelopment funds for a new Chargers stadium or for affordable housing planned for Broadway and Ninth Avenue.

Filner said he would try to get Department of Finance officials to change their mind regarding some of the projects.

"The position I'm going to take with regards to everything, but especially the budget, as mayor, is not to be Pollyanna. We're not going to say the roof is falling or we're not going to cry wolf, but we are going to try to be honest about the budget," Filner said at a news conference.

He said San Diegans should temper their expectations about things such as expanded library hours or quicker repair of potholes.

The city recently was awarded $27 million in a settlement with San Diego Gas & Electric over the 2007 wildfires,  and nearly $7 million in lawsuit over miscalculated fees for the administration of property taxes.

Filner said he wants to use that money to pay for public safety projects, such as replacing the police department's  communications system.

City officials previously projected a surplus of about $4.9 million for fiscal 2013-14, and growing surpluses in the future, but they failed to account for pension and redevelopment issues, because those decisions had not been made yet.

At worst, according to Filner, the budget deficit for FY 2013-14 would be about $37 million. The city may have to make a one-time payment up to $10 million to the pension fund, which has been performing below expectations.

Also, the city could lose some state funding for municipal construction projects because voters passed Proposition A, which bans the city from requiring Project Labor Agreements.

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