Why San Diegans Are to Blame for the City's Problems

Why San Diegans Are to Blame for the City's Problems
September 30, 2011
by Liam Dillon

About nine months ago, I asked Mayor Jerry Sanders about critics who say he focuses too much on downtown at the expense of the city's other neighborhoods. The mayor stopped me before I finished my question.

"You mean Steve Erie?" Sanders said.

The mayor, who rarely calls out his critics by name, was referring to University of California, San Diego political science professor Steve Erie. Now, Erie has given Sanders much more to work with.

Last month, Erie and two other academics released a book on San Diego city government called "Paradise Plundered." The book, as its name implies, takes Sanders, other city leaders and even residents to task for San Diego's financial and governance problems.

Erie blames weak leadership, a disinterested public and, above all, low taxes as the source of San Diego's decay. I spoke with him about the city's financial problems, his critique of Petco Park and other major development projects and his response to Sanders' criticism.

Erie also made a case for why corruption isn't always the worst thing in government.

I'd like to start with the central premise of your book. You say that San Diego has a shiny exterior and crumbling underbelly, sort of a Potemkin village. Can you explain what you mean by that?

There are really two faces or sides to San Diego. There's the San Diego the tourists see. There's a high-tech industry that spawned the new economy by places like UCSD. That's the public face of San Diego at least in terms of the local PR machine, which is very good at getting the San Diego image out.

The reality of San Diego is on the public sector side. I think on the first page we talk about an increasingly grim and visible civic reality, which is dry rot for public services and infrastructure. That's still largely hidden. You get intimations of it like during the 2003 and 2007 fire when you suddenly realize we have very little fire protection.

The problem with San Diego is that the ocean and the sun are both our blessing and our curse. Obviously, it's a wonderful place to live in if you can afford it. But the problem is, is that it induces sort of a sense of complacency that as long as the sun comes up everything is OK.

You say that San Diegans are as much to blame for the city's problems as its politicians. So why are they, or why are we, to blame?

You have to understand history. The first thing you need to understand about San Diego is that for years it was a military town. Navy Town, USA. That meant a couple of things in terms of the willingness to pay for local services. One is military pay wasn't all that great. Number two there was a sense that Uncle Sam would provide.
Subscribe to the Morning Report.

In addition to this military heritage, there's a libertarian culture here that's particularly anti-local government: Local government is a hot-bed of waste, fraud and corruption. You hear this not only from politicians but from voters all the time.

It's very hard to move voters. The only thing I think in this town that will move them is really a grand coalition. It is the elected officials using the bully pulpit. And a united business community actively supporting things. And the media on board. You see that in a place like Chicago. It's a Republican business community. It's a Democratic machine. The Chicago Tribune has hated the Daleys for years. Yet when it comes to raising revenue and taxes for needed public services and investments they all speak with one voice.

Isn't Chicago notorious for being the most corrupt big city in the country?

But it's a better form of corruption than you have here in San Diego. It's systemic corruption rather than ad hoc or personal corruption.

OK.

What I mean by that is, it's cost plus 10 or 15 percent. You just add that on. It's tithing on the part of the machine. And then the services get delivered.

Why should the public stand for that?

Because it works. You just pay more. It works. In San Diego, you pay less and it doesn't work.

But if you look at Chicago's pension situation from a pure numbers perspective, they're in a lot worse place than San Diego is.

But a place like Chicago and a place like Los Angeles, which is also facing pension difficulties now, they tend to have sources of revenue and an ability or capability to raise revenue. Both of those things are lacking in San Diego. In Los Angeles, right, they just took money out of the Department of Water and Power. It was an ATM machine.

The deficit looks big right now, but the ability to solve it within let's say a five to 10 year period is greater in those communities than it is here.

But how is borrowing from the Department of Water and Power or taking from the Department of Water and Power, how is that good government?

That wasn't the question that you asked. That's a secondary problem, right?

Is it the right way to run a government? Is it really a hidden tax on ratepayers? Yeah, it is. But that's the way, until recently, these places have worked.

What's interesting about San Diego is that we were just the first to get caught. Because we were an early and eager underfunder of the pension among other things. If anything I hope that this book will be read as a cautionary tale of what happens when you go down this route.

Is it fair to say you blame San Diego's financial crisis on inadequate revenues?

On inadequate revenues, yes.

Why is that the primary cause?

San Diego is well below the average in terms of spending on a lot of metrics.

It doesn't mean that it's at the bottom. There are others that are at the bottom, too. But on average the other California cities they spend like today 50 percent more on basic services. They don't have unaccredited fire departments. They don't have the smallest police department in the nation of any big city. They don't have roads with potholes where the deferred maintenance is such. So much of the crisis of public services and infrastructure is our unwillingness to spend money on services.

Back in 1972 we were spending just about the average. You'll notice that the trend line begins to diverge, San Diego dropping further and further behind.

Some could say L.A. is the worst case possible. They throw money at government and public services. But, and not to say that any San Diegan would like to live in Los Angeles, but if there were a major fire where would you wanna be?...

Dean Calbreath hopes Arnold Schwarzeneggar will stop tax breaks

Tax changes may be key to plugging budget hole
Dean Calbreath
San Diego Union-Tribune
June 21, 2009

With California on the brink of insolvency, Sen. Dianne Feinstein recently recalled the days when, as mayor of San Francisco, she would venture out into the neighborhoods and ask people what kind of services they wanted.

“Do you want more police?” Feinstein would ask.

The answer would come back, loudly, “Yes.”

“Do you want more firefighters?”

The answer would come back, loudly, “Yes.”

“Do you want to pay for them?”

“And instantly,” Feinstein said, “there would be a booming 'No.' ”

Speaking to a crowd of mostly government workers at Lawrence Livermore National Laboratory late last month, Feinstein said “that's part of the dilemma of (the California budget crisis). And the hard part of it is where the cuts have to come from.”

Feinstein's comments get to the heart of the problem facing Sacramento now. How many schools, libraries, parks and other public services is California willing to do without as we try to close our budget deficit, currently pegged at $24.3 billion?

Gov. Arnold Schwarzenegger's proposal before the Legislature is to rely on cuts alone to fix the budget: $5.5 billion from health and human services, $5.1 billion from education and $1.3 billion from the court and prison systems. The rest of the money would come from one-time sales of state assets; borrowing from cities and counties (an idea that infuriates local officials); furloughs, pay cuts and layoffs of state employees; fee increases and cuts in other services.

Schwarzenegger pledged last week to veto any budget that includes new taxes beyond what he has already proposed, which largely consist of increases to the state sales and income taxes.

“To do another tax increase is irresponsible,” Schwarzenegger said.

But if Schwarzenegger really wants to be responsible about putting out a budget, he should re-examine some of the tax breaks that were inserted into the budget last year to gain the votes needed for a two-thirds passage in the Legislature. And he should reconsider some of the taxes that were abandoned during the budget negotiations.

A conference committee of the Legislature last week proposed doing just that: clipping out the tax breaks and adding back the taxes. Despite Schwarzenegger's veto pledge, he should give the panel's recommendations some consideration:

Oil companies. California is the fourth-largest oil-producing state in the country behind Louisiana, Texas and Alaska. But despite our reputation as a high-tax area, California has never imposed severance taxes for pulling gas or oil out of the ground.

That's a stark contrast to the other oil-and gas-producing states, most of which have double-digit severance taxes. The taxes in conservative, Republican-dominated Alaska are at 25 percent, generating so much money that the state is able to pay residents $2,000 per year as a benefit, besides building a war chest for when oil will no longer be available.

The conference committee proposed putting a 9.9 percent severance tax on oil – a proposal that Schwarzenegger supported last year – which would generate an estimated $830 million in revenue.

Joseph Sparano, who represents oil interests as head of the Western States Petroleum Association in Sacramento, argues against the severance, noting that in California, as opposed to some (but not all) oil-producing states, oil companies pay property taxes for the land where they are drilling.

“If you add the severance tax, oil producers would be paying higher taxes than anywhere else in the country,” he said.

Sparano may have a point. But perhaps we could at least lift severance taxes to the point where we'd be on a par with, say, Texas, Louisiana, New Mexico and Wyoming, which now collect far more on their oil and gas than we do, even after taking property taxes into account.

Corporate tax breaks. During the budget negotiations in February, the Legislature inserted three corporate tax breaks that resulted in a total gap of $2 billion to $2.5 billion

Data from the state Franchise Tax Board show that one of the proposals – to allow companies to choose between two ways of being taxed in the state – would largely benefit the 0.1 percent of companies in California that make more than $1 billion per year. Much of the benefit would go to just nine companies, saving them an average of $33 million a year.

“These massive, permanent tax cuts will exacerbate California's persistent budget troubles, requiring deeper cuts in public services or potentially larger tax revenues from California's families,” said a report of the California Budget Project, a liberal think tank in Sacramento.

Another proposal, which would allow corporations to transfer taxes among related companies, would benefit just 0.03 percent of corporations, with the top six companies saving an average of $23.5 million a year.

Auto license fee. Schwarzenegger's first action as governor was to roll back California's fee on automobile licenses, which put a $4 billion hole in the budget. As the budget problems mounted last year, Schwarzenegger was forced to increase the license fee. And now the Legislature is proposing to raise it an additional $15.

The standard argument against raising taxes is that it would discourage people from buying automobiles. But will an additional $15 fee on an auto license really stop Californians from buying a new car? That's doubtful – but it could generate millions of dollars for the health care, education and other services being cut.

Cigarette taxes. The committee is proposing to increase excise taxes on cigarettes and other tobacco products by $1.50 per pack, nearly tripling the tax on a pack of cigarettes from 87 cents to $2.37. This proposal would increase revenue by an estimated $1 billion next year.

Esmael Adibi, economist at Chapman University in Orange, who happens to be a smoker, complained that such a tax would be “Draconian” and would fall most heavily on the poor.

But if you weigh the value of helping people quit smoking versus laying off teachers and suspending health care for poor children, it would be hard to call it an altogether bad idea. Even if that proposal were chopped down by 90 percent, to 15 cents per pack instead of $1.50, it would still generate $100 million in revenue, which would be enough to keep quite a few teachers on the job.

The bottom line is that to have a balanced budget, there will be pain all around. Assembly Speaker Karen Bass, who supports the tax revisions, said she just wants to make sure “that the shared pain be shared by oil companies and tobacco products, as well.”