Posted on 10/03/2006 11:22:49 AM PDT by NormsRevenge
San Diego's financial hole is much deeper than previously suggested.
A retiree health care liability has grown from $978 million to $1.38 billion, and the city's share of the pension deficit has increased from $1.39 billion to $1.76 billion.
The roughly $770 million increase is found in an unaudited report on San Diego's 2003 fiscal status that Mayor Jerry Sanders released yesterday to replace a discredited 2002 audit that was the city's most recent annual fiscal report.
What kicked the new report loose was a consultant recommendation that the City Council share responsibility with the mayor for approving the accuracy of the city's annual financial reports – and be given two weeks to review them.
Sanders has asked council members to vouch for the report Oct. 16, about two weeks before he expects the city's outside auditors to certify it.
The report recounts a history of the city's legal and financial woes to date and – once the financial data is audited by the firm KPMG – is expected to start a series of events that should ultimately restore San Diego's reputation and an ability to sell bonds for a growing list of capital projects delayed since 2004. City Attorney Michael Aguirre, who has said the city's pension deficit was understated, called the report “the first step out of the hole.”
“There's no more running, there's no more hiding,” Aguirre said. “This brings home in a very cogent and powerful way how serious the financial crisis is that we face.”
The pension deficit has been widely reported at $1.43 billion. The city's share of that was $1.39 billion, with the rest divided between the San Diego Unified Port District and the San Diego County Regional Airport Authority.
The estimate excluded certain contingent city liabilities – until now.
The reason for the retiree health care estimate's increase is that city officials realized they had used wrong assumptions when making the projection in March.
The new report is more evidence of the failures of city officials whose unsound decisions have overturned San Diego's once-buoyant financial reputation and left it short more than $3.1 billion in long-term retiree promises made but never paid.
The report also lists 57 individual errors that caused the city to overstate its net assets in 2002 by $456 million – or nearly 7 percent.
Jay Goldstone, Sanders' chief financial officer, called the number and type of errors “egregious” and said one or two restatements a year is more typical.
San Diego's errors included double counting of roads and bridges and delays in depreciating the value of water and sewer plants.
The city's 2002 financial report was released in November 2002, and the 2003 report normally would have followed a year later but it was delayed when major questions emerged about the accuracy of San Diego's accounting.
The past three years have been anything but normal for San Diego, which has halted a range of capital projects – from sewer pipes to fire stations – since its discredited financial reporting contributed to a credit rating suspension.
In short order in 2004, the city's auditor retired suddenly, the federal government began investigating San Diego for possible fraud and corruption, and KPMG, a global auditing firm, was hired to scrub the city's discredited books.
KPMG was brought in to replace Caporicci & Larson, a Costa Mesa firm that landed the city job in 2003 when it bought the assets of Jaham, Calderon & Osborn, a local outfit that won the contract over staff objections in 1993.
San Diego's auditing carousel has since led to the hiring of another firm for the city's books from 2004 and 2005. City officials expect to retain the same firm – Macias, Gini & O'Connell – for its 2006 books, work that typically would wrap up next month but is now expected to be completed by June 2007.
Based on a timeline Sanders released in August, the 2004 and 2005 audits should be done by late November and mid-February 2007, respectively.
KPMG is still fine-tuning its estimates and may not finish field work for two more weeks, Goldstone said yesterday. Sanders, who declined an interview request through a spokesman, cautioned the City Council in a memo that the 2003 report could still change in material ways.
A need for one change can be found in the introduction, which says San Diego overstated its net assets $424 million because of 51 separate mistakes, a line mistakenly included from an earlier draft.
Related stories at SD U-T
City may be close to settling with SEC
http://www.signonsandiego.com/news/metro/pension/20061003-9999-1n3sec.html
Documents
Fiscal Year 2003 Draft Comprehensive Annual Financial Report (PDF)
http://www.signonsandiego.com/news/metro/images/061003financialreport.pdf
I see MASSIVE taxes of all sorts on the horizon ... .
Spending money to buy unsold Chargers' tickets sure was a great idea!
I see massive marches on D.C. asking, begging, BAIL US OUT!
Living in decadent New Jersey ... I'm not laughing at you ... we have the same crap going on here.
Eh, who cares. The weathers' perfect, everyones fat with home equity and surf's up, duuude.... /sarc
Frigging unreal ....all over this state!
Thinking about Vegas....
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
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