SAN DIEGO - Last week Mayor Jerry Sanders announced his intention to enact all 121 recommendations offered in the remediation section of the recently released Kroll Report.
Calling it a "once in a generation opportunity," Sanders said that adopting the remedial plan would result in greater transparency in the City's financial reporting practices, and make the City government more efficient and accountable to citizens.
The mayor also believes that the plan's implementation will introduce crucial internal fiscal and executive controls.
"I believe that adoption of these actions will send positive messages to the bond rating agencies and the financial markets that we understand the depth of our past wrong doing and that we are prepared to institute corrective actions so that we never make the same mistakes," said Sanders in a press release.
The mayor also said the City's outside auditors, KPMG and Macias Ginni & O'Connell have told City officials that they are satisfied with the remedial steps found in the Kroll report. They assured Sanders that if the City accepts and implements a comprehensive remedial plan, KPMG will issue the long-awaited audited financial statements for the fiscal years 2003, '04 and '05. The City needs the outstanding audits to regain access to the public credit markets.
Sanders also dismissed City Attorney Michael Aguirre's recommendation to wait for a ruling from the SEC before committing to a course of action.
"I think most in this community would agree that we've waited long enough. The Kroll report painfully points out that delays have been the tradition, not the exception, at City Hall," said Sanders.
Sanders detailed his plan of action in a 38-page report to the City Council, which they will consider at a special meeting on September 6.
City Attorney's Recommendations
City Attorney Michael Aguirre released on Tuesday a statement calling for more public debate on the issue of remediation, and offered his own 21-point plan for fiscal reform.
Aguirre cautioned against the hasty adoption of remedial steps that haven't been fully analyzed and publicly debated, pointing out that many of the actions recommended in the Kroll Report require the taxpayers to foot the bill.
"As the SEC completes its investigation, it is critical that the City of San Diego take initial steps to implement a serious and viable package of reform measures that have been thoroughly discussed, debated and endorsed by the public. Our citizens deserve nothing less," said Aguirre.
Controversy Continues
The San Diego Union-Tribune reported on Wednesday that Mayor Sander's spokesman, Fred Sainz, dismissed Aguirre's plan as a list of political statements instead of ideas for remediation.
"If you like tax increases and endless lawsuits, then you'll love Mike's plan," he said.
Adding to the controversy, Aguirre announced that he plans to file a lawsuit against Kroll over its $20 million investigation into San Diego's finances. "That was a misuse of $20 million," Aguirre said at a Wednesday news conference. "Kroll did not meet its contractual obligations."
1) The San Diego City Council must settle on behalf of the City with the SEC. Individuals, including members of the City Council subject to SEC investigation, must resolve any personal issues with the SEC separately without further expenditure of public funds.
2) The San Diego City Council shall admit wrongdoing in underfunding the pension plan and increasing pension benefits with no funding.
3) The San Diego City Council shall adopt legislation that rescinds the creation of all illegal pension benefits.
4) The San Diego City Council shall direct the Comptroller to remove any illegal pension benefits from the accounts of City employees who have yet to retire.
5) The San Diego City Council shall rescind any elected official's pension benefits that were granted retroactively in 2001 and 2002.
6) The San Diego City Council shall place on the ballot in the next election a City Charter amendment granting the voters the opportunity to permanently require that any increase in City pension benefits will require a vote of the electorate.
7) The San Diego City Council will prepare a revenue enhancement plan for submission to the electorate at the next feasible election that will raise sufficient funds to pay for all legal pension benefits.
8) As recommended by former Mayor Dick Murphy's Pension Reform Committee, the San Diego City Council shall place on the ballot in the next election a City Charter amendment to change the San Diego City Employees' Retirement System (SDCERS) Board composition so that it will consist of seven independent members.
9) The San Diego City Council shall reinstate the City Attorney as the chief legal counsel to the SDCERS Board.
10) The San Diego City Council shall amend the Municipal Code to include a revised version of the Employee Retirement Income Security Act (ERISA), and the City Attorney will establish a separate legal section within the Office of the City Attorney to oversee the City's new pension plan.
11) In the next election, the San Diego City Council shall place on the ballot a City Charter amendment granting the voters the opportunity to determine whether to have an appointed or elected City Auditor.
12) The City Auditor shall be required to make quarterly reports on the financial condition of the City to the City Council and to the public.
13) If the City establishes an Audit Committee, its members should be comprised of the City Council, the Independent Budget Analyst, and the independent Auditor.
14) The Monitor function shall be fulfilled by the independently-elected City Attorney.
15) The independently-elected City Attorney shall remain the Chair of the Disclosure Practices Working Group (DPWG).
16) San Diego City Councilmembers will take mandatory financial management training with a continuing education requirement, and also be required to pass a related financial examination.
17) When issuing municipal bonds and approving the City's Certified Annual Financial Report (CAFR), the San Diego City Council must certify under penalty of perjury that the financial disclosure statements contain no material misstatements of facts and no misleading information, and that the City Council has read and understood the disclosures.
18) The San Diego City Council shall immediately disclose to the public any adverse financial facts discovered by them.
19) The City will pursue all third party claims to recover damages for breaches of duty owed to the City or the pension system including a recovery of the funds paid to Kroll, Inc.
20) The City will meet and confer about this Plan with credit rating agencies and the SEC, and based on these discussions, make any agreed-to changes in the Plan before it is implemented.
21) The City will seek to mediate any and all disputes arising under this Plan with interested parties in the context of resolving all outstanding litigation.
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