Q&A: Toni Atkins, deputy mayor of San Diego
September 4, 2005

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    (My comments in red)    
    Question: Where does the city stand on the audit of its past financial documents given the recent development by the pension board to keep attorney-client privilege but turn over subpoenaed documents to the SEC, the District Attorney's Office, the city's audit committee as well as the U.S. Attorney's Office?

Answer: I think we're trying to determine that based on the action of the pension board in the past few days. I have spoken with Lynn Turner (of the audit committee). They are trying to determine what access we are going to have. They perceive this to be good news at this point. The audit committee and KPMG will be moving to get access to that information as soon as possible.

....that WE are going to have. Does that include Aguirre?

So despite initial reports KPMG, the accounting firm, will have access?

That is my understanding. If there are gaps in information that the pension board is providing to the U.S. Attorney and the SEC that it is not providing to us, I think the audit committee and KPMG will be making that determination and letting us know immediately. So the fact that we didn't get a full waiver is a concern to me. I still think full disclosure would have been the best solution for us. The limited information does concern me but the audit committee is optimistic. The committee wants to get its hands on the information, it wants KPMG to have that information. They will let us know from there if there are gaps that are problematic.

How can KPMG have access but not Aguirre?

Under this scenario, is the public excluded from seeing this information?

As I understand it, yes.

Read the Brown Act Toni.

Doesn't the public deserve to see this information? The public is being asked to pay for these past mistakes but it is going to be excluded from knowing what happened?

A full waiver, which I support, would allow access to that information and is better. What we are happy about is that the audit committee and KPMG will have access to that information which moves us along. It is a step in the right direction but the minute that the audit committee or KPMG indicates to me that there is a gap and it is a problem we are going to be back to square one.

Is there such a thing as a partial waiver? I doubt it.

Are you going to press for full public disclosure?

Well this just happened two days ago. I want full public disclosure. I think that is the best way to go. We have nothing to hide. In the next day or so I will be hearing from the audit committee whether they have any concerns. We hired them to do a job and I expect our audit committee to tell us where the problems lie. We still have four appointments to make to the retirement board on Tuesday. Our fallback plan continues to be that we will appoint people to the pension board who understand the significance of the attorney-client privilege waiver. We still have the issue of the removal of Peter Preovolos on the docket for Tuesday so we will be taking up both of those issues. This action by the pension board does not change the fact they we need those people on the board so we can come to some conclusion to this.

She wants a waiver?

Does this wider disclosure blunt the effort to fire Preovolos, which would require five votes from the current six-member council?

It may factor into my colleagues' decision on whether they are going to keep or remove him. It takes five votes and we have six people so it will be an interesting discussion.

She wants to keep Preovolus.

What is your prescription for returning the city to fiscal health?

This is going to take many years to resolve. We have to follow the intent of what the voters voted on last November when they talked about going to a 15-year amortization versus a 30. That's going to mean financially that by 2009 the contributions to the pension fund are going to be significantly more. And then we have further disclosure requirements on financial statements about how we're going to fund health benefits.

Was that an answer?

What do you do to return the city to financial stability?

Downsizing. Making the institution smaller. Or we're going to have to talk about how we get the revenue to do what we need to do in the city in terms of operation. Or a combination of both. And I think the rating agencies have pretty much said that we did not make some of the tough calls as a council that we needed to make. So you've got the audits, whatever news that tells us. We've got to come through the U.S. attorney and the SEC investigations and find out what they tell us in terms of whether it's going to be a financial hit to the city in addition to any potential criminal charges that might result. Mitigation, disclosure practices. Are all of those things going to cost us money?

She will "downsize" the City by making her District one big redevelopment area for Sol Price and Jack McRory who now control the City Heights Redevelopment Project. Pretty soon this city will consist of eight giant redevelopment projects that used to be called City Districts. That would definitely "downsize" the City administration all right.

What do you mean by mitigation?

The mitigation up to this point is in making changes in personnel, which we've done. We have a new auditor. Making changes to our disclosure practices. In terms of the rolling back pension benefits, that's probably going to be determined in the courts. We are going to have to look years ahead. I think it's going to be a very hard decade for labor negotiations.

What about rolling back benefits for future employees?

I think for future employees we're going to have to make some drastic, hard decisions as a council.

Did Mayor Murphy fail to provide material information to the council that you should have had? Or the city manager?

I am not sure what Mayor Murphy knew and when he knew it.

Under a strong mayor form of government, to take effect Jan. 1, the council will have two new offices of a budget analyst, which you have not had, and a legislative analyst. Won't those two offices give the council more information than it had before?

That is certainly our hope. Whether you're under a strong mayor form of government or a city manager form of government, the checks and balances are supposed to work. I think this is a reminder to those who are going to be elected to office, like myself, that you have a responsibility to ask the tough questions. And really I think the lesson is you can hire experts, you can hire consultants, but you still have the responsibility to ask the hard questions. And I think over time the culture of our city was to learn to trust and to just accept the information provided by the manager, the auditor, whoever.

All non-answers.

I'm told the SEC staff wanted a truly independent audit committee. The council has since decided to stick with its audit committee. What are the SEC's expectations?

This where it gets very interesting - the SEC told the U-T they wanted "a truly independent audit"? And the Council have since decided to stick with its audit committee.

The SEC gave us four messages. One, we don't like this being aired in public. This is an investigation. Two, we expect you to do your own internal investigation and your own mitigation. Three, we would like one point of contact with the city. And four, document production is not going as we would hope. We need more assistance there. And the message was pretty clear that they thought we were on the right path in working with the audit committee. And I don't think it was coincidental that they wanted to meet before the council would be voting on the ninth (August to continue in a particular direction or change course.

Translation: One the Council can rely on the SEC not contradicting them in public. Two the SEC asked for an "internal" investigation - according to the Council KROLL qualifies but Aguirre does not. Is Aguirre external and Kroll internal? Three the "one point of contact" is anybody so long as it is not Mike Aguirre. Four she forgets she is telling us what SEC is supposed to have said and lapses into "we". The last sentence means absolutely nothing.

Will the SEC issue a public report of its investigation?

It does not become public unless other enforcement action is taken, as I understand it.

She has them locked in nicely. Perhaps that's why they spoke to the U-T editors. Did Leavitt coach her?

What did you tell the Municipal Employees Association when you spoke to them a week or so ago?

Basically, three things. One, I wanted to thank them for the work they do every day. I wanted to tell them that we are in difficult days. I expect that to continue and that what I would hope they would do is to continue to do their jobs. We have a serious employee morale problem right now. Most of these issues are going to get resolved in the courts. The legality, illegality of the benefits. We have the POA lawsuit now. We didn't come to agreements with the Police Officers Association. We had to go to impasse.

She did not tangle with them and wished them well in court against the City.

Is it just a matter of time before the City Council finally comes around to the inevitability of the two-tier solution, lower benefits for new employees?

We did create a two-tier system (in some respects) in the recent negotiations. The problem we're having right now is because of this morale problem the good employees are choosing to leave. That's what I hear from the rank and file. That's what I hear from the police officers.

This so-called morale problem is straight out of the union defense handbook.

Has enough preparation been done for the transition to the strong mayor?

I was a little worried early on. And then, of course, as Dick Murphy resigned and I went in to the mayor's office I realized basically nothing had been done. But in the last couple of weeks during this legislative break I have been busy meeting with the attorney's office, the manager's office, and I have a point person helping. I am convinced there's very little, really, that needs to be done from the mayor's perspective. There are some things that are a little bit difficult that we're going to have to have a new mayor in place before we can make some decisions.

Like what?

Redevelopment, mostly. The redevelopment issues and the housing authority. Because seemingly by the virtue of Proposition F and by state law that deals with redevelopment, it looks as if the mayor has absolutely no role in redevelopment at all. That seems illogical. What I want to do as I sit in the mayor's office is make sure that the flexibility is there for the newly elected mayor to negotiate with the council what the mayor's role will be in redevelopment. And we have the time to do that after Jan. 1.

She has realized that the Mayor will have no power over redevelopment while the Council IS the redevelopment authority. She is therefore more interested in becoming the Council's Presiding Officer who will set the Council's agenda.

You represent City Heights. What is your view of the city agency that is using eminent domain to tear down housing in order to build housing?

The city acting as the redevelopment agency already has eminent domain powers in City Heights. The school district already has eminent domain powers. The housing commission actually has some level of eminent domain powers as well. The joint powers agreement and the model school project in City Heights were put together for land use purposes to determine how you use existing land in urban communities to get housing, parks and schools. It was a way to look at using joint resources to try to meet the needs of an urban community when basically you don't have a lot of land.

But now you have a situation where people have remodeled their homes in a gentrifying area. Does it make sense to have this agency demolish homes that are not blighted in order to build new homes?

The whole intent was to do it together so that we would maximize our resources, maximize the ability to get the most out of precious land. But the school district moved ahead because they were on a timeline. We couldn't meet it in terms of putting together the financing or the vision for how to create all of that in a smaller space. So now I think we have to go back and re-examine whether we're even going to proceed with the whole concept.

"Do it together so that we would maximize our resources". That's what this battle is all about: the preservation of individual city lots or collectivization. She is for "doing it together" which is  collectivization.

Does it make sense for a city to take homes that are not blighted just in order to build a different kind of housing on the site?

A; When land becomes more precious, how do you further densify? How do you create more housing opportunities?

She is for densification by extinguishing title to vast numbers of single family residential lots.

Surely you don't do it by eminent domain.

Not always, but I think that you have seen downtown densify and they've used eminent domain to do that, to create more housing opportunities. I think that it's a very serious issue to talk about taking people's property. And you really have to make the nexus and make sure there is a public benefit and you're able to clearly define what that public benefit is. And if you can't, I think that you have to err on the side of not moving forward.

Her justification for densification and collectivization is "more housing" which she sees as a "public benefit". Again this is straight out of the developers' handbook.

Does the city have any say in this case because the entity was created by the state?

Technically, legally, we have no say. But we fund the process so I think we have more of a say than people would realize. We have a number of appointments on there. And Habitat for Humanity, that built those houses, we told them this was in the footprint of a redevelopment project that might take the property.

Anybody located in a redevelopment area adds value to their property at their own risk. This creates blight, which is exactly what the redeveloper uses to justify eminent domain.

Do you think this project is a bad call or is it something you could live with?

The original vision of what we wanted to do there was a good vision and it had community buy-in from the planning committee, from the redevelopment committee that's made up of citizens who live in the area, the project area committee. It had the support of council. But again that was when we thought we could move forward as three entities together. In my communities, which are more densely impacted except for downtown, UTC and now Mission Valley, I have more density than most communities. The struggle in my neighborhoods has been do you want housing, do you want parks or do you want schools? Well, we need all three.

I understand the vision but now that we've seen the practical application can you live with it or are you against it?

We are going to take another look at this and determine whether we've missed the opportunity to do what we set out to do and if so we'll change direction.

Can the city by itself pull the plug on this?

Yes. Our redevelopment agency is a participant. Our housing authority is a participant. If we remove our support, it will unravel.

The "original vision" has not changed, to use eminent domain. She says it was "a good vision". Does she still support it? Would she support 'pulling the plug"? She seems to be clinging to the argument that we need more "densification". She sounds like the developers' gal to me.

Any final thoughts?

My goal is to try in the midst of all of these challenges and chaos and the people not getting along to try to keep things as calm as I possibly can to reduce the level of static.

She buys into the characterization of  Aguirre's struggle to root out City corruption as "people not getting along". This is straight out of the unions' strategy handbook to make the pension benefits issue a personal vendetta by Mike Aguirre against the unions.

I still want city business to be conducted. I want the council offices that are vacant to have good representation even as those offices are vacant. I want to incrementally try to be moving forward on the financial issues. And I feel much more positive today about the transition to strong mayor and that I'm going to be able to protect the position of the mayor and to have whoever is elected on Nov. 8 step in and have the support to make the changes he or she needs to make. And then I will return to the council seat happily and try to be as supportive as I can to our new mayor so we continue to get through this.

Toni knows that the new Mayor's Office will have even less power than the powers of the previous City Manager's Office and the previous Mayor's Office combined. The big winners are the City Council and the developers. The present owners of single family lots located in the path of the "densification" juggernaut bearing down on them will have few friends on the City Council and the new Mayor will be powerless. Atkins like all upwardly mobile politicians knows where campaign finance comes from - redevelopment.

   
         

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