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2012 was a year of change for city

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2012 was an exciting time for politics in San Diego. Aside from a historic mayoral race, several referendums and propositions — along with a new budget — were passed, which will affect the region for years to come. Here are some of the highlights.

Voters approve new public pension system

City voters gave 66 percent approval in California’s primary election to a plan to end defined benefit pension plans for new, non-police city hires and instead enter them into a new defined contribution plan similar to the 401(k)-style plans of the private work force.

Proposition B, which earned its way onto the ballot billed as Comprehensive Pension Reform, will now face a series of legal challenges by the public employee labor unions who oppose it, likely delaying implementation for months or years. Pending those legal challenges, the plan received a complicated actuarial analysis from the city’s Independent Budget Analyst (IBA) that allowed proponents and opponents of the plan in the weeks leading up to the election to accurately say that it both saved almost $1 billion for the city and that it saved nothing at all, respectively.

In addition to creating a new retirement plan, the measure also attempts to freeze employee pensionable pay for five years. That freeze isn’t a guarantee, however: employee pay can’t be mandated by voters, so it instead sets the pay freeze as the city’s starting position in labor negotiations. The City Council can overturn the position with a two-thirds supermajority. The IBA says the pay freeze, if enacted, would save the city $963 million, or $581 million after adjusting for inflation. Changes to the pension plan, however, will cost the city $13 million over 30 years, or $56 million accounting for inflation.

A defined contribution system — which wouldn’t force the city to make up for market losses suffered by the pension plan — also shifts investment risk from taxpayers to individual city employees. The legal challenge facing Prop. B was brought by the state Public Employee Relations Board on behalf of the Municipal Employees Association, the union for San Diego’s office workers, and alleges the citizens’ initiative was actually a sham device by the city itself to bypass the need to negotiate the law with labor.

After an administrative process between the city and union, it’ll go before a judge and is likely to face appeal, regardless of the ruling. City Attorney Jan Goldsmith has said he’s unimpressed by the legal challenge and has begun efforts to implement elements of the law immediately, including instituting a hiring freeze and setting up the new benefit plan for unrepresented city workers.

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Project labor agreements banned in San Diego

Project labor agreements (PLAs) — an arcane element of construction contracts that set compensation and working conditions for workers and require non-union hires on the project to nonetheless come through the labor hall — can no longer be required by the city of San Diego.

Fifty-eight percent of city voters approved the measure in the June primary. It was supported by nonunion contractors, especially the Associated Builders and Contractors (ABC). Opponents of the initiative — led by former Councilwoman Donna Frye and the San Diego County Building and Construction Trade Council — made a late push to inform voters that passage would mean millions of lost state funding for construction projects due to the recently passed state Senate Bill 829, which eliminates state funding to cities restricted from using PLAs.

In 2011, the state gave San Diego $158 million in construction funding. Prop. A, however, says the ban on PLAs can be lifted for project slated to receive state or federal funding. It also requires that contracts of over $25,000 be posted online. Similar bans were passed by San Diego County and Chula Vista voters in 2010.

Prior to the vote, the ratings service Fitch Ratings issued a public notice that San Diego’s credit rating could be affected if Prop. A were to pass. As of June 27, Fitch had made no changes to or follow-up statements on the city’s credit rating.

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Mayor, council pass first deficit-free budget in years

For the first time in decades, San Diego’s annual budget in the 2013 fiscal year won’t spend more on city services than it’s set to collect in revenue. In fact, improving financial conditions have even allowed the city to build a healthy reserve fund.

Mayor Jerry Sanders announced early in the year that projections showed his to-be-released budget wouldn’t need to run at a loss, saying he had effectively closed the “structural budget deficit.” Critics, especially Councilman and mayoral candidate Carl DeMaio, quickly jumped on the claim as premature, saying the city’s fiscal battle wasn’t over. Specifically, DeMaio and others said the city was simply running a new kind of deficit: an infrastructure and services deficit. Until San Diego’s physical infrastructure — especially its decrepit roads — were universally in “fair” condition by national standards and until public services returned to pre-crisis levels, the crisis was ongoing, they said.

But Sanders and his staff maintained that closing the deficit between money spent and money received was the first step, all while announcing increases in certain services for the coming year and a new bond program for infrastructure repair, payments for which were cooked into the new budget.

The new budget projects a $119 million surplus over the next five years, increases library hours citywide by eight hours per week and reopens them on Saturdays, adds five operational hours for city recreation centers. It also gives the city two fire academies and replaces the fire station alert system. On infrastructure improvements, the budget includes payments on the $80 million bond program that allows for $75 million in projects, including $30 million for street resurfacing. The budget also includes $8.3 million in other infrastructure improvements, like stormwater needs, and increases by $300,000 the city’s funding for arts and culture projects. The City Council approved the budget on a 7-1 vote, with only DeMaio voting in opposition.

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