San Diego Mayor Bob Filner said Wednesday that the city's budget situation may not be as rosy as was projected just three months ago.
The absence of state funding for redevelopment and certain construction projects, along with a drop in investment returns for the city's pension fund, could quickly turn an estimated budget surplus into a deficit.
Filner said the city could face a budget deficit of $37 million in 2014, as opposed to a $4.9 million surplus that was projected by then-Mayor Jerry Sanders in September.
"The expectations of a balanced budget, which would allow us to make some gains in certain services that have been lost over the last five years, may not be realized," Filner told reporters at City Hall. "I don't want expectations to be too high based on the previous statements of a balanced budget.
"I want to sort of dampen expectations that everything's been fixed and that everything's OK and we're moving forward. It's a little bit more complicated than that. We're hoping for the best, but we have to prepare for the worst."
How the state decides what to do with redevelopment funds now that redevelopment agencies have been abolished is crucial.
One expense is certain: the city will have to assume the $14 million annual payment on the bonds for Petco Park that were previously the responsibility of the Center City Development Corp. (CCDC). The city may have to take on other redevelopment obligations as well.
"Some projects can be halted; some we can't. In any case, there's a potential landmine there," Filner said.
The implementation of Proposition B — the voter-approved initiative that eliminates pensions for most new city employees in favor of a 401(k)-style plan — will add a $27 million cost to the San Diego City Employees' Retirement System (SDCERS) because there won't be any new people coming into the system.
Additionally, the rate of return on the pension system's investment funds — assumed to be 7.5 percent — dipped to less than 1 percent this year. It means the city's annual payment to the pension system could increase by as much as $45 million next year, from $231 million to $276 million.
The city also may also miss out on state funding due to the passage last summer of Proposition A, which placed a ban on project labor agreements for city projects. The state previously passed a law that said it will withhold state funding from any city that pans PLAs.
"It's unclear how that is going to be enforced," Filner said. "I'm in discussions with Sacramento. It probably won't affect the operating budget or the general fund budget, but it could affect our ability to do water or sewer projects."
Filner, a 20-year veteran of Congress, said he is less concerned about the "fiscal cliff" facing the nation's economy than he is about San Diego's potential budget woes.
"I hope it doesn't get to this, but I don't want people to have expectations that may be too high based on (the premise) we've gotten over our problems," he said.
Filner also spoke briefly about the city's travel policy and said he's imposed a 60- to 90-day moratorium on city employee travel until that policy can be strengthened.
He cited weak reporting requirements, including the absence of a need to present receipts or explain how a trip would benefit the city.
"I don't want our city to be seen as disrespectful of the public funds," he said. "I just want to make sure there's a deep respect for the taxpayer dollar that is spent, and I just don't see that."