A few weeks ago, the local newspaper here asked readers to come up with a new slogan to replace the worthy but tired one that has stuck around since 1972: "San Diego: America's Finest City." The campaign, in the pages of the Union-Tribune, garnered more than 500 entries and reflected the widespread feeling that this seaside city famed for its salubrious climate and its snoozy Midwest-on-the-Pacific feel has lost its moorings.
"An Eruption of Corruption" and "All Major Unmarked Bills Accepted Here" vied with the downright boosterish "Best Climate for a Conviction."
But if the slogans were amusing, the problems of the nation's seventh-biggest city are not. San Diego is more than $1.4 billion in arrears on its pension payments. Its bond rating is so low that it cannot issue bonds for needed public works. Last month city leaders acknowledged that a plan to help deal with the crisis by selling city land was almost unworkable because city bureaucrats had overvalued the city's assets by more than $600 million and the city's inventory of real estate assets actually includes land it sold, never owned or hopes to buy.
"Simply put," said Jesse Knight Jr., the president of the San Diego Regional Chamber of Commerce, "San Diego is a mess."
The budget crisis doesn't just humiliate San Diegans -- it's cutting into their quality of life. The crisis has forced the elimination of a citywide day-care program for children from middle-to-lower-income families. Public library hours have been slashed, and plans for a new central library in the rejuvenating downtown district have been shelved. The city's sewer system is so decrepit that it could face federal fines. Police are jumping ship to nearby cities that offer bigger salaries and the promise of a real pension. In 2004, for the first time in seven years, the region's population actually fell -- by 600. And road repairs have ground to a standstill.
"The average San Diegan doesn't scream too much; it's not like you're stuck waiting for a snowplow that never comes," said Carl Luna, a professor of political science at San Diego Mesa College. "You get a sunny day, you can always go to the beach. But bit by bit, the wheels are starting to come off."
Luna said San Diego's problems are a template for what other states and cities could face. A report issued in March by the financial firm Wilshire Associates Inc. estimated that more than 85 percent of state and local pension funds are underfunded nationwide. Massachusetts and Connecticut pension funds face billion-dollar deficits. Rhode Island and Oregon recently lowered pension benefits for public employees. And San Francisco, a supposedly liberal bastion, is one of the only cities in California where voters have to approve pension benefit increases.
San Diego's city fathers committed two big mistakes, financial analysts said. First, during the go-go years of the stock market boom in the 1990s, they used the pension fund like an ATM to pay for projects such as the 1996 Republican National Convention. Then, when the market dipped, they allegedly conspired with union bosses to raise pension benefits without raising revenue. This wasn't tax-and-spend; it was spend-but-don't-tax.
Six former members of the city pension board have been indicted by the county district attorney in connection with allegedly intentionally underfunding the pension. The Securities and Exchange Commission and the FBI are also investigating the city's finances.
San Diego has been without a mayor since July, when Dick Murphy, dubbed by Time magazine as one of the three worst big-city mayors in the United States, quit. His replacement had to step down shortly afterward after he was convicted of accepting $34,000 in illegal campaign contributions from the owner of a strip club who was seeking an end to San Diego's ban on touching between dancers and patrons at such establishments.
The city will hold a vote for mayor on Nov. 8, but few people seem particularly enamored with either candidate. Jerry Sanders, the former police chief, has pledged that he would provide new leadership, but even business leaders think it would be more of the same with him running the city. The other candidate, Donna Frye, a council member and the owner of a surf shop, has garnered worldwide press as the "surfer chick" candidate but is not taken seriously by many in the business community. Significantly, both candidates have said they would consider bankruptcy as a way to deal with the pension mess.
Part of San Diego's soul-searching stems from tectonic shifts in the demographics of the city and of the industries that drive the economy, according to Luna and other observers.
The old San Diego was a majority-white community where aircraft manufacturers and Navy officers hobnobbed on the golf links and made believe that the Mexican border wasn't a stone's throw away. It was a Republican town, but Republican with a centrist Californian twist. The only nod to its Mexican neighbors was the Spanish Mission simulacrum of red-tiled roofs and whitewashed walls at Balboa Park, street names in Spanish, and the eerie yellow-and-black signs posted on Interstate 5 telling drivers to watch out for bolting illegal immigrants.
In the new San Diego, biotechnology, telecommunications and high-end real estate have replaced defense-related businesses, and the region ranks near the top of the nation in PhDs per capita. But gone are most of the middle-class manufacturing jobs, replaced by low-paying positions in tourism and other services. A symbol of the changes can be found on a busy corner in the city -- the former site of an airplane manufacturer. Today it's a mix of high-end condos -- San Diego's real estate market has been booming -- and an enormous down-at-the-heels inflated trampoline staffed by people who complain that they do not even make minimum wage.
By 2002, the City Council was in the hands of the Democratic Party -- part of a shift of California's cities away from the Republican Party. And, according to the 2000 census, the region, home to booming Hispanic and Asian communities, was no longer majority white. San Diego is now an important testing ground for products geared to the Hispanic market. It's one of three cities where Interstate Bakeries Corp., the maker of that all-American snack Twinkies, is introducing a line of cakes called Las Delicias de Hostess.
San Diego's news hasn't been all bad. Its economy has boomed for the past decade, and despite a slowdown, at 4.4 percent it is still growing faster than the national average. But Knight and other business leaders caution that without an improvement in city services, more trouble is ahead.
San Diegans appear uniquely sanguine about their problems -- at least several did during on a glorious Sunday on Pacific Beach, where the ratio of body art to exposed bronzed flesh hovered at about one to one.
"Sure, City Hall is being run by a bunch of crooks," said Jason Lebrae, 28, a well-muscled marine biologist, as he readied for a day in the surf. "But you can't beat the weather."