Posted on 02/02/2005 5:51:49 PM PST by CyberAnt
A private memo has just been released that demonstrates the Mayor’s Blue Ribbon Committee intentionally watered down its report on city finances in 2002. This is the clearest evidence to date that the Mayor knew of the city’s financial crisis back in 2002.
The memo also makes a troubling reference to concerns over the City’s ball park bonds and credit rating in the context of the Blue Ribbon Report being watered down. The memo is available online at www.sandiegobudget.org so you can read and judge for yourself.
Below is our press release; the link to the San Diego City Beat which broke the story is www.sdcitybeat.com. Fox 6 also broke the story this morning at 7:00am with an in depth package which can be found at www.fox6.com.
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A Motive to Deceive?
Mayor’s Committee Held “Unstated Concern Over Ball Park Bonds” and Intentionally Watered Down Public Report on City’s Financial Problems
CONTACT: Erica Mendelson office: 858-503-6787 or cell: 619-306-1798
SAN DIEGO – A private memo leaked this week suggests that Mayor Murphy’s Blue Ribbon Committee on City Finances intentionally softened its assessment of city finances in its public report while harboring an “unstated concern over the ball park financing and any impact to the city’s credit rating in general…”
In an April 29, 2002 memo privately circulated to Blue Ribbon Committee members and the Mayor’s personal budget analyst, committee member Richard Vortmann ominously warned that “I have growing and daunting concern that we possibly did our city a disservice by not ringing a very loud bell that the City’s fiscal health is not what it appears to be.”
The damning memo emerges at a time when federal investigators are looking into whether the City of San Diego intentionally issued false and misleading financial documents to gain favorable ratings on Wall Street for its bond offerings.
The Mayor’s Blue Ribbon Committee report was used by the Mayor and city bureaucracy in press releases, public statements and documents associated with the City’s representations on its fiscal health to the public and credit rating agencies. Even in his 2004 State of the City Address, the Mayor proudly proclaimed “The (Blue Ribbon) Committee found that in general the City of San Diego is fiscally sound.”
Yet in his memo to the Mayor’s office and fellow committee members, Vortmann details various problems with the city’s finances relating to the pension fund and the water and sewer funds. In a stunning foreshadowing of events to come, Vortmann raises “a chance the City will grant further pension benefits this year which will either increase the pension budget line item or (more likely) push yet more current costs out to future taxpayers.”
Reacting to news of the private memo, Performance Institute President Carl DeMaio said, “This is the first concrete evidence that the Mayor’s Blue Ribbon Committee knew about the growing financial problems facing the City but intentionally watered down its report to the public. More shockingly, the memo suggests the Committee might have had a conflict of interest with its concern on seeing that the ball park bonds were sold and the City’s credit rating was not adversely affected by their report.”
The San Diego City Beat will be the first publication to break this story in its edition tomorrow. As reported in City Beat, Vortmann and fellow Committee member April Boling are denying that the ball park bonds factored into their watering down of the Committee’s report on city finances. Instead Vortmann and Boling claim the suspicious reference to the ball park bonds related to concern over potentially high interest rates the City might have to pay to finance the project.
DeMaio flatly rejected that spin, pointing not only to the plain English statement about the “unstated concern over ball park bonds” contained in the memo but to other troubling links between the ball park bond offerings and the Blue Ribbon Committee’s deliberations.
First, the Blue Ribbon Committee report, even in its watered down state, was delayed until after the ball park financing deal was completed. The ball park bonds were issued February 16, 2002—and then the Blue Ribbon Committee report was released one week later on February 22, 2002.
Second, a review of the players involved in the Blue Ribbon Committee uncovers a significant conflict-of-interest. At the same time that he served as the Chairman of the Blue Ribbon Committee, Joe Craver was and continues to serve as the Chairman of the City’s Public Facilities Financing Authority. The Authority was the legal entity that had to approve and issue the ball park bonds. Craver, as chair of the Authority, was perhaps the most important official in the promotion and sale of the ball park bonds. Any hint of instability in the City’s finances during this critical time of the ball park project could have killed the bond offering.
The Mayor’s office also exhibited a significant conflict-of-interest in how the Blue Ribbon Committee was staffed. Mayoral advisor Dennis Gibson was assigned to staff the Blue Ribbon Committee—at the same time that he was the point person on one of Mayor Murphy’s Ten Goals: Completion of the Ball Park. Like Craver, Gibson was intimately involved in the complex financing deal and financial representations made in support of the ball park bond offering. Last week City Manager Lamont Ewell awarded Gibson the plum appointment as manager of the ball park.
Finally, there continues to be the possibility of legal risk stemming from the Blue Ribbon Committee report. City Attorney Michael Aguirre has stated that the report was used to promote city bond offerings through public relations and that any intentional misrepresentations made by the Committee may be covered under an investigation into possible securities fraud. According to Aguirre, Vortmann—now a member of the City’s retirement board—has asserted attorney-client privilege in the federal investigation now underway.
In a subpoena issued January 27, 2005, the US Attorney made it clear that documents would be sought in connection to a number of city agencies, including the ball park agency and the Public Facilities Financing Authority.
“This memo raises serious issues that go directly to the Mayor’s office. We call on the US Attorney to take a close look at the possible link between the ball park financing deal and misrepresentations made by the Mayor’s Blue Ribbon Committee. While the motive may not be yet clear, the impact of the Blue Ribbon Committee is all too clear. Instead of ‘ringing the bell’ as Mr. Vortmann suggested in April 2002, the Mayor’s Committee sat silent—and in doing so truly did a disservice to San Diego taxpayers.”
Based here in San Diego, the Institute is a national government reform think tank that promotes the principles of performance, transparency, competition and accountability in government. Additional information on the San Diego citizens’ Budget Project can be found at www.sandiegobudget.org.
Congratulations Carl!!
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