|
Update on the City’s
Financial Situation
As I’ve said many times, the single most
important issue the City must resolve is completing the FY 2003
audit with the 2004 audit to immediately follow. We even voted
today to select the audit firm for the 2005 audit – but everything
hinges on getting the 2003 audit completed. Without the audits we
are paralyzed and do not have the ability to bond which means no
funding to move forward on important City projects.
I also
continue to maintain as have others that San Diego’s problems are
mainly political, not financial. We aren’t filing for bankruptcy
nor do we plan to.
Why all the
delays?
Mainly now due to one word: Waiver. The Audit Committee has
requested the Retirement Board to waive their attorney-client
privilege so the Audit Committee can conclude its investigation.
I’m hopeful we will see a resolution to this in the very near
future.
Here is a re-cap leading us up to today:
Following
revelations of disclosure irregularities in early 2004 by the City’s
Finance Department, the City hired the Washington, D.C. based law
firm of Vinson and Elkins (V&E) to conduct an investigation of
problems with City Finances. Paul Maco of V&E is a well respected
former senior staff member at the Securities and Exchange Commission
(SEC) where he was the first to head up their Municipal Securities
Division.
V&E drafted and the
City Council enacted major changes to the municipal code regulating
the manner in which the City of San Diego approves its bond
offerings. Borrowing from Sarbanes-Oxley, a set of laws regulating
businesses in the securities world, the City of San Diego today has
on the books some of the most stringent disclosure requirements of
any municipality in the nation. In fact, I was amazed to learn how
lax security law requirements are for municipalities compared to
public companies (something has to change on that one nationally –
more on that in a future eNewsletter). I’m hoping one day San Diego
will be viewed similarly to the manner in which the SEC views the
Seaboard case as a model for procedure and compliance.
V&E also produced a
report in 2004 that was later chastised by the City’s outside
auditing firm, KPMG, as being inadequate. Newly elected City
Attorney Mike Aguirre jumped on the bandwagon and called it a
whitewash. The City Council then hired a forensics firm, as KPMG
requested, to conduct further review and verification. This work
was later blasted by the City Attorney as being inadequate. It was
at the point that we needed to bring in another firm to conduct an
independent review to provide assurances for KPMG (the auditing
firm) through a separate illegal acts analysis. We also knew it had
to be a firm our City Attorney would agree to hire as an independent
investigator. The firm we selected was the Kroll Company with
principals including Arthur Levitt, the former Chairman of the
Securities and Exchange Commission, Lynn E. Turner, the former Chief
Accountant for the SEC and Troy Dahlberg of Kroll which is an
international financial consulting firm. Mr. Aguirre agreed to
their retention. Not long afterward however, things began to break
down between the Audit Committee and the City Attorney and due to
his highly charged litigious nature, Kroll stated it was apparent
they needed outside legal counsel to provide legal advice. So the
City hired the attorney’s they requested from the New York law firm
of Wilkie-Farr including Benito Romano, the former US Attorney for
the southern district of New York. Since then the audit committee
has been very busy.
I have the utmost respect for the Audit Committee. They are
credible, accomplished and well respected. The Audit Committee is
completely independent and has been conducting the analysis which is
imperative for KPMG to be able to conclude their audit. Unimpeded
by politics, they will get the job done.
In fact, click here to read the Audit
Committee's report to the City Council.
More recently, the
Audit Committee had complained that the City Attorney was impeding
their progress. The Audit Committee stated in a letter that Mr.
Aguirre’s office - the Office of the City Attorney – had failed to
provide information requested by the Audit Committee since last
April and his lack of response was hindering their efforts. Just
this past Friday after Councilmember Scott Peters and I held a news
conference where I shared a letter from the Audit Committee to
Aguirre, the City Attorney provided an initial response to the Audit
Committee.
Click here to see the Audit Committee's letter to the City
Attorney.
It’s this simple:
The Audit Committee must conclude their work. KMPG wants the
assurance of the Audit Committee before they sign off on the
audits. We also need to have the pension board waive their
attorney-client privilege. As part of their obligation, the pension
board needs to realize that unless they waive their attorney-client
privilege, the Audit Committee will not render an opinion as part of
their investigation into City finances. And without Arthur Levitt’s
signature, KPMG will never give the City an unqualified opinion
letter for our audit. And without an unqualified opinion, we will
not begin the process of restoring our City’s good name in the
credit markets and get back into the bond market.
Some have suggested we
simply dump the Audit Committee and start over. That would be
penny-wise but pound foolish. Others have said let’s just wait for
the SEC to conclude its work. I’ll explain why neither of these
scenarios make any sense from both a timing and financial
standpoint:
-
The
SEC is not going to issue an
audit opinion for the City of San Diego and it could be two years
or more before the SEC closes their books on their investigation
of San Diego.
The SEC investigates, makes recommendations and files charges –
they don’t write audits.
-
Additionally, the SEC is looking to the Audit Committee to
complete an independent investigation.
-
The SEC is
looking to the City to complete its audited financial statements,
which also requires the Audit Committee to complete its
investigation
-
The SEC
cannot complete its investigation until the financial statements
are issued
It should also be
pointed out, no matter what auditing firm we would hire to replace
KPMG, they too would want an adequate investigation conducted and
would likely encounter the same issues the current audit committee
has run into. And those investigators would want a law firm to
provide legal advice. And all of this would take at least another
year to year and a half. Not to mention at least another $10
million more. Ultimately dumping our current Audit Committee and
Audit firm would do nothing more than guarantee a wasted $10 million
and buy us another $10 million in additional expense and another 18
months. It’s not worth it. The Audit Committee can probably finish
in the next few months – especially if the Retirement Board waives
their attorney-client privilege.
Please Be My Guest
Consider this your personal
invitation to attend a truly special event. It has been three
decades since we opened a new branch library in District 7 and the
long awaited day is almost here. Please join me at the grand
opening of the new College Rolando Branch Library on Friday,
September 9th. At
2:00 p.m. we’ll have a brief
ceremony to mark the occasion and then open the doors for business.
The library is located at 6600 Montezuma Road at the intersection of
Montezuma Road and Reservoir Drive.
It’s new, it’s needed and
it’s impressive. Imagine replacing a 50-year-old branch library
that was 4,430 square feet with a completely up-to-date branch that,
at 15,222 square feet, has more than three times the space. It has
community rooms, a computer lab, a colorful children’s section,
meeting areas and even cozy chairs in front of a fireplace. Another
remarkable feature is that the design allows significant natural
light into the main reading areas.
The Friends of the College
Rolando Library deserves much credit for raising $250,000 for
equipment and materials for the new branch and their assistance in
securing $100,000 in state grants. My commitment included securing
more than $5 million to build a new College Rolando Branch Library.
We broke ground in February of last year and stayed on track for
completing this project. As the photos show, it is essentially done
and the contractors are putting on the finishing touches.
Please join me on September 9th and see the final
results.
Book Sale
Speaking of libraries, the Friends of the
Allied Gardens/Benjamin Branch Library are looking for donations in
the form of hardback books and paperback books that are in good
condition. They cannot accept textbooks or damaged books. Please
drop off your donation at the library located at 5188 Zion Street in
Allied Gardens. Donated books will be used for the October 22nd
book sale to benefit the library.
SDSU – Part Two
In my next eNewsletter I’ll
have a more detailed article about the communities standing up to
SDSU regarding their expansion plans. But briefly I want to tell
you that on July 1 9th
representatives from my office, the San Diego City Attorney’s
office, the City of San Diego’s Redevelopment Agency, Alvarado
Hospital, the San Diego River Park Conservancy and the College Area
and Del Cerro communities testified before a committee of the
California State University Board of Trustees regarding our
opposition to the SDSU Master Plan Environmental Impact Report (EIR).
As a result of the
numerous concerns I and others have expressed regarding the proposed
Master Plan, Dr. Stephen Weber, the President of SDSU, asked for a
60-day delay by the CSU Board. He was directed by CSU to form an
ad-hoc committee comprised of the City of San Diego, the University,
community leaders and business leaders. The University was
instructed to listen to the community and their concerns regarding
the Master Plan.
Last week I met
with members of the community to review their issues. I also met
again with Dr. Stephen Weber, President of San Diego State
University. Our meeting was productive and we agreed to form two ad
hoc committees. One will deal with the concerns of Del Cerro
including the traffic impacts of the SDSU Master Plan – specifically
the Interstate-8 and College Avenue interchange and another,
separate ad-hoc committee regarding The Paseo project adjacent to
San Diego State.
We are in the process of selecting who the representatives will be
for each committee. We also agreed to use professional mediators to
keep SDSU and the concerned parties focused on the multiple issues
at hand. I’ll keep you posted.
Tierrasanta’s New Neighbor
On July 2nd the congregation
of the
Chinese Community
Church held a ground breaking ceremony for their new church in
Tierrasanta located at Via Valarta and Via Playa De Cortes. The
two-building, 24,000 square foot facility on four acres will be home
to a 325-seat sanctuary as well as a 365- seat fellowship hall that
houses a commercial kitchen, eleven classrooms, conference rooms,
and administrative offices. Construction is expected to be
completed by next summer. They worked closely with the City of San
Diego and with the community in order to build this new facility.
This year the
Chinese Community Church proudly celebrates its 120th anniversary
and its status as the oldest Chinese church in San Diego.
Originally started as a mission school in 1885 it was situated in
various downtown locations before moving to their East San Diego
home at 1750 47th Street
in 1960.
Pictured in the
photos are from left to
right, Roger Lee, Co-Chair of the Building Committee, Emma Hom,
Co-Chair, Building Committee, and Tom Hom, Capital Campaign Chair.
Calling All Kids
The Kumeyaay Campground at
Mission Trails Regional Park has some fun new programs that will be
of interest to children between the ages of 8 and 12. “Kids Night
Out” features a cook out, campfire program, night hike and
marshmallow roast. It takes place every third Friday from 6:30 p.m.
until 9:30 p.m. “Kooking for Kids”, as the name implies, teaches
young people the basics and fun of cooking.
There is a nominal fee and pre-registration is
required. Forms are available at the MTRP Visitor Center
and at the Kumeyaay Campground.
For more information, visit the MTRP web site at
www.mtrp.org
Happenings in the District
From time to time I include
a few community events taking place throughout the District. Here
are a few you may be interested in:
August 26 –
The National Management Association’s 4th annual golf
tournament supporting the San Diego Family Justice Center and the
NMA with registration at noon and tee off time at 1:00 p.m. It is a
scramble format tournament with prizes and a BBQ awards dinner
afterwards. The cost is $80 per person. For more information call
619-533-3082 or email to
jcarroll@sandiego.gov.
August 31 –
That is the last day to donate business clothing for Time Warner
Cable’s sixth annual Clothes 4 A Cause drive. If you can, please
donate ready-to-wear business outfits to benefit the men and women
served by the Alpha Project and the YWCA/Becky’s House. Over the
years I’ve worked closely with Bob McElroy and the Alpha Project and
know what a tremendous job they do working with the homeless.
Donations can be dropped off at any San Diego County Jenny Craig
Weight Loss Center or Time Warner Cable office. There are also
prizes available. For more information please visit
www.twcsd.com
September 15 –
The City of San Diego is holding a community outreach meeting about
efforts to underground overhead utility lines. The public is
invited to attend the meeting which takes place that Thursday from
4:00 p.m. until 6:00 p.m. in the auditorium of the War Memorial
Building in Balboa Park. For more information call (619) 533-3872.
I wish I could include every
single community event but unfortunately I have to limit it to a few
each issue. We welcome submissions. For upcoming events you would
like to see in the next eNewsletter, please email information to
lwebb@sandiego.gov.
Thanks for reading the
eNewsletter.
Regards,
Jim
Neighborhood
E-Watch Keeps You Informed
The City of San Diego's Neighborhood eWatch provides information
about crime incidents in the City of San Diego to the public for
free via the Internet and is updated every 24 hours. I introduced
this popular service last year and encourage you to use it. The web
site address is:
http://ewatch.sandiego.gov.
Thanks for reading the eNewsletter.
In the meantime, please don’t
hesitate to send me your thoughts on issues by sending email to
jmadaffer@sandiego.gov
and please
forward this email to your friends who might enjoy reading it.
They can always visit
JimMadaffer.com/email to sign up themselves.
I welcome hearing from you at any time and rely on your
opinion.
Regards,
Jim
Forward
this email
If you know someone who might enjoy receiving this
email, you can send them their own copy -
simply click on this link.
Do we have your email, name, zip code and other
information up to date?
Please click on this link to update your information so we can
send you items of interest to you for your specific area.
If this email was forwarded to you, you can join
our email list by clicking
here.
We value your privacy. It is our intention
to only send this email to those who want timely updates on issues
of interest from Councilmember Jim Madaffer. Your email address is
shared with nobody. If you would like to be removed from our list,
please click on the remove link below. |
