Pension Flap Costs San Diego City Manager His Job

In a letter to San Diego Mayor Dick Murphy, Uberuaga said he intends to retire on April 9, without giving a reason.   Murphy, accepting Uberuaga’s resignation, said he would ask the City Council to promote Assistant City Manager Lamont Ewell to fill the suddenly vacant post, according to an Associated Press report.

Uberuaga has managed the daily operations of California’s second-biggest city for 6 1/2 years, overseeing more than 10,000 city workers and a $2.3 billion budget.   In the end though, federal investigators began to ask questions about details offered to bond investors by the city that may have not been rooted entirely in fact, which may have ultimately led to Uberuaga’s untimely departure.

Financial Fiasco

At the heart of San Diego’s woes was the city’s $1.1 billion pension plan, of which officials have made no secret of the fact that it has been intentionally underfunded since 1996 so that funds can be directed to other areas of the budget.   At that time, then-city manager Jack McGrory’s office and retirement trustees agreed to stabilize its annual payments due to widely fluctuating markets that caused the city’s payments to vary dramatically each year, making it tough for the city manager’s office to budget for the annual payment.

The solution reached by theretirement board and the city was to establish each year’s payment as a percentage of employee payroll, regardless of what the actuary recommended be put into the system.  This system showed few flaws in the late-1990s market boom as the plan remained at a healthy level due to market gains.

The last few years were a different story, as market declines have revealed large cracks in the system.  Now the current shortfall has begun to project problems for the fund years down the road, as the shortfalls accrue an interest of 8% annually.   Wall Street has not looked kindly on the matter, downgrading the city’s financial outlook as a result of the city’s financial shifting.  

Enter the US Securities and Exchange Commission (SEC) and the US Attorney’s Office.   The two federal agencies have opened up investigations after allegations surfaced that investors were given fraudulent information by the city in an effort to sell more than $2.3 billion in bonds.