Millions in Extra Cash: How did Poway become the poster child for exotic school financing?
www.voiceofsandiego.org
NOVEMBER 2012
Vol. 1 No. 7
A Changing City Chooses Filner He’s feisty, unabashedly liberal and pro-any-neighborhood-but-downtown. And he’s San Diego’s next mayor. BY LIAM DILLON
Voice of San Diego is a member-based news organization. Join our community and get a subscription to this magazine. Learn more at VOSD.org/join-members ▸▸
November 2012 Volume 1 Number 7
18 SCHOOL BONDS
Millions in Extra Cash Why did Poway become the national poster child for exotic borrowing when other districts across the state did the same? We find out. BY WILL CARLESS
10 ELECTION
A Changing City Picks Filner for Mayor Where his predecessors have been calm, moderate and pro-downtown, Filner is feisty, unabashedly liberal and pro-any-neighborhood-but-downtown. BY LIAM DILLON
Inside 2 EDITOR’S NOTE | Sara Libby Four More Years! … Of VOSD
22 ART AND SCIENCE
A Scientist-Painter Considers the Molecules of Wellbeing Kelsey Brookes put down the test tube and picked up a paintbrush. BY KELLY BENNETT
3 RAISE YOUR VOICE | Mary Walter-Brown Finish Strong!
4 ON THE STREET Share This Bike, San Diego | Andrew Donohue The Challenges Facing Filner’s Budget Plan | Liam Dillon IRS Digging Into Poway Schools | Will Carless Meet the Players in the Poway Bond Story | Sandy Coronilla
32 FACT CHECK | Rob Davis The Airport Authority’s Exaggerated Warning
35 COMMENTARY | Scott Lewis DeMaio Never Had a Shot
28 ENVIRONMENT
Wildlife Killers: What We’ve Learned Five months later, basic questions about thousands of animal deaths remain unanswered. BY ROB DAVIS November 2012 VOSD MONTHLY
|1
Editor’s Note Four More Years! … Of VOSD IT SEEMS LIKE EVERY BIG CHOICE in this election was eventually framed as a search for the lesser of two evils. The presidential contest, many argued, boiled down to a president who has yet to produce a thriving economy versus an unlikable flip-flopper who might favor the wealthy in office. The big local school bond, Prop. Z, amounted to a choice between letting schools continue to deteriorate versus the risk that any new money would be spent unwisely by district officials. Our Lisa Halverstadt encountered a voter in Carmel Valley who perhaps captured it best when describing her struggle to choose between mayoral candidates Bob Filner and Carl DeMaio: “In the booth, I kept thinking, ‘Should I go for what I decided last night?’ I held my nose and went for it,” the woman said. Hardly a ringing endorsement for her eventual pick. Election coverage, too, can often amount to a depressing choice: Do I pick the network that favors views similar to mine, and risk putting myself in an intellectual bubble? This is all to say that I’m so thankful to have landed at a place that took part in this election season in a way that its audience and community can be proud of. Never once in my time covering national campaigns in D.C. do I remember any reporter or editor (admittedly, myself included) ever saying, “How can we step back, and break this issue down so that a teacher in Minnesota or a nurse in New Mexico can understand it; and grasp how and why it affects her.” At VOSD, those questions don’t just get asked, they drive everything we do. We think you should know who is making decisions about your kids’ schools. We let proponents of both sides make their case for a hard-tounderstand ballot measure that would have curbed unions’ abilities to use dues money for political causes. And while we doggedly covered the mayor’s race, we tried to do it in a way that was forward-looking: What issues will the new mayor tackle first, and how will he get the support to do it? You’ll get to enjoy some of the fruits of those efforts here. We didn’t always do it flawlessly. It should shock no one that we can get lured into impassioned Twitter dialogues only to wish we’d never hit “send” or that on occasion we simply got something wrong. Politics is messy, and so is the business of covering it. But we hope that your decision to ride along with us as we’ve covered this election is more a no-brainer than a reluctant lesser-of-two-evils choice.
SARA LIBBY
Managing Editor
|
2 VOSD MONTHLY November 2012
MANAGING EDITOR
Sara Libby
CONTRIBUTING EDITOR
Andrew Donohue STAFF WRITERS
Kelly Bennett, Will Carless, Liam Dillon, Lisa Halverstadt CREATIVE DIRECTOR
Ashley Lewis
CHIEF EXECUTIVE OFFICER
Scott Lewis
VICE PRESIDENT, ADVANCEMENT & ENGAGEMENT
Mary Walter-Brown WEB EDITOR
Dagny Salas MEMBER MANAGER
Summer Polacek FOUNDERS
Buzz Woolley & Neil Morgan BOARD OF DIRECTORS
Blair Blum, Reid Carr, Bob Page, Gail Stoorza-Gill, Buzz Woolley
November 2012 | Volume 1 Number 7 Subscriptions and Reprints
VOSD members at the Speaking Up and Loud & Clear levels receive a complimentary subscription to Voice of San Diego Monthly magazine as a thank you for their support. Individual issues and reprints may be purchased on demand for $7.99 at VOSD.org/vosd-mag. Digital editions are also available for $2.99.
Advertising
Want to advertise in VOSD Monthly? Call today to become a Community Partner: (619) 325-0525.
Thank you to the John S. and James L. Knight Foundation for supporting innovative journalism.
News and Updates from Our Member Community
Finish Strong! IT’S BEEN A WHIRLWIND YEAR for Voice of San Diego. We launched a new membership program, a popular event series, rolled out new community partner packages, redesigned our website and started publishing a monthly magazine. In the process, we’ve steadily built a community of supporters who are helping us create a healthy model for long-term sustainability. As we’ve been strengthening our news organization internally, the external media landscape in San Diego has been going through changes of its own. With the merger of the U-T and the North County Times, residents now have fewer options for in-depth investigative reporting. Many of them have turned to us for help. A growing group of concerned citizens is asking us to expand our coverage to ensure residents all over the county have more access to accountability journalism. Voice of San Diego was founded seven years ago because San Diego needed more news options. We agree the time is right to expand our public service, but we can’t do it alone. If you want VOSD to play a bigger role, we need your support. The first step is helping us finish this year strong. We’re launching our year-end campaign on November 19 with the goal of raising $100,000 from individual members by December 31. If we finish strong, we’ll be in an excellent position to launch a strategic expansion plan in 2013 that will increase our reporting, reach and impact. Once we meet our year-end goal, we’ll start putting together an advisory group made up of VOSD members and subscribers who can help guide us as we determine how and where to focus our expansion efforts. If you’d like to be involved, please contact me at mary.brown@voiceofsandiego.org. Thanks for your support.
MARY WALTER-BROWN
Vice President, Advancement & Engagement
RECENT EVENTS
VOSD CEO Scott Lewis chats with some new friends at a recent One Voice at a Time event at the Institute of the Americas in La Jolla.
Lewis interviewed City Council candidates Sherri Lightner and Ray Ellis from San Diego’s District 1.
UPCOMING EVENTS NOV 28
Meeting of the Minds
7:00 P.M. | NATURAL HISTORY MUSEUM
Join us for our next installment of our Meeting of the Minds arts and culture series. Six local enthusiasts will present a rapid-fire glimpse of stimulating ideas at the San Diego Natural History Museum. For more details visit voiceofsandiego.org/members/news.
NOV 29
Member Coffee
8:00 A.M. @ VOSD OFFICE
VOSD members are invited to join us for coffee, a light breakfast and lively discussion about the issues shaping our city with CEO Scott Lewis and the VOSD reporting staff. Space is limited. Please RSVP to summer@voiceofsandiego.org.
QUESTIONS? CONCERNS? Write to mary.brown@voiceofsandiego.org
November 2012 VOSD MONTHLY
|3
On the Street
ELECTION DAY Voters cast their ballots at the Mid-City Police headquarters in City Heights.
HAPPENINGS
On the Street Share This Bike, San Diego SAN DIEGO WILL JOIN the growing group of urban areas across the country and world with bike-sharing programs by next spring if an ambitious plan by Mayor Jerry Sanders comes to fruition. And his office wants to put a new twist on it. While city officials say their metropolitan predecessors have had to subsidize their programs or leave them to private investment, the city has a bigger goal: to actually turn it into a money-maker. Here’s how it works: Unmanned stations get set up around the city. Each station hosts a group of bikes. You pay either a membership or a day rate to rent a bike and you can return it to any station across the city. I used Minneapolis’ program in 2010 and wondered why San Diego didn’t have one. (Maybe the mayor does read VOSD after all.) There, you could pay $5 for a day rental, $30 for a monthly membership or $60 for an annual membership. It’s one of those rare things that can be equally useful for residents and tourists alike. The country’s three largest cities are about to launch their own programs. New York and Chicago are set to go live soon, though their programs have been delayed by a software problem. This summer, Anaheim launched the first program in California; Los Angeles is also working on a program. “This is the year bike sharing is exploding,” said Eric Engelman, Sanders’ guy for energy and innovation.
What Bike Sharing Means
|
I asked a couple of bike enthusiasts to answer that question for me.
6 VOSD MONTHLY November 2012
Here’s restaurateur Jay Porter: “From what I’ve seen in Mexico City since they instituted bike sharing, it’s made a huge difference. I was really intimidated by the idea of riding the streets in the center city there a few years ago, now there are so many people riding that it feels safe, it’s like there’s usually another bicyclist near you to help establish the flow — and 4 times out of 5, that other cyclist is riding an Eco-Bici (their bike sharing program).” And bike activist Sam Ollinger: “Sometimes, getting business and resident support to build bike infrastructure is a challenge because they presume no one wants to ride. But bike share programs can drive up demand and witnessing riders can draw in support from the groups that would be otherwise opposed to supporting bike infrastructure.” Plus, it can be bigger than bikes. The city already has a car-sharing program, Car2Go. Combine that with a successful bike program, and you could have a thriving alternative or at least a complement to the urban core’s incomplete public transit system. Here, public transit in the urban core takes a backseat to longhaul commuting in the region’s transportation focus. These programs could fill in the gaps, without the high public costs that come with building transit infrastructure.
But How Will the City Actually Make Money on This?
That’s my biggest question in this and potentially the biggest stumbling block. While Minneapolis’ program, for example, was subsidized by federal and state money, Anaheim’s reportedly receives no public money. Sanders wants to push it a step further and partner with a company that will share its profits with the city.
Number of the Month
13% The percentage point edge that Democrats had over Republicans in the city of San Diego.
First, the Mayor’s Office says, it was approached by a company that wanted to bring bike sharing to San Diego and offered to do it at no cost to the city. Why not just take it, I asked the mayor’s spokesman, Darren Pudgil. It sounded like as good of a deal as anyone was getting. You could get moving on it right away. But a second company approached the city, Pudgil said, also offering to do it at no cost to taxpayers. “So we decided the right thing to do was put it out to bid,” Pudgil said. So now city officials are going to have a competition to see who will partner with them. They’re issuing a call for proposals from companies to offer the bike-sharing program, with this revenue-sharing hope. They want to get bikes on the street by the spring. The increased prominence of biking in the public conversation speaks to a larger issue: residents’ desires to return to the core neighborhood-level quality of life issues that have been ignored because of both the city’s financial crisis and the overwhelming focus on major downtown projects.
— Andrew Donohue
SAM HODGSON FOR VOSD
CYCLE CITY
QUOTE OF THE MONTH
“The cat was already out of the bag and had kittens.” — Attorney Michael Conger on Carl DeMaio’s claims he’d uncovered the city’s financial crisis
NOT SO FAST
The Challenges Facing Filner’s Budget Plan AS A CANDIDATE, incoming San Diego Mayor Bob Filner suggested that “it’s time to add not to subtract” when it comes to the city’s finances. It might have been the single biggest distinction between his campaign and that of his opponent, Carl DeMaio. “I think we’ve cut and cut and cut and cut,” Filner said. “When it comes to police or fire or libraries or rec centers, it’s time to add not to subtract.” It won’t be that simple and many of Filner’s money-saving ideas are narrow or legally questionable. The city’s budget does look much healthier than it used to. There’s little worry of hemorrhaging money or services like in years past. Mayor Jerry Sanders has declared an end both to the city’s pension and financial crises. But city services remain far below levels seen a decade ago, and roads and other infrastructure continue to worsen each year. And when you combine projected increased pension costs with current figures, the city could be looking at a $20 million-plus deficit next year. Filner said his overall budget strategy will be to redirect money that he believes supports private interests toward programs with concrete public benefits. He wants to divert money from these other areas into frontline services and infrastructure.
Spend Fire Settlement and Redevelopment Money
In the past year, the city received $27 million from San Diego Gas & Electric to settle claims related to the 2007 wildfires and $23.5 million for its dayto-day budget from the unwinding of the state redevelopment program. City officials put the payments into reserve accounts. Filner wants to spend both. He says
the fire settlement should go toward improving public safety. And he wants to funnel the former redevelopment money into neighborhood infrastructure. Both ideas present challenges. The city already plans to spend the wildfire settlement indirectly. It dumped that cash into a reserve fund used to cover legal claims against the city. That freed up money to cover the cost of a $25 million loan to help repair a sea wall in Mission Beach, build libraries in Mission Hills, San Ysidro and Skyline and a fire station in Mission Valley. It’s uncertain how much redevelopment money will flow into city coffers. Last year saw a $20 million-plus windfall, but this year the city’s only budgeting $2.5 million from the end of redevelopment. The state’s unwinding of the program has left little clarity about future budgets.
comes with downsides, too. The independent budget analyst has warned that doing so could hurt the city’s credit rating, making it more expensive to borrow money in the future.
“I think we’ve cut and cut and cut and cut. When it comes to police or fire or libraries or rec centers, it’s time to add not to subtract.”
THE INTERNAL REVENUE SERVICE is examining the Poway Unified School District’s controversial 2011 bond deal to determine whether it complies with federal tax requirements. A Feb. 6 letter from IRS Agent Edna Diaz to the district states that Poway’s 2011 bond has been selected for examination. “The IRS routinely examines municipal debt issuances to determine compliance,” the letter states. Voice of San Diego received the document pursuant to a California Public Records Act request. Diaz requested dozens of documents from the district, including detailed records of how the proceeds from the bonds were spent, who was paid in connection with the deal and who eventually bid on the bonds and bought them. An attorney for Poway said the audit is ongoing. He said it’s a routine, random investigation and said Diaz hasn’t found anything of concern. “No issues have come up whatsoever. It’s squeaky clean,” said John
“Everybody that we speak to, and I’m sure everybody that you speak to, has no idea what’s going to happen year to year,” said Seth Gates, a fiscal and policy analyst with the city’s independent budget analyst. The city also faces the risk that as much as $25 million a year in loan payments from the previous Convention Center expansion and Petco Park could shift from the redevelopment ledger to the day-today budget, creating a massive new expense. Spending money from reserves
Shift Cash to Public Safety
As we’ve noted before, Filner wants to shift about $15 million a year from a hotelier-approved surcharge on hotel bills from tourism promotion to public safety. This idea faces significant legal difficulties because of state rules on fees that can be raised without a public vote.
— Liam Dillon
UNDER THE MICROSCOPE
IRS Digging Into Poway Schools
November 2012 VOSD MONTHLY
|7
HAPPENINGS
On the Street
|
8 VOSD MONTHLY November 2012
money raised last year was spent. It wants to know the date, amount and purpose of every expenditure made from the bond proceeds. The key point: If the district spent any of the extra cash it received from the deal on construction projects or other capital expenditures, its legal argument for getting the extra money largely falls apart. Poway based its argument for getting the extra money on the fact that school districts routinely squeeze extra money out of their bond deals to pay for costs associated with selling the bonds. It says it was just doing what many districts have done before it. That argument was already a significant stretch of the existing law, and fell afoul of the attorney general’s reading of state statutes. But bond attorneys around the state disagree on whether what Poway did was actually illegal. If it turns out the district didn’t actually spend every dollar of the extra cash it got on ancillary costs, then the tenuous legal argument the district has presented would essentially evaporate.
John Collins Superintendent
▸
▸
▸
— Will Carless
BOND BOSSES
Meet the Players in the Poway Bond Story WE’VE LEARNED A LOT about the Poway Unified School District’s controversial bond deals. We’ve learned they will saddle future residents with more than $1 billion worth of debt. We know the district squeezed $21 million in extra up-front cash to pay attorney’s fees and other costs associated with the bonds. But what we haven’t focused on, until now, are the people behind these extraordinary deals.
In 1989, he was hired by Poway as an assistant principal. For nine years he was the deputy superintendent in charge of business and learning support services and he became Poway’s superintendent in July 2010. Late last year, local media reported that Collins’s home was in foreclosure after a public notice stated an auction would be held to settle $1.1 million in unpaid obligations.
IN HIS OWN WORDS: “We want to be open, transparent and forthright in our responsibility to the district. If only one member of the community comes forward with questions and concerns, it’s one too many.” Yet, Collins has so far refused to provide even basic information about a proposed review of the district’s bond deals.
Linda Vanderveen Board President
▸
Vanderveen has served three consecutive four-year terms on Poway Unified’s board but lost her
SAM HODGSON FOR VOSD
Rottschaefer, counsel for the district. It’s not the first time Poway’s bond deal has caught the attention of a government agency. Last year, the district received a stern warning letter from the state Attorney General’s Office, which cautioned Poway that the deal it was making was illegal. Two aspects of last year’s $126 million bond are controversial: First, Poway borrowed the money using an expensive long-term loan called a capital appreciation bond. That deal resulted in an almost $1 billion price tag to voters, or almost 10 times what the district borrowed. Second, Poway used a budgetary tactic to squeeze millions of dollars in extra up-front cash out of its loans (see full story on page 18). The IRS letter indicates that the agency is examining both elements of Poway’s bonds. The agency requested detailed information about who Poway paid to put the deal together, including attorneys, financial advisers and the underwriter of the bonds. And it has asked for information about any agreements between the district and the investors in the bonds. The IRS has also requested highly detailed information about what the proceeds from the bonds were spent on. That information is crucial in determining whether the extra cash Poway got out of the deal was obtained illegally. The district says the extra cash is legitimate. But for weeks Poway refused to provide Voice of San Diego with evidence that it actually spent the extra cash this way. The district released some of its accounting information to us last week, and we are currently examining those records to try and ascertain how Poway spent the extra $21 million it got from voters. The IRS seems to be interested in the same issues we are. The agency requested intricate records about how every dollar of the
HAPPENINGS
On the Street ▸
▸
bid for re-election this month.
IN HER OWN WORDS: “Our newly renovated schools are testimony to the community’s commitment to our Building for Success program. People move to [Poway] for the schools. Clearly, we are doing something right.”
▸
Vanderveen has ignored our interview requests.
Andy Patapow
Board Vice President
▸
▸ Patapow has served four consecutive ▸
▸
terms on Poway’s board and won re-election this month. He was the principal of Poway’s continuation school for 28 years. U-T San Diego reported that he accepted more than $300 in meals from Stone & Youngberg, the underwriter of last year’s controversial bond deal.
This is Davis’s first term as a board member; in 2014 he will be up for re-election. IN HIS OWN WORDS: “I am running to share my financial and business expertise to help address the monumental budget problems that we have now and will have in the future. I understand financial markets, contracts, employment rules, pension plans … and tax issues.”
In an Aug. 8 email to Carless regarding the extra money Poway squeezed out of its bond deals, he wrote: “[Poway Unified] did not circumvent the will of the people in doing this but followed long standing legal precedent in doing so and the advice of our bond counsel.” Three attorneys not affiliated with the district who were contacted by Carless said Poway’s deals were, in fact, extraordinary, since they pushed the boundaries of state law. The Attorney General’s Office also deemed the district’s 2011 deal illegal.
Board Member
Board Member
▸
▸
Patapow has ignored our interview requests.
▸
Board Clerk
▸
▸ Davis is the newbie of the group.
Gutschow is in the middle of his second term as a board member; he’ll be up for re-election in 2014. He was appointed to the Citizens’ Oversight Committee for Proposition U. IN HIS OWN WORDS: “I think most people who take a moment to think about things before they vote would
Of the five board members, Gutschow has been the most willing to communicate with us on this story.
Penny Ranftle
Todd Gutschow
Marc Davis
▸
▸
have said, ‘Well, gee. We’re going to be paying more money for a longer period of time. And that’s probably going to mean that’s going to be more expensive.’ I think that general idea is something most people could have and should have recognized. Would they be able to estimate how much? Would they have been able to have that kind of level of detail? No.”
Ranftle has been on the board the longest; she’s in the middle of her fifth consecutive term, meaning she has spent the past two decades in her position.
She has defended Poway from criticism over its bond deals. During an interview, she said the board had acted in good faith and had delivered what voters wanted: more money to construct schools, without raising taxes. IN HER OWN WORDS: “It saddens me to see a couple of members of the media that have turned their scrutiny of this district into some sort of a sport. They have taken a single aspect of this massive rebuilding and modernization program and wrapped it into innuendo and inaccurate reporting, without regard to the damage or expense it is causing the district.”
— Sandy Coronilla
November 2012 VOSD MONTHLY
|9
|
10 VOSD MONTHLY November 2012
OUR NEXT MAYOR
A Changing City Chooses Filner Where his predecessors have been calm, moderate and pro-downtown, Filner is feisty, unabashedly liberal and pro-any-neighborhood-but-downtown.
BY LIAM DILLON
SAM HODGSON FOR VOSD
T
HIRTEEN YEARS AGO, Bob Filner openly pondered running for mayor of San Diego. In his view, San Diego had become dominated by Republican interests, and increasingly out of step with the city’s growing Democratic population. But Filner passed — he didn’t think he could win. Seventeen months ago, Filner announced a mayoral bid expressing certainty that now was his time. The city has only grown more ethnically diverse and Democratic in the years since he had floated a bid. Filner was right. His victory over Carl DeMaio on Nov. 6 highlights the rise of the Democratic Party in San Diego city government, one of the last bastions of Republicanism in California’s big cities. Before Filner, San Diego had not elected a Democratic mayor in two decades. Filner, a 70-year-old congressman, rode a 13-point Democratic registration edge to victory. But Filner represents a break from past San Diego mayors that goes beyond party affiliation. Where his predecessors have been calm, moderate and pro-downtown, Filner is feisty, unabashedly liberal and pro-any-neighborhood-butdowntown. November 2012 VOSD MONTHLY
| 11