Paradise Plundered: Fiscal Crisis and Governance Failures in San Diego

PARADISE PLUNDERED

Fiscal Crisis and Governance Failures in San Diego

Steven P. Erie,

Vladimir Kogan,

and Scott A. MacKenzie

Stanford University Press

Stanford, California

©2011 by the Board of Trustees of the Leland Stanford Junior University.

All rights reserved.

No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press.

Printed in the United States of America on acid-free, archival-quality paper

Library of Congress Cataloging-in-Publication Data

Erie, Steven P., author.

Paradise plundered : fiscal crisis and governance failures in San Diego / Steven P. Erie, Vladimir Kogan, and Scott A. MacKenzie.

    pages cm

Includes bibliographical references and index.

ISBN 978-0-8047-5602-0 (cloth : alk. paper)—

ISBN 978-0-8047-5603-7 (pbk. : alk. paper)

1. Finance, Public—California—San Diego. 2. San Diego (Calif.)—Politics and government. I. Kogan, Vladimir, 1985–author. II. MacKenzie, Scott A. author. III. Title.

HJ9205.S28E75 2011

336.794′985—dc22

2011015039

Typeset by Newgen in 10/13.5 Sabon

E-book ISBN: 978-0-8047-8218-0

To Clarence N. Stone, mentor and friend

Contents

List of Tables and Figures

Preface

PART I Overview and Historical Development

1 America’s Finest City?

2 Never, Never La-La Land: Growth and Governance Challenges, 1800s–1990

PART II Fiscal Crisis and Governance Challenges, 1990–2010

3 Paradise Insolvent: From Pension Scandal to Fiscal Crisis

4 Paradise Impoverished: Underfunded Public Services

5 Eyes Wide Shut: Grandiose Plans for America’s Finest City

6 Redevelopment, San Diego Style: The Limits of Public-Private Partnerships

PART III At the Crossroads

7 Regional and Binational Infrastructure: Governance Challenges and Failures

8 Paradise Ungoverned

Notes

Index

Tables and Figures

Tables

3.1 Property Tax Revenue of the Ten Largest California Cities before and after Proposition 13

3.2 Per Capita General Revenue of the Ten Largest California Cities, Fiscal Year 1977–78

3.3 Public Pension Burden in the Largest California Cities, Fiscal Year 2008–09

3.4 Revenues of the Ten Largest California Cities, Fiscal Year 2008–09

3.5 San Diego’s Era of Reform, 2004–10

4.1 Per Capita Expenditures by Function, Fiscal Year 2007–08

4.2 Demographic and Political Characteristics of San Diego City Council Districts, 1990 and 2000

4.3A 2000 and 2004 Mayoral Election Results

4.3B 2005 Special Mayoral Election Results

4.4 Selected San Diego Public Service Levels, Fiscal Year 2001 versus Fiscal Year 2010

5.1 Outstanding Long-Term Debt of the Ten Largest California Cities, Fiscal Year 2007–08

5.2 Local City and County Tax and Bond Propositions, 1995–2008: San Diego Relative to Other Large California Cities and Counties

6.1 Tax Increment, Redevelopment Revenue, and Spending in Los Angeles, San Francisco, and San Diego, 1990–2003

6.2 Major League Baseball Stadium Construction Costs, 1990–2003

8.1 Fortune 500 Companies in Metropolitan Areas, 1960, 1980, and 2003

8.2 Top Twenty Property Owners in San Diego by Taxes Paid, Fiscal Year 2010–11

8.3 City of San Diego Tax and Bond Initiatives, 1960–2009

8.4A City and County Voting Results for Selected Local Revenue Measures

8.4B City Voting Results for Selected Local Reform Measures

Figures

4.1 Total City Expenditures per Capita, 1972–2007

4.2 San Diego City Payroll Trends, 1992–2007

4.3 Pension Payment as Percentage of the General Fund

4.4 Map of San Diego City Council Districts, 2000

4.5 Weekly Hours per Library Branch Location

4.6 Per Capita Spending on Sewers in California’s Ten Largest Cities

5.1 City of San Diego Development Tiers under 1979 General Plan

6.1 Project Areas of the Centre City Development Corporation

6.2 Nested Structure of San Diego Redevelopment Relationships, 1990–2005

6.3 Growth in Assessed Valuation of CCDC Project Areas, 1994–2010

6.4 San Diego Redevelopment Expenditures and Tax Increment Funds, 1990–2008

6.5 Naval Training Center Project Area (renamed Liberty Station)

6.6 Navy Broadway Complex

Preface

The early twenty-first century has not been kind to California’s reputation for good government. With a dysfunctional state government and a soaring budget deficit, the state has become the butt of late-night television jokes. Things have fared even worse for local governments. The City of Bell, a small immigrant community located in Los Angeles County, earned national notoriety for allegations of massive corruption and fraud by city officials. The nearby City of Vernon, in the words of the speaker of the California State Assembly, is a situation where a handful of individuals are able to use an entire city as their own personal fiefdom.¹

In actuality, the Golden State’s governance flaws, whether chronic and seemingly irresolvable budget deficits or public corruption, reflect worrisome national trends with origins in the 1970s and 1980s. Growing voter distrust with government and a demand for services but not new taxes to pay for them, a sharp decline in enlightened leadership and effective civic watchdogs, and dysfunctional political institutions ranging from term limits to an initiative process gone awry have all contributed to the current governance malaise.

Some jurisdictions appeared immune to systematic governance disorders. Until recently, such was the case with San Diego, California, America’s eighth-largest city. Lauded by antitax activist Howard Jarvis for its fiscal stewardship and nationally praised as a governance exemplar, this sunny beach town entered the last decade of the twentieth century proudly proclaiming itself America’s Finest City. However, the new millennium has not been kind to paradisiacal San Diego. In a few short years, the town’s reputation went from Futureville to Enronby-the-Sea.² A pension scandal blossomed into a huge pension liability. With a large and seemingly intractable budget deficit, the city teetered toward bankruptcy. A number of public officials resigned from office or went on trial, charged with corruption and fraud. Horrific wildfires revealed the paucity of public services. Paradise, it seems, had been plundered.

This is a study of San Diego’s myriad civic woes. This project began as a political biography of an understudied Sunbelt city. As events unfolded, we sharpened the focus to the City of San Diego’s fiscal crisis and governance failures. San Diego, we believe, is a harbinger for dysfunctional state and national trends related to political culture, leadership, and institutions. The project also can be traced to our active involvement in local civic affairs, ranging from debates about the strong-mayor system to thorny issues involving pension and budget policy, redevelopment, water-supply reliability, and airport development.

Many people have assisted us along the way. Most of all, we wish to thank Kathleen Ames, Cheryl Boudreau, and Laura Tate for their love, support, and patience during the many hours of research and writing. We also want to thank Harold Brackman and Rumman Chowdhury for their able research assistance. Scholars and practitioners kindly read—and improved—earlier drafts of the manuscript. Erik Bruvold, Nico Calavita, Norma Damashek, Jameson Doig, Iris Engstrand, Earl Fry, Larry Herzog, Dennis Judd, Sandy Lakoff, Phil LaVelle, Paul Lewis, Scott Lewis, Roger Showley, Abraham Shragge, Glen Sparrow, Mike Stepner, Clarence Stone, Ken Sulzer, and Todd Swanstrom offered valuable comments and suggestions. We are also grateful to the many individuals we interviewed who so generously gave of their time and effort. Project support was furnished by the University of California, San Diego’s Academic Senate Committee on Research.

Finally, we wish to thank an extraordinary mentor and friend, Clarence Stone, who has contributed so much to the study of urban politics. A dedication is small reward for the encouragement, insight, and wisdom Clarence so generously imparts.

Steven P. Erie

Vladimir Kogan

Scott A. MacKenzie

La Jolla, California

February 2011

PARADISE PLUNDERED

I Overview and Historical Development

1 America’s Finest City?

Welcome to San Diego, California’s second largest city, where blue skies keep watch over 70 miles of beaches and a gentle Mediterranean climate means paradise every day.

—San Diego Convention and Visitors Bureau,

Neighborhood Guide¹

In the popular imagination, San Diego is a sunny seaside paradise. Touted as one of the nation’s top leisure-vacation destinations, San Diego aggressively markets itself for an idyllic climate, pristine beaches, a dazzling array of world-class tourist attractions, beachfront resorts and luxury spas, and a vibrant downtown district. Although the beach is a way of life, golf is serious business here, with more than ninety courses offering stunning ocean views, desert sun, or mountain vistas. Local boosters trumpet the immense options for business—such as an innovative high-tech industry—as well as pleasure in a place that proudly proclaims itself America’s Finest City.²

Yet there is a grim and increasingly visible civic reality to San Diego not depicted in slick marketing brochures. It consists of a chronic municipal fiscal crisis, exacerbated in recent years by a pension scandal and multibillion-dollar pension deficit; severely underfunded public services and infrastructure; grandiose plans for big-ticket civic projects divorced from straitened fiscal realities; and a privatized downtown and bay front, the product of poorly crafted and inadequately monitored public-private redevelopment partnerships underwritten by hundreds of millions of dollars of public investment. Paradise, it appears, has been plundered.

The result of San Diego’s civic mismanagement is the making of an American Potemkin village³—an impressive privatized facade with a dark public-sector underbelly—featuring a gleaming new downtown and bevy of tourist attractions but saddled with billion-dollar pension liabilities and deficient public services. With civic energies and resources focused on building downtown legacy projects, such as a new city hall, a central library, an expanded convention center, and possibly a new football stadium, pressing neighborhood improvements and regional initiatives, ranging from improved fire protection to a new airport, have faltered. The appearance of prosperity well serves the interests of the remnants of a once-potent local growth machine, which includes real estate developers, professional sports team owners, the tourist industry, organized labor, public agencies, business groups, and self-interested politicians seeking legacy projects and reelection.⁴

San Diego’s civic woes have tangled roots. As far back as the 1970s, the city was an early and eager advocate of limiting taxes and living beyond its means. City officials raided the pension and other revenue streams to pay for big-ticket items while providing a semblance of public services that tax-averse residents demanded but did not want to pay for. At the same time, voter-approved initiatives at the state level, the culmination of a nationwide tax revolt, erected crippling barriers to local governments’ ability to raise new revenues. These changes also empowered small but impassioned minorities to block future efforts to raise taxes, thus exacerbating the tenuous financial position of cities like San Diego. To go along with its free lunch political culture, San Diego scores unexpectedly low on social capital metrics, with residents displaying low levels of trust in local government and high levels of political ignorance and apathy. As a former local reporter observed, To win over San Diegans, you have to let them sit back and do nothing and then congratulate them for doing it.⁵ Low social capital makes collective action and public monitoring of government performance more difficult.⁶

At the elite level, the capacity to resolve civic challenges diminished as the old business leadership faltered and San Diego became a quintessential branch-plant town. New policy entrepreneurs on the scene have pursued self-interested, single-issue agendas. They include professional sports team owners, real estate developers, and public-sector unions. Aiding and abetting the new policy entrepreneurs are semiautonomous shadow governments, such as the Centre City Development Corporation, which oversees redevelopment efforts downtown, and the San Diego City Employees’ Retirement System, which manages local pension funds. Another factor contributing to weakened civic capacity has been a sharp decline in the monitoring and effectiveness of civic watchdogs, ranging from the local media to good-government groups.⁷ Though hardly unique among the nation’s big cities in terms of these troubling civic trend lines, San Diego has been a leader of the pack.⁸

Paradise Plundered dissects San Diego’s fiscal crisis and related governance challenges and considers their root causes and likely consequences. In doing so, we hope to provide cautionary lessons for the many communities that are now emulating the San Diego way. In explaining local government’s performance lapses and failures, we emphasize three broad explanatory factors: (1) civic leadership and capacity, (2) political culture, and (3) political institutions. The primary focus is on the City of San Diego and its policy making during the period from 1990 to 2010. We analyze five policy spheres that together encompass the exercise of the city’s primary public powers, each with distinct governance arrangements: the city’s pension system, municipal finance, public service and infrastructure provision, planning, and redevelopment. We also examine how the city’s past has shaped the present, regional and binational infrastructure and governance challenges facing the border metropolis, and prospects for the future. Throughout, we benchmark San Diego with other large cities, particularly in California.

From Futureville to the Most Screwed-Up City in America

After the North American Free-Trade Agreement, the Mexican connection is bound to grow. That and other changes—economic, demographic, cultural—are transforming a place which used to have a reputation as a sleepy navy town, a California cul-de-sac with a great climate and a nice zoo. Nowadays, San Diego can tout itself, without sounding ridiculous, as the first great city of the 21st century.

—"Futureville," Economist, 1996⁹

Most folks probably have certain images in mind when they think of San Diego. A gentle breeze blowing off the Pacific. . . . Well-fed folks lining up putts on country-club greens. Money oozing from the wireless and biotech juggernauts up and down the coast. How, then, to square this idyllic vision . . . with the scandals that have sprouted in California’s second-largest city faster than wildflowers after a desert rain? There’s so much slime in this town that civic leader George Mitrovitch, president of the City Club of San Diego, calls it the most screwed-up city in America.

—Stay Classy, San Diego! It’s Wealthy, Sunny, Beautiful—and Possibly the Most Dysfunctional Big City in America, Fortune, 2005¹⁰

Modern San Diego came of age during and after World War II. In the postwar era, the defense industry brought growth and prosperity, but it collapsed when the Cold War ended, sending unemployment soaring. San Diego embraced the widely held mantra that low taxes, low debt, a small public sector, and business-friendly regulations are the most crucial factors for attracting new businesses and keeping local industries globally competitive.¹¹ This formula appeared to work. By the late 1990s, San Diego had reinvented itself, with new high-tech industry and foreign trade joining real estate and tourism as pillars of a diverse and apparently healthy economy. In a study of regional innovation, the urban scholar Richard Florida rated San Diego the nation’s third-best creative class city on the basis of a new model of urban economic development tapping technology, talent, and tolerance.¹²

Beneath the accolades, however, serious problems were festering: woefully underfunded public services and infrastructure, a large and growing low-wage service sector, inadequate schools, and one of the nation’s least affordable housing stocks. San Diego’s public sector was undernourished and overburdened. Relative to its size (1.3 million residents), the city’s police and fire departments ranked among the nation’s smallest. Their equipment was aging and deficient. During the disastrous 2003 Cedar Fire, which killed fifteen people and destroyed more than two thousand homes, San Diego firefighters had no helicopters to help contain the conflagration.

In the 1990s, as San Diego recovered from defense cutbacks and a deep recession, the city doubled down, joining other cities in the competition for convention traffic, Super Bowls, and giveaways to professional sports team owners. Raiding pension funds swollen by the bull market of the 1990s was one of the few ways San Diego could pay for big-ticket items like the 1996 Republican national convention and balance its books without raising taxes. Despite San Diego’s relatively low tax burden, the T word remains anathema to residents in this military and retirement mecca. This has resulted in little money for public services and basic infrastructure improvements essential to a sound economy. After public pensions were boosted, many blamed organized labor for the city’s financial woes.

Having plugged its immediate budget deficit with money meant for municipal pensions, San Diego’s elected officials chose to lavish scarce public resources on downtown redevelopment and professional sports stadiums. The capstone project of San Diego’s Downtown Renaissance,¹³ which paired the Petco Park baseball stadium for the Padres with ancillary development in the once-moribund East Village, has been widely hailed as a public-private partnership worthy of emulation.¹⁴ This and other projects, their proponents argued, would spur private investment downtown and create new jobs, affordable housing, and public improvements. Critics, however, have pointed to the city’s inability to conduct meaningful oversight and to extract public benefits from its substantial investments in downtown and bay-front redevelopment.¹⁵

California’s other big cities appeared to be better prepared to cope fiscally. After Proposition 13 passed in 1978, many cities raised new revenues by imposing utility-users’ taxes, increasing business taxes, and charging higher user fees. The Los Angeles Department of Water and Power, for example, found surplus revenue to balance the city’s budget.¹⁶ Had San Diego emulated these cities, its General Fund revenues would have been much higher, capable of financing essential services and infrastructure without raiding its pension funds. Instead, San Diego became a poster child for the state’s tax revolt and the penurious effects of Proposition 13’s fiscal straitjacketing of local government.¹⁷ With the onset of the 2008 recession, even fiscally creative cities like Los Angeles faced yawning budget gaps and growing demands from some residents to scale back pensions.¹⁸ In San Diego, the downturn brought the city to the verge of bankruptcy.

Civic Meltdown

The irony is that, before 2003, San Diego was lauded as one of the nation’s best-governed cities and held up as a model for the new millennium with its low-tax, business-friendly government; its downtown renaissance; and its environmentally sensitive planning.¹⁹ On the eve of the 1996 Republican national convention, San Diego was praised by Economist as Futureville for its vibrant high-tech economy; rapidly growing Mexican trade; and lean, efficient municipal government, with the lowest ratio of city employees to population among the nation’s fifty biggest cities.²⁰ The urbanist Joel Kotkin hailed San Diego as an exemplar of a ‘Republican’ form of urban governance . . . that could make [the GOP] a majority party well into the next century:²¹

[P]rivate-sector activism constitutes a critical component of making smaller and less expensive government work. . . . This political model, first developed by Republican Progressives in the early 20th century, adapts the best private-sector accounting and hiring practices to city government. Such governments tend to see themselves as a utility that serves the public rather than as a vehicle for political patronage and redistribution of wealth.²²

Kotkin also claimed that San Diego has benefited from what it fortunately does not have: no vast municipal welfare state, no entrenched urban underclass, no powerful municipal employee unions to skew spending priorities, and no industrial union tradition to make its labor force rigid.²³ Evidently, San Diego’s Republican progressive political tradition had shallow roots. Even as Kotkin was celebrating the city’s center-right consensus, the city was already having trouble managing newly assertive public-employee unions.

Within a few short years of these sunny prognostications, San Diego earned national notoriety as one of the most ineptly managed cities, with a brink-of-bankruptcy pension deficit, multiple bribery and corruption scandals, resignations of key city officials, and charges of gross fire-safety unpreparedness in the wake of major wildfires destroying thousands of homes. San Diego’s metamorphosis from civic archetype to national laughing stock was swift. By 2004, as the city’s pension scandal unfolded, the New York Times proclaimed that Sunny San Diego Finds Itself Being Viewed as a Kind of Enron-by-the-Sea, and Governing magazine called the city Paradise Insolvent.²⁴ In 2005, with corruption scandals erupting amid civic turmoil, Fortune called San Diego possibly the most dysfunctional big city in America.²⁵ The Washington Post reported a serious vacuum of power in a former beacon of good government now dimmed by federal corruption probes, deep deficits and election controversies.²⁶

According to the Los Angeles Times, one local television station . . . banned use of San Diego’s longtime slogan—‘America’s Finest City’—until further notice, deeming it too ‘arrogant and cynical’ for a municipality in the throes of national humiliation. The leading local newspaper raised the editorial question: ‘Can San Diego sink any lower in the eyes of the world?’²⁷ If you want to study municipal failure, San Diego City Attorney Mike Aguirre observed, you can’t do better than come here.²⁸

Mounting Challenges

By 2010, a sizable $2.1 billion unfunded pension liability—projected to increase to $2.6 billion by 2015—placed San Diego’s shaky municipal finances in dubious company with once-bankrupt Orange County and once nearly bankrupt New York City.²⁹ Ballooning pension payments were severely straining General Fund outlays for critical public services like fire protection, police, parks, streets, and libraries. Long considered a model reform city, early-twenty-first-century San Diego, according to the Chicago Tribune, exceeded political machine–era Chicago in the number of local public officials indicted for or convicted of bribery and corruption.³⁰ Randy Duke Cunningham, a local congressman, was convicted in one of Capitol Hill’s worst bribery scandals in recent history. Three city council members were indicted for accepting illegal payments from a strip club owner and were forced to resign. Ongoing criminal investigations into the pension debacle led to the indictment of several members of the city’s retirement board. In the face of scandal and investigations, city hall became a revolving door, with the mayor, city manager, and auditor-controller all abruptly resigning.

In the wake of these calamitous events, it was apparent that civic priorities were misplaced. With strong, local antitax sentiment and seemingly feckless political leadership, vital public services remained under-funded and impoverished. Despite experiencing disastrous wildfires in 2003 and 2007, the city had barely two-thirds of the fire stations needed to meet national accreditation standards. Its aging water and sewer infrastructure required billions of dollars in replacement pipes and upgrades. Instead, San Diego continued to seek waivers from the Federal Clean Water Act while dumping millions of gallons of partially treated waste-water into the Pacific Ocean. With key public officials opposed or sitting on the sidelines, voters rejected plans to build a new airport to relieve congested Lindbergh Field. The town’s major newspaper even labeled San Diego America’s Cheapest City, chiding residents for their love of public services but hatred of higher taxes, both of which contributed to the financial chaos.³¹ With no new revenues and growing pension outlays, San Diego faced a chronic, long-term, structural-deficit budget crisis.

These vexing civic failures belie San Diego’s long history of notable accomplishments. The creation of one of the nation’s largest cities on a geographically isolated scrabble of semiarid land with limited local water supplies was no small feat. Although the natural harbor, scenic coastline, temperate climate, and nearby mountains were impressive natural endowments, it took concerted collective action to build this idyllic, if troubled, paradise. Early visionaries planned and built iconic Balboa Park and the world-renowned San Diego Zoo. Energetic civic leaders successfully lobbied for a reliable water supply and to reinvent San Diego as Navy Town U.S.A. Like many other Sunbelt cities, San Diego’s twentieth-century growth was underwritten by the federal government in the form of large-scale military investments. Massive public investments built on the region’s impressive natural endowments.³²

Therein lies the paradox at the heart of San Diego’s storied past and troubled current circumstances: the city and region were built and sustained by big government. Even in the early twenty-first century, the military—payroll and defense procurement contracts—still accounts for a significant share of the region’s economy. The State of California, through investments in two large public universities, pumps hundreds of millions of dollars more into the regional economy and has fueled a significant number of business spin-offs. As a creature of big government, San Diego never had to fully pay its own way. The region grew accustomed to someone else—particularly the federal and state governments—paying for critical public services and infrastructure, ranging from aqueducts to fire protection. Today, however, San Diego’s public dialogue is dominated by conservative critiques of big government and a celebration of laissez-faire capitalism and rugged individualism—notwithstanding a still-hearty appetite for public services coupled with a strong aversion to paying taxes.

When Governance Fails

Semper vigilans (Ever vigilant).

—Official motto of the City of San Diego

The fiscal crisis that has paralyzed the City of San Diego for much of the past decade is just one dimension of a larger failure of the local public sphere. Equally debilitating is the neglect of basic infrastructure, a problem that is decades in the making and that rivals the city’s unfunded pension liability in its size. Unlike the pension liability, which exists primarily on the balance sheets of the city and its retirement system, local residents feel the consequences of the city’s infrastructure deficit every day. San Diego does not have enough police officers to protect its citizens from crime. Its fire department lacks the personnel to respond to emergencies quickly, and its aging equipment is inadequate for its day-today activities, let alone to fight the catastrophic wildfires that have twice threatened core neighborhoods in the past ten years.

San Diego’s wastewater system is out of compliance with federal laws passed more than thirty years ago. In the interim, the city has compiled one of the poorest records of sewage spills of any big city in the country. Imported water constitutes more than 90 percent of the city’s supplies. Nonetheless, the city continues to dump most of its reclaimed water into the Pacific Ocean. San Diego’s library system is hemorrhaging, with too few librarians to staff the local branches and too little money to pay for books, computers, and maintenance. The city’s roads continue to decay, with more than 50 percent of roads in poor condition. Among the nation’s largest cities, San Diego’s roads are the seventh worst.³³ The city’s lone commercial airport is undersized, near capacity, and already requires local residents to rely on airports outside the region.

Considered against this backdrop, the city’s decisions to pour ample money, including loans backed by future revenues, into downtown redevelopment appear downright irresponsible. The resources devoted to upgrading the convention center and building a new downtown ballpark for the San Diego Padres—projects that, regrettably, yielded few public benefits to local taxpayers—extend beyond the property tax increment harvested by the Centre City Development Corporation. Local public officials have opted to supplement those funds with loans, land, and development rights that continue to affect the city’s General Fund. Equally bizarre are pie-in-the-sky proposals for a new central library, a second convention center expansion, a modern city hall campus, and—more recently—a downtown stadium for the San Diego Chargers.

In short, the modern political history of San Diego has been marked by persistent and systematic governance failures, of which the city’s fiscal crisis is just one stark example. Urban practitioners and scholars agree that the most appropriate criterion for assessing the quality of local governments is by their ability to govern—to effectively mobilize both public and private resources to achieve collective goals. The focus on governance recognizes that urban areas today confront incredibly complex social and political challenges that often exceed the capacities of both local government and key stakeholders such as the business community.³⁴ Contemporary urban problems can be tackled only through sustained cooperation between the public and private sectors that strategically deploys the resources of each to bring about desired policy outcomes. Governance failures occur when public and private actors fail to coordinate to advance welfare-enhancing policies and, alternatively, when civic elites succeed in channeling the powers of government to benefit narrow, private interests at the expense of the broader city interest. San Diego over the past twenty years exemplifies both types of failures.

The informal coalitions between elected officials and local private-sector leaders that define the governing capacity of cities have been described by urban scholars as regimes. Clarence Stone’s influential study of Atlanta first popularized regime theory as a tool to describe and classify cities on the basis of the identity of actors who participate in their governing coalitions. Within this framework, San Diego most resembles many other cities with limited governing capacity and weak regimes. Historically, declining regimes have most often emerged in the former industrial capitals of the Frostbelt, such as Detroit and Cleveland.³⁵ However, traditional explanations for urban decline, which focus on shrinking populations, deindustrialization, and suburbanization, cannot explain the widespread governance failures in San Diego, a growing Sunbelt city where service industries and tourism have long overshadowed manufacturing as the primary source of jobs and where the urban core has peacefully coexisted with single-family suburbs within the city’s municipal boundaries.

In many ways, this book builds on the work of regime theorists such as Clarence Stone and Stephen Elkin. Like these scholars, we focus on local politics as a source of social production rather than social control. Governing San Diego is about the power to achieve public objectives rather than the exercise of power over its citizens.³⁶ However, our study departs from this theoretical approach in important respects. As Gerry Stoker has argued, regime theory is a tool that should be used to explain a process rather than to predict an outcome.³⁷ Too often, however, description and explanation are conflated—for example, progressive regimes are those with progressive public policies, and weak regimes are denoted by the incidence of fiscal or other civic crises. In contrast, this study not only chronicles the governance failures of San Diego but also seeks to identify their primary causes—key factors that vary across cities and can be used to explain and predict policy outcomes.

In addition, although we focus on the central role of political and business elites—the primary actors in regime theory—in setting the political agenda and mobilizing public support for civic initiatives, our analysis also places ordinary voters at the heart of San Diego’s governance problems. Although effective leaders can and often do move public opinion, our account recognizes that voter preferences and the broader political culture greatly constrain the strategies and options available to public-sector and private-sector leaders. As Royce Hanson has argued in his study of Dallas, political culture can create a logic of appropriateness that defines the parameters within which political debates are held, public decisions are made, and conflicts are resolved.³⁸ In San Diego, the voice of the voters is amplified through political institutions—including the frequent use of the initiative process and voter-approval requirements added to the state constitution in the late 1970s—that not only structure the interactions between public officials and the business community but also define the relationship between elected officials and their constituents.

More generally, our account stresses the microfoundations of urban governance, a term borrowed from economics that emphasizes individuals, rather than the city, as the primary unit of analysis. Throughout, we pay particular attention to the motives of individuals—whether voters, elected officials, or business owners—and the strategies available to them to achieve their goals. By rejecting alternative accounts of urban politics based largely on theories of economic determinism, this book emphasizes the political choices of San Diego’s civic leaders and its citizens, and it pays close attention to the alternative paths not followed and the resultant outcomes.³⁹ In San Diego, systematic governance failures have been an unintended, but largely predictable, by-product of these decisions.

Explaining Governance Failures

The roots of the city’s failures are not in the necessity of earning its keep but in how that impulse gets translated into action.

—Stephen L. Elkin, City and Regime in the

American Republic, 1987⁴⁰

How can San Diego’s local governance failures be explained? We have spent several years researching this question—culling through countless primary documents; compiling detailed statistics measuring local inputs and outputs; interviewing former city officials and other informed observers; and reading hundreds of news accounts, local histories, and academic analyses. Several recurring explanatory themes emerged from the secondary sources we consulted and were echoed by those we interviewed who had firsthand knowledge of the policy decisions analyzed in this study. We have organized these themes into three broad explanatory categories: leadership, political culture, and political institutions. These form our primary explanatory variables in the chapters that follow.

Leadership

The first category, leadership, is perhaps easiest to describe but its impact hardest to measure or explain. Unlike Atlanta or Dallas and many other cities, contemporary San Diego lacks cohesive and effective business leadership. This was not always the case. Powerful business moguls like John D. Spreckels, who invested in regional water and transportation systems, shaped the city’s early trajectory. Later, a well-organized business community led a concerted campaign to lure the U.S. Navy to San Diego. In the years following World War II, local defense contractors such as Reuben Fleet, bankers, hoteliers, and real estate developers provided the city with a critical mass of civic-minded business leaders concerned about San Diego’s future. In the late 1950s, many of these leaders organized San Diegans Inc., which was instrumental in drafting early plans for the city’s downtown revitalization. Like the economist Mancur Olson’s stationary bandit, the pursuit of personal profit encouraged these business leaders to promote needed investment in public services and infrastructure, thus providing critical private-sector leadership necessary to sustain public initiatives with widespread positive spillovers.⁴¹

Over the past thirty years, however, San Diego’s corporate civic leadership has diminished. The savings-and-loan scandals of the 1980s crippled San Diego’s financial services sector. The end of the Cold War led to a decline in local defense-related firms and employment. More than anything, however, the decline is a consequence of global economic forces. Today, San Diego’s financial services sector consists largely of regional branches of national and multinational megabanks. Similarly, local hotel proprietors compete with international chains, which capture a large share of the region’s tourist traffic. More recently, the city’s only major daily newspaper—never a strong civic watchdog—was sold to a private equity group located in, of all places, Beverly Hills. In place of Spreckels and Fleet, San Diego’s new private-sector entrepreneurs more closely resemble Olson’s roving bandits—pursuing exceedingly narrow, single-issue agendas that provide few positive spillovers for the entire city. With the decline of civically engaged local business leadership, the politics of extraction have replaced policies promoting public investment.

These changes, not unique to San Diego, have had several effects. First, the absence of corporate civic leadership has removed a strong source of monitoring of local government’s performance. Unlike residents who pay little attention to politics, local businesses have an interest in the health of the city by virtue of their role as major employers and property owners. Increasingly staffed by branch-plant managers with few local roots, the region’s major corporations today are less inclined to see their fate and the city’s as intertwined. As such, their interest in local politics has declined.

Second, as Clarence Stone has argued, corporate civic leadership provides local governments with critical resources needed