How San Diego's budget broke
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San Diego government fees skyrocketed last year — fueled by inflation, delayed repairs, losing federal COVID funds, and big spending on things like employee raises and the 101 Ash Street building — city leaders and political experts told Axios.
Why it matters: That boiling cauldron of factors bubbled over into a $318 million deficit last year, leaving the city scrambling to make cuts and add fees.
The big picture: San Diego's budget problems have been brewing for a long time, Mayor Todd Gloria told Axios.
Some of the highest costs include:
🚧 Delayed repairs to things like water mains or streets.
- Maintenance delays raise costs, because it's more expensive to fix things after they break, SDSU political science professor Brian Adams told Axios.
💵 Raises for city employees.
- The city gave a 23% raise to more than half its employees, plus a 10% raise to police and firefighters, in 2022. Those raises also increase the city's pension obligations.
🏢 101 Ash Street.
- The city bought the building for $86 million in 2022 and will have to pay $2.4 million a year to maintain it.
📈 Inflation. Rising costs impact the city just like a household budget, Gloria said, citing gas prices as an example.
- "You have one or two cars in your family, but for the city, we have 5,000 vehicles," he said.
😷 Losing COVID funds. The city took in $248.4 million in federal funds to provide emergency services in 2020 and 2021, which helped offset other budget drains.
- San Diego Regional Chamber of Commerce CEO Chris Cate told Axios the city expanded too much at that time, adding new departments like the Office of Race & Equity and the Office of Child and Youth Success.
📉 Shrinking taxes. Money from taxes isn't decreasing, but isn't increasing as much as expected, Adams said.
- The city also tried to raise sales taxes to bring in $400 million a year in 2024, but voters said no.
Friction point: Cate told Axios "there are definitely other tools in the tool belt" to balance the budget besides increasing fees.
- Consolidating departments or contracting outside businesses for city work to save money, he said.
Context: San Diego's taxes and fees are comparable to those of other large cities, Adams said.
- For example, most people in big cities have long paid for trash pickup, a fee tacked on for San Diegans last year.
- Big cities also often have financial problems unless they are really wealthy suburbs, Adams said, so San Diego's budget deficit is not unique.
- But the city's charter still requires a balanced budget.
What we're watching: Adams said it's concerning that the city's budget is struggling when the economy is doing fine.
- "Maybe not as great as we would like, but it's doing OK, and yet we're having this big deficit," he said. "If we have a recession, then we're going to have a really big problem."
- That could further drop tax revenue, leaving the city in an even worse spot.