Jay Goldstone

As San Diego climbs back into solvency, Mayor Sanders and his team at City Hall often will be looking for guidance to Jay Goldstone, the city’s first CFO and a financial expert who helped rescue the city of Pasadena from a similar, albeit smaller, financial morass. Following, Goldstone answers questions we posed to him about the city, his job and his personal life.

Question: What had you heard about San Diego’s financial issues before taking the job?

Answer: I have been following San Diego’s financial situation for nearly two years. Working in the profession, it was nearly impossible to go anywhere without San Diego being discussed. I read local newspapers and talked to people who had varying degrees of familiarity with what was happening here. Of course, the primary issue I was most familiar with dealt with the city’s huge unfunded pension liability, the fact that it had not adequately or properly disclosed its financial condition in its Comprehensive Annual Financial Reports (CAFR), and that it included inadequate financial information in its bond offering documents and was under SEC investigation.

Q: Knowing all that, why did you still want the job?

A: I had worked for the city of Pasadena for 10 years and was able to accomplish a lot during that time. I am approaching the later part of my career and thought that San Diego would be a great opportunity and challenge. While it faced significant financial challenges, the local economy is strong and I truly felt that the problems facing San Diego were definitely solvable. It will take some time and the political will to make some tough decisions, but I believe that with discipline and focus and complete disclosure, the financial problems facing San Diego today can be fixed. In addition, I had heard great things about Mayor Sanders and Ronne Froman and felt that it would be a great opportunity to be part of a team that would help lead San Diego out of its current predicament.

Q: The magnitude of what you’re facing in San Diego, compared to what you worked on in Pasadena, obviously is much bigger. In what other ways is what you’re facing different?

A: While San Diego’s population is nearly 10 times larger than Pasadena’s, San Diego’s budget is only four times larger. Pasadena is an extremely complex operation and in some respects more complex than San Diego. It is only one of three cities in California with its own health department and provided every type of service to its residents, including owning and operating its own electric utility.

When I first came to Pasadena, it was facing the possible threat of deregulation of the electric utility industry and everyone thought that publicly owned utilities would not be able to compete with investor-owned utilities. In addition, Pasadena had a fire and police retirement system that was closed to new participants but had a funding ratio of only 32 percent. The city had a football stadium (the Rose Bowl) that was in dire need of improvements and limited funding sources available to pay for them. There was no long-range financial plan and no policies covering its reserves. The list goes on. So while the pension deficit is much larger in terms of absolute numbers, the problem is the same.

Perhaps one of the real differences between San Diego and Pasadena is the high profile of San Diego’s financial situation. Everything is under a high-powered microscope and everyone is expecting immediate solutions. As Mayor Sanders appropriately stated in his State of the City Address, “these problems did not happen overnight and will not be solved overnight.” We will, however, stop the bleeding and begin putting the city back on the road to recovery. One other difference between the two cities is the tax structure. Pasadena had more taxes in place than San Diego and received a much larger percentage of the 1 percent property tax base. Another difference is the form of government. This is the first time I have worked in a strong mayor form of government.

Q: As you’ve plowed into San Diego’s situation in recent weeks, have you felt fully equipped when it comes to information and resources?

A: I am very confident that we will be able to pull together the kind of information needed for the mayor to present a true and accurate budget for the coming fiscal year. It will be a challenge getting there given the limited amount of time we have to accomplish this and the fact that a large number of budget staff positions are currently vacant. It appears to me though that everyone is putting a lot into getting me the kind of information I feel will be necessary to instill the kind of confidence in the numbers that everyone expects. I do wish the city’s financial reporting systems and budgeting systems were more advanced so that we could more easily pull the data together, but that cannot be an excuse to not meeting expectations.

Q: We understand this is speculation on your part, but this is educated speculation after only a few weeks on the job: How long do you think it will take before San Diego can re-establish its credit as among the very best municipalities in the nation?

A: I think it will take at least two to three years. If Kroll completes its investigation by May, the city should be able to issue its fiscal year 2003 CAFR by late June. The fiscal year 2004 CAFR may be available approximately 30 days later and the fiscal year 2005 CAFR perhaps within an additional two weeks. If this happens, by sometime this summer the city could have its ratings re-established by all three rating agencies. This does not mean that they will be restored to the same level they were prior to the current crisis.

I have worked with the rating agencies for the past 20 years. I have presented financial data and local economic information to them and when times were tough, made promises and commitments to them as to actions the particular city I was working for would take to address the problem. These promises do not come lightly and carry a great burden because the rating agencies have long memories. I am pleased to say that I have never made a promise I wasn’t able to keep and that I believe this has gone a long way in establishing trust between myself and the rating agencies. As you can imagine, this trust and credibility takes years to build and minutes to destroy. I will not jeopardize this relationship but do plan on using it to restore the city’s ratings as quickly as possible. They want to see action though and issuing the CAFRs is only the first step. Developing and implementing long range plans to fund the pension system and the city’s post-retirement medical costs, delivering an honest and balanced budget, and developing a long-range financial plan that can be used to guide future council decisions are steps that will be critical to the rating agencies.

Q: Have you moved your whole family into town yet?

A: Not yet. My wife will be moving down here sometime in late March or early April and we are moving my dad down here in mid-March. I have two children, one living and working in Irvine and the other who is a senior at UCSD.

Q: In what part of town are you settling?

A: I am not sure where we will ultimately settle, but right now we have a place in Mission Valley.

Q: Tell us a little about yourself.

A: I have been married to my wife Marie for almost 29 years. I have a daughter, Jenni, who is 25 and son, Matt, who is 22. I am originally from Minneapolis, but moved to California in 1976. I have a bachelor of science degree from the University of Minnesota, a master’s of public administration from Arizona State University and an MBA from Santa Clara University.

Q: What are your early impressions of San Diego as a place to live?

A: From everything I can see and based upon the times I have visited the area, I think San Diego is going to be a great place to live. I haven’t had too much time to enjoy it since starting work, but I hope that will change once the budget is released and a few of the other pressing issues addressed. I do enjoy the blue skies and the clean air though.