Grand Jury Says City Needs Serious Financial Overhaul
The city of San Diego, now facing a long-term deficit of about $7 billion mainly related to delayed debts to its employee pension fund, needs to evaluate its entire financial structure and undertake significant changes to return to fiscal health, according to a county grand jury report released June 8.
In the 22-page report, the grand jury notes the underlying cause for the city’s problems was the underfunding of its employee pension fund in 1996 and 2002. As of June 2009, the pension fund was underfunded to the tune of $2.2 billion, while its employee retiree health plan was underfunded by some $1.3 billion, the report states.
Among the recommendations from the grand jury to return the city to financial health are:
• Marketing some of the city’s most attractive parks, including Balboa Park and Mission Bay Park, to developers for long-term leasing contracts.
• Outsourcing the city’s library system.
• Repealing the People’s Ordinance, which ensures free trash-removal service for residents.
• Consolidating some city services with similar services provided by the county of San Diego.
• Researching alternate retirement systems to determine whether the San Diego City Employees’ Retirement System should be dissolved in favor of another system or should be outsourced.
• Possibly discontinuing a deferred retirement plan for long-term city workers unless a study shows that it’s saving the city more money than it costs.
Actions taken by elected city leaders to resolve the city’s financial woes should be put to city voters for their approval, the grand jury report recommends.
The report also criticizes the current answer to the crisis, namely cutting hundreds of jobs, a move that has resulted in the reduction or elimination of many vital services. The report cites recent “rolling brownouts” at certain fire stations and eliminating the mounted police force.
“Layoffs, or not filling vacant positions caused by attrition, do not positively serve the community interest and adversely impact the safety of city residents, businesses and visitors,” according to the grand jury report.
— Mike Allen
SAIC Computer Deal Could Be Worth $502M
SAIC, now based in Virginia but with more than 4,000 employees in San Diego, said June 10 it was awarded a contract by the Navy’s Space and Naval Warfare Systems Command for information technology services that will be mainly provided by the local work force.
The four-year contract has an optional four-year ordering period, and a total value of more than $502 million if the option is exercised, SAIC said.
The new contracts are part of the Navy’s initiative to update and replace legacy computer and data networking systems aboard its surface ships and submarines, the company said.
— Mike Allen
International Stem Cell Gets Parthenogenetic Patent
International Stem Cell Corp. of Oceanside said it has been granted a patent relating to the development of human parthenogenetic stem cells, a key step toward licensing its technology to others.
The patent protects the company’s technology, a process that involves the coaxing of unfertilized eggs into the blastocyst stage, when it is an embryo of about 200 cells. ISCO has touted the advancement as a major step toward regenerative medicine without the destruction of human embryos or immune rejection issues.
The company first announced creation of the cells in 2007, but said the latest development allows it to share its knowledge with other researchers through partnerships, joint ventures and funded research and licensing arrangements.
“International Stem Cell Corporation is particularly proud of these accomplishments because we have been funded thus far entirely by investors, without NIH or other governmental aid,” said Jeffrey Janus, senior vice president of operations at ISCO.
He said he expects that the cells will be increasingly used in government funded studies once proven to exhibit similar characteristics as embryonic stem cells.
— Heather Chambers
Employers Expect Pickup In Hiring Pace, Survey Says
Twenty-four percent of local employers responding to a Manpower Inc. survey say they expect to hire more workers during the third quarter, up from 15 percent who said they would hire more workers in the second quarter. Only 8 percent said they planned job cuts, down from 11 percent in the second quarter, according to a June 8 press statement.
The largest portion of the survey respondents, 59 percent, said they would maintain the current staff levels, while 9 percent said they were uncertain of their plans.
Nationally, Manpower found 18 percent of surveyed employers plan to hire more workers, while 8 percent would reduce their staffing levels. Seventy percent said they would maintain the same levels.
Local Manpower co-owner Phil Blair said the local numbers indicate companies in the region expect a much faster hiring pace compared to a year ago.
— Mike Allen
Credit Rating Services Give High Marks to City, County
Both the city and county of San Diego received some of the highest ratings from Wall Street credit rating services recently in advance of the agencies issuing short-term debt.
The city announced its bond ratings June 7.
In the city’s case, it is the first time since 2003 that it received top ratings on $167 million on the bonds called tax revenue anticipation notes from all three rating entities.
Those higher ratings mean the city and county won’t have to pay high interest rates on the funds.
Because of an accounting scandal tied to the city of San Diego omitting major financial data in earlier bond disclosure documents on obligations to its employee pension fund, the city was unable to issue any public debt from 2004 to 2008.
Mayor Jerry Sanders said the high ratings by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings validate the city’s creditworthiness, and are a reflection of a lot of hard work that’s been done to stabilize the city’s finances.
San Diego County also received top ratings from the agencies in advance of its issuing $140 million in TRANs that occurred in late May.
The county and city routinely issue TRANs, helping them to pay off bills incurred in the current year, and repay the borrowings as tax and other revenue are generated throughout the year.
— Mike Allen
Carlsbad’s ViaSat to Buy Encryption Specialist
Carlsbad-based ViaSat Inc. said June 4 that it had inked a deal to acquire Stonewood Group of Dorset, England, for $20 million in cash and stock. Stonewood is a privately held company that makes products able to encrypt data on computer hard drives, so a lost or stolen laptop doesn’t give up classified information or intellectual property.
ViaSat produces satellite and other digital communication products.
The transaction is expected to close within 45 days.
— Brad Graves
Genomic Center Upgrade Creates Sales for Illumina
San Diego-based Illumina Inc. said June 7 that it sold 51 of its latest generation genetic sequencing machines to the Broad Institute, a Cambridge, Mass.-based genomic research center.
The machines, called HiSeq 2000, can run two genomes at once and complete the entire sequence of 3.1 billion base pairs in about a week. The HiSeq 2000s will replace an equal number of earlier generation sequencing machines at the Broad Institute as it upgrades and expands its sequencing capacity, according to Illumina.
In January, Illumina said it sold 128 of the machines to BGI, formerly known as Beijing Genomics Institute, which had plans for establishing a genome center in Hong Kong.
Illumina said the machines list for $690,000 apiece before volume discounts.
— Heather Chambers
Former Sequenom Exec Pleads Guilty in Fraud Case
Elizabeth Dragon, a former senior vice president of research and development at locally based Sequenom Inc., was charged June 2 with lying to investors about the accuracy of the genetic analysis company’s prenatal test for Down syndrome, according to the U.S. Securities and Exchange Commission.
Dragon pleaded guilty to a single count of conspiracy to commit securities fraud before a federal judge, and will be sentenced before the U.S. District Court Attorney’s office.
The SEC complaint, filed in federal court in San Diego, alleges that Dragon knew the test was far less accurate than she claimed publicly. The regulator claims she misled investors during at least three public events.
Additionally, it alleges that Dragon made false claims that researchers were “blinded” to the results, meaning they had no knowledge of whether a fetus had Down syndrome when testing blood samples. The SEC claims Dragon provided researchers with the results, allowing them to manipulate the data to show higher rates of accuracy.
Dragon was fired by Sequenom last year, along with Chief Executive Officer Harry Stylli, following the delay of Sequenom’s Down syndrome test. The company said it was delaying the test because of “employee mishandling” of research data, although it didn’t reveal any further details.
Dozens of class action lawsuits were filed by shareholders against the genetic testing company after it withdrew its plans to unveil the test, and an investigation was launched by the SEC and Federal Bureau of Investigation.
Last month, a San Diego federal judge approved Sequenom’s $14 million settlement with investors, which, in addition to the payment, gave shareholders a 9.95 percent stake in the company.
— Heather Chambers