updated 4/25/2005 11:22:53 PM ET 2005-04-26T03:22:53

Mayor Dick Murphy announced his resignation Monday amid a widening federal investigation into the handling of the city’s deficit-riddled pension fund.

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“It’s clear to me that the city needs a fresh start,” Murphy said, holding back emotion as he made the surprise announcement at City Hall while surrounded by his staff and family.

Murphy, a 62-year-old former judge who has served 4½ years as mayor, said he will step down on July 15 as leader of the nation’s seventh-largest city.

The announcement comes just months after a bruising re-election battle in which Murphy, a Republican, pulled out a 2,108-vote victory over a maverick Democratic city councilwoman who waged a surprisingly strong write-in campaign. The councilwoman, surf shop owner Donna Frye, said she would run again in a special election to replace Murphy.

Pollster John Nienstedt, of Competitive Edge Research & Communication, called Frye “the most-liked politician in San Diego today.”

He said other potential contenders include Ron Roberts, a county supervisor who finished third in the November race; state Assemblyman Juan Vargas; and former California Gov. Pete Wilson, also a former San Diego mayor.

City Attorney Michael Aguirre said the City Council could either appoint a replacement until the next general election in June 2006 or call a special vote to finish Murphy’s term.

$1.4 billion deficit
Murphy was sworn into office Dec. 8 after a series of legal challenges in the race with Frye. Frye contended more votes were cast for her, but thousands of the write-in ballots were disqualified under a state law.

The source of the turmoil that has followed Murphy is San Diego’s pension system, which has a nearly $1.4 billion deficit. The deficit is partly the result of a 2002 decision to enhance pension benefits while cutting contributions to the retirement system.

The Securities and Exchange Commission, federal prosecutors and the FBI are looking into the city’s finances, including the possibility of securities fraud and other corruption.

Murphy also has publicly clashed with Aguirre, the newly elected city attorney, who has called for the mayor’s resignation and issued a scathing report that found he and the City Council violated federal securities laws by hiding key information about city finances.

Last week, Murphy was called one of the country’s three worst mayors by Time magazine, which said the mayor was “discredited” by the pension fund crisis.

“When I ran for re-election, I had hoped that my second term would as productive as my first but that now seems unlikely,” Murphy said.

No questions
At the end of his short statement, he hugged his family and left the press conference to the applause of his staff. He did not take any questions from reporters.

Murphy also cited his accomplishments as mayor, including the creation of an ethics commission, new libraries, establishing an airport authority, a new downtown baseball ballpark and reduced sewer spills. But his announcement was an acknowledgment that the problems overshadowing his administration had made him ineffective.

The city’s outside auditor, KPMG, has warned it cannot complete its audit of the city’s 2003 books until an investigation is launched into whether city officials committed illegal acts. The lack of complete audits for 2003 and 2004, coupled with the ongoing investigations, has hobbled the city’s ability to issue bonds, putting vital water and sewer projects on hold and threatening library and fire station construction. Standard & Poor’s Ratings Services has suspended the city’s credit rating.

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