Mayor's financial 'rock' set to leave


Five years ago, Peggy J. Watson scoffed when Martin O'Malley repeatedly asked her to come out of retirement to be the chief financial officer for the newly elected mayor's administration.

Watson had served in city government for 21 years before retiring in 1997, and she was not about to give up the good life for a daily diet of constant crises and lousy late-night snacks.

But after turning down the mayor three times, Watson made a tactical error - she looked O'Malley, who was turning 37 at the time, straight in the eyes.

"I said, 'He's just a baby, and he doesn't have a clue,'" Watson said. So she relented and said, "Let me go help him."

And help him she did.

As finance director, Watson has had the daunting task of keeping the city on firm financial footing, and O'Malley and other city leaders lauded her for her efforts at a Dec. 22 ceremony at which she received the inaugural Richard A. Lidinsky Sr. Award for excellence in public service. The award is named for the late deputy comptroller who served under eight mayors.

Watson, 57, is retiring - again - early next month despite O'Malley's attempts to get her to stay beyond the one term she promised him. So all the mayor could do was praise the time Watson has given city government.

"She was our rock," O'Malley said. He then warned her that he would be calling her at home for advice, something he has done often since being elected in 1999.

"There was never an issue - no matter how big or small - that the mayor didn't turn to me ... and say, 'What does Peggy think?'" First Deputy Mayor Michael R. Enright said. "There were very few decisions the mayor made until he heard what Peggy thought."

Serving in such a critical post in O'Malley's Cabinet and being responsible for the fiscal health of the city's $2.1 billion operation and its hundreds of millions in debt and investments is a powerful position for a Baltimore native with only a high school diploma.

Watson graduated from Western High School in 1965 and landed a job at First National Bank of Maryland, where she worked as a government bond trader and an investment officer.

She joined city government in 1976 as an assistant city treasurer and three years later was promoted to supervisor. Mayor Clarence H. Du Burns, with the City Council's approval, named Watson deputy finance director in 1987, a job she held until retiring 10 years later.

O'Malley said that his transition committee in 1999 contacted Watson to tap her finance department expertise to determine who could take the critical role of director. It was then that he realized he wanted her for the job.

At the time, he said of Watson: "No one knows more about the finances of the city of Baltimore than Peggy Watson."

This week, O'Malley said: "Not wanting her city to tank, she took the job."

Watson is widely known as a good-humored, humble city official who, by virtue of having to control the city's purse strings, has to often tell people "no."

"She has a rare sense of humor when she's telling you 'no' - she does it gracefully," Councilwoman Mary Pat Clarke said. "I think she's brought a lot of the human touch to a fairly numbers-driven job."

One example of that touch is when Barbara Berry, Watson's personnel officer, learned she had breast cancer. Watson quickly took Berry out to shop for a wig to alleviate her fears of losing her hair during chemotherapy.

But Watson was also shopping for a wig of her own. She had decided to cut her own hair and wear a wig to support Berry.

"It helped a lot," said Berry, who has worked for the city for 31 years. "She was really right there with me. She's a good boss, and a good friend."

Watson was a steady, if behind-the-scenes, presence in O'Malley's administration as well.

O'Malley frequently credited Watson with engineering the $42 million city schools bailout this year and for building up the $56.2 million rainy day fund that made it possible.

Watson structured the bailout to protect the city from incurring the wrath of Wall Street. The city had built its reserve fund from $17.3 million in 1999 to $56.2 million to bolster the city's credit rating with bond agencies. Good bond ratings enable governments to borrow money more cheaply.

The city's reserve fund had been slightly more than 5 percent of the city's $1 billion general fund, the goal Watson set in 1999. Watson structured the loan so that the school system had to repay $34 million quickly, which helped reassure bond rating agencies.

"We wouldn't have been able to do these things without her," O'Malley said.

Watson would have preferred to avoid the attention that has come her way because of the award and her retirement. She donated the $1,000 that came with the Lidinsky award to Baltimore City Foundation.

"I'm uncomfortable with awards because basically I'm from the old school, when an old-fashioned 'thank you' is all I need," said Watson, who credits Deputy Finance Director Edward J. Gallagher for his help. "I didn't do any of this by myself."

Gallagher will serve as interim finance director while the city embarks on a national search for Watson's replacement.

The divorced mother of one son said she plans to spend more time with family, especially a sibling suffering from an illness. But she also plans to take care of herself.

"I plan to commit myself to take the first three months," Watson said, "and return the discipline in my life and lose the 30 pounds I gained eating Tastykakes working late at night at City Hall."

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