Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

Talking Sewage, Start Up Cup

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We all have an impact on the sewer system and our waste must go somewhere to be treated. Miles upon miles of pipe transport and maintain our civilization and virtually eliminates outbreaks of typhoid and cholera. As some have said, “No pipes, no civilization.”

Our sewer system is financed through fees on our property taxes, which pay for this mostly unseen infrastructure. For many residents, the impact of a clogged sewer line from house to street can not only be expensive to fix but disruptive to daily life.

if you would like to learn more about the challenges San Jose has with over 2,000 miles of sewer lines—and some portions being approximately 100 years old—attend a presentation at 6:30pm tonight at City Hall. RSVP tomelrose.cacal@sanjoseca.gov.

Come learn tonight on how to avoid this expense and disruption.

On another note: Ever thought about putting that daydream or wild idea to test? See a way to generate revenue that no one in the marketplace seems to recognize? Have an idea but not sure how to execute?

Local residents now have the chance to submit business plans in a contest that has no better home than Silicon Valley: the Santa Clara County Start Up Cup. The business idea doesn’t need to be about technology but perhaps creating a service company. Free coaching and mentoring is provided towards ideas.

Submissions start on April 24 for the first annual Santa Clara County Start Up Cup.

Lawsuit ‘Victory’ a Double-Edged Sword

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The “victory” claimed by certain union members by suing the city over the word “reform”—as in “pension reform,” known as Measure B for the June ballot measure—may have actually jeopardized a future tax increase to fund their own jobs. The removal of the wording, “essential city services including neighborhood police patrols, fire stations, libraries, community centers, streets and parks,” was included in the ruling and cannot be used as a way for the city to lure residents into supporting higher taxation.

As a result, if the city of San Jose wanted to propose a general sales tax increase for the November ballot, the Council could no longer list “essential city services.” This wording has been used in the past by the city to garner support for higher taxes. However, there is no guarantee that tax dollars would actually be allocated to essential city services.

Now, as we move forward, only a special tax that requires a 2/3 vote could list the essential city service without a legal challenge. Will taxpayers support a general tax increase if they are not confident it will be spent on essential/core services?

This takes me back to my proposal of setting a fixed percentage—higher than today—of the general fund to be spent on police. Without this assurance, the voter has no way of knowing that additional tax dollars will actually be allocated to police or anything else in the City Charter.

On another topic, I attended the Oversight Board Successor to the Redevelopment Agency (RDA) last week, where the County of Santa Clara auditor reviewed the San Jose RDA Recognized Obligation Payment Schedule. No flaws were found in the payment schedule and San Jose was actually complimented on its work. Who would have thought! The County auditor has issues with other neighboring cities’ accounting.

The Community Budget Season has begun. The first of community budget meetings started in council districts 9 and 10. District 9 had approximately 10 residents, who made comments against opening new facilities that are closed, allowing more volunteer opportunities in the libraries and keeping compensation in check with the private sector so residents would be more likely to support a tax increase. District 10 had a much higher turnout of 40-plus residents, who were concerned about police response time, street lights turned off to save money, getting police out of desk jobs and into the field and suggesting fewer firefighters respond to medical calls.

Your Cholesterol Rate is $1.5 Billion

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As we know, health care costs are escalating at double-digit rates. The continuous high costs are a burden to the self-insured, businesses and government. In San Jose, we have an unfunded health care liability of approximately $1.5 billion. The City of Stockton has been in the news for starting the process of bankruptcy under AB506, and much of their plight is due to the cost of health care benefits.

San Jose should implement a incentive/mandatory wellness program in 2012 to reduce the cost of health care. Any mandatory wellness program would require negotiations with the unions. Since many of the unions have shared their support of wellness programs at public meetings, I am hopeful they will be open to this idea. While voluntary wellness programs may slow the rate of grow, they do not decrease the cost of the plan. On the other hand, raising deductibles does reduce the cost of the plan. Mandatory wellness is somewhere in the middle on cost savings to the plan.

In 1984, the city of San Jose decided that employees and the taxpayers should share 50 percent of the unfunded health care liability costs. The employees’ share (pre-tax) is expected to double next year since there are more retirees than current employees. Current employees partially fund the health care of existing retirees. As soon as one person retires from the city, the retiree no longer pays for anything towards health care. However, the retiree will receive free health care until he/she turns 65 and is eligible for Medicare. At that time, the city will fund the retirees’ monthly Medicare supplement. Incidentally, the Medicare eligibility age may rise to 67 under a proposal floated last year by President Obama, which would further increase the cost to the city. The most expensive part of retiree health care is the 50-65 age range or pre-Medicare eligible.

Doing nothing will increase the cost to employees substantially and would eventually drain the health care reserve to pay for retirees health care, leaving nothing. San Jose is taking steps to make payments on the unfunded liability over a 30-year period. Some unions like the police union, for example, understand we must fund some portion of the benefit now for people to receive it in the future.

Health care tied to jobs costs any organization that employs people. Unless there is dramatic change, costs will continue to rise, which presents a dilemma on whether or not to: hire the next employee; stay with the current organization; or find a health care plan on the open market that may be less expensive to the individual.

An incentivized health care system may be an appropriate cost savings alternative.

For example, in Chicago, Mayor Rahm Emanuel, who served under President Obama, has decided to add teeth to the city’s wellness plan. If a Chicago city employee does not participate in health screenings, then they pay more for health care. Those who participate in the wellness program pay a reduced rate. Health screenings are like a physical, measuring cholesterol, blood pressure, weight, etc.

After these screenings, individuals are given advice on how to reduce their chance of illness and/or change unhealthy habits. It is not used to discriminate against those with pre-existing conditions, however, health screenings may prevent individuals from becoming a diabetic, for example.

We should examine Chicago’s mandatory wellness program and see how we can use preventative measures to ensure better health and lower costs.

West Side Airport Development

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The city’s General Fund is not legally obligated to pay an airport expense or debt service payments.However, the City Council has discretion over the allocation of general fund monies in general, and may approve an allocation of general fund monies for airport expenditures. This includes payment of debt service. The allocation of general fund resources to the airport would be a policy decision by the City Council, not a legal obligation.

Our airport is much like a child that leaves the nest. Everything is going great, they have a job, they bought their own home and they are by all means financially independent. But what happens if that adult child runs into some issues? For example, the child does not save enough money and then purchases a bigger house and is doing everything he/she can to keep up with the payments. To make matters worse, the “child” loses their job and now does not have a regular stream of income coming in. Although the parent does not have a legal obligation to help out, the parent may choose to help anyway.

Our airport is similar to the child, and the first paragraph spells out the legal relationship between the city and the airport. The airport budget is also called an Enterprise Fund in that all the fees collected go back to the airport to pay for expenses. However, if the airport’s economic condition worsens—and it most likely will—then inevitably there is risk to the general fund. Prior to that ultimate policy decision, the airport could face more outsourcing to non city employees to save money or even put our curfew at risk to gain more long-haul flights. The airport could try to grow revenue through the development of vacant land on the west side of the airport, which may or may not create other externalities.

If you are curious about this topic, consider attending a public meeting at City Hall Council chambers tonight at 6:30pm. The airport management will present alternatives on future development.

Reading of the RDA Will

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Last week, I attended the Oversight Board for the Successor Redevelopment Agency public meeting. One person who watched the meeting said it was “like viewing the reading of a will.”  That was a fair analogy. In the case of thedeceased RDA (56 years old), the deceased had property it owns but comes accompanied with liens from the County and JP Morgan. The deceased had a substantial income stream but also has debt payments, so revenues collected moving forward will go towards paying the debt of bonds and JP Morgan line of credit.

The meeting also showed that while the deceased was alive, Sacramento poached over $100 million from the estate, which disrupted RDA’s ability to pay planned debt installments over a period of 20 years.

It was a bit startling to see the county representative appear shocked when they understood that no money would be coming to the county soon—bonds must be paid down first. The only potential for the county to get money this year is to sell a RDA property like the Billy DeFrank center on The Alameda, which I would not support, and split the proceeds with JP Morgan and the Successor Agency.

The other option is that if property values increase, like in North San Jose, for example, those higher values would bring in more tax increment to pay off the bonds sooner. To some degree this is likely to happen because developments have been approved and are under construction in North San Jose. This will cause those parcels to be re-assessed. However, even with this scenario it will still be years before the county gets revenue. The county is last in line.

There is a tax increment shortfall that will impact the general fund for the Fourth Street Garage and Convention Center. The reason is the State of California took $154,714,244 from the San Jose RDA, including interest. This amount is far greater than the annual bond payments to cover the Fourth Street Garage and Convention Center. The city of San Jose could relieve itself of this debt payment by selling these assets, but it may choose to keep them. It is not unheard of for a city to own a downtown parking garage or a convention center. However, if a potential buyer emerges, the City Council should consider the offer.

In 2001, the council could have brought the RDA to a peaceful closure. Instead, the City entered into a new revenue-sharing deal with the county on May 22, 2001, to keep the RDA alive. The deal assumed property valuations would rise at a “bubble” pace. This agreement over the last 10 years paid the county over $344 million. This amount was much larger than the required annual $2 million per AB1290. The 2001 agreement was unrealistic.

As I have written before, the RDA was not meant to last forever. As a result, San Jose could have planned for an end of the RDA but it is hard for elected officials (around the world) to say no to capital projects. Of course, RDA was positive in many ways, which relates to the comment that was shared with me Saturday at a public school event.  A 50-year resident of my district shared with me that “for people that have lived in San Jose a long time they know the before and after of San Jose and that RDA investments were good.”

Which Type of Tax Do You Like?

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Last week, the council discussed a poll of residents/likely voters regarding their views about tax increases. The majority of the Council appears to be considering a June ballot measure for a tax increase.

Since the poll respondents are anonymous and nearly everyone on this blog is anonymous, I thought I would ask the question: Which tax do you want? How much of it?

Would you like a ¼ cent or ½ cent sales tax? Would it be a general tax that could be spent on anything like golf courses, Hayes Mansion and Mexican Heritage Plaza, or would you like it allocated to only a specific department which requires a ⅔ vote in favor?

If not a sales tax, how about a tax on property owners with a parcel tax? How much? Exemptions? Would property owners pay the new tax based on square footage or assessed value? Would it be a general tax or for only one department?

How about an environmentally-friendly tax like a utility tax? A utility tax would raise the existing tax rate on water, electricity and gas. With the lack of rain and constant uncertainty in the Middle East, maybe local government can minimize consumption with an utility tax increase. Again, should it be a general tax or only one department?

How about some more bonds? Voter approved bonds seem to pass all the time as voters love to see new construction—they know for sure what they are getting. However, there is a disconnect with the voter on how to actually fund the operation of the new building, if it is a new building versus a restoration or reconstruction of an existing facility.

Perhaps voter approved bonds could be used for street repair only? The only problem for the long term is the interest. For example, San Francisco passed a $248 million bond for road repair and will pay another $189 million in interest. It seems that the more frugal route is to pay for something with tax revenue versus bond revenue. Which is similar to the lesson I learned from my parents about saving money and only spending what you can afford.