Last week, the City Council made a change to suspend two construction taxes for a limited time in an attempt to encourage commercial property owners to provide improvements for their existing buildings. The hope is that if owners can improve their buildings at a lower cost, they may find tenants—which is a win for them and for San Jose.

Providing incentives to property owners to improve their property is one way the City can show that it is a partner in economic development. As we know, new tenants brings jobs and payroll spending to San Jose. Also, new office development like market rate housing—not affordable housing—pays fees and taxes that helps provide money for road paving. However, the current municipal code kept the construction taxes higher than they needed to be, and it appeared that the high tax may dissuade certain office development like research and development.

With this new policy, any loss of tax revenue for road paving would be taken from the economic development department. The Economic Development department thought this was so important that it was willing to give its own budget away to make it happen.

The other item the council discussed was exploring the traffic impact fees in the North San Jose development plan. There is concern that the fees may be a hindrance to locating a new expansive corporate headquarters. The approved Environmental Impact Report (EIR) for North San Jose was challenged in court, and as a result, the EIR requires that certain road improvements take place. Many of these traffic improvements would have been paid for by the Redevelopment Agency (RDA), but alas the Golden Goose appears dead. Unfortunately, that leaves really high traffic impact fees that increase new development costs in comparison to other cities.

The housing units for North San Jose are traffic mitigation for the EIR, because it is assumed a portion of those new residents will work in North San Jose and/or take shorter car trips versus someone who drives to North San Jose for work from South San Jose.

Cities often invest in infrastructure to induce economic development. For example, if San Jose listed certain infrastructure projects as a core priority, then we could possibly allocate funds and therefore increase jobs in San Jose. These infrastructure projects would have to compete against city departments for funding instead of hoping they will get built.

Or, and possibly better yet, instead of making market rate housing developers in North San Jose pay millions of dollars towards affordable housing projects, let’s instead take that money and allocate it to an earmark fund for the North San Jose traffic impact project. We can literally use this money to pave the way for news jobs in North San Jose.

Last year, Mayor Reed’s budget, which most of the councilmembers supported, gave warning to the city-funded “Art” groups that they would no longer receive funding from the city starting on July 1, 2012. As we know, the budget deficit continues.

Many of the art groups are in facilities partially or fully built by the Redevelopment Agency (RDA). These include the San Jose Museum of Art ($475K), The Tech ($1.1M), Children’s Discovery Museum ($285K), Mexican Heritage Plaza ($600K), San Jose Repertory Theater ($285K), History San Jose (775K), etc. The dollar amounts are how much money they received from the city this fiscal year (2010-2011).

Although valuable, art is not in the City Charter. However, there are other discretionary things the city spends millions of dollars on like health insurance for children, golf nets, etc. Art promotes San Jose and boosts the economy in ways that others items we spend millions on do not. This other spending does not have have the same return on investment.

These art groups, with some exceptions, have done a good job overall in fundraising and cutting costs. Most of the donors for these cultural facilities live outside of San Jose. Therefore, the good news is that these out-of-town donors bring money to support San Jose art groups. Besides providing exciting places to visit in San Jose, these facilities also generate an economic buzz through visitors parking, dining, drinking and some hotel room nights downtown.

Deloitte did a pro-bono study this summer for The Tech, The Rep, SJ Museum of Art and the Children’s Discovery museum. It showed an economic impact of $54 million to San Jose.

Still, money is needed to support the repair of the four facilities profiled in the Deloitte study, in the amount of $5.5 million. In the past, if a HVAC system needed replacement, the RDA would pay for it. But this is no longer the case.

There have been a few suggestions and options shared about how to financially help the arts moving forward. One option is to not cut city funding 100 percent but something less. A second option would be to charge a ticket surcharge of $1 on each ticket. A third idea was to create property tax based assessment district to fund the arts groups, however, there is already an assessment distrint in the downtown to pay for cleaning, which has been very successful. Another contemplation is to fund repairs with a Hotel Tax (TOT), but that would bump something else. Finally, the suggestion of providing validated parking for attendees was requested if entrance fees were raised.

Some of the art leaders pointed out it is difficult to raise funds for building repairs since they do not own the building. One idea discussed at the Economic Development Committee meeting was to simply give them the building in lieu of continued fiscal subsidies, allowing art groups the potential to increase fundraising. This would allow them the option to sell the naming rights to a company or a patron of the arts like the famous Medici family. Naming rights would be easier done privately than through the city.

While we are at it, I think all San Jose facilities should be on the table for paid naming rights, including the airport and Convention Center.

The fact is, downtown is a hub for cultural activities in Santa Clara County, and that art is a differentiator from other cities. Some arts groups have said they may leave downtown, but I believe that would be a huge undertaking to find another building that can house their needs.

The city has been a substantial “donor” in the past, but this “donor” is suffering and may not be able to do so at the same level for the foreseeable future. This “donor” may only be able to donate one more time by donating the building—as long as the art institution continues to operate in that specific building.

Looking back at the efforts of so many across all cities, we know it is much easier to support a downtown than create one. The arts are a major differentiator for downtown.

In a quest for even more affordable housing in San Jose, the City Council voted 10-1 to amend the North San Jose Area Development Policy. I voted no.

San Jose, known for its propensity to approve 99 percent of proposed housing developments, continues to go down the same road. North San Jose is a Redevelopment Agency (RDA) zone, and any housing built in a RDA zone historically must allocate 20 percent of the units for affordable housing. However, the “Palmer Case” changed this so rental housing developments cannot be mandated to set aside affordable units. But housing for sale still has the 20 percent affordable requirement, if a city has an inclusionary housing policy like San Jose.

So, of course, the only thing being built now is rental housing, because it doesn’t have to put aside 20 percent of the units. However, the city of San Jose policy incorporates an affordable housing policy by allocating total housing units by market rate and affordable for different phases of North San Jose development. Now that all of the market rate units have been allocated, this leaves only unused allocation for affordable units. The allocation for affordable units exists because they require millions of dollars in subsidy from the city of San Jose housing department to build. This well is a bit dry now due to the potential elimination of RDA.

Tuesday’s proposal is to enter into a development agreement for additional housing developments, which will be entitled if the developer (wink-wink) allocates 20 percent of the units for affordable AND pays money into a fund to help finance other 100 percent affordable housing projects in North San Jose.

As a result, not only do you get more housing, but you also get more of it by not paying the same taxes and fees as market-rate housing. How do we build a tax base to pay for police and libraries if we allow exemption from taxes? How do we pay back RDA bonds with tax increment if an affordable housing development is not taxable and, therefore, creates no tax increment?  How do we pay to pave roads if there is an exemption for paying road paving fees? Do you feel that a future general tax increase will already be allocated to pay for exemptions?

School districts also lose out, as more than 50 percent of every property tax dollar goes to K-12 school districts compared to approximately 10 percent for cities. So, you have more students from new housing yet no new property tax revenue to pay for instruction.

Remember that San Jose has been the leader in providing affordable housing in the state of California, while other cities have done very little. As I wrote about on a prior blog, affordable housing must be a shared goal and not just in San Jose, because there is a burden to existing residents.

I think a better idea would be waiting until the California Supreme Court renders its decision on RDA in January. If the courts kills RDA, then there is no more 20 percent affordable requirement. The other option is to strike the affordable component from the North San Jose Development Policy, so San Jose can get the maximum amount of property tax, park fees and road paving fees.

Alas, the heavy heart of San Jose makes it difficult to think about the bottom line.

The sick leave payout perk was something that the current City Council inherited from a prior council. Although once considered a nice perk, if the city continues this trend without any change it will continue further on a downward spiral of spending money it does not have. If the City froze all sick leave payouts today, it would still have an outstanding liability of $80 million. That is the same amount of money for the predicted budget deficit for 2012-2013. If sick leave was simply eliminated, then that $80 million goes to zero. If sick leave was phased out over a series of years, then the amount paid out would be more than zero and less than $80 million. The longer the phase-out period, the closer to $80 million. The shorter the pay-out period, the closer it goes towards zero.

What we do know is that last year alone the city paid out $14.8 million in sick leave.

Although a prior council allowed for the sick leave payout to be what it is today, I don’t think sick leave payouts are something the city should continue. Instead, I support a “use it or lose it” system like the private sector. Last year, the council imposed the elimination of sick leave for four of the 11 unions effective January 2012. However, seven unions still have it and among those seven, police and fire sick leave status may ultimately be settled by arbitration. Some feel that sick leave payouts are a vested right, while others say that isn’t since it is compensation and not a pension.

I am open to a phase out approach, but not for everyone. There will be some employees who choose retirement by Jan. 31, 2012, who qualify for the 3 percent bump via the COLA (cost of living adjustment) and having their pension based on salary before the 10 percent compensation reduction. Some of those who retire in January may also be doing so since they are worried about sick leave payouts being completely eliminated.

If an employer wants to retain a skilled subset of workers that may leave, and one of those levers is determined to be sick leave, then perhaps instead of elimination the employer should offer a phase out over 4-5 years to that specific subset of workers. However, it must certainly be for police since losing veteran officers with special skill set could be a setback. (I would suggest police negotiate on sick leave payouts separately, based on their own value proposition.) For non-police positions, the city should possibly cap the amount at $40,000, as opposed to some of the well-known payouts that approach $300,000.

Another alternative is to freeze the accrual and pay the sick leave over years instead of all at once. The new retiree gets the entire amount and less of a tax hit for a large payout. The city gets the benefit of paying back with inflated dollars over, let’s say, 10 years.

Some positions in the city have many applicants for few positions. If people in those positions choose to retire then they can be replaced more easily. And those newly hired can be on a new benefit structure. Ideally, that new benefit structure is a 401K, but at minimum it’s a reduced pension. I feel a reduced pension is still more generous than a 401K.

Approximately, 450,000 veterans are returning from the war and will be looking for work. Veteran’s getting hired as a fire fighter, for example, would cover any gap within that department of potential retirements. In addition, it would be a substantial raise compared to the military pay. Some of those same veterans may find other positions in the city attractive. We can lament over the current condition or we can anticipate and plan for the next wave.

The City has been grappling with proposed changes to Title 16 for over two years. Title 16 covers the regulations of card rooms. The 125-page document reads like a novel. Although the State of California oversees gambling facilities, San Jose has it’s own regulations for two gambling facilities, which are Bay 101 and Garden City. Some say this is duplicitous since another level of government regulates this type of legal business. Others say the state does not regulate closely enough.

The City Auditor came out with a report last April that showcased some of the issues within the regulations, with an emphasis on the permitting process of employees. The process for prospective employees in getting a job can be frustrating due to how long it has historically taken to get a background check. This background process is done for a fee so it is cost-recovery for the police department.

One example of something that could change is when a counterfeit bill is discovered. If the counterfeit bill is discovered in any other business in San Jose, the Secret Service is called because this is one of their duties. However, if it happens at a card club, a police officer must drive out to the card club and respond accordingly. My guess is the Secret Service has more background on counterfeit bills than an individual police department.

The oddest part of last week’s Public Safety & Strategic Support Committee meeting, where this issue was discussed, was when it was discovered that the gaming administrator who oversees the card clubs was not at the meeting. I do not recall a person so integral to a discussion being absent. When asked about where this person was, the answer was that this person is not here. A further question determined that this person was not ill or traveling but just not at the meeting. Upon further questioning, it was finally revealed that there was a pending lawsuit and they did not want this person to speak in public.

In addition to the many unresolved questions, plus the gaming administrator not being at the meeting, the committee decided to continue the item until the December scheduled meeting.

In the meantime, if you want to partake in some other gaming, check out Bingo this Wednesday night at the Billy De Frank center on The Alameda.

Happy Thanksgiving.

Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor—and whereas both Houses of Congress have by their joint Committee requested me to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.
—George Washington, Oct 3, 1789

Ensuring that cars travel slowly near schools should be a priority for San Jose. Local governments should embrace tools that make streets safer for pedestrians, especially when those pedestrians are overwhelming children walking and biking to and from school.

In 2008, Assembly Bill 321 (AB321) was signed into law with support from the national organization, Safe Routes to School. AB321 allows cities the flexibility to lower speed limits adjacent to public and private schools. Arizona, Nevada, New Mexico and Pennsylvania have already implemented lower school speed limits successfully.

Reduced school speed zones in California were quickly implemented in Goleta, Santa Barbara County, Lompoc and Santa Maria among other cities. In 2010, I proposed implementing AB321 on Dana Avenue in front of Trace Elementary and Lincoln High School. Parents, teachers, principals, residents and the school superintendent have proclaimed the reduced speed on Dana Avenue a great success. As a result, this issue is coming back to the council on Tuesday, Nov. 15th.

Allowing schools to choose if they would like to have a 15-mph speed zone for their school—if their school meets the criteria—would then allow for an easy and affordable way to reduce accidents and the degree of injury. This is timely as funding for crossing guards may be eliminated in next year’s budget.

Lowering the speed limit is also a benefit to residents and neighborhoods adjacent to schools. If we look back at history, we know that former schools in San Jose are closed like Belden, Camden, Cory, Kirk and Lincoln Glen. That means student population at remaining schools has increased. As a result, residents who live by an elementary school that was designed for 350 students may live next to an elementary school with over 800-1,000 students, thus higher car volume. By lowering the speed limit, we will bring piece of mind to the residents who live by schools. Also, it will offer the opportunity for more kids to walk or bike to school.

Unfortunately, city staff is proposing as a pilot program that we lower speed limits at only three schools out of over 200. Still, there have been some who think that it’s OK to not lower the speed limit near schools and instead rely on grandparents and parents to walk their kids to school. However, Mayor Reed, Councilmember Don Rocha and I disagree with staff’s proposal and instead we are asking the Council to support allowing schools the autonomy to choose for themselves.

The cost to procure and install new 15-mph speed limit signs per school in San Francisco is approximately $1,500. It may be less if we simply put a 1 over the 2. Even with our budget woes in San Jose, this is affordable and I have already heard from school parent groups and residents that they would be willing to pay for the cost of implementation.

A special thank you to all those who stood in the rain to support the Veteran’s Day parade Downtown. The Brigadier General spoke about the 1 percent—the other 1 percent. The 1 percent of the population that is dedicated to our nation’s security. Thank you to all veterans for the freedom we enjoy.