Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

We Pay Twice for Affordable Housing

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In past blogs I have expressed my concern about the cost to our city of too much housing. Specifically, housing that does not pay its own share of revenue. One example I have pointed out—and constantly been the lone vote against—is affordable housing.

We run the daily operations of our city with tax revenue. The city does not write paychecks signed “goodwill” or “number-one provider of affordable housing,” but rather with dollars backed by tax revenues. So when we add to the housing stock by approving, for example, an affordable housing project that does not pay property tax, road-paving fees and only 50 percent of park fees, it is a net loss for our city. Therefore existing residents subsidize city services for the new residents.

Annual property taxes in San Jose are needed to pay ongoing salaries and benefits of employees. Road-paving fees go towards paving streets in San Jose. If you ride a bicycle or drive a car you know that we need every dollar. Park fees allow for new parks or increasing the size of current parks so we do not wear out the existing park infrastructure in established neighborhoods.  For years developers were exempted from paying park fees for affordable housing projects which created more residents but not enough open space. However last year with the support of the city council I managed to get it changed to where developers must now pay half the park fees that market-rate housing pays.

The other item of interest is that affordable housing generates extraordinary calls for service from our police.  Attached is a snapshot of data for eight affordable housing developments in San Jose and the calls for police service. Since there are more calls for service around these affordable housing projects, over time our police department may schedule more police in this area to manage those calls. This may translate to less police coverage in other areas of San Jose, perhaps where you live.  In addition, our fire department receives more medical-related calls, and again there’s no tax revenue to pay for the employees.

So we pay twice. Once, by exempting taxes and fees. Twice, by higher use of city services than existing residents. (Also, most of these projects were financed with RDA funds, and the State of California mandates that 20 percent of that money be spent on affordable housing. And many of these projects were put in places zoned for jobs and not housing.)

Out of the many suggestions I have made on this topic I believe affordable housing developments that have too many calls for service should hire an off-duty officer and/or ambulance to be there on site.

Here is a link to 730 police calls on eight housing developments, among some 11,000 units built.

On another topic, one of my favorite Downtown events starts Tuesday night, The Cinequest Film Festival. Check it out at Cinequest.org.

Related to cinema I obtained a documentary film about urban parks directly from the filmmaker called The Olmstead Legacy.  Monday, March 7 at 6:30PM will be the premiere showing in San Jose at City Hall. Find out more about The Olmstead Legacy here. The film will be followed by a discussion on urban parks. The event is near capacity; please email me if you want to reserve one of the remaining seats at Pierluigi.Oliverio@SanJoseCA.gov

Finally, the bipartisan Little Hoover Commission, an independent state oversight agency, made its recommendation to Governor Brown about pensions last week:

Read the Feb. 24, 2011 Little Hoover Commission Report here.

What Should the City Do With Sick Leave Payouts?

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Sick leave payouts are part of the City of San Jose budget deficit problem. These payouts do not discriminate; every employee including management accrues sick leave, and if employed with the City long enough, will be eligible for sick leave payout when they retiree. One exception is that councilmembers do not accrue sick leave.

The City of San Jose has paid over $28 million over the last two years for sick leave payouts. Upon retirement, the City pays out those sick leave hours at the current base pay plus other premium pay(s). Unfortunately, the Council/City failed to design a system that would track sick leave at the pay rate it was accrued. The City cannot go back and retroactively change the structure so that all employees sick leave is adjusted to the specific pay that their sick leave was accrued at.  In hindsight the sick leave structure should have been one that pays out sick leave on the rate it was actually earned with a maximum cap but this was not how the past Council set it up.

Two years ago, I called for capping sick leave pay outs to no more than $100,000 but there was little support to change the existing system. Any change to sick leave payouts then or now would require the City of San Jose to go through the Meet and Confer process with the unions. The Meet and Confer process can take as long as a year.

$28 million is a significant amount of money; more than the annual citywide library budget and quarter of our budget deficit. In my view, we need to change the benefits on sick leave just as we will on pensions for new employees. It should be eliminated for new employees so that it is like the private sector, a use it or lose it benefit for those that are actually sick.

So now what do we do with everyone that was promised to be paid on their accumulated sick leave hours?  There are different options, however, any change goes to the “Meet and Confer” process with the 11 Unions.

One option is to cap the amount of the payout to say no more than $100,000, or $80,000, pick your number. The other is to phase out sick leave over a number of years where the payout is reduced X percentage each year until the benefit is eliminated. Another option would be that the City pays out over time.

If the City must pay out another $14 million in sick leave this year that means we do not have $14 million to employ police or librarians to provide services to residents. Paying out another $14 million in sick leave would cause an undue burden to our residents. So instead of paying out $14 million in one lump sum I would suggest we pay it out over 10 years or roll it into the employees’ pensions. This would leave us with money on hand to keep city employees employed. Then, in the next budget year we would know the amount of the sick leave payout from the prior year and make subsequent budget cuts in the next fiscal years. However, we will have the same fiscal liability every year unless we change the current system.

Government is known for making promises it cannot keep.  People and businesses downsize or use bankruptcy to reorganize their debt and obligations. If The City is avoiding the “B” word then we must figure out a way to keep San Jose afloat, since we will continue to have $50 million increases in the pension system each year that is paid directly by the taxpayer.

Clearly if a person is about to retire, then they are getting out at a lucrative time and probably do not care about concessions. However, if you are an employee with less seniority (since merit is not a factor today) you may be more inclined to accept concessions to keep income coming in as being laid off is a 100 percent pay cut.  Only time will tell but it will all hit the fan in the next few months.

Congratulations to the Association of Legal Professionals of The City of San Jose for being the first collective bargaining group to conduct their negotiations as public meetings. I attended and was enlightened to watch as a member of the public last Thursday.

Joint Venture Silicon Valley held their annual State of Silicon Valley 2011 last Friday at the San Jose Convention Center. Much of the time was spent on how cities and counties will have hard times the next five years due to rising pension costs and decreased revenues. The outlook was grim and the notion of never recovering and delivering services the same way was discussed. Therefore they advocated outsourcing and consolidating services among cities to cut out duplicate administrative positions.

Be My Budget Valentine

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The Budget Valentine will be visiting with the Council today at 1:30pm. The Council is having a public study session that will be streamed on the Internet and broadcast on Channel 26. This meeting will include discussion of what cuts will be required based on the budget shortfall.

The budget is assuming that each union agrees to 10 percent total compensation cut. Last year, 25 percent of the workforce took 10 percent total compensation cuts for one year. The current ask of 10 percent is not in addition to the cut from last year, but rather maintains the 10 percent cuts another year for those who took it.  The budget is also asking the remaining 75 percent of employees who did not take a 10 percent cut last year to please do their part and take the same cut the others have.

I have thought that a pay freeze for five years or more would be a way to cap spending, but increased pension payments and slow incremental property tax receipts do not allow for this option.

Service-delivery model changes will be discussed as a way to maintain services for residents since layoffs will be sizable. It will challenge the values of providing services to residents versus the current delivery model.

Even if the assumption that the entire workforce takes a 10 percent total compensation cut, the City will still have a huge deficit and therefore sizable reductions in service, thus layoffs. An alternative to the 10 percent total compensation pay cut would be additional layoffs. There is no easy way out and the impacts will be stark. We will also discuss options on the increasing taxpayer contributions to the pension funds and legal options on pension reform.

The last portion of the meeting is something I have asked for several times. This is where the Council must prioritize/rank ordinances. Ordinances originate from Councilmembers, City Departments and State/Federal regulation. Implementing ordinances in many instances will involve the city attorney, planning department, office of economic development, public works, department of transportation and so on. Each ordinance takes time and effort to implement thus what we call “workload.” I believe ordinances should be prioritized to what could bring in revenue to the City and then what may stimulate economic activity. Quality of life ordinances may have to be put on hold. Some of the choices are:

• Landscape Ordinance to reduce water consumption
• Habitat Conservation Plan
• Sign Code
• Electronic Signs
• Bail Bonds Zoning
• Distinctive Neighborhoods for preserving neighborhood character
• Green Building for home additions and alterations
• Lighting on Private Property
• Off-Sale Alcohol Process
• Fence Heights
• Tree Removal Process
• City Landmark Criteria
• Regulate Check Cashing
• Medical Cannabis
• Zoning for Housing around Transit
• Outdoor Events in public places
• Towed Car Regulation
• Condominium/Apartment Conversion
• Social Host-Liability for adults that allow minors to drink alcohol
• City-County Collaboration
• Smoking Outdoors
• Excessive Police Force
• Expansion of Parking Meters
• Taxicab Vehicle Regulation

Which ordinances are most important to you?

Finally, you may have heard that San Jose is eligible for a $15 million (over two years) Federal Grant from Federal Emergency Management Agency (FEMA) to rehire firefighters who were laid off last year when an agreement could not be reached on concessions.  The grant sounds good; however, there is a significant string attached to your federal tax dollars.

If the grant is accepted then there would be zero layoffs in the fire department for the next two years. As I mentioned above, the deficit, even with 10 percent concession, is huge and accepting this grant would force the City to lay off, in an out-of-proportion scale, police officers, librarians, attorneys, planning staff, public works staff, community center staff, transportation staff,etc…

In addition the taxpayer contributions to the pensions will grow again next year which may cause even more layoffs outside of the fire department the secnd year of the grant. A concession from the Fire Union to not impact police for example would be much higher than 10 percent and would be in the 15 percent to 20 percent range. A concession of this size is highly unlikely, but never say never.

A FEMA grant with these stringent terms should be rejected Monday unless terms can be changed by the Feds. The Federal COPS grant Council accepted did not have these restrictions.

I highly recommend that you watch the budget study session today at 1:30pm and share your thoughts afterwards.

Watch the San Jose City Council study session on the 2011 budget here.
View the San Jose City Council Budget Study Session Agenda here.

$1 Million in RDA Money

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In my opinion, the Council made two great investments two weeks ago for our tax base and jobs. The Council provided $500,000 of Redevelopment Agency (RDA) funds each to Sunpower and Maxim, totaling a one million dollar investment for economic development. These two companies compete globally, therefore they could have chosen any other location in the world.

Maxim, a billion-dollar semiconductor company, will consolidate its offices and relocate its corporate headquarters from Sunnyvale to North San Jose.  Maxim has design facilities all over the the USA and the world.

Sunpower will double its headcount to a payroll of approximately $75 million in San Jose instead of Texas. Texas offered Sunpower $4 million.  Sunpower could have also expanded its Malaysia facility and been exempt from taxes.

We can’t ignore that we are competing at a global level and the fact that San Jose was able to have these two companies call us home after the Great Recession is an accolade. Although I do believe RDA has lost its focus from time to time, this kind of economic development is right on target.

The County of Santa Clara is upset with these two investments, issuing a letter to the City of San Jose citing Sunpower and Maxim specifically. This is the same government agency that says time and time again that they want job growth in the County; especially green jobs. The saying “action speaks louder than words” comes to my mind here. The County will benefit from these investments as the majority of Sunpower and Maxim’s employees will have homes in the county paying property tax and sales tax, of which the County government gets a significant portion.

In contrast, the Council funded the construction costs for an existing charter school in East San Jose with $950,000 of RDA money.  So, is one million better spent for economic development or a school? Neither economic development nor schools are in the City Charter. Do they provide the same measurable return on investment?

RDA did fund the extensive remodel of the existing Horace Mann elementary in our downtown 10 years ago when there was more cash on hand. Horace Mann was an eyesore and is now a very attractive school. Part of the thought process was for downtown to have a good public school for young families. I think the Horace Mann PTA would agree it has benefited the school community. On the other hand, the money spent did not generate any new ongoing jobs or revenue for the City.

Council could have directed the million dollars to fund more affordable housing, since that is funded by RDA, or another million on top of the $73 million RDA has spent on the Strong Neighborhood Initiative, which benefits a fraction of San Jose.

Finally, important to note is that long ago RDA funded a bridge and light rail station in North San Jose next to then-small company that relocated from the Peninsula. That small company was Cisco and is now the largest private employer in San Jose.

2011 Community Budget Survey Results

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As you may remember, two weeks ago I shared that the City of San Jose contracted with a public opinion organization to conduct a telephone poll of 1,000 residents. These residents were asked survey questions from Jan. 13 to Jan .17. In comparison to my web survey, the City did a “scientific survey” which means they called men and women from all council districts, different age groups, ethnically diverse, homeowners and renters who are likely voters. The company responsible is instructed to get a group that mirrors San Jose.

Here are the results from the 2011 City of San Jose budget web survey.

As I have shared in previous blogs, the surveys that I conduct are not scientific. They can be taken by anyone, and passed on through e-mail, therefore allowing anyone who has access to a computer to take it. The only control is the the survey can only be completed once on a computer. So, for example, if you have one computer in your household and one person completed the survey on that computer, then the survey can not be taken again.

Sharing surveys, especially those that are about budgets and policy, is commonplace.  Each week I receive several emails offline by actual residents about my blog. Residents shared they like to see what questions are being asked on the phone survey and to consider the choices themselves.

I edited the survey so that it did not have so much “city speak” in it. I also deleted and added to the format. For example, I omitted a question that I found confusing regarding transferring $1.5 million from municipal water to the general fund. I also modified a word that read “non-profits” and I wrote “charity/non-profits” since I have found people are unclear when they only hear non-profit.

On questions about retirement age, the survey did not offer the current retirement age as an option so I added that. Plus I added the Social Security retirement age.  The library tax question did not share the existing parcel tax cost so I added that. On the question of reducing the number of firefighters assigned to “certain” stations—“certain” stations translates to the least calls for service so I swapped in word “slowest.” On ending overtime pay for fire battalion chiefs and police captains, I found most people don’t know what these ranks mean, so I swapped out the titles and put in the word “management” as they are managers. My goal was to make the survey east to understand for residents.

With all this said, can I or you or anyone else for that matter learn anything from the survey? Can we extrapolate anything from it? Well, that will be up to you to judge.  Here are some results from the scientific poll:

80 percent support giving raises based on performance rather than seniority.

79 percent support slowing the pace of City employee pay raises.

79 percent support making decision on layoffs based on employee performance
rather than seniority.

73 percent support eliminating the traditional pension plan and replacing it with a 401K.

73 percent support limiting the amount of union business that union leaders can conduct while on City time.

69 percent support lowering the maximum level of annual pension benefits employees can receive.

65 percent support ending the policy of paying employees for a portion of their unused sick leave.

67 percent feel it is acceptable to reduce days and hours of operation at community centers.

61 percent feel it is acceptable to reduce the number of days the libraries are open.

The Mayor held the 5th Annual Neighborhood Association and Youth Commission Priority Session this past Saturday. Great turnout but unfortunately not equal attendance from all parts of San Jose. This yearInnovation Games donated their services (free) which consisted of 25 collaborators to facilitate each table into discussing and making choices about the budget.

Participants were given play money and trade offs the Council will have to make.  To eliminate a program, 100 percent of the table participants had to agree. To continue funding a program participants had allocate their play money—however it required buy-in from other table participants. City department heads were in attendance to answer specific questions from participants. Nearly all of the comments I heard Saturday were favorable from participants. Congratulations to our Mayor for incorporating more public input on the budget.

How Many Homes Does it Take to Fund a City Service?

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It is pretty common to hear from residents, when discussing our City budget: “But i pay my property taxes.” As I have covered before on a prior blog post, your property tax bill does not flow 100 percent to the City. Much of it is taken by the school districts, County, community colleges and special districts. (This does not include various parcel taxes, school bonds, hospital bonds, that are collected via your property tax bill.) Even with all these other government entities taking nearly 90 percent of your property tax, this remaining portion is the number-one source of revenue, by a large measure, for the City of San Jose.

So I got to thinking: How many houses does it take to pay for a city service?

The average single-family home in San Jose (excluding the Redevelopment Areas, such as downtown condos) has a 2010-2011 assessed value of about $356,000. This combines newly assessed properties as well as grandfathered pre-Prop 13 homes.  Of the 1 percent secured property tax levied on those homes, the City receives approximately 12 percent of the tax revenue. That works out to around $427 per home.

Using an average annual cost per full time firefighter of $185,000, it takes 433 homes to support one firefighter. However we do not staff a one-engine fire station with one firefighter in San Jose 24/7, 365 days a year.  We staff it with 14 fire fighters to cover all of the shifts, vacation, sick time, etc…throughout the year. Therefore it takes 6,062 houses to cover just the staffing of a one engine fire station—and that does not include the cost of the fire engine. 6,062 houses is almost an entire Zip Code that is needed to pay for one fire station with no money to fund asphalt for roads, electricity for street lights, police, libraries,etc.

According to the County Assessor’s office, there are 207,220 single family homes (including owner-occupied housing such as townhouses and condo flats) in San Jose (again excluding the Redevelopment Areas: Downtown, North San Jose & Edenvale). All those homes should generate enough property tax revenue to support 478 firefighters. However the City currently has 660 fire fighters, so all of the property tax generated from all of the City’s single family homes is only sufficient to support 72 percent of the City’s firefighters. Of course, this analysis ignores the property tax we receive from all of the other types of secured property in the City like commercial property. Around 85% of the City’s assessed value (excluding RDA areas) is from residential.

What exacerbates this is approving housing projects that do not pay property tax and suburban sprawl (both of which I have historically voted against).  The higher the density of infill market-rate housing (not affordable housing) the more property taxes generated in a smaller geographic area to pay for city services without expanding city streets, sewers and call for service areas.

How about if we combine all property tax and sales tax? In 2008-2009 all property tax (residential & commercial) and all sales tax covered 82 percent of the fire department and police department budget only. In our 2010-2011 budget year these same revenue sources only paid for 72 percent even though we have less personnel.

Other choices could be used in this analysis, such as the golf cources or the Hayes Mansion, which are two items I think the City should exit.  Both divert money from core services every year.