Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

Arbitrator: Retired Judge or Out-of-Town Labor Lawyer?

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At first glance, modifying binding arbitration back in July was not my first choice over new pensions for new employees. I support the Mayor on fiscal issues, so voting in favor of Measure V and giving residents the opportunity to support this measure is consistent with my line of thinking.

You can read more about the San Jose fiscal reforms measure here.

In a nutshell, Measure V would put limits on outside arbitrators. During the course of the campaign I have become more and more supportive of this measure.  There are two primary reasons why it is important, neither of which are getting much publicity. One, the passage of Measure V will mandate that binding arbitration for public safety unions would be held as public meetings.  Public meetings that the taxpayer could attend and see how tax dollars are allocated.

As it stands today, even Councilmembers that you elect are not allowed to attend these meetings.

Second, Measure V would require that the current out-of-town labor lawyer acting as arbitrator be replaced with a retired judge. Most people share the belief that a judge is more fair than a lawyer. Not every judge is perfect, however, I would pick a retired judge instead of an out-of-town labor lawyer to make a final financial decision under binding arbitration.

I have known many of our public safety professionals for more than 30 years. They are good people who do good work. However, the status quo of pay and benefits increasing faster then revenue actually results in less police and less firefighters for residents. The City has a legal obligation to pay pensions and does not have money left over to hire more police or firefighters.

I would suggest moving forward that the critics of Measure V explain the value of how the current closed-door binding arbitration process overseen by an out-of-town labor lawyer is better than Mayor Reed’s suggestions that would control costs and let taxpayers in the room. Instead, those against Measure V are attempting to mislead the voting public by sending out materials that are incorrect and contradictory as reported in a Mercury News article on Sept. 12 and again on Oct. 22.

As a side note, it was announced at the council meeting last week that the city paid out $14.6 million in accrued sick leave to retirees in July. It is a record breaking year that beat last year’s all time record of $11.7 million. Next year the potential sick leave pay out could be as high as $21 million which is equal to this years entire city wide library budget.

Also expected property tax revenues next fiscal year will be approximately $194 million while payments for pensions will be approximately $250 million!  Perhaps we all write “reform pensions to hire cops” on our check this year to the Tax Collector or better yet: Vote yes on Measures V & W.

Worst Roads, but Great Pensions

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Last week, Council dove into a study session about street paving. As you may have heard, San Jose came in last on a national survey on road conditions. This survey was done prior to the $12 million in federal stimulus money that was allocated to San Jose for road paving this summer.

San Jose’s cost to maintain roads is high due to our suburban sprawl. Total lane miles in San Jose is double that of San Francisco, which came in second for worst roads.

San Jose has 2,370 miles of road (60 feet wide) that would stretch from here to Detroit!  (Could you imagine if we continued on the notion to build out Coyote Valley and increase our road network plus the sidewalks, sewers, street lights and signalized intersections?) Those 2,370 miles of road are split between 1,570 miles of neighborhood streets and 800 miles of major streets. State and federal grants for street paving (if you get them) typically only apply to the major streets and not the majority of neighborhood 25-mph streets where we live.

Staff presented us with the dilemma that as streets wear down they are more expensive to repair. For example, to “reseal” a street in good condition may cost $35K-$70K per mile, however if a street is in poor condition the price rises to $200K-$800K a mile. Complete rebuilding of a street is the most expensive at approximately $1.8 million per mile!  So transportation engineers do their best to with the limited dollars to try and keep streets from falling into poor condition.

Some streets are being left behind since they are so expensive to repair. So, thus a trade off: Do we fix one mile of a terrible street or instead 10 miles of streets that are in fair condition? Well, if you live on those 10 miles of streets it is great; however those on the one mile of terrible street are left behind.

Inevitably, the decision to repair, rebuild, etc., always turns to money. The city has lowered it’s road repair budget at the same time as other department budgets were being trimmed. As the structural budget deficit took hold and the portion of the pie chart for road paving got smaller, other portions of the pie chart, such as pensions, got bigger. One proposal on how to pay for the deferred maintenance backlog (streets only) of $250 million (which may swell to $1 billion by 2020) was an annual parcel tax of approximately $300.

A comparison is that many households pay $480 a year for basic cable TV or $600 for high speed Internet, so paying $300 for streets each year would be just be considered another household expense.  The other factoid cited in favor of a parcel tax was that the annual cost for car repair due to poor roads is $700 a year.

Of course this $300 parcel tax was preliminary, and other parcel taxes may arise based on different properties, or a Council decision to charge a big-box store more since their store generates many car trips. Cities alone do not have the ability to raise gas taxes so parcel taxes, sales taxes or utility taxes are the main ways to raise revenue for ongoing expenses. Gas taxes make those who drive on roads pay for them; however some of the biggest culprits for wear and tear on streets—buses, garbage vehicles and commercial delivery trucks—are exempt by state and federal law from paying a fee to cities for the damage they cause.

One of my questions at the study session was: “Since the city council policy exempts affordable housing from paying construction taxes which go towards road paving, how much money have we lost and/or could have had in the coffers for street paving from affordable housing?” Unfortunately, staff did not have the answer readily available. I am aware that the city has lost approximately $80-$90 million for our parks with a similar exemption for affordable housing developers. My back-of-the-envelope calculation is we have lost out on approximately $30 million that could have gone to road maintenance.

I think it is important that we know these things since a council policy has cost implications. If we raise your taxes for road repair but then make exemptions for something else, then maybe the tax should be called an affordable housing tax instead of tax for roads or parks.

Here is a link to the staff presentation on road repair. Click on Pavement Maintenance (Street Paving) Study Session Presentation-October 12, 2010

Unexpected Support for the Plan to Sell Hayes Mansion

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Last week, I got a mailer from the No on V campaign railing against the decisions of past city councils about spending on the Hayes Mansion.  I was elated! I felt validated in my support for selling the Hayes Mansion to stop the annual bleeding of millions of dollars. I wrote about selling the Hayes Mansion two years ago on the Council and on this blog.

I remember sitting through many long speeches from my former colleague Forrest Williams who touted that money spent on this hotel and conference center instead of spending the money on police and libraries was appropriate.  So, I wonder why are the people who support the No on V campaign endorsing Forest Williams, who was biggest proponent of the Hayes Mansion, in his supervisorial race?

I am thankful that the Hayes Mansion and its $4 million a year subsidy is being brought to light to all the voters of San Jose. However, it’s dwarfed by the $52 million taxpayers had to pay just for the pension loss last fiscal year. I can’t help but wonder where everyone was when I spoke about selling the Hayes Mansion in the past? Where was everyone when the vote was taken for taxpayer subsidized golf courses and when income-producing land was converted from industrial to housing?

It was also interesting that this mailer cited—almost as gospel—the Santa Clara County Civil Grand Jury Report titled “Money-Losing Hayes Mansion: A San Jose City Council Responsibility.” Apparently, this campaign supports the Civil Grand Jury as a trusted and reliable source. So perhaps they would then agree with other Civil Grand Jury Reports, such as: “Cities must rein in unsustainable employee costs” or “City of San Jose Hosed by IAFF Local 230 Executives” or “Los Lagos Golf Course—San Jose’s Financial Sand Trap.”

It is difficult for policy makers and interest groups to be consistent and this to me is an example of being inconsistent.

Here are the Civil Grand Jury Reports mentioned above:
Grand Jury report on Hayes Mansion.
Grand Jury report: Cities Must Rein in Unsustainable Employee Costs
Grand Jury report: City of San Jose Hosed by IAFF Local 230 Executives.
Grand Jury report: Los Lagos Golf Course—San Jose’s Financial Sand Trap.

A Public Spanking

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County Assessor Larry Stone visited the San Jose City Council study session last week and gave an extensive lecture on the role of the County Assessor and a critique of Spectrum Economics. His comments were blunt, sparing only profanity about the economist hired by the RDA for $15,000. I wrote about this topic three weeks ago.

This is the only time that another elected official has spoken to the City Council at length during my tenure. Mr. Stone explained how property values rise and fall. Property values change for a variety of reasons: when property is sold, new construction, Prop 13 adjustments, Prop 8 appeals, business property (servers, factory equipment) and assessment appeals. Revenues from property tax will not increase for local governments this year and may even fall further.

Those that are hopeful of more property tax revenue have stated that if a global corporation stock price rises then so should their property value.  Assessor Stone stated that there is no correlation between the stock price of a single company and how much their commercial property is worth.  His example was that if you got a raise or bonus that your own home would not increase in value.

I think next year we may want to forgo an economist and instead pick up the phone and call Larry Stone. To be fair, the assessor only looks back and does not offer projections; however he has a more informed view then most and the only cost may be lunch.

Click this link to view the Spectrum Economics Report.

Click this link to view the informative presentation of Larry Stone.

Click this link for the the play by play speaking notes that went with the presentation slides.

This Wednesday night at City Hall, 6:30PM our City Auditor will present the findings of the pension audit to the public.

Can We Learn From the Fall of Rome?

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The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance. Cicero, 55 BCE

The San Jose convention center was visited by experts on the National Debt last Friday, Sept. 23. This was part of the Fiscal Solutions Tour comprised of both Democrats and Republicans, with budget expertise organized by the Concord Coalition. The speakers former titles included: the Comptroller General of the United States, head the General Accounting Office (GAO),  head of the Congressional Budget Office, Public Trustee of the Social Security and Medicare program to name a few.

Unfortunately, the Power Point presentation stopped working after the first few slides, which was a shame since the slides were very informative and gave background information on the enormity of the problem we face.  I showed their documentary film IOUSA at City Hall in May 2009 to show parallels with our own budget in San Jose.

The presenters shared some eye-opening items on Friday. One was that there is no Social Security trust fund. No money stashed away in a “lockbox”  to pay obligations. Instead, there is a file cabinet in Virginia with a long list of IOU’s, since the government has the spent the money. This year Social Security is paying out more in benefits then it takes in.

Another revelation was that this year we will spend $202 billion just on interest on the national debt, which is more than the wars in Afghanistan and Iraq. By 2019, nearly all federal revenue will go to paying interest on the national debt and entitlement programs like Social Security, Medicare and Medicaid, leaving a sliver for military, food safety, science, etc.. Not mentioned was the sleeping giant of $3-5 trillion in unfunded pensions from local and state governments nationally.

One may hope the federal government will bail out state and local governments from their pension obligations, however, it would require borrowing even more debt from foreign countries or raising income taxes to benefit one group in society instead of other priorities Americans may have.  The more the United States borrows from other countries limits our liberty, as you must be nice to your lenders (foreign governments) even if they are wrong.

Whatever level of government, hard decisions must be made or citizens will feel the consequences of punting. When asked, “How we solve this problem?” Fiscal Solutions’ David Walker said: “It depends if elected officials are willing to risk their jobs” … “elected officials don’t get re-elected by raising taxes and cutting spending. Instead they get re-elected for not raising taxes and increasing spending.” The presenters offered solutions ranging from budget reform, defense spending, health care reform and yes raising taxes strategically.

Click on this link to view an online video that briefly lays out the problem and provides their proposed solutions. http://blip.tv/file/4048954

Finally, a big thank you to the San Jose police officers who donated their time Saturday morning for the Willow Glen High School homecoming parade. Thank you Lt. Ta, Sgt. Montonye, Sgt. Moody, Sgt. Lira, Officer Ramirez and Officer Herbs.

High Speed Revenue

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For the most part, I do not think people want things to change. However, could you see living without highway 280, 85, 87 or 237? When building large transportation projects there always seems to be opposition of some sort. Government at all levels—local, state and federal—deems that certain projects have a higher value in the long term.

A current public transportation project that has been receiving attention lately is High Speed Rail (HSR). Last week, the city council discussed whether the trans should run above ground or underground.  The preferred choice among many in Northern California is to underground/tunnel the HSR.  However, it appears that the majority of elected officials support an above-ground structure.

I have attended approximately 16 evening meetings regarding HSR. At first, the meetings were terrible with few answers and little data to answer audience questions. Over time, the quality of outreach and information has improved. It was through this process the HSR decided not to run the trains directly through the Gardner neighborhood, but rather hug highways 87 and 280.

To tunnel or not to tunnel is both a financial and timing question that includes geological reality. A tunnel from the Diridon station to the 87/280 interchange will cost an additional $800 million to $1.2 billion and may add seven years to the project. In addition, not every piece of land and what is beneath the surface lends itself to tunnel. Downtown has its challenges with sandy soil and a shallow water table. So, a piece of land in one city is different then another city, just as some parts of San Jose have streets that sink and others do not.  (Wait till the Big One hits and liquefaction of soil happens in certain parts of San Jose.)

Some questions I asked at the council meeting were: “ How much does it cost to include a tunnel in the Environmental Impact Report (EIR)?” and “What more would we learn if the tunnel was included in the EIR?” The first response was “don’t know” and second response was hard to translate.

Another question I asked: “Where is the local money coming from since the City does not have any?” One response was “Well, maybe the City could make money from parking.” It sounds like we would have to find millions of dollars to build a parking garage and then promote driving your car and parking it over using public transportation—so my questions remained unanswered.

I believe our Mayor is doing a good job trying to manage an uncontrollable situation. Uncontrollable since the power in this decision does not rest with cities but rather with the state. I believe our state assembly and state senate have more power over a state agency then an individual city. We see that year after year the state takes RDA money from the cities.

It is highly unlikely there will be an underground tunnel due to cost and years and examples of issues that occurred with the “Big Dig” in Boston. Overall, I lack confidence on the HSR project since it will take $43 billion to $100 billion to build it out over time. To complete HSR will mean going back to the voters a few times for more money. I know from history that some projects take decades to complete, however you compound this on top of $500 billion in state pension liability and ask, “Where is the ability to pay?”

There is the hope to get a legal agreement with HSR that would allow San Jose to have a say in the architecture of an above-ground structure. There is good reason for HSR to agree since HSR would save money and years in construction. So if HSR would save $800 million to $1.2 billion, then they should allocate some of that money to San Jose for the architecture.

Everyone has a different view of what they like or do not like about architecture but we can agree on is that $100 million, for example, buys you some level of architecture. Since we know that the price tags on these projects grow and grow then we might want to assure a certain percentage of the build cost in that future year instead of an exact monetary figure.

On another topic, this week the council is posed to approve yet another rezoning of land to housing for an affordable housing project that does not pay property tax which has been the number one revenue for our city. How will we fund our police and libraries without property tax?