Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

Here Come the Cuts

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The City Manager will release the list of proposed cuts to balance the city budget today (March 29). These cuts are based on no concessions from any of the labor unions nor savings gained through outsourcing of janitorial services (among others) to save money.

Money saved from outsourcing could help pay for library hours or the aquatics program, for example. The question of concessions has been out there for months and could be included in the budget. Agreement would need to be reached in early April since layoff notices would start going out April 19. If concessions are made then some of these cuts could be avoided but in lieu of an agreement in hand here are some of the proposed/likely cuts.

As it stands now, 802 positions would be eliminated, of which 656 are filled positions, which closes the deficit of $118.2 million. In addition, there were services that were funded last year with one-time funds ($7,476,000), such as library hours, community centers and the SJPD horse-mounted unit, which will be going away as well, accounting for 77 filled positions.

Library:
Eliminate 104 positions to save $7.4 million in 2010-2011 and $7.9 million in 2011-2012. Neighborhood branch libraries would be open three days a week and the MLK Main library would reduce hours 12 percent. Delay opening of new Seven Trees and new Bascom libraries saves $2.3 million for library staffing. Does not include community center staffing costs.

Parks, Recreation & Neighborhood Services:
Eliminate 38 positions to save $4.3 million in 2010-2011 and $5 million in 2011-2012. Close smaller community centers.
Eliminate 12 positions, saving $836,000 in 2010-2011 and $854,000 in 2011-2012. Reduce maintenance staffing at parks; restrooms open only on weekends except in summer. Eliminate 10 park rangers, saving $634,000 in 2010-2011 and $848,000 in 2011-2012. Eliminate 24 positions, saving $630,000 in 2010-2011 and $637,000 in 2011-2012. Reduces aquatic program to only 2 pools in San Jose. Eliminate two positions in Code Enforcement, saving $302,000 in 2010-2011 and $323,000 in in 2011-2012.

Fire:
Eliminate 90 positions (88 are filled), saving $12 million in 2010-2011. 2011-2012 costs determined through binding arbitration. Reduce/suspend fire apparatus and fire fighters at station 30 Auzerais, Station 33 Communications Hill, Station 34 Las Plumas, Station 35 Poughkeepsie, Station 3 Martha Street and one other station yet to be identified.

Police:
Eliminate 160 positions (153 are filled), saving $25.5 in 2010-2011. 2011-2012 costs determined through binding arbitration. Reduce police patrols; eliminate funding for new officers; reduce Metro Unit; reduce Investigations unit; reduce Downtown services unit; delay opening of Police Substation; reduce Financial Crimes unit. Reduce the Crossing Guard program by 8.3 positions to save $354,000 in 2010-2011

Transportation:
Eliminate 12 positions for capital projects, including transit and bike/pedestrian projects. Saves $1.4 million in 2010-2011 and $1.6 million in 2011-2012. Eliminate 9 positions for Neighborhood Traffic Calming. No more traffic studies and no implementation of traffic calming tools. Saves $921,000 in 2010-2011 and $999,000 in 2011-2012. Eliminate five positions for residential street sealing. Saves $375,000 in 2010-2011 and $415,000 in 2011-2012.

Convention Center:
Eliminate 25 positions to save $1.9 million 2010-2011 and $2 million in 2011-2012.

This list is not comprehensive and may/will fluctuate based on final Council adoption of the budget in June.

3%—100%? 250%!

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Monday: No Impact Man Film at City Hall
Nearly 300 San Jose residents attended to watch this documentary, which portrays a family that adopts environmentally friendly choices over the course of a year.  For example, they bike instead of driving, buy only locally produced food and give up their television. The main point of the evening was that we do not have to wait for government to mandate behaviors that help the environment but that collectively we as residents can choose to compost, use less electricity, bike vs. drive today, etc…
A reporter from the San Francisco Examiner attended and wrote about the event. Read the report here.

Tuesday: City Council Meeting
Council waived the business license fee for the first 1,000 business under 35 employees retroactive to Jan 1,2010.  Some on the Council commented that it was symbolic and would not create jobs. The Council does not create jobs; private individuals do.  If the Council wants to do something symbolic lets get rid of the Labor Peace regulation and allow Starbucks to open at city hall as planned. Nearly five years and still empty.

During public comment on the Mayor’s Budget message, a lobbyist from the union chided the Council for even thinking about 2nd Tier benefits that the taxpayer can afford since it would be unfair to have people working side by side who have different retirement benefits. The next non lobbyist speaker stated that people in private sector are compensated differently from each other today and they survive. The current pension system is unsustainable and must be changed for new employees.

A couple of SJI readers asked last week how retirement works under the city charter.  Here is the response to that question:
Each employee puts $3 and the city puts an additional $8 into the retirement fund. On top of the over 200 percent match, the city guarantees an 8 percent net rate of return, but the fund needs to gross 9 percent to cover investment fees. (Average rate of return the last 10 years is 4.4 percent) If the retirement portfolio (stocks, bonds, real estate,etc.) does not return 8-9 percent, then the taxpayer covers the difference.

Any changes to the current system requires a vote of San Jose residents.  As we hopefully implement 2nd tier benefits I would suggest an option for new employees of a one-to-one dollar match up to the federal 401K limit of $16,500 and no guaranteed 8 percent return.  This way the retirement funds will continue to get funded by new employees much like social security is funded by younger workers.  The newer employees will draw less benefits but then we will not have to close more libraries or layoff more police in future years.

A dollar-for-dollar match (100 percent) is extremely generous in comparison to the average 3 percent match of private employers to 401K’s. If there are specific positions in our city that are tough to recruit then raise the entry level salary since young workers want more money up front to buy a home or fancy car.  Same time if there are positions with many qualified applicants then those entry level salaries should be frozen indefinitely or lowered.
Wednesday: Grand Boulevard Committee, Member
Attended meeting at SamTrans in San Carlos. The purpose of this committee is to provide a venue for cities and transit agencies from South San Francisco to San Jose to plan transit-oriented developments all the way up and down the El Camino Real.  The thought is through density, the El Camino will gain the improvements to add large sidewalks and pedestrian friendly accoutrement’s the entire way creating a Grand Boulevard.
Thursday: Public Safety Committee, Member
The committee received a verbal report from staff on why hiring retired San Jose Police Department (SJPD) officers is problematic. Staff response seems odd. We have many qualified retired SJPD in our area that it seems silly not to hire them to do background checks for new recruits instead of pulling police officers off patrol to do this work. But then again we have postponed the police academy indefinitely yet we fund a community center in Los Gatos for $80K out the $11 million in tobacco funds that goes towards charities.
Friday: Diridon Joint Policy Advisory Board, Member
First meeting of the Diridon Joint Policy Advisory Board whose goal is to create a Grand Central Station of the West by collaborating with state, federal, transit districts, adjacent residents and business owners over the next 10-20 years. We elected Mayor Reed as the Chair.

Click this link and vote for ultra-high broadband networks from Google for San Jose.

What Would Cesar Chavez Do?

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Below are a few observations from last week.

Monday: Council study session on Airport
Overwhelming majority of Council thought outsourcing of janitorial to save $3 million was a bad idea so it looks like we will lay people off and consider getting rid of the night time curfew in the future.

Monday Night: General Plan 2040 Task Force Meeting
Although the General Plan board members were informed that the City’s budget problems are partially due to most of our land being dedicated to housing instead of jobs, the Task Force voted in favor of adding 300,000 people with a 14-11 vote. The two options were 200,000 or 300,000 new residents. Several task force members shared that they voted no because they wanted to see higher growth of 500,000 more residents to San Jose! I voted for the option that added 200,000 people by 2040.

Tuesday: Council Meeting
After 18 months of staff and paid consultant “research” regarding my Sept. 18, 2008 memo proposing that developers of affordable housing projects be required to pay park fees, as market-rate developers are required to, the question finally came to Council. I believe that people of lower income are deserving of 100 percent park fees/land dedicated, the Council decided to support the Housing Department’s compromise that developers pay only 50 percent. To date, the City of San Jose has lost approximately $90 million in park fees from developers because of this park exemption.

Are you familiar with the term, “What Would Jesus Do?” Well I wonder as we come up on Caesar Chavez Day, “What would Caesar Chavez do” if he was alive and on the Council. Considering that affordable housing provides for people of lower incomes and is often located in areas that do not have parks, would he vote for equity when it comes to parks in San Jose for all people?

The next agenda item on the council agenda that day was the Habitat Conservation Plan where it seemed that the Council had more sympathy for the checker spot butterfly then parks for people of all income levels.

Wednesday: Visit Medicinal Marijuana Collective in Oakland
One collective is on target to write a check to Oakland for $360,000 in city taxes and another check to the State of California for nearly $2 million in sales tax of which approximately $200,000 will come back to Oakland; therefore Oakland will be receiving approximately a half a million dollars from one legal medical collective that employs 80 people with an average hourly pay of $43.

Thursday Night: Neighborhood Association Meeting
I talked about the budget and announced to the audience that the City would be suspending the $750K aquatics program for the 2010-2011 city-wide. I shared that the City could restore the entire program if we chose different ways to do city services, like outsourcing janitorial services at City Hall for example.  There were many in the audience that felt that they did not care who cleaned city hall but they would rather have a summer aquatics program for youth or a library open.

Friday Morning: American Leadership Forum-panel discussion titled, “A new recipe for regional job growth.”
Panel discussion of private sector and labor spoke to how the region can create jobs going forward. A business person asked the labor panelist, “What if public employees would take less in pensions to help balance the budget and avoid layoffs? Response from labor panelist was that, “Most of the deficit in San Jose is not pensions but debt service on City Hall.”

Actually, the debt service on City Hall is $24 million of which $17.1 million is from the general fund out of a $116.2 million general fund deficit. $52.9 million is the amount the general fund must cover this year in increased pension contributions since the taxpayer must cover any losses in the pension funds. The $52.9 million to cover pension losses is only a portion of the total amount devoted to pensions this year which is $200.2 million.
Looking back in history on 5/14/02 the only votes against new city hall was Linda LeZotte and Chuck Reed.

Keep the Airport Curfew

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This afternoon at 1:30 the Council will gather for a special meeting to discuss the City’s airport. The expansion was voted favorably by the council in 1997 with then-Councilmember David Pandori casting the only vote against. The airport, with the hands artwork that is visible driving on Highway 87, was approved in 2005. Through the selling of bonds (borrowing) the city of San Jose has spent $1.3 billion on the renovation.

Since 2007, the airport has experienced a 25 percent decline in the number of passengers and 33 percent reduction in number of flights. The airport competes with San Francisco and Oakland airports and is one of the few city assets that competes with other cities. Airports and airlines have been impacted negatively from terrorist threats, web meeting solutions. spiking fuel costs that pushed companies to adopt new web meeting technologies faster and of course the Great Recession.

Take all of these factors listed above into consideration and then add on government “feel good” measures like the new city of San Jose living wage policy that was passed by the council last year (I was the only no vote) that requires private companies at the airport to pay private sector workers above-market wages. It may “feel good” for politicos but it raises costs to the airlines and to the taxpayer as the city now has a city employee who makes $156,000 to oversee the living wage policy just at the airport.

In fact, we have a total of 11 full time people ($1,414,941) at City Hall who oversee that private sector workers are paid a certain wage. Personally, I would rather have 11 code inspectors or 11 planning dept staff. Another “feel good” measure is that the airport must spend $3 million extra every year on janitorial services because of another council policy that does not allow outsourcing, which again raises the costs to the airlines. (Well, technically we “allow” outsourcing but it takes nearly two years and multiple highly charged City Council votes that require at least six votes…so essentially NO). As Marvin Gaye said, “Mercy Mercy Me.”

If you put yourself in the airlines’ shoes and you know that the Bay Area has three airports and that residents will drive the short distance to fly, then you might be more likely to choose the airport where you can maintain a higher margin of profit that has the lowest cost. If you choose to not maximize your profit then consumers, mutual funds and even retirements funds may sell your airline stock and eventually you may get fired.

Some suggest that eliminating the curfew would solve the airport’s financial dilemmas. It is a big unknown that if eliminating the curfew would be the salvation of our airport. Will flights at 3am generate more revenue then the $12 million of savings that outsourcing would deliver at the airport as outlined by the airport director? I don’t think so.

What I do know is that approximately 100,000 people hear the airport flights today and they would prefer not to be awakened in the middle of the night. Now there are some areas of San Jose that do not hear the airplanes during the day, but I think that residents of Almaden Valley and Evergreen might start to hear the planes if they are arriving and departing at 1am, 2am, 3am, etc. The economic value of getting rid of the curfew is unknown however we do know the Council has the power to allow the airport to start saving money today without upsetting many residents.

My viewpoint is we need to have a successful airport and by that I mean a successful daytime airport that operates up to what the Environmental Impact Report (EIR) allows. The airport should be allowed to run itself like a private business, competing with San Francisco and Oakland without all of the city policies, while maintaining its successful curfew as other cities do so in the USA.

On another note: Tonight the General Plan 2040 Task Force will choose a scenario to recommend to the Council for San Jose’s growth by the year 2040.
Here is a link to a General Plan 2040 Task Force web survey prepared to solicit feedback.

Why Free Parking is a Bad Idea

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Professor Donald Shoup of UCLA visited City Hall last week. He was in San Jose to present a lecture titled, “Why free parking is a bad idea.”  The information he shared is based on his book and research.

There are approximately 700 million parking spaces for 230 million cars in this country and 99 percent of cars trips have free parking.  Prof. Shoup showed an aerial picture of the Cisco Systems campus with its empty asphalt parking lots. He felt that these empty parking lots are not a good use of land and that it creates higher-than-needed vehicle miles traveled (VMT). He then continued to share what he thought would be a way to better utilize the land, which was to allow Cisco to build housing on their parking lots and waive all parking requirements.  He felt this would provide housing close to jobs, reduce VMT and bring a more appealing look to the current parking lots.

Another point that Prof. Shoup spoke to was metered street parking. He told the story of Old Town Pasadena and how it was dilapidated. The city of Pasadena started meter parking and put all of the metered parking money collected back into improvements of Old Town. At first there was opposition to metered parking but when people heard that the money would stay local and be earmarked directly to Old Town improvements the community supported the metered parking concept and asked that the City to keep the meters on till midnight and even on Sundays! Over time Old Town Pasadena’s private property owners improved their buildings since the city was investing into those blocks that had metered parking.  It has now become a very successful business district and generates more sales tax then other business districts that have free parking.

His main points are that street parking should be priced to where 85 percent of the spots are occupied but there is still some empty spaces. This allows someone to park quickly on the street but at a higher price for the convenience. The alternative today is we have inexpensive on street parking where people circle the block (cruising) countless times (unnecessary VMT) to try a find that one inexpensive magical parking spot.  He felt the money generated from the parking meters should be spent in those blocks doing sidewalk repair, tree maintenance, pedestrian lighting, under-grounding utility lines, sidewalk cleaning, landscaping etc…

I asked the question, “What about parking meter districts that border residential neighborhoods?” He felt permit parking was one way to make sure cars did not overtake residential areas however that the neighborhood should allow employees to buy a parking permit pass so they could park on residential blocks. His reasoning is that there is ample open parking especially during the day when residents commute to work. The employees would pay a higher price then the residents and the employee would only be able to park on a certain block. All of those funds collected would then be spent on those blocks and spent on things the residents want.  His idea was to let specific blocks choose if they want to allow employee permit parking and receive the benefits.

Since councilmembers typically hear “there is not enough parking” as the main complaint about any development, whether it be residential or commercial, I asked the following question: “What about new developments that want to have lower parking ratios?” He felt that the creation of permit parking areas around adjacent streets was good but more importantly he said the less cars allowed to park at the new development the better because it creates less traffic.

What do you think?

Are these pie-in-the-sky academic theories, or should San Jose curb parking and allow for a different lifestyle choices to emerge?

Finally I hope you will join me for the showing of the film, No Impact Man. The documentary follows a family that tries to live a zero-carbon footprint for a year; no water bottles, no soda cans, no magazines, no TV, no car.  Think you could do it?

When: Monday March 15 at 6:30pm
Where: City Hall Council Chambers
Limited seating please RSVP to Pierluigi.Oliverio@SanJoseCA.gov

http://www.youtube.com/watch?v=1fITT6rVPds ” title=“Here is a YouTube link to the trailer.”>Here is a YouTube link to the trailer.

When Times Get Tough Just Borrow More Money

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Mayor Reed shared a candid and honest view of city revenues and expenses at the State of the City Breakfast last week. (Personally, I miss the State of the City speeches in the evening as it led to dinner after the speech and spending money Downtown.)

As we already know the City is walking the plank, with the sharks swimming below in the ocean (sharks = bankruptcy) and a sword wielding pirate (pirate = hard choices) is forcing us to walk down the plank off the ship. Walking back up the plank in not an option unless tough decisions are made now. However it seems that another alternative being heard more and more at city hall is borrowing.

This week the council will vote on an RDA budget that proposes to borrow $10 million from the Park Trust Fund, Ice Center and Water Pollution Control Plant to be repaid in approximately six years. Six years of risk. What if there is a major repair needed at the Water Pollution Control Plant or the Ice Center?

Six years of not being able to make a strategic purchase of property for a park or trail connection. The Park Trust Fund comes from fees paid by housing developers who build market rate housing (affordable housing is exempt from paying park fees). In turn, they want to see their money spent on what it was intended…parks! Actually if we do not spend Park Trust Fund money within a certain amount of time the city must return the money.

The Library Parcel Tax reserves were considered for borrowing but spared since it would kill the chance of getting the voters to continue the tax in 2012. (A point I brought up at the Neighborhood Services Committee.) The alternative to borrowing this $10 million would be to borrow this amount from the Housing Department as allowed by the State Legislature, which I support.

Borrowing of these funds today limits the city’s options tomorrow when the state will grab more money from the city. If we are forced to borrow then let’s do it to maintain core services like police and libraries, not more affordable housing, most of which does not pay property tax.

The City will also be issuing $25 million in commercial paper to pay a portion of the State’s raid of San Jose RDA. Commercial paper is the equivalent of a home equity line that must be paid back. The collateral for the $25 million in commercial paper is our beautiful California Theater, home of San Jose Opera and Symphony Silicon Valley. Again the other option would be to borrow this money from the Housing Department instead of borrowing more on our equity line. Borrowing in both cases is due to the State Legislature taking $75 million away from San Jose RDA funds.

At the budget study session last week a union lobbyist touted the idea of risky pension obligation bonds. Pension Obligation Bonds (more borrowing) are used to fund the unfunded liability of pensions, so as to lessen the large amounts coming out of the general fund in future years when there will be losses. This year $38 million is being transferred from the general fund to cover the pension investment losses which is equivalent to over 200 police officers or staffing for 17 fire stations or paving 24 miles of road. This arbitrage scheme would have the city issue taxable bonds at say 6 percent and then take that money and invest it with the city Retirement Funds. The hope is that the city Retirement Funds would have a greater rate of return than the 6 percent we would have to pay the bondholders. In the last 10 years the average rate of return for city Retirement Funds has been 4.4 percent. (While doing my taxes on Valentines Day I noticed my own mutual funds had returned 3.5% percent over 10 years.)

If the Retirement Fund investments do not perform over time then we could lose more money or possibly break even or make a higher return. Positive investment returns would be restricted to paying off future retirement liability. I think outside of the risk, Pension Obligation Bonds may give the council a reason to not seek second tier retirement benefits the taxpayer can afford for new employees.

The other idea suggested by the union lobbyist was bonding construction and conveyance tax (C&C) funds so that we could spend more now so cuts do not have to be as deep. There again you have to gamble on the future tax receipts and the total amount of C&C funds will shrink since you have to pay the costs associated with bonds. However this borrowing would allow the Council to avoid the question of outsourcing.

It is just another day in local government. Perhaps one way to raise money for the city is to sell bumper stickers that read, “Why do today what you can put off ‘till tomorrow?”