Last week, I participated as the alternate for Mayor Chuck Reed on the oversight board for the

Successor Agency to the Redevelopment Agency (SARA). The primary focus of the meeting concerned the approval of a one-year extension to the existing Letter of Credit (LOC) with JP Morgan bank. This extension had already been passed by the City Council, but it was still up to the SARA Oversight Board to approve the extension as well.

Back in 1996 and 2003, the council, acting as the Redevelopment Agency (RDA), issued a total of $119 million in variable rate bonds—this does not include the millions in fixed-rate bonds issued during the same time period. The city then entered into a LOC arrangement as an insurance measure to guard against the higher interest rate trigger inherent in variable rate bonds. The LOC approval enabled the council to borrow even more money. The annual fee for this LOC is $2.4 million, and the only way to avoid this annual fee is to come up with the $90 million required to pay off the remaining balance on the bonds.  The final payment of these bonds is scheduled for 2032, which will be a continuing challenge for future city leaders.

Unfortunately, we have little leverage in negotiation with the bank and are beholden to its terms. Just as excessive debt can reduce a person’s individual freedom, the same is true in municipal finance: Onerous debt obligations can impede the ability of government to provide vital community services.

In the event that the city were to default on the LOC, the general fund would be on the hook for at least a decade to cover the full annual debt payments on the convention center and fourth street garage, which is currently $18.7 million. In addition, JPMorgan would charge an 11.5 percent penalty on the outstanding balance, further compounding the problem. JP Morgan, understanding the inherent risk involved, presently holds $5 million of San Jose SARA funds in escrow should there be a default. The bank is also listed second on deed of eighteen city properties that could be sold. This form of collateral was negotiated in a prior LOC extension.

The other item discussed at the same meeting concerned the fact that State Controller John Chiang had informed city officials that the SERAF loan is not an enforceable obligation. If this is the case, then the RDA tax increment cannot be used to repay the source of the funds borrowed.

Once again in 2011, the state grabbed money from RDA agencies statewide. Cities were allowed the flexibility to use housing funds to make the SERAF payment. At the time, I stated that we should utilize all funds from the housing department in order to make the payment, since funds were available at that time. The option was either to create more non-tax paying affordable housing developments, or fund economic development projects for companies that employ residents and pay taxes, such as Brocade, Maxim and SunPower. For me, the choice was clear—without tax revenue, we can not employ police officers or pave roads.

However the rest of the council disagreed with me, and decided instead to put the general fund at risk by borrowing $10 million in commercial paper instead of using available housing funds to make the SERAF payment. Another way of looking at it is the council voted to borrow money to provide more affordable housing instead of funding future police and roads. At the time of the council vote, there was more than $10 million available from the Housing Department to borrow without putting the general fund at risk. I wrote about how I was the only no vote on this item back in May 2011.

Back in December 2009, I sat through another borrowing binge to the tune of $25 million. A proposal from my council colleagues passed, which allowed for the borrowing of $25 million at a time when housing funds were available to cover this amount. On this occasion Mayor Reed and Councilmember Pete Constant joined me in voting “no.”

If the State Controller’s finding stands, approximately $52 million would now be dedicated to paying down the RDA debt, and sooner than currently anticipated. A consequence of this, however, is that the housing department would not be repaid the $42 million that was borrowed, and the general fund of San Jose would not be repaid for the $10 million issued in commercial paper. Inevitably, litigation may be required to resolve this issue, and the future policy direction will depend on a vote from the council.

If we do go down the route of litigation, I would be satisfied with a judgment that protects the general fund and its $10 million, and allows the remaining $42 million to be dedicated towards paying down the RDA debt. This debt reduction would also help the general fund in a future fiscal year.

By attending meetings such as SARA, I am able to hear firsthand about the issues of the day and analyze the information that is shared. This is what led me to find a way to save the general fund $10 million: After my article was published on San Jose Inside, city staff reversed their original decision, and I’m happy to announce the General Fund was spared $10 million as a result.

But what will happen this time?

San Jose has spent approximately $1 billion on affordable housing, which has produced tens of thousands of units being built within our city limits. The city has always done more than its fair share in this area. In fact, San Jose has carried the region—to its own economic detriment—by shouldering most of the affordable housing needs, resulting in fewer jobs.

This is important, because San Jose should not repeat past mistakes when it comes to future affordable housing decisions. City residents would be better served if we focused instead on commercial development and higher density market rate housing—both of which contribute to San Jose’s revenue, as neither are typically exempted from paying taxes and fees.

In my view, the goal of most past and current members of the City Council has been “quantity instead of quality” in regards to affordable housing projects. The combination of special interest pressure and support pushed many elected officials to do whatever they could to provide the lion’s share of affordable housing for the entire region. Unfortunately, this mindset has led to the city sacrificing more than $100 million in foregone tax and fee revenue. I believe voters would not approve of these developments if they knew the revenue trade-offs and understood the methodology that is currently in place to determine that who actually occupies these housing units.

One would hope that, at a bare minimum, all this affordable housing would actually benefit San Jose residents. But this is only partially true, due to the fact that San Joseans are not given preferential treatment in terms of access to available units.

An illustrative example concerns affordable housing for seniors. When a new senior affordable housing complex opens, residents from any region may apply for the highly coveted units. Let’s assume that one candidate is a person who has lived in San Jose all their life and has contributed to San Jose in some meaningful way over the past several decades. The other candidate is a person who recently moved to San Jose from out of the area, perhaps even from out of the state or country. Both these individuals qualify for the unit in terms of their income level and age. Who should get the affordable housing unit? It would seem only fair that the long-time San Jose resident would ultimately get the spot, but this is not always the case. The answer, quite literally, is “luck of the draw,” as the result is determined via a random lottery.

While this method does level the playing field and give all applicants an equal chance, I feel the system is imperfect if it fails to take into account that the city of San Jose and its current residents sacrifice tax and fee revenue to subsidize new affordable housing. Each time residents support more affordable housing projects they are forgoing the kind of revenue-generation that can lead to the funding of police officer salaries, more paved roads and new parks.
Charity starts at home, and we should find a way to allocate the majority of new affordable housing units to “native” or at least current San Jose residents. This would be a small but significant step in the right direction. In politics, as in life, we are often confronted with tradeoffs:  How can we best meet the needs of our citizenry and provide the services that residents rightfully demand while simultaneously working within budgetary confines? The answer is we must prioritize projects that generate revenue.

While there is no denying the fact that the need for affordable housing is great and compassion should affect policy decisions in this area, the best solution should always be governed by the realization that there are limits to what we can do as one city.

The day begins like any other in beautiful Silicon Valley: children are on their way to school, commuters are stuck in traffic, etc. Our carefree existence then suddenly gives way to a terrorist attack at a high-profile technology company. People are killed, injured, power is out, phone service is down, and a pursuit is underway for those who have set out to harm us. Police and fire departments across the region and in neighboring counties attempt to communicate and provide mutual aid, as an “all hands on deck” approach is required to tackle the catastrophic situation as it unfolds.

But in this scenario, one of the main issues is that there is no way to for all personnel to effectively communicate with other agencies in real time. This is the problem that the Silicon Valley Regional Interoperability Authority (SVRIA) is currently trying to solve. SVRIA was formed in 2010, and its exists to identify, coordinate and implement communication interoperability solutions. The goal is to seamlessly integrate voice and data communications between all first responders for critical incidents, disaster response and recovery.

The SVRIA board of directors is comprised of elected officials throughout the county, including our Sheriff Laurie Smith. I have been a board member of SVRIA since its inception and have found the proceedings to be extremely technical. I also believe that most residents are unaware of the shortcomings inherent in our current communication technology. Even in a post 9/11 environment, public safety departments still lack the technology to have multiple conversations in a secure, encrypted format. The current countywide system for public safety only allows one unsecure—not encrypted—conversation and hand-held radio coverage is limited.

In the case of a major earthquake, cities within Santa Clara County cannot connect with other Bay Area counties in an optimized manner, because those counties use different technology. Santa Clara County would essentially be on its own, but it would also be internally divided by cities based on communication platforms.

So this begs the question: Why, in Silicon Valley of all places, do we not have a more effective system in place?

One reason is that we have separate jurisdictions, each of which made investments in technology at different points of time and with different objectives in mind. The end result is that we have roughly a dozen distinct legacy systems in place across the geographic span of the county.

The other reason is cost. The price tag for the latest standards-based technology and maintainable solution has been estimated at $250 million. This includes building out dozens of sites that transmit signals and equipping thousands of our first responders and their vehicles with devices that receive these signals.

One method to fund such a proposal would entail a ballot measure to raise taxes to cover the cost. Preliminary estimates put this parcel tax at $29 per parcel for 20 years. Another option is for each city to go it alone, which could lead to further systemic incompatibility and the inability for cities within our county to communicate. In other words, we could potentially end up right back where we started.

Polling data suggests support for this parcel tax at the simple majority level, but not enough to clear the two-thirds threshold necessary. I cannot envision a scenario where this new tax would pass without the strong and visible public support of all the police and fire chiefs from every city in the county. In addition to the support of public safety leadership, I would also call upon the high-tech community to lend their public support and financial backing for passage of such a ballot measure.

I realize this may not be the most exciting or high-profile issue to bring to the table. However, I think it is my responsibility as an elected official to keep residents apprised of the documented shortcomings in our emergency preparedness technology. Voters may potentially see this item on the ballot in 2014, along with a general-purpose sales tax, library parcel tax and road paving tax. Since communication technology is comparatively “intangible” when compared to potholes, for example, it may not be a top priority for voters. But it only takes one catastrophic event to bring this topic front and center in the minds of voters, so maybe they will take this factor into consideration.

San Carlos (WSC), with its cool vibe and eclectic mix of businesses, is not only a destination in-and-of itself, but it also plays a pivotal role linking downtown San Jose and Santana Row. This area also happens to fall within both the city and county jurisdictions. This dual jurisdiction has historically thwarted development, and has made consistent code enforcement difficult. But with recent annexations, there now exists the opportunity for positive private economic development to happen on WSC.

Small, family-run business, many of which have been in place for decades, help give the WSC business district its unique character. You may choose to feast at Falafel Drive-In, Time Deli, Gojo Ethiopian, Korean Palace, Pizza Jack’s or Race Street Seafood Kitchen. One can also shop at several interesting stores, including Antiques Colony, Crossroads Trading, Moon Zoom, Just Leather, Winchester Western Wear, Ginseng Shop, Sam’s Downtown Feed, Mel Cottons and a variety of national chain stores.

Some of my earliest memories of WSC date back to high school, when I used to cover shifts at the Burger King on WSC and Race Street in the mid 80s. This particular Burger King location had a colorful cast of characters as its clientele, and bizarre incidents frequently ensued. Occasionally the police were even called. This “edgier” side of WSC still exists, and today one can find an adult bookstore, tattoo parlor, medical cannabis collective, the Pink Poodle, a pool hall and even a bar that just sold a winning million dollar lottery ticket. Although this may not be ideal for some, there is no denying the fact that these businesses contribute to the commercial offerings of the WSC business district.

Economic development via private investment occurs incrementally, and almost always takes place parcel by parcel. Last week I participated in a WSC community meeting that was well attended by residents. The main topic of discussion concerned the fate of a vacant and blighted building on a high profile corner. The request from the BMW motorcycle and Vespa dealership, a prospective occupant of the building, was to allow an incidental vehicle repair use so that they could then improve and subsequently rent space in the vacant building. Coincidentally, 40 years ago this same corner housed a business that sold BMW cars and motorcycles.

Council approved a similar request over a year ago for a Tesla store to locate within Santana Row. Tesla has been a fantastic source of sales tax revenue and the benefit of such tax remittances redounds to the entire community. The expanded store on WSC, which plans to sell a variety of vehicles that cost up to $20,000, would be one of the few dealerships of its kind in the Bay Area, and would thus bring in customers from other cities.

Although this is only one corner parcel, it certainly represents a positive step in the right direction. In order to fill vacant storefronts in a timely fashion, our planning department should expedite the process and “rubber stamp” new tenants the same day they apply for a business permit. If not, WSC and other areas of San Jose may lose out to other cities—even though those same cities have higher rents, they yield they faster turnaround time on such permits.

An incentive program has been proposed recently that would, in effect, give tax dollars to private property owners for the purpose of subsidizing rent for tenants. This seems confusing to me, especially given the fact that many tenants I have spoken with seem more concerned about lengthy time to market factors associated with the permit process. I am not certain our limited revenues should subsidize this when the city controls the permitting process, which has the potential to enable commerce today. Why subsidize a process that we have the ability to change?

The Redevelopment Agency (RDA) spent over $6 million dollars on improving the WSC neighborhoods with new medians, street lights, palm trees, sidewalks, pavers, curbs, gutters and many new retail stores facades. The RDA also devised a 250-plus page master plan for the street in 2003, which ended up costing taxpayers approximately $1,000 a page. After countless public meetings and substantial community input, 100 recommendations were outlined in this exceedingly expensive report. It is significant to note that most of the recommendations in the report failed to materialize, as many of the suggestions it contained required continued government spending and/or control over private property. Such efforts often breed unrealistic expectations, and usually lead to unsatisfactory results. Excessive reliance on government funding and control over private property rarely—if ever—produces a successful outcome.

WSC continues to evolve into an area filled with mixed-use development. Private investment construction is currently underway at the corner of Meridian Avenue. This project will yield a development with market rate housing units situated above street level retail establishments. Meanwhile, year after year, on the other side of the street, an empty lot sits waiting for government funding to build affordable housing. Private investment will change WSC over the next 20 years. However, in the meantime, we should appreciate and celebrate the cool funkiness of WSC now. This funkiness is what makes WSC truly one of a kind.

The new minimum wage law, Measure D, will take effect March 11, 2013. The increase in pay to $10 per hour represents a 38 percent increase, when including employer matching payroll taxes.

Back in November, the voters overwhelmingly supported Measure D. Many business owners I have spoken with plan to cover the increase in payroll costs by raising prices, reducing the hours of current employees and, in some case, simply eliminating positions altogether.

Given these circumstances, my suggestion to business owners is that they should consider adding a surcharge to each customer’s bill. This line item should be clearly spelled out, and appropriately called “San Jose Minimum Wage 2012.” This is similar to what is being done today in San Francisco, where a “Healthy San Francisco Surcharge” is added to restaurant bills. This fee goes towards the cost of providing health care to employees as mandated by San Francisco County. When city specific fees—such as Measure D—are clearly stipulated on an invoice, it removes any ambiguity as to why prices are higher in San Jose than in neighboring cities.

It is possible that some voters may have underestimated the negative impact that the passage of Measure D will have on the service industry, and in some cases, on these same voter’s personal pocketbooks. It is my hope that when business owners DO raise their prices, all those that voted for Measure D will continue to support these businesses without a second thought, despite the higher prices attributable to the wage increase. After all, voters should take pride in their affirmative vote, and paying the surcharge allows them to show the strength of their conviction.

It has often been said that there is no better barometer to how people feel than their wallet. If paying 10 cents for a paper bag caused a stir, then a substantially higher surcharge for a minimum wage increase will most certainly create a vigorous debate. As a result of this debate, residents and business owners may decide to repeal Measure D due to the previously unforeseen impact on consumer prices, employment and tax revenues lost to other cities.

Alternatively, we may find ourselves more unified in the belief that increasing the minimum wage was the right thing to do. Either way, my hope is that all business that are impacted will add the minimum wage surcharge to all receipts next month, in the form of a clearly defined line item.