Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

Retirement Board Governance

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Last week, I chose to attend both outreach meetings regarding the issue of retirement board governance, so I could hear concerns first- hand instead of reading a staff report. The possibility of changing the makeup of the current retirement board was presented by the consultant. The biggest change, if adopted, would be to remove city councilmembers from the board and add “independent” board members with a finance background.

Discussion about changing the amount of pension contributions or starting a second-tier retirement system for new employees was not part of the report. If you want to review the entire report by Cortex then go to this website.

Since 99.95 percent of city residents did not attend the meetings I thought I would share a synopsis of the comments that were made by attendees:

• Ken (City retiree and former retirement board trustee)
Status Quo is fine. Like none of the report

• Yolanda (union leader)
City employees have a stake in the pension, independent people would not.
Leave the the Councilmembers on the board. Why fix what is not broken. More outreach to city employees is needed. City is taking advantage of the recession. City wants to implement a two-tier retirement system.

• Jerry (SJ taxpayer)
Change pensions to 401K’s

• David (SJ taxpayer)
Thinks Council appointment of “independent” finance experts would be political and council would appoint union approved experts. The taxpayers are on the hook for pension fund losses. Cortex should have studied current board system.

• Steve (City retiree)
The report is a slap in the face. The City is stingy. Picking of Cortex was biased. There is no problem with current system.

• Brad (City retiree and 12-year trustee of retirement board)
Report is flawed. Only people that live in SJ should be on retirement board, currently not the case.
Council in the past appointed people the board that were Union favorites and not the most qualified.

• Carmine (City retiree and 13-year trustee of retirement board)
The current pension losses is not due to current governance model.
Council would appoint “independent” experts that serve their wishes and possibly not the employees.
How can we look to financial experts when many financial institutions have people in jail?

• Ben (union leader)
It would be bad policy to exclude elected councilmembers from the board. People with fiscal experience will not solve problems-not a cure all.

• Pete (City retiree)
Changing board will do nothing. No trust of financial experts. San Jose retirement plans should be a model of the nation. Yale lost 25 percent last year in pension fund and they are a Cortex client. Ontario teacher fund lost 18 percent last year and they are a Cortex client. You are awaking a sleeping giant of city workers that will go out and inform the public of the real story.

• Mary Sue (spouse of city retiree)
Feels that the “independent” experts represent city management and not the unions.
Unions should have a majority control of board not “independent” experts.
Life experience more valuable than education and expertise. City Councilmembers themselves are against us because they do not get retirement benefits.

• Rodney (SJ taxpayer)
No protection for taxpayer.

• Dan (union leader)
The board has done a wonderful job.
The theme is that there is a lack of trust. More outreach needed to Labor.

• Susan (SJ taxpayer)
Small business owners should be on retirement board. Investments should strive for safety and security and not be invested in risky assets. SJ needs pension reform. Taxpayers are not an ATM.

• Michael (city retiree)
I am a taxpayer too. City management is the problem.

• Naomi (spouse of city retiree)
This is not the time to make changes

• Bob (city retiree)
Suspicious of city management. Why hire a firm from Canada? Don’t trust people in suits.
Posting reports on website is no good-we want paper.

• Linda (union leader)
Concerned about the option of active employees electing a non active employee representative.

• Ashok (SJ axpayer)
Pensions are a structural problem.
Totally disappointed that SJ not considering true pension reform
Why should SJ residents have to pay for pension losses?

• Jeffrey (city employee)
This is a power grab by city management.

• Gail (spouse of city retiree)
Against any changes. People invested in the plan have a stake in the plan. Wrong time to make changes. Don’t trust the Council they make bad financial decisions like funding Mexican Heritage Plaza.

• Bill (union leader and former neutral retirement board trustee)
The reports touts “flexibility” but he does not see “flexibility” this is more of a concession.
Would give too much power to the Council

• Don (City retiree)
City management has been after our money for 30 years.Banker and attorneys are not experts.
We are not broke since we control it. We don’t need your expertise.

• Joyce (SJ taxpayer)
Mercury News is not favorable to business interests.
My 401K is a 201K. Add SJ taxpayers to retirement board.
Heads of Unions have conflicts of interest.

• Dorothy (city retiree)
All people should have guaranteed pensions. 401K’s bad.

• John (union attorney)
Likes removing veto power of council on board trustee nominations.
Prefer Florida model of pension boards which is 3 from employees, 3 from city/council and then 7th person is appointed by the 6 board members for a neutral member.

• Dave (city retiree)
Gave King Solomon analogy.
Mayors and Council will go but the benefits need to stay.
Bankers getting big bonuses. Something about selling Tulips in Holland.
Experts have nothing to bring to the table.

• Craig (SJ taxpayer)
Thank city employees for their work.
Former CFO. Nearly all companies have 401K’s. Pensions are the same as Social Security and are destined to go bankrupt. Why does not the city do a comprehensive pension overhaul. Taxpayers are the guarantee on pension losses.

• Walter (city employee)
Against report. No need to make changes.
Concern of removal of trustee and how super majority would work for pension fund investing in SJ projects.

• Bob (city retiree and president of retired employees, 2900 pensioners and 4600 with spouses/partners)
City councilmembers are good to have on boards. Board should stay the way it is.
Majority vote by non union trustees is not good. Next decade may have modest investment returns and if we pay “independent” experts that will raise the cost to administer the pension funds.

• Paul (city retiree)
I vote and pay taxes. Why fix what is not broken.
City management power grab that last 30 years. Leave it alone. Cortex is the low bid-it is a sham.
We want elected councilmembers on the board.

• Tony (city employee)
We do not have to support your proposal.

• Bobby (union leader)
City Management and staff lie. Police union only given two hours to give input.
Distrust of city manager over the years, lies. We are all taxpayers. Not broken-no trust.
City wrong in facts and makes financial mistakes.
Councilmembers on the retirement board safeguard the system. Want fairness

• Gay (union leader)
Concerned how budget will pay for “independent” financial experts.

• Eric (union leader)
Nothing broken. City Mgr trying to mess around with benefits. Do not agree with the report.

• Tim (city retiree and former retirement board trustee)
City management trying to control. We have experts already. I have a vested interest in pension and only people with vested interest should serve on the board. Companies like Apple and Intel get in trouble for options backdating. Unions need to be the majority on pension board.

• Tom (city retiree)
Not paid enough. Proposed governance model is a charade.
Mercury news is biased and not telling the whole story. It is my money.

• Mike (city employee)
Current systems is not broken. More experts will overkill board. Prop 162 split government from pension boards.

This topic will come to the Council in late September/early October.

Buyer Beware

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One of the most important responsibilities a councilmember has is working on constituent issues. So far, my office has managed 4,675 constituent issues, which I refer to as “cases.” I set up a web database that allows constituents to track our case work in real time online.

In most cases we are successful in resolving the issue or concern. In other cases, constituents just want to share their comments on a particular matter. Some of the cases are comments on federal or state policy or other requests that are above and beyond what the city budget can provide, like, “please spend millions of dollars on a certain project” or “we want vintage street lights” when others streets do not even have street lights.

Recently, I had a request that came from a constituent who is a professional in the commercial real estate industry and is a veteran at purchasing property. He contacted my office a few months ago after purchasing a piece of property on Meridian Avenue. Unfortunately, this person did not contact the San Jose Planning Department before he bought the property to check how the property was zoned. He wanted me to tell the Planning Department to change the zoning to fit what he thought should be there instead of what the zoning has been for the past 30 years.

This request reminds me of the old adage: “buyer beware.” For example, someone may buy a home near a bar, school or church and then complain about the noise and parking. Well, it is the due diligence of the buyer to research the area, check zoning as well as any inspections a home or property may need. To choose to complain instead of taking responsibility for the purchase lacks credibility.

There are two things to remember when purchasing property; one, when you buy property, check out the zoning first so you know what you’re getting into—and if you do not like the zoning do not buy it.  Second, if you buy a property and want to change the zoning, be prepared to invest time and money to do so, and figure that into the cost you pay for the property. Councilmembers cannot snap their fingers to change the zoning in the General Plan or at the whim of a real estate professional who thinks that their opinion should override the General Plan process.

I feel sorry for this person since he put himself into a predicament. However, blaming government for your own lack of due diligence is probably not going to help matters. In this particular case, I have met with the planning department and even asked the planning director to get involved to see how we might be able to help this person even though he is the one that did not take responsibility. The director is pursuing possibilities on how we might be able to help, but the real estate professional is still not pleased.

I remember from the private sector that sometimes there was the client who was never happy no matter how much you gave of yourself to help them, even when they made the mistake. So, in those cases sometimes you parted ways with the customer, since mutual respect was absent. Sometimes working on constituent issues is like working with private-sector clients, and we try to help, but have to admit that we cannot please everyone every time.

Worth the Cover Charge

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The 20th San Jose Jazz Festival was a shining success—for itself, and also for Downtown San Jose. The festival showcased straight-up jazz, Latin jazz, blues, and Brazilian music, at outdoor stages scattered throughout the Downtown. Many of the Downtown hotels were filled with visitors, which means money for the City of San Jose in the form of transit occupancy tax (TOT). Forty percent of this tax goes to the general fund, and the balance is split between the convention center, cultural facilities, cultural grants and arts groups.

After the stages were closed down, the restaurants in the Downtown were filled with patrons spending money and listening to live music. I thought to myself: “If someone was visiting San Jose for the first time, they would be very impressed with our Downtown.” There was something for everyone.

At one time, the San Jose Jazz Festival was free. However, over time the event changed and the organizers decided to charge an admission fee. In some ways, this was a risk. We can usually count on people attending a free event as long as it is advertised, however, changing a free event to one with an admission is a gamble.

Although I appreciate free events, for example, Farmers Markets and Music in the Glen, I do believe that people will pay to attend an event if they see the value in the entertainment. Once someone buys a ticket, they commit to staying for most of the event vs. a quick walk through. In addition, the cover price usually can keep the crowd manageable and diverse which I believe benefits the attendees and the sponsors.

For example, at the Jazz Festival, there were many happy people vs. people that sometimes are looking to cause trouble. In a day in age when sponsorships are harder to come by and cities have fewer resources, I believe events that have a cover charge may be the way to go.

Of course, if you’re the Jazz Festival in Montreal and your main sponsor is a cigarette company, then perhaps funding is not such an issue. However those types of sponsors are not so popular in healthy California.

So perhaps Music in the Park, put on by the Downtown Association on Thursday nights, might consider a $2-$5 cover; or the same for Dancing on the Avenue in Willow Glen. Outdoor events are expensive to put on and a nominal amount of money per person could help to cover the costs and be treated as a partial tax deduction for the attendee if the festival is benefiting a charity of some kind.

On another note: I attended the ribbon cutting for the Ericsson Campus in North San Jose last week where I met the CEO from Sweden, Carl-Henric Svanberg. I thanked him for his investment in San Jose but also noted that as they grow partly by purchasing other companies that San Jose is the perfect place to be since so many new technologies are created and funded through local Venture Capitalists.

Ericsson is the world’s biggest supplier of cell phone network equipment. Ericsson bought Redback Networks and others to make a presence in Silicon Valley and make San Jose a premier global Research and Development facility. Ericsson has great signage and is located in several buildings along 237 next to Force10 Networks and the new headquarters under construction for Brocade. Kudos to Ericsson’s expansion during these times and providing 1,400 jobs in San Jose.

Musical Chairs

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The City of San Jose closed a $84 million dollar budget shortfall for the 2009-2010 fiscal year, which resulted in 13 city employees being laid off. However, these 13 former employees are first in line for job openings at the City should they become available. Also as a result of the balanced budget, 250 city employees moved into different departments and/or positions based on their seniority. For those 250 people involved in the “bumping,” it is a intricate process that is all about years or months of service that I will attempt to explain. Bumping is governed by the Civil Service Rules.

Example 1:
Steve has been a Maintenance Assistant for three years and Greg has been a Maintenance Assistant for 2.8 years—both work in the Parks Department. Steve’s position was eliminated in the budget; however, vacancies for a Maintenance Assistant exist in the Public Works Department. Steve will bump into Greg’s position and Greg would leave the Parks Department and be reassigned into a vacancy in the Public Works Department.

Example 2:
Pat has been an Analyst for one year and a Staff Technician for five years in the Department of Transportation. John has been a Staff Technician for five years in the IT department. Pat’s position is eliminated; there are no vacancies; and he is the least senior on the Analyst list, so he is bumped from Analyst. His prior job as a Staff Technician and six years of seniority overall will allow him to bump John, who only has five years of overall seniority. Now John must find someone else to bump.

Example 3:
Kathleen has been a Senior Analyst for three years and Dale has been an Analyst for two years. Kathleen’s position is eliminated; there are no vacancies; and she is the least senior on the Senior Analyst seniority list. Therefore, her three years of city-wide work will allow her to bump Dale. Now Dale must find someone to bump.

Just like the game of “musical chairs” there will be some who find a seat/job and others who do not.

This game of Musical Chairs occurs in all civil service organizations, since they are based on seniority rather than merit. The historical reasoning for this is so that civil servants do not become political pawns of elected officials. However, the caveat is that many good people can be let go just because they have not spent as much time in a job as others.

From my experience as a Councilmember, I can say that the overwhelming majority of people that work for the city do a great job and are dedicated to their work. With that said, there is that 5 percent of the city workforce that are non-performers.

I have worked with non performers in the private sector and eventually they get let go—especially as the business cycles ebb and flow. However, by civil servant rules it is difficult to get rid of non-performing employees to make room for those that may be harder working but have less seniority.

Recruiting Vigilantes

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The first council meeting of the new fiscal year will result in discussing the new budgets cuts that must be made due to Sacramento’s raid of cities’ property tax money. Since San Jose does not want to look at delivering services differently, as Chicago and other cities do, then that leaves us with only one option: cut services to San Jose residents.

For example, my office receives calls and emails on a variety of topics, including street paving, park maintenance, blight and so on. However, there is one thing that almost all people comment about.  I agree, this thing is totally out of control. You see it all around San Jose when you traverse its roadways at and stop at every intersection.  Sometimes these things are over five feet tall, and they grow bigger by the day.
They come in different colors and varieties and are as attractive as a broken window that never gets fixed.

Well, if you haven’t guessed what this “thing» is yet, its weeds. The subject of weed abatement is so taboo that we would rather have the city look terrible then outsource a simple task of removing weeds.  Well, ladies and gentleman, I can tell you that if you call any of your councilmembers to complain about a certain city-owned space being ravaged by tall weeds, that the response time will be really long…really long.

Also in case you weren’t aware, the City of San Jose ripped out nice looking plants in medians throughout the city because the City cannot afford to maintain the plants. Yep, remove the beautiful plants that were paid for by your dollars to let weeds grow in abundance. Welcome to San Jose!  Not the type of neighborhood marquee I advocate.

However, I am calling on and recruiting Vigilantes, specifically Weed Vigilantes. If you see a forest of weeds in San Jose, I say do not hold back—tackle it head on and pull them out. Maybe even carry shears or a lopper and cut them down. I know that some of you are wondering if you need a permit to remove weeds since some of them are so big people may think they are trees. I say don’t worry about a permit—you are doing your neighbors and city a favor. Consider yourself deputized. As far as cleaning up, that would be great but if not, just leave them as your calling card as an example to others weeds not to mess around.
San Jose: a place where you pay higher city taxes, pick your own weeds and fund multi-million dollar golf courses. Priceless.

The State’s Ginsu Knife

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Do you remember the commercial for Ginsu Knives from the late ‘70s?  It would show a sharp knife on TV cutting through everything from tomatoes to tin cans. The announcer would repeatedly say: “But wait! There’s more!”

Well, just when you thought we had a balanced budget for the City of San Jose, the state of California has said “But wait! There’s more!” The state’s own Ginsu Knife just slashed our gaunt budget’s belly. The newly passed state budget will hurt the cities and counties. As much as local municipalities think they are independent from the state, this budget should serve as a wake up call and reminder that the state can take from us without permission.

Counties and cities are not Sacramento’s primary constituents; they have other interest groups that apply more pressure.

As a result of the state’s recent action, San Jose will lose property tax revenues of more than $20 million out of the general fund—which is equivalent to operating all the neighborhood libraries citywide. This will equate to fewer services from the city as there will be fewer city employees providing some type of service, whether it be code enforcement or neighborhood watch, etc.

$74.8 million will be taken from the Redevelopment Agency (RDA) (However, the $40 million of RDA money for affordable housing was not touched by the State, since Sacramento wants San Jose to continue building more affordable housing). Headline projects like the Convention Center expansion, proposed baseball stadium, locating clean tech jobs in San Jose and Strong Neighborhood Initiative projects will be thrown into a casket.

In looking for a lemonade-out-of-lemons solution, I thought maybe we could just make a quick $74.8 million lump sum payment on the outstanding RDA bonds and dodge the state, since there would be no money, and we would at least have less debt down the road. Not an option. The state would force RDA to borrow the money to pay the state or make the City of San Jose liable.

However, there is one option that might allow for projects to go forward. RDA is one of the only tools cities have for economic development which provides genuine stimulus to the economy with construction jobs, and, more importantly, future revenues to the city. The state this year would allow RDA to borrow money from the $40 million affordable housing funds as long they were paid back by 2015. This would simply require a majority vote of the city council.

If San Jose would do this then it would allow for economic development that could bring long-term revenues to the city of San Jose.

It is time for the Council to prioritize what is most important in 2009 and moving forward. The choices are more affordable housing during a time of current housing affordability in both rental and for ownership housing OR economic development that could build the tax base of our city to pay for city services like public safety and libraries. This would mean less affordable housing units built this year; however keep in mind San Jose has been the number one provider of affordable housing in the state of California.

Affordable housing does not pay park fees or fees to pave streets and in many cases does not even pay property taxes for ongoing city services. So it’s a net loss on the balance sheet.

What would you choose, more affordable housing or economic development? Do you think it’s time that voters started voting on how much affordable housing is built in San Jose?

On a separate topic: Last week, I was asked why I did not sign the Police Union pledge. I do not sign pledges for interest groups, period.  I believe signing pledges can be problematic. For example, many of our state legislators signed pledges to never raise taxes. However, we have a state that is mostly dependent on personal income tax and capital gains tax to pay for services, so a recession can hurt the budget quickly. So maybe during times like this it is prudent to cut spending but also to reinstate the vehicle license fee or raise the tax on gasoline while dropping taxes on personal income.

It might be any number of scenarios; however, signing a pledge can get in the way of doing the right thing at the right time. As far as my support for public safety, I have two years of votes, two years of public statements, 121 City Hall Diary blogs on SanJoseInside.com, and a public safety page on the District 6 website that San Jose residents and the police union can view to ascertain the level of my support.