Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

A Model for Police Compensation in 2013

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Note: This is Pierluigi Oliverio’s 300th Post:
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Negotiations between the city of San Jose and the Police Officers Association continue to be contentious. (Photo by Thomas Hawk).

Our goals for law enforcement in San Jose must be based on need and the amount of tax revenues on hand. As Gov. Jerry Brown stated last month, “People want to have more childcare, they want to have more people locked up, they want to have more rehab, more, more, more. More judges, more courtrooms. We have to live within reasonable limits.”

San Jose has no choice but to operate in the world of reasonable limits, and it can only allocate money that is actually on hand. The city should not make new promises that cannot be kept.

Much has been said recently about law enforcement budgeting. A year ago, I wrote two articles suggesting a specific percentage of the budget should be allocated to police, thus allowing the police department to grow in keeping with future tax revenues and a growing population. Those previous posts can be found here and here.

Since this is not the case today, I must work within the current system.

One of the shared community goals is to increase the actual number of police officers. In addition, another shared community goal is for pension reform. In my opinion, these two objectives are inextricably linked. Back in 2010, I initiated, and a majority of the City Council supported, ballot Measure W. Voters in November 2010 approved Measure W by more than 72 percent. This gave us—for the first time ever in San Jose—the ability to create a new, lower cost pension plan for future employees.

Since the passage of Measure W, a second-tier pension system has been implemented for all new city employees, except for fire and police. Neither the fire nor the police unions agreed to accept a new retirement plan for future employees—again, we are talking about people who do not even work here yet. The restructured, lower-cost retirement plan for new hires is fundamental to financial stability, and it allows us to add new police officers over time as savings are achieved through pension reform.

Countless other government entities across our state and country have implemented a tiered pension system that includes public safety unions. In my view, a second tier must be in place for fire and police prior to any compensation discussions.  Again, our Governor clearly agrees with this line of reasoning: “Pension reform can be hard to talk about,” he said. “In the long run, reform now means fewer demands for layoffs and less draconian measures in the future.”

When it comes to the present discussion on compensation, one option is to give all employees an ongoing raise. While an ongoing compensation increase may be ideal, there is no money to backfill it next fiscal year, which would then result in 100 percent pay cuts for some city employees—in other words, layoffs. Every 1-percent compensation increase to all city employees would cost $7.9 million per year. However, this assumes that all positions are equal in value, and are equal in terms of interest for recruitment purposes. I can guarantee that in any outcome achieved, no one will be happy since tax dollars are finite. Those who want, may not get; and those who get, may want more. Knowing this, I suggest an option for cash in hand now for those who enforce the Social Contract.

This proposal would function in the following manner: Each police officer would be given the option to select a scheduled redemption of their accrued benefit of up to $15,000 over 15 months, starting in the upcoming fiscal year. The $15,000 could be derived—by employee choice—from any of three accrued sources: comp time, sick leave or vacation time. These three accrued sources currently add up to over $50 million just for police officers alone, the majority of which is sick leave at approximately $36 million. This $50 million is recorded as an accounting liability and must be paid out when someone retires or resigns.

Paying a portion of this out now would reduce future payouts that would be even more costly in the future, as accrued benefits are typically earned at a lower pay scale but always paid out at the highest pay scale. This action would also enable a future council to have more money to fund city services. The $15,000 payout option would cost approximately $15.2 million if every police officer was to redeem the maximum, and would consume over half of the $22.5 million in one-time funds that are available.

There is also potential to add new police officers. On Tuesday, the council will take action on a $6.9 million reimbursement from the county on property tax recalculation. This one time windfall of money should go directly to hiring new police officers if, and only if, a new retirement plan is in place for the police union. This money could be used to “hire ahead,” which would front the cost of new officers being vetted to coincide with future vacancies as current officers retire or leave. Incidentally, $6.9 million is approximately the same amount of money the city pays to subsidize golf and the Hayes Mansion each year.

The fact is that each individual has their own economic situation, which may or may not include a variety of personal factors. Whatever the situation may be, it is impossible to examine each police officer’s household income and ensure that they are paid according to their needs. This option ultimately allows the individual to choose what is best. One individual may choose to redeem the maximum amount, while another may redeem half, while yet another may choose to not redeem at all, instead saving it up for a future potential payout. This option is based on individualism rather than collectivism.

With this spirit in mind, we acknowledge that individuals will pursue their own happiness, and, as a result, may seek employment elsewhere or a different vocation.

On Gangs and Doing the Right Thing

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Neighborhood Watch programs serve as one tool for communities to combat gangs. (Photo by hsivonen, via Flickr)

The Mayor’s Gang Prevention Task Force held its fifth annual community summit Saturday, and more than a hundred San Jose residents were in attendance. This task force started in 1993, spanning the terms of three mayors, three district attorneys and five police chiefs. The Department of Justice believes that the Mayor’s Gang Prevention Task Force is a model to be emulated by other cities across the USA.

The summit had four different breakout sessions. I attended the following three: promoting Neighborhood Watch programs, recognizing distinguishing characteristics of different gangs, and gang exiting strategies from a female, Latina perspective.

For me, much of the information presented at the meeting served as an unfortunate reminder of the havoc gangs create in our communities. From youth violence and drug trafficking to prostitution and other forms of organized crime, gangs represent one of the single most detrimental forces in society. Gangs rob individuals of their personal freedoms and introduce unwelcome violence into our neighborhoods. Organized crime impedes the legitimate economic activity that allows communities to prosper. This much I already knew.

What I was surprised to learn is that gangs use social media in a very effective fashion, sharing information and communicating across platforms, such as Facebook, with affiliates in different cities. This expanded reach ensures that gang-related activity does not stop at neighborhood, state or country lines. Indeed, countries and cities throughout the world struggle with this challenge. But the fact remains: Gangs are more organized now than ever before, and we must be organized in our efforts to curb their expansion and appeal.

To this end, I am hoping residents will join city officials in recommitting to crime prevention practices. This includes watching out for and reporting suspicious behavior, block by block, via the Neighborhood Watch program. For its part, the city will continue the good work currently underway by the Mayor’s Gang Prevention Task Force, including but not limited to community engagement and youth intervention programs. In addition, we should prioritize filling existing vacancies in the police department to augment gang suppression efforts.

The sad truth of the matter is that gangs will never disappear entirely, even from the most vigilant and proactive of communities. A city can never have complete control over the unpredictable nature of select deviants, or be held responsible for the unfortunate choices these individuals sometimes make. Fortunately, we have many hardworking and sincere people in San Jose who are doing their best to prevent young people from making choices that may lead to a life spent in and out of jail. This gives me hope, because—given the opportunity—I feel that most youth will see the wisdom in choosing the path of non-violence.

For those of you who were unable to attend the summit and want to learn more, click here.

Let’s Talk Trash

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San Jose’s elected officials recently discussed options on how it should manage billing for its garbage services, with some councilmembers arguing that they thought residents should pay higher rates without offering new services.

When it comes the garbage services, residents have two simple requests: 1. Pick up the garbage every week in a reliable manner; 2. Do it in the most cost-effective way possible. Easy enough, right? Well, no. Potentially higher costs for garbage services were the topic under discussion at the last City Council meeting.

In my opinion, cost increases can be avoided by systemic streamlining, and by structuring the payment for services in a way that is more efficient than the status quo.

The council deliberated at length on how to best manage the billing for garbage services, and the following options were discussed: billing would continue to be done internally by the city of San Jose, or externally by either the garbage company or Santa Clara County, via the annual property tax bill. Thirty-three city employees currently manage billing and customer service. Residents can walk into city hall and pay their bill in person, mail a check, have the amount automatically deducted from a checking account or pay online—assuming the resident has a PC; the current software platform does not support Apple devices.

Few cities actually manage this process internally because it is not fiscally optimal. Prior to my tenure, staff brought forward and council unanimously supported the implementation of a software solution that would manage garbage billing in house. This process was originally supposed to cost $5 million and be fully implemented in 12 months. However, it ended up taking 30 months to implement and costs eventually exceeded $15 million.

Even worse, the city borrowed money by issuing commercial paper—similar to a line of credit—to pay for the software implementation. Ugh!

To complicate things further, another company acquired the software provider, and now the specific billing software that the city utilizes is no longer supported. When this is the situation, the city is exposed to greater risk and pain in case of any systematic software failure. Not good, any way you look at it.

When considering possible solutions, one option is to double down and spend an estimated $16 million—actual cost could be even higher—on a new software solution, and maintain the internal billing procedure currently in place. This would allow the 33 employees to keep their positions. But it would also raise garbage collection rates by approximately $14.50 a year for every household.

I could not support this option in good conscience, due to the fact that any incremental cost increase without some additional value to residents is not warranted. Fortunately, the council as a whole voted 7-4 to eliminate internal billing.

Another possible solution would entail adding garbage fees as a line item to property tax bills, as the city currently handles the library parcel tax and sewer fees. This method creates a stable revenue stream for the city, and the streamlined process would be the most efficient way to avoid future rate increases for residents. This is one of those special instances where government is not only the lowest cost solution, but also offers the least amount of risk to the city and residents.

The issue is really about efficiency. Whether it is a tax dollar or a fee dollar, government has a responsibility to be efficient with all remittances. Business processes can and should be streamlined whenever there is an opportunity to avoid increasing costs. For the individual opposed to organizational efficiency in government, I have a gently used abacus and typewriter I could sell real cheap.

Why I voted for a New School

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My parents were not born in the USA. Both emigrated to America from Italy when they were adults. For approximately 10 years, my family lived in an apartment on Willow Street in the largely immigrant neighborhood that has been known by many names over the years, depending on who you asked: Washington, Sacred Heart, Goosetown. My parents, both career teachers, made a choice to live on a tight budget during that time, which enabled them to make a down payment on the first and only house they have ever owned. Our family home is located approximately two miles away from the apartment, and it was chosen because of its location in a neighborhood with lower crime rates and an award-winning public school.

Looking back on my early years in the apartment, I recall the children living on our street made do by playing games in the driveway and on the roof of the carports, where laundry was hung to dry. Further down the street, there was a bar that, oddly enough, was located inside a house. Most noteworthy is the fact that there was no neighborhood park for residents to enjoy.

This same neighborhood was the focus of a land use discussion raised last week at the City Council meeting. The principal question before the council was whether or not a new school should open up in this neighborhood. Being familiar with this area, I believe a new school would benefit the community and interject a positive force into the neighborhood. A charter elementary school is being proposed; however, in the future the school could be a middle school, vocational school, etc. Thus, the rezoning allows for a school to occupy the land now and into the future.

The city of San Jose has no policy or budgetary role in the decisions concerning public schools, including charter schools. This is the domain of the state of California and locally elected school boards. The city provides auxiliary services—libraries, community centers and crossing guards—but this is the limit of our involvement. However, presented with the opportunity for a new school to be in this neighborhood, based on the land use aspect alone, I voted “yes.” A new school would offer an additional education option within the public school system, and having more choices as opposed to fewer choices is seldom (if ever?) a negative thing.

For those who voiced concerns regarding the negative traffic impact that a new school may bring to the neighborhood, I will not deny that this may indeed be the case. Thinking of the many schools that exist currently, it is doubtful most would have been approved if dependent on a positive vote from the City Council—all schools create traffic. And yet, in so many cases, schools make the neighborhood what it is today. It is common for neighborhoods with outstanding public schools to have higher real estate values, and sometimes these neighborhoods will even be named after the local school. What is actually more chaotic for a neighborhood is when a school closes, and hysteria engulfs the community concerning the future use of the school site.

I also acknowledge that the proposed school would be a smaller, urban-style school without the expansive lawn that we’d all like to see in an ideal world. However, a smaller outside play area would not change the quality of classroom instruction: students would still learn, a new recreational playground would be added to the neighborhood, and a strengthened sense of community would likely result.

After reviewing residents’ concerns submitted via email, phone and at the meeting, I empathized with the desire to open a middle school at this location rather than an elementary school. Unfortunately, the existing public school district has not moved forward with a new middle school for this area in 60 years, and it does not have any current plans in the works for any new schools. A charter school has the ability to adapt and modify its charter, and over time these schools may alter their use to become a middle school, or find another entity that can provide a middle school in the same location.

The proposed campus would open up as a Rocketship charter school, assuming a favorable vote by the county Office of Education’s board later this month. Rocketship currently operates several other charter schools in San Jose. Many of the students attending Rocketship schools come from disadvantaged backgrounds, and have struggled to keep pace with the higher test scores and academic performance of their counterparts living in more affluent neighborhoods. Some within the educational community believe that charter schools represent the most effective way to narrow this so-called “achievement gap,” and the impressive success achieved by many of the existing charter schools—as evidenced by the oversubscribed waiting lists and vastly improved test scores—seem to lend credence to this theory.

Charter schools are a subset of the public school system, yet they are exempted from a portion of the state’s education code and rules governing tenure. Charter schools must show that they have met stated goals in a valid, measurable way, and these schools are held accountable for their performance. Underperforming charter schools are shut down.
Charter schools can be a highly political issue for a variety of reasons. Whether or not one agrees with the underlying concepts of charter schools, for me this was ultimately a land use decision about a new school in a neighborhood that I am personally familiar with.


Sports Complex Presents Fiscal Curveball

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A proposed softball complex could generate revenue for the city of San Jose, or it could be a liability for the general fund. (Photo by Laura Padgett, via Flickr)

The City Council ended 2012 with a vote supporting the exploration of building a new softball complex at either the former Singleton Landfill site or at the County Fairgrounds. The Singleton property is located within city limits and is owned by the city of San Jose, while the fairgrounds site is located within an unincorporated pocket and owned by Santa Clara County.

The Measure P bond money that was approved in November 2000 by 78 percent of voters would fund construction of the proposed sports facility. The usage of these funds is restricted by state law, which stipulates that Measure P funds can only be spent on purchasing land or the construction of park facilities. In other words, Measure P funds cannot be used to operate and/or maintain the proposed softball complex. This is important to note, because any new or expanded facility funded by bonds may require ongoing financial support that would be drawn from the city’s general fund.

Since the 90-acre Singleton property is a landfill, options for development of the site are limited. Landfill sites are seldom utilized for farming or housing and rarely support tall buildings due to geotechnical considerations. Such land use proposals would face legal challenges and are unlikely to move forward. A new sports complex, on the other hand, would be a legally acceptable use for the land and the resulting facility would add to San Jose’s recreational offerings.

The clear advantage of choosing the Singleton site over the county fairgrounds site can be seen when one follows the money: Revenue from sales tax and the ground lease at the Singleton site would go to the city of San Jose. Unfortunately, no revenue would flow to San Jose if the county fairgrounds site were selected. For this particular reason, I am hopeful that the Singleton site is chosen if the project moves forward.

Regardless of which location is selected in the end, the city needs to approach the proposal review process in a comprehensive and diligent fashion. Legislators must look towards a positive outcome that is notable not only for its overall success, but also for its fiscal prudence.

The softball complex needs to be self-sustaining, and the projections provided by city staff need to be realistic. I say this because advocacy from staff along with some councilmembers threw the city a financial curveball in the not too distant past. This curveball contained flawed projections and led to the approval and subsequent spending of tens of millions of dollars subsidizing both the Los Lagos and Rancho Del Pueblo golf courses, as well as the Hayes Mansion.

The city continues to pay millions of dollars each year from the general fund to subsidize these facilities, instead of using this money to hire police officers or repaving streets.

The city should lease the Singleton property to a private company rather than having city staff operate the complex. The 60-acre Twin Creeks Sports Complex located in Sunnyvale operates in a similar fashion. The private company should manage the sports complex by assuming responsibility for their own human resources and procurement needs, without involving the city.
In addition to revenue collected from the ground lease, the city should derive a portion of the facility’s net income. The complex will have on-site food and beverage sales and a retail center. The council should also allow opportunities for advertising revenue.

In order to ensure that the city has adequate visibility, our finance department should have real time access to the private company’s accounting software. (This is similar to the arrangement currently in place between the city and Team San Jose regarding the management of the San Jose Convention Center.)

I prefer net income to gross receipts, because the city should experience first hand the impact of any city ordinance or policy that may limit profit margins on private business.

A state of the art sports complex has the potential to become a destination in and of itself. Such a facility would draw more people to the area and lead to greater consumer spending for local business. However, we cannot be blind to the fiscal liabilities that new facilities may create for the general fund.

Softball requires that players follow the rules of the game. The city should also be required to follow the rules of fiscal pragmatism when this item comes up for a final vote in approximately six months.

How to Save the General Fund $10 MIllion

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The city reached a deal with Jose Theater to extend the lease of the property, home to comedy club The Improv, for another 10 years. But a different item discussed at last week’s Oversight Board meeting could have a huge impact on the city’s upcoming budget.

Many of the historic buildings in the downtown area were purchased, renovated and brought to life by the now defunct Redevelopment Agency(RDA). One example of this is the $13 million restoration of the Jose Theater, which currently houses The Improv comedy club.

The Improv brings national comedy acts to San Jose, and with it an audience that animates the downtown district. The property was previously owned by the RDA and has now been transferred to the RDA successor agency, appropriately called the “Successor Agency Redevelopment Agency,” known by its acronym of SARA.

The City Council serves as advisory to SARA, but the SARA Oversight Board must ultimately approve all actions, such as the disposition of property or allocation of funds. Since the formation of SARA, I have attended the Oversight Board meetings in order to understand what options are before us as a city, and what impact any actions taken will have on the general fund.

Last week, the SARA Oversight Board, comprised of members from local tax entities as laid out by the state, approved a 10-year lease with the Improv. The terms of the lease allow SARA to charge rent and collect a portion of gross receipts on a monthly basis, and all proceeds go to pay off the debt. The county representative, who is not an elected official, stated that the city of San Jose was doing a good job in negotiating these leases, and that it was important to have this comedy club downtown as it draws more visitors to the area. I appreciated this perspective and positive feedback from the county board member.

Later at the same meeting, the Oversight Board discussed the Housing Due Diligence report. During the course of review, it was revealed that $10 million had not been allocated in a clear manner. In no time at all, a strong difference of opinion surfaced on how the funds should be spent: for building a specific affordable housing project or paying down the debt. Not surprising, the housing director, Leslye Corsiglia, wanted the entire $10 million to be dedicated only to the affordable housing project.

Bearing in mind that SARA has inherited over a billion dollars in debt from the RDA bonds that were issued over past decades, I could not support the “double whammy” outcome of yet another non-revenue producing project that simultaneously casts a blind eye to the city’s debt situation. (As an aside, I found it very interesting that when the subject of the $10 million was being discussed, the only other person present for this item—besides myself and staff members—was a representative from an affordable housing developer.)

As it turns out, the housing director has been lobbying the state Department of Finance (DOF), which oversees all of the oversight boards in California, for quite some time. The objective of the lobbying is to get a favorable opinion from the DOF that would exclusively dedicate the $10 million to the affordable housing project.

Such an action, with no further deliberation or input from the council, would fly in the face of flexibility, especially in situations that became available to cities when the state dissolved RDAs. Until the council has had the opportunity to weigh in on this issue, in the form of a public session, all lobbying efforts should cease immediately.

The flexibility reference above allows excess affordable housing funds to cover debt payments, or, in city speak, allows these funds to be “swept in.” If the city chooses to responsibly pay down the debt, it would have the additional benefit of avoiding any further hits to the general fund, which other city departments—police, libraries, etc.—draw from to provide services to residents.

This $10 million would minimize the hit to the general fund next fiscal year, which would permit us to pay down senior debt obligations and allow continued funding for other city services. As you may know, the general fund is currently covering the shortfall in SARA property tax revenue by paying the senior debt payments on the 4th Street Garage and Convention Center. Bridging this funding gap from the general fund means less money for day-to-day services such as public works, road maintenance, code enforcement, etc.

In conclusion, I feel strongly that the discussion of how the $10 million is allocated should go before the council for a decision in a public meeting. After all, it was already covered once at the public Oversight Board meeting, and I do not think this issue is one that would be best addressed in a closed session.

Furthermore, I disagree with the housing director’s viewpoint. It is shortsighted and untimely to advocate for an additional affordable housing project that would directly and negatively impact the general fund.

Ultimately, we all have choices and responsibilities in life, and we must work within the dictates of reality. The opportunity cost of allocating $10 million to an affordable housing project that doesn’t pay property taxes means we cannot simultaneously pay down our debt in the same amount. The money simply cannot be in two places at once.

By dedicating the $10 million to paying down debt obligations, it allows more funds to remain in the general fund and be directed towards vital city services.