While the economic morass commands the headlines, there is a bright spot in San Jose. Specifically, south San Jose, in Edenvale.

Last week, I attended a ribbon-cutting for CTS Electronics Manufacturing Services. They are an outsourced manufacturing company for companies that design electronic equipment like networking equipment. CTS competes against large multinational companies like Flextronics and Sanmina.

Much of this manufacturing has gone overseas for lower labor and material costs. However, due to the increase in the price of oil, the shipping and logistics costs have made it more sensible to build here vs. China for some companies. Plus, their customers do not have to travel around the globe to visit their outsourced manufacturing facilities—and especially for medical devices, the USA still has better quality.

CTS moved from Santa Clara to San Jose. CTS has 376 employees at their new facility, with 25 open positions. I asked the person in charge of the new facility where most of the employees of CTS lived. His answer was that most of the people live in south San Jose.
Great! Fewer San Jose residents driving North.

There was some assistance provided from the Redevelopment Agency (RDA) that will allow CTS to receive up to $500,000 towards the purchasing of manufacturing equipment. Also, the City of San Jose’s Office of Economic Development is pursuing funding on behalf of CTS from the State of California Employment Training Panel for up to $100,000, to help train new workers.

I wondered about the $500,000 from RDA for equipment in proportion to their total spend on equipment.

On a touring the manufacturing floor, I saw seven production lines. Each production line makes a specific product for its customer, and each line requires $1 million in manufacturing equipment—therefore $7 million in manufacturing equipment. Plus there is room to expand for another three lines. In addition they spent $3 million in tenant improvements on the new facility.

Just next door to CTS was the new Snap-On Diagnostics building. They recently moved from Senter Road in San Jose to South San Jose with more than 100 employees. And, on the other side of CTS is NDS Surgical, a medical device company that moved from Morgan Hill with almost 200 employees.

Incidentally, both Snap-On Diagnostics and NDS Surgical use local outsourced manufacturing in San Jose and Fremont. Also both Snap-On and NDS Surgical generate sales tax since their products are physical objects.

Economic development needs to be the key focus of the Redevelopment Agency with each company and building receiving appropriate time and consideration so that they can provide jobs, grow and in some cases, provide taxes to the City.

Last week I went on my first City to City trip organized by the Chamber of Commerce. The delegation was comprised of 80 “San Jose Cheerleaders,” including Mayor Reed, four councilmembers (besides myself), City Manager, Police Chief, high-tech representatives, affordable housing developers, attorneys,etc. Interestingly enough, about 20 percent percent of the group lives in District 6.

Before I decided to travel, I researched the purpose of the trip. Because I am an advocate of web conferencing, I wanted to see if travelling for this trip was necessary. Travelling to Chicago was necessary since the purpose of the trip was to experience the physical City of Chicago, like walking Cabrini Green, Millennium Park, Green Rooftops and other destination points in Chicago.

The purpose of the City to City trip is to visit a different city each year to see what they do best and possibly emulate their positive aspects in San Jose.  I did not go last year.

Chicago is a great city that does have its own problems including budget shortfalls and an escalating crime rate.  Unlike San Jose, Chicago is responsible for it’s public schools, has a massive skyline, and has more steakhouses than Starbucks.

A few “snapshots” that I learned about Chicago.
• Mayor Daley has been at the helm of Chicago for almost 20 years.
• The Mayor is the head of all city departments and there is no city manager.
• Elected officials do not have term limits in Chicago and they have 50 alderman (coucilmembers).
• Chicago O’Hare airport has 3400 flights a day vs. San Jose, which has 156 flights a day.
• They use surveillance cameras to fight crime.
• $2,500 fine for illegal dumping or they impound your car.
• City employees must live in Chicago.
• Civilian city employees are allowed to manage street closures allowing sworn police to stay on the beat.
• Largest convention center in the US.
• One of four global cities bidding on the 2016 Olympic games where Chicago see this as a way to build more infrastructure.
• Chicago privatized Midway Airport and leased out the Skyway toll road

Chicago and San Jose both use tax increment financing (TIF) to fund redevelopment.  Chicago invests a billion dollars per year on infrastructure funded by TIF. Some of that money is spent on streetscapes and sidewalks. Block after block had planter boxes with flowers. Every block was immaculate. It was interesting to me that in a big union city like Chicago, they allowed competition for 25 percent of the landscape maintenance, or in other words, outsourcing.

Like San Jose, Chicago has been generous in providing affordable housing. Important to note however, is that Cabrini Green, a well-known affordable housing area, had developed the highest crime rate in the city. In an effort to cut down on crime, Chicago negotiated with HUD and knocked down “the projects.” The City gave all the residents Section 8 vouchers to find temporary housing.

Now, Chicago is reconstructing new affordable housing that is mixed with residents who purchase units market price and at discounted price. The old residents are invited back to occupy units as affordable renters. The affordable units are sold at $190-$220K and the market rate units are sold at $350K. Unfortunately, the timing could not be worse with the collapse of the housing market and mortgage lending. An important point, in my opinion, is that Chicago does not waive park fees for affordable housing and strongly leans on land dedication for parks.

Chicago has programs that provides assistance towards home ownership and grants for poor homeowners to fix their roofs. Chicago does have inclusionary housing, however, developers are allowed to pay an in lieu fee instead. If you build in Chicago and ask for no zoning changes, then 10 percent of the units must be put aside as affordable. If, on the other hand, you require a zoning change like a Planned Development (which is very common) then 20 percent of the units must be put aside for low-income buyers.

In my opinion, it is important for cites to take bold steps. For San Jose it was the Arena and for Chicago, it was Millennium Park. Millennium Park covers 24 acres. It was once a surface parking lot and an old railroad yard. Mayor Daley led the charge to create this destination park. He and others tapped the many established families of the greater Chicago area and raised $220 million in donations!

The city put in $270 million of which $175 million came from selling bonds on future parking revenues. If you are not familiar with the park, I encourage you to do a web search and check it out. The park is amazing, immaculate and was the catalyst for building several nearby residential towers, which added substantially to the property tax revenues for Chicago.

The park was not without its own cost overruns. For example, the famous Bean sculpture went from $5 million to $23 million. On the other hand, the City bids out the park maintenance to a property management company which then subcontracts out the work to 17 different contractors to keep the park immaculate.

Our group also visited city hall, where we had an opportunity to walk the Green Rooftop and chat with city staff in the departments of housing, planning, environment, special events and more. Unfortunately, we did not get to meet Mayor Daley—he was traveling to Russia.

Touring Chicago reinforced my support of park fees for affordable housing projects, that its important to take bold steps to accomplish goals that benefit the entire city and that if the union city of Chicago can outsource some of it’s services, then perhaps it works.

What cities have you visited that you feel San Jose could learn from and/or adopt best practices from?

Last week I visited the Rules and Open Government Committee which sets the agenda for upcoming Council meetings. The Rules Committee includes Mayor Reed, three councilmembers, the City Attorney, City Manager and the Redevelopment Agency (RDA). The purpose of my visit was that two memos that I wrote were going to be heard.

The first memo was to request that the city update it’s travel policy by using technology. I asked that the “travel request” form include a question asking if the proposed trip could be done via a “web meeting.” And if not, why not?

Web meetings are used by organizations of all sizes, both public and private—it’s not a new concept. Web meetings will not replace all travel, but I suggest that they be considered as a viable alternative. Reducing travel will save money and help by lowering CO2 emissions. San Jose companies like Webex and Adobe offer this technology for as low as $39-$59 a month and it requires zero infrastructure investment as all you need is an internet connection and web browser.

The recent audit of the Retirement Board found waste and abuse on travel expenses. I am not sure why the audit didn’t include everyone, however, since we found problems with 14 travelers. Just imagine what we might have found if we actually did an audit for the other people that traveled last year for $1.3 million.

For example, a few months ago, a city department director shared with me that they were flying two employees to Minnesota to visit with a company regarding a software product. I suggested that perhaps they consider web conferencing. The director took my advice and instead did a two-hour web meeting which accomplished the same goals.  So the city saved money on airfare, transportation, lodging and food. Wasn’t this better for the city employees who did not have to leave their family and go through the hassles of travel? Of course if the intention was to get a mini-vacation, then web meetings won’t help that.

At the Rules Committee, it was shared that my memo regarding web-conferencing was violating city policy. The City Charter section 411 states that the council is not to “interfere with administrative matters.” That makes sense, but I do not view a public memo—whether authored by me or any of my colleagues—as “interference,” but instead offering an idea that saves the city money and is good for the environment.

One reason a councilmember is elected is to bring ideas to the council for discussion and consideration. Consequently, I suggested web meetings at a study session on the Green Vision back on Feb. 1. However, no movement after seven months was yet another reason to write a memo and save the city money.

The other memo was asking that affordable housing be held accountable for paying park fees and/or dedicating land. I also asked that a temporary moratorium be placed on affordable housing until we change the policy. Currently, San Jose exempts affordable housing developments from paying park fees or donating land. However, market rate housing developments are required to pay park fees or donate land.

San Jose has a history of cramming too much housing together without enough open space. As a result, we have problematic neighborhoods that turn into SNI’s (Strong Neighborhood Initiatives). SNI’s are where we spend your RDA tax dollars ($60 Million) to fix problems, like providing parks in park-deficient areas. The 19 SNI’s come up with their wish lists, and in almost every SNI they want parks. In fact only two of the 19 asked for more affordable housing. So why keep making the sames mistakes over and over again?

Prior to writing my memo I met with the housing, parks, and planning departments and the RDA where I asked a question to housing. Would you choose 4,000 units of affordable housing without parks OR 3,500 units of affordable housing with parks? The housing director chose all housing and no parks. I expected that answer, as housing does not want to talk themselves out of a job. However, I don’t believe that San Jose residents would choose that answer.

The audience at the Rules Committee was filled with affordable housing advocates (from as far away as Santa Cruz), home developers, real estate brokers, business interests and one resident. That resident spoke about her experience living in a District 3 neighborhood with affordable housing developments surrounding her existing neighborhood without any open space for the new residents.
I believe we can do both affordable housing and parks. I support affordable housing communities—not housing at any cost. Again it is important that councilmembers bring policy ideas to the public so they can be discussed at public meetings.

I was pleased that the Rules Committee asked staff to do a workload assessment to better gauge the importance of the affordable housing/parks question. Since land use is a core service of city government, I am not sure what other items would have more importance than finding productive ways to provide parks for affordable housing in our city. After all, if we stick to the Association of Bay Area Governments (ABAG) numbers, San Jose is supposed to create over 20,000 affordable housing units. Although ABAG has no legal authority over San Jose’s housing development, these are the numbers that San Jose chooses to use instead of creating it’s own policy of what is good for San Jose.

In the meantime, bake some muffins to welcome your new neighbors. There is more affordable housing coming your way with no open space. So get ready to share your existing park with more and more residents.

If you’re a homeowner, most likely you received your property tax bill in the mail last week. I did and I owe $11,854. (If Washington Mutual does not collapse I will pay this amount from my savings). My parents, who live next door, with the same size lot, will be paying $1,696.

Why the huge difference? A little thing called Proposition 13, which protects my parents and other seniors. Both of my parents are retired teachers that own no other property and are on a fixed income. Prop. 13 lets them and seniors like them hold on to their home.

Even though our property taxes are nearly a 10 to 1 difference our “special assessments” are the same. Both houses have special assessments of $525.54 each. The bulk of this is $395.64 for the city of San Jose sewer sanitation/storm fee, which equates to $79 million to the city per year. Townhouses/condominiums pay less then single family homes at $223.68. The reasoning by city staff is that condos use the toilet less since there tend to be fewer occupants compared to houses. The money that is collected goes towards our sewers and the water pollution control plant. A portion of these funds are then bonded out to make them go further and to be used to pay back bonds that the city issued in the mid-1990s to build and expand the recycled water system. (I wrote about this plant on a prior blog on June 2nd called “Disneyland Comes to Alviso.”)

Last week on the city council, we were approving a contract for security guards at the water pollution control plant. City staff did an RFP and chose a vendor based on references and price. At the last minute it was proposed by some on the council that Living Wage should apply to this type of work and we should therefore pay the security guards more then what they are asking to be paid.

If it would apply to this contract then it would open the door to higher costs for janitorial and landscape maintenance as well at the water pollution control plant.

Living Wage would raise the cost of running the plant on a day to day basis since it would be paying contracts at above market rate. The thought by some on the council was that it was okay to spend more then we need to operate the plant since it is not general fund dollars but instead Sewer Sanitation funds paid by San Jose property owners. Some of the council felt paying people above market rate is OK and the homeowners would support this.

Well, considering the council already raised the rate this year by 15 percent, I think we should ask the homeowners directly whether or not they would like the city to pay more then it needs to for services and then in turn increase the rates? How about for those seniors on fixed incomes under Prop 13 where special assessments keep increasing and make a higher percentage of their property tax bill?

The last time we raised fees, my office received calls against the increase.  My office receives calls daily about the need for street repair, better public safety, keeping fire houses open, maintaining parks.  However, I have not once received a call asking me to have homeowners pay more for security guards at the plant even though they did not ask for more money.

The reality is $1 billion is needed to update and maintain the plant and the council will need to raise rates in the future to pay for these improvements. However when we have discretion we should look to keep costs low and raising your taxes only when it is really needed. I support infrastructure investment since we all the use the toilet every day. Councilmember Constant and I voted against paying more then we needed to with your money for services that are not core to the city.

Finally looking at my property tax bill closer if we remove the special assessments of $525, that leaves roughly $11,329 for straight property taxes. Where does that money go?

$6570 goes to my local school district.

$2039 goes to the County of Santa Clara.

$1019 goes to my local community college district.

680 goes to special districts (always get a fuzzy answer here).

Finally $1019 or a whopping 9% goes to the City of San Jose to pay for police, fire, road paving, street lights, libraries, parks, community centers, code enforcement, planning staff, school crossing guards and even 3 golf courses.

What do you think about the City of San Jose increasing fees and then paying more for services then is needed?