Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

From Last Place to First

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As most of you are most likely aware from the front page article in the San Jose Mercury News on August 12, The San Jose Municipal Rose Garden was selected as America’s Best Rose Garden. What an incredible achievement! Congratulations and thanks to all involved including the paid park maintenance city staff and the non paid volunteers.

The rebirth of the Rose Garden could not have been done by only park maintenance staff or only by volunteers. It is the combination of both that allows for this fantastic achievement. And the leadership of Beverly Rose Hopper and Terry Reilly.

Just over three years ago, I walked through the Rose Garden park with numerous concerned neighbors and saw the decline and devastation. I knew then that our City did not have the resources to pay for staff to care for the park, nor would a band-aid approach allow the park to reach its potential.  I also knew the City was behind the times with it’s volunteer policy. Instead, I proposed a pilot for outsourcing park maintenance. That caused the unions to assemble and defend the status quo.

Bringing up the topic of outsourcing allowed for the larger message to get out that this park and other parks need attention, especially with our structural budget deficit. Although outsourcing park maintenance, even as a pilot, was not approved in May 2007,  I did push for and was successful in having council support amending the City’s volunteer policy in October 2007.

I remember asking several times then-Vice Mayor Dave Cortese to accept my friendly amendments to allow more flexibility in the volunteer policy,  including a stipulation that corporations be allowed to have their employees donate time at San Jose parks on their community service days.  This change allowed 250 Google employees and 150 Recology employees to volunteer in the Rose Garden this summer, for example.

The Municipal Rose Garden is a city landmark and now a national one.  Volunteers include residents of San Jose and people from all of over the county. The volunteers are doers and not talkers, as they enjoy giving back to the larger community. I think they serve as an example of the JFK quote (with a twist): “Ask not what your city government can do for you, but what you can do for the community you call home.”

Municipal governments will continue to shrink as revenues will be constrained as pension costs rise. Therefore—now more then ever—residents could provide small increments of their time improving their local park, trail, traffic medians etc… Waiting on government will be taking longer then ever before.

However, residents may ask a fair question as to why cities do not do more to provide services at a lower cost.  As the Wall Street Journal reported recently, San Jose will be saving approximately $4 million a year by outsourcing janitorial. The $4 million in savings was substantial enough to garner national attention and is the trend nationally.

I am very proud to live in a city where doers start with a dead vine and do not give up.  As a result of the conviction from the Rose Garden volunteers, the City of San Jose Rose Garden is Number One!

Pension Reform: Speak Now or Forever Hold Your Peace

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The Rules Committee allowed my memo on Pension Reform to go before the City Council Tuesday, Aug. 3, to be considered as a ballot measure for San Jose voters this November. At the Rules Committee meeting, members of the public were few compared to the number of paid lobbyists that were in the audience.

I have a supplemental memo coming out today which will ask the Council to adopt the language below:

“To provide fiscal stability, control costs and maintain City services to residents, shall the Charter be amended to allow the Council, by ordinance and subject to the requirements of applicable law, to exclude any officer or employee hired on or after the ordinance’s effective date from any retirement plan or benefit of any plan?” (For example, this means we could exclude new employees from the 250% pension match.)

I have been a Councilmember for over three years and pensions have only increased in cost for residents of San Jose. The ability for the Council to have the flexibility and the option to negotiate a 2nd Tier would be a positive step for everyone involved, union members and taxpayers alike. Only through developing a new fair pension for new employees can we get to a point of trying to balance the structural budget deficit.  However, during my three-plus years on the Council, discussions of 2nd tier always get postponed.  “Kicking the can” is the easy thing to do, but San Jose can no longer pretend that our problems will go away.

Many of the union speakers at the Rules Committee last Wednesday mentioned that there needs to be dialogue, a process and time to discuss 2nd Tier. Actually my proposal does just that since changing the charter means we will still have dialogue and negotiations with the unions as obligated by law.  A union lobbyist said Pension Reform would waste money since a second election would be needed once a 2nd Tier was agreed upon. Not so. As stated by the city attorney on Wednesday only one election would be needed since the 2nd Tier would then be implemented by ordinance which only requires a vote of the city council. The cost to the City to have Pension Reform on the ballot now is less expensive then a special election advocated by others.

Another union speaker was critical since my pension reform proposal did not mandate a specific 2nd Tier. This instead gives the Council flexibility in decision making as actuarial studies need to be completed as well as negotiation with our unions.  Also, this allows the Council in future years to have the flexibility in adopting changes to a 3rd Tier should city revenues continue to deteriorate.

A letter submitted by a lobbyist for the union talked about needing two to four years to negotiate a 2nd Tier.  This would be problematic—we should conclude negotiations within one year. Delay misses the opportunity to stop the bleeding.  Another union speaker claimed the city is not hiring when that is not so. The City must hire to replace retiring employees. In fact 35 percent of the workforce is retiring in the next four years and it is important to lock in those cost savings. If we do not, each new employee carries 60 years of fiscal pension liability (30 in their career and 30 in retirement).

With all due respect, I believe the union leadership is missing the point. If we do not provide new pensions for new employees then the alternative will be to lower wages significantly and/or layoff employees. Laying off employees will affect residents. If the pension costs had not soared by $60 million this last year then we would not not be closing fire stations, libraries, postponing police academies and laying off other city workers.

The criticism I have heard from non-union people is that my proposal is not draconian enough and that the pension plans should be blown up. To them I paraphrase Voltaire: “Do not let the perfect be the enemy of the good.” Failing to act now will only lead to more obligations we cannot afford .  Otherwise, do nothing and we will have more layoffs. Again, the increase in pension costs of $60 million dollars this year led to the layoff of city employees who provide services.

The ball has been teed up for the public. Speak now or forever hold your peace. Aug. 3 at 3:30pm. No need for a babysitter—City Hall is open to children. Bring a book or some knitting needles or both.  If it is your first time to a Council meeting you may find you enjoy watching your city government in action.

The results of last week’s survey on November ballot measures, with 129 respondents, are viewable by clicking this link.

Potential City Ballot Measures

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On Tuesday, Aug. 3, the City Council will decide on five possible ballot measures that would go before San Jose voters in November. So far, the Council has budgeted money to place two items on the ballot; therefore the council must choose two of the five. However a group known as Baseball San Jose has offered to pay for the cost of putting the Downtown Baseball Stadium question on the ballot, so three ballot measure may go before voters.

Below is each proposal in alphabetical order:

Baseball Stadium
(This will be considered at the Rules Committee on Wednesday, July 28 at 2pm. The Rules Committee would need to support placing this item on the Tuesday, Aug. 3 City Council agenda.)

Ballot Language:
Shall the San Jose Downtown Ballpark and Jobs Measure be approved to authorize, but not require, the use of Redevelopment Agency funds, with no new taxes, to acquire and clear a site for a baseball stadium, fund related off-site improvements, and lease the site for a professional baseball team where the team would pay all on-site construction costs, operation and maintenance costs, generating new tax revenues for City operations?
Binding Arbitration
(This will be considered at the Rules Committee on Wednesday, July 28 at 2pm. The Rules Committee would need to support placing this item on the Tuesday, Aug. 3 City Council agenda.)

Ballot Language:
To provide fiscal stability, control costs, and help maintain the level of services being provided to residents, shall the Charter be amended to require outside arbitrators to base awards to City employees primarily on the City’s ability to pay and to prohibit creation of unfunded liabilities, increasing police and firefighters’ compensation more than the.rate granted to other bargaining units or more than the rate of increase in General Fund
revenues, and granting retroactive benefits?
Tax Medical Cannabis
(Already on the Tuesday, Aug. 3 City Council Agenda.)

Ballot Language:
In order to provide funding for essential City services such as police, fire, emergency response,street maintenance, pothole repair, parks, libraries and youth and senior programs, shall an ordinance be adopted to impose a tax at the rate of 10% of gross receipts on marijuana businesses in San Jose, subject to existing independent financial audits, with all revenue controlled by the city.
Pension Reform
http://www.sanjoseca.gov/district6/documents/7-19-2010PensionReformVoterApprovalMemo.pdf

(This will be considered at the Rules Committee on Wednesday, July 28 at 2pm. The Rules Committee would need to support placing this item on the Tuesday, Aug. 3 City Council agenda.)

My proposal is to change the city charter language so the city can offer new employees some degree of lower pension the taxpayer can afford. Current employees and retirees will continue under the current pension system and will not be affected in anyway. Pension reform includes public safety, non-public safety, city management, RDA and Councilmembers. Official ballot language will be provided by the city attorney.
Sales Tax
(Already on the Tuesday, August 3rd City Council Agenda)

Ballot Language:
In order to provide funding for essential City services such as police, fire, emergency response, street maintenance, pothole repair, parks, libraries, and youth and senior programs, shall an ordinance be adopted to enact a one-quarter percent tax on retail transactions in San Jose, subject to existing independent financial audits, with all revenue controlled by the City?
Rules committee members are:

Chuck.Reed@SanJoseCA.gov
Judy.Chirco@SanJoseCA.gov
Pete.Constant@SanJoseCA.gov
Nancy.Pyle@SanJoseCA.gov
Madison.Nguyen@SanJoseCA.gov

I think it is important that major issues should go before voters to validate Council direction or let the Council know something different.

In addition to the city of San Jose proposed ballot measures, there will be at least two other countywide ballot measures that raise approximately $14 million each.  One is from VTA for $10 per vehicle annual fee for road repair. The other is a $29 parcel tax per property by the County of Santa Clara to fund children’s health insurance. Are these items what you would choose to fund with new tax revenue?

Since the City will most likely choose two of the proposed ballot measures (baseball proposal excluded) due to budgetary constraints, which do you believe are most important to be placed on the ballot if any? For me, I believe the most important two are Pension Reform and Taxing Medical Cannabis.

Here is a link to a brief survey on the November Ballot Measures that I will share later on San Jose Inside.

Pension Reform Now!

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My memo below will be discussed, next Wednesday, July 28 at 2pm at the Rules Committee which includes Mayor Reed, Vice-Mayor Judy Chirco, Councilmember Nancy Pyle and Councilmember Pete Constant. This is a public meeting.

Recommendation
Direct City Attorney to prepare legally binding ballot language for a ballot measure to be considered at the August 3, 2010 Council meeting for the November 2010 election allowing residents of San Jose to vote on changing the City charter by removing charter language regarding “minimum benefit” and “contributions/ cost sharing” in regards to pensions (Sections 1504 and 1505). Removing this language would allow the flexibility to negotiate a 2nd Tier pension for new employees whose hiring date is after January 1, 2011. This proposal would not change current legally vested benefits for existing employees.
Background:
Public pensions costs are soaring and forcing our City to reduce essential services to residents. In fiscal year (2009-2010) the cost of pensions was $138 million. In fiscal year 2010-2011 the amount jumped to $200 million. (The $62 million increase is double the citywide Library budget).  In fiscal year 2011-2012 that number will grow to $240-250 million ( $240-250 million is approximately the annual Police budget) and could balloon to $350 million by 2015-2016 ($350 million is double the citywide Fire Department budget or more than the annual property tax and sales tax revenues)

The average private sector employer match is 3% for a 401K in the USA. In comparison, the City of San Jose as an employer matches at an 8 to 3 ratio or 250%.  Individuals with retirement plans like a 401k, IRA and SEP IRA bear 100% of the investment risk.  However San Jose employees do not have this risk and are guaranteed a net return of approximately 8% which means the gross return must hit 9%.  The average combined return on the retirement funds for the last 10 years has only been 4.4% thus the taxpayer makes up the difference; this fiscal year alone it was $52 million.  Therefore, since the taxpayers are responsible for paying the difference in pensions, I believe that residents should have the right to vote on whether or not they want to continue to pay sums such as $52 million in a single fiscal year.

It is imperative that the 2nd Tier pension be put on the 2010 ballot for the following reasons:

1). The City should give voters the opportunity to vote on the pension system.  To not allow the voters the chance to vote on this issue is undemocratic.  Some may say that we should just handle this “in house” and create a committee to look into alternatives and/or have closed meetings with the unions to try and negotiate an agreement.  Closed door meetings would not be transparent and we do not know how many years it will take to negotiate or if a consensus of any kind can be reached by a committee or negotiations. Additionally, any recommendation that may come out of negotiations or a recommendation by a committee would need to be voted on in a citywide election anyway.  We need to take advantage of the November 2010 election to know whether or not the residents of San Jose support a 2nd Tier retirement system for NEW employees.  Delay will result in missing out on the numerous “Baby Boomer” retirements that will take place and be filled by new employees.

2). A 2nd Tier provides flexible options.  The 2nd Tier may have a 1 to 1 match instead of 8-3 or it may have a 1 to 2 instead of 8-3 or it may be simply a new system like a 401K with a generous match from taxpayers of some reasonable percentage.  Actuarial studies must be completed and presented prior to making a final decision.  Retirement contributions from new employees and the city shall be put in an escrow account until a new 2nd Tier pension plan has been selected.

3). Reforming the pension system now will allow the city to balance the structural budget deficit and over time hire additional police officers, extend libraries hours and pave more roads in San Jose. If this is not addressed the rapid growth of the pensions will force our city to make additional cuts to essential city services or layoff more employees. Delay of pension reform may force our City into bankruptcy and raise taxes significantly. Even with higher taxes the new revenue is unlikely to keep pace with pension growth. This proposal maintains the benefits for retired and existing employees.

If the City Charter is not changed to allow the option for 2nd Tier system, the City will face continued severe financial duress.The current pension system is absolutely unsustainable and threatens the quality of life for San Joseans.  Let the voters vote!

Prioritizing Services That Touch Residents

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Hope your Fourth of July holiday was fantastic. On June 29, prior to the holiday the Council made the final vote for a balanced budget. More than 20 people spoke at the Council meeting and all but one advocated that the Council not outsource janitorial services but rather keep the janitorial staff employed, since they provide an incredibly valuable service. You would have thought janitorial was listed in the city charter by the speakers’ comments.

All but one of the speakers advocating for the janitors were affiliated with a labor union or religious congregation. The religious leaders ranged from Methodist to Lutheran to Jewish to Presbyterian. I understand the brotherhood and sisterhood concept of labor unions uniting to advocate for spending taxpayer money to help another union member. I also understand the calls for social justice from the clergy. However I wonder if the janitor at the church or temple makes approximately $55K a year plus a 250 percent pension match and free lifetime medical (minus co-payments) for themselves plus spouse/partner. My guess is no.

The Council was called, “shameful” and criticized for “picking on the most vulnerable.” There were undertones of racism, since the majority of janitors are not caucasian.

The notion that janitors make the least amount of money is incorrect, as I have stated for months. A recreation leader in our parks and community centers makes in salary only $38,001 and a senior recreation leader makes $54,496. A library clerk makes $50,897 in salary only while a senior janitor makes $54,787 in salary only.

So since all three of these positions come from the same pot of money and around the same dollar amount, then it is a trade-off. If the Council chose to not lay off and outsource the janitors we would have to make those same cuts elsewhere to lay off staff that work in our community centers, or lay off staff that work in our libraries.

I chose and will choose to keep services that actually touch the million-plus residents of San Jose over services that do not add value for our residents. The ability to have a community center or library open is more valuable to our residents then who cleans City Hall.  The new janitorial staff will be paid like janitors at Cisco and Apple but possibly more with the city of San Jose’s living wage requirement.

A big thanks you to the Alameda Business Association and Larry Clark for another great Rose, White & Blue Parade on Sunday! Congratulations to Cleveland Ave for winning 1st prize in the parade (three years in a row) for their creative float.

Finally, as an observer early this morning it was quite a sight to see six out of 35 stations working on suppressing the fire at Trace Elementary. Thank you to our Fire Department—fortunately there were no major injuries.

Final-Final

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The final-final vote for the budget is tomorrow, to enact appropriations. Much work goes on behind the scenes with our budget office. Each time a change is made it is an arduous effort to balance the books and calculate the impact on the budget.

If there is a compensation cut in a private sector, it is simply a reduction off the top of base pay — that is easy to calculate. However, when we have unique requests from labor unions that require municipal code changes or legal interpretations of the city charter, it gets complicated.

Quickly, there is a ripple effect that creates work for the budget office, finance department, City Attorney, retirement department and office of employee relations.

This is why I believe labor negotiations as public meetings would be best, because information can be shared early on and we’ll know the ramifications of different options.

Part of the pain of the budget office is that our city uses 20-year-old financial software. When you are dealing with a $3 billion budget with many different types of funds and unique requests, much of the process becomes manual. This is time consuming and increases the chances of error.

Installing new financial software is no easy task and is at least a $10-15 million line item (Interestingly, $14.3 million is the projected payout this year for accrued sick leave).

When we talk about core services, we may think of sewers and streets. Nonetheless, there is the need to make things work on the back end.

Considering San Jose’s structural deficit, it will be quite a challenge to figure out how to pay for this financial system. Open source software can be looked at as an alternative, but we are talking about managing a complex multibillion dollar budget. So, I am inclined to choose a solution that has a track record.

There are so many needs in San Jose that competing for limited funds and resources has become a trading game. Some will say that public safety, for example, is so important we should spend the reserves to avoid cuts. I acknowledge this argument. I’m open to draining the reserves and then — when the State of California takes more money from cities or the tax revenues dip — we simply start laying off people with a two week notice.

However, it is not a choice I would make. Why spend all the reserves while we still fund charities with $10 million in Healthy Neighborhoods Venture Funds (HNVF)? I mean, if public safety is really so important and people are saying that “people will die” because of the budget cuts this year, why continue to do things that are discretionary with general fund dollars?

The HNVF money is not legally restricted like RDA funds or capital funds. All it takes is six votes to redirect this money.

I am not sure why city employees do not support the HNVF money, to be used for themselves and their colleagues. I think that our employees are worth keeping and worth using the HNVF money to keep them employed.

This might be another disconnect between the city employees and the larger labor union movement that supports the HNVF status quo over their own membership’s employment. We cannot be everything to everyone during tough fiscal times.

Some say we are heading into another financial storm. The Federal Reserve and the federal government still have the foot on the gas. But, the economy is sputtering. We had terrible housing numbers last week, and a weakened consumer spending outlook, thus revising GDP growth down last quarter.

Sovereign debt in Europe and Japan continues to be a worry. Japan is going to limit bond spending which seems like the lifeblood of government. The Fed is saying that they may have no rate hikes utill 2012, in an effort to spur activity as financial conditions have become more volatile as the banking sector in Europe is having issues. Cries for austerity abound regarding our huge national debt, so it is unlikely we’ll get more federal stimulus dollars. The Fed stopped buying more mortgage-backed securities last quarter.

The USA may have Japan-disease, where we have a lost decade of slow growth plus high unemployment. After the early ‘80s recession, the economy in the USA grew at 7 percent and 9 percent five quarters in a row. Last quarter, the economy grew at 2.7 percent barely, which barely kept pace with new entrants into the job market. The government sector is leveraging to the hilt, but the private sector is deleveraging even with ultra-low rates.

Most of the tools have been used by the Fed to boost the economy, and there are not many bullets if there is a double dip recession.

To read more about the “Broken State of America,” check out the cover article of Time magazine this week:
http://www.time.com/time/nation/article/0,8599,1997284,00.html

So, considering all of these macroeconomic factors, would you spend down the reserves (which is a total of 2.5 weeks of payroll) the City of San Jose has on hand? Would you personally spend your own savings down to zero if you had other alternatives?

Come out and enjoy the Rose, White and Blue Parade on July 4th. Sponsored in part by the San Jose Redevelopment Agency and The Alameda Business Association.
http://www.rosewhiteblueparade.com/index.htm