Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

Unexpected Support for the Plan to Sell Hayes Mansion

By

Last week, I got a mailer from the No on V campaign railing against the decisions of past city councils about spending on the Hayes Mansion.  I was elated! I felt validated in my support for selling the Hayes Mansion to stop the annual bleeding of millions of dollars. I wrote about selling the Hayes Mansion two years ago on the Council and on this blog.

I remember sitting through many long speeches from my former colleague Forrest Williams who touted that money spent on this hotel and conference center instead of spending the money on police and libraries was appropriate.  So, I wonder why are the people who support the No on V campaign endorsing Forest Williams, who was biggest proponent of the Hayes Mansion, in his supervisorial race?

I am thankful that the Hayes Mansion and its $4 million a year subsidy is being brought to light to all the voters of San Jose. However, it’s dwarfed by the $52 million taxpayers had to pay just for the pension loss last fiscal year. I can’t help but wonder where everyone was when I spoke about selling the Hayes Mansion in the past? Where was everyone when the vote was taken for taxpayer subsidized golf courses and when income-producing land was converted from industrial to housing?

It was also interesting that this mailer cited—almost as gospel—the Santa Clara County Civil Grand Jury Report titled “Money-Losing Hayes Mansion: A San Jose City Council Responsibility.” Apparently, this campaign supports the Civil Grand Jury as a trusted and reliable source. So perhaps they would then agree with other Civil Grand Jury Reports, such as: “Cities must rein in unsustainable employee costs” or “City of San Jose Hosed by IAFF Local 230 Executives” or “Los Lagos Golf Course—San Jose’s Financial Sand Trap.”

It is difficult for policy makers and interest groups to be consistent and this to me is an example of being inconsistent.

Here are the Civil Grand Jury Reports mentioned above:
Grand Jury report on Hayes Mansion.
Grand Jury report: Cities Must Rein in Unsustainable Employee Costs
Grand Jury report: City of San Jose Hosed by IAFF Local 230 Executives.
Grand Jury report: Los Lagos Golf Course—San Jose’s Financial Sand Trap.

A Public Spanking

By

County Assessor Larry Stone visited the San Jose City Council study session last week and gave an extensive lecture on the role of the County Assessor and a critique of Spectrum Economics. His comments were blunt, sparing only profanity about the economist hired by the RDA for $15,000. I wrote about this topic three weeks ago.

This is the only time that another elected official has spoken to the City Council at length during my tenure. Mr. Stone explained how property values rise and fall. Property values change for a variety of reasons: when property is sold, new construction, Prop 13 adjustments, Prop 8 appeals, business property (servers, factory equipment) and assessment appeals. Revenues from property tax will not increase for local governments this year and may even fall further.

Those that are hopeful of more property tax revenue have stated that if a global corporation stock price rises then so should their property value.  Assessor Stone stated that there is no correlation between the stock price of a single company and how much their commercial property is worth.  His example was that if you got a raise or bonus that your own home would not increase in value.

I think next year we may want to forgo an economist and instead pick up the phone and call Larry Stone. To be fair, the assessor only looks back and does not offer projections; however he has a more informed view then most and the only cost may be lunch.

Click this link to view the Spectrum Economics Report.

Click this link to view the informative presentation of Larry Stone.

Click this link for the the play by play speaking notes that went with the presentation slides.

This Wednesday night at City Hall, 6:30PM our City Auditor will present the findings of the pension audit to the public.

High Speed Revenue

By

For the most part, I do not think people want things to change. However, could you see living without highway 280, 85, 87 or 237? When building large transportation projects there always seems to be opposition of some sort. Government at all levels—local, state and federal—deems that certain projects have a higher value in the long term.

A current public transportation project that has been receiving attention lately is High Speed Rail (HSR). Last week, the city council discussed whether the trans should run above ground or underground.  The preferred choice among many in Northern California is to underground/tunnel the HSR.  However, it appears that the majority of elected officials support an above-ground structure.

I have attended approximately 16 evening meetings regarding HSR. At first, the meetings were terrible with few answers and little data to answer audience questions. Over time, the quality of outreach and information has improved. It was through this process the HSR decided not to run the trains directly through the Gardner neighborhood, but rather hug highways 87 and 280.

To tunnel or not to tunnel is both a financial and timing question that includes geological reality. A tunnel from the Diridon station to the 87/280 interchange will cost an additional $800 million to $1.2 billion and may add seven years to the project. In addition, not every piece of land and what is beneath the surface lends itself to tunnel. Downtown has its challenges with sandy soil and a shallow water table. So, a piece of land in one city is different then another city, just as some parts of San Jose have streets that sink and others do not.  (Wait till the Big One hits and liquefaction of soil happens in certain parts of San Jose.)

Some questions I asked at the council meeting were: “ How much does it cost to include a tunnel in the Environmental Impact Report (EIR)?” and “What more would we learn if the tunnel was included in the EIR?” The first response was “don’t know” and second response was hard to translate.

Another question I asked: “Where is the local money coming from since the City does not have any?” One response was “Well, maybe the City could make money from parking.” It sounds like we would have to find millions of dollars to build a parking garage and then promote driving your car and parking it over using public transportation—so my questions remained unanswered.

I believe our Mayor is doing a good job trying to manage an uncontrollable situation. Uncontrollable since the power in this decision does not rest with cities but rather with the state. I believe our state assembly and state senate have more power over a state agency then an individual city. We see that year after year the state takes RDA money from the cities.

It is highly unlikely there will be an underground tunnel due to cost and years and examples of issues that occurred with the “Big Dig” in Boston. Overall, I lack confidence on the HSR project since it will take $43 billion to $100 billion to build it out over time. To complete HSR will mean going back to the voters a few times for more money. I know from history that some projects take decades to complete, however you compound this on top of $500 billion in state pension liability and ask, “Where is the ability to pay?”

There is the hope to get a legal agreement with HSR that would allow San Jose to have a say in the architecture of an above-ground structure. There is good reason for HSR to agree since HSR would save money and years in construction. So if HSR would save $800 million to $1.2 billion, then they should allocate some of that money to San Jose for the architecture.

Everyone has a different view of what they like or do not like about architecture but we can agree on is that $100 million, for example, buys you some level of architecture. Since we know that the price tags on these projects grow and grow then we might want to assure a certain percentage of the build cost in that future year instead of an exact monetary figure.

On another topic, this week the council is posed to approve yet another rezoning of land to housing for an affordable housing project that does not pay property tax which has been the number one revenue for our city. How will we fund our police and libraries without property tax?

89 Houses, or 170-High-Paying Jobs?

By

On April 18, 2006, the City Council unanimously approved the Guadalupe Mines General Plan amendment, changing the zoning from Research & Development to Residential. At that same meeting, the Council debated other industrial conversions along Old Oakland Road/Rock Avenue, and voted to convert all of the employment-land parcels that night to housing.

Now, four years later, on Aug. 31, the Council heard a proposal for housing on the Guadalupe site for 89 single family homes.  The issue for many who spoke at the meeting was that this piece of land is against a creek and the city’s Riparian Corridor policy should be adhered to.  (A riparian corridor is another term for a waterway. The purpose is to make sure that developments are not built right next to a as a creek, river, etc..)

Although the internet is great for providing maps and aerial views, I prefer going out to the sites of land-use items that are on the council agenda.  I drove through the existing neighborhood across the street from the proposed development to know more about it, and finally drove and walked the parcel.

The thing that struck me is that I saw many parked cars. I looked up and recognized the name on the building, Monolithic Power Systems (MPS). MPS is a $240 million analog semiconductor company whose global headquarters are in San Jose. I went into the lobby, introduced myself and asked for the Chief Financial Officer (CFO).  While I was waiting, I noticed people were coming in for job interviews. I later found out they had 11 open positions they were hiring for this location on top of the 160 current employees in San Jose.
I met with Richard, the CFO, and he gave me the history of the company which started in Los Gatos and then moved to San Jose. MPS ranks as one of the fastest-growing companies in Silicon Valley. The CFO told me they like the location and would really like to stay, but they understand they do not own the property. They like the location so much they offered to buy the building—and an additional vacant building, even though they did not need it to sweeten the pot.  So they put in an offer for the market price for R & D office space and a housing developer put in a bid as well, based on building houses. We know that housing trumps jobs for the cost of land. So the private property owner chose the higher bid.

The CFO understands they will have to move, so I asked what about Edenvale or North San Jose?  He responded that San Jose is not on the short list, as they have looked at properties in other cities based on where executive management lives.

Understanding the rezoning was done four years ago, I could not vote for housing knowing the city of San Jose would lose a corporate headquarters and 170 really well-paid jobs.  As a result, I voted ‘no,’ as I did not want to associate myself forcing a technology company to move out of San Jose. My colleague Councilmember Kalra also voted ‘no,’ citing concerns from the dais about the development being too close to the creek. Final vote was 8-2 in favor of housing.

PS: I highly recommend seeing the documentary The Tillman Story at the Camera Cinemas. It is the story of San Jose native Pat Tillman. It is a must- see and good on many levels. Do not wait for Netflix.

Pension Reform: Speak Now or Forever Hold Your Peace

By

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

By

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.