Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

A Dollar Borrowed is a Dollar Earned

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Last week, I attended budget meetings in council districts 9 and 10 as well as the labor unions’ budget meeting at the Tully library. The people that attended this meeting were mostly union members and city council staff. It was admitted at the meeting that significant layoffs were inevitable since the deficit is enormous.

Ideas were presented on what money-saving measures could be implemented and what new sources of revenue could be found to balance the $118 million budget gap. Ideas ranged from replacing natural lawns in parks with artificial turf (lower ongoing maintenance costs, but more costly upfront) to turning down the air conditioning at city hall during the summer. Others included putting banner ads on the city website for advertising revenue and charging owners of vacant property a fee/fine since they do not have a tenant.

Although many “creative” ideas were mentioned, none of them seemed to really tackle or help offset our deficit of $118 million—nor did the suggestions even get close to $1 million. Other thoughts were a “crash tax.” For example, if you were to get into a car accident and police or fire truck showed up, then you would pay $500 to $2,000, since you used city services. Another idea would have the city attorney sue code enforcement violators for fines owed rather then placing liens on their property as we do today.

There was a proposal advocating outsourcing. Really?! This concept would outsource the workers compensation program to a third party since it would be cheaper and faster then if the city continues to run it. Interesting that it makes sense for this program but not outsourcing city hall janitorial to keep swimming pools open!?

The major theme at the meetings, however, was about borrowing more money. There was a discussion advocating pension obligation bonds (POBs), which is an arbitrage scheme where the city borrows tens of millions of dollars in the bond market, and then we give that money to the city retirement funds, hoping the retirement board investment strategy earns more money than the city pays for its bonds. If the retirement fund does make more money than we owe the bond holders (and the associated investment fees), then the city can spend the difference. However if the investment return is lower than the city’s cost, then city loses even more money. Similar to a cash advance on a credit card and then investing the cash advance amount in the stock market and hoping that the stock will have a higher return then the credit card interest rate. Also, by issuing POB’s the pension obligation, which can vary over time due to investment returns, becomes a hard liability in the sense that debt service is fixed for 30 plus years.

Probably, the «best» idea, was to borrow money by taking out tens of millions of dollars in one-year notes/commercial paper to pay for ongoing city services. Then, when these notes come do in 2011, we would issue more notes to cover the original 2010 notes. When the 2011 notes come do in 2012, we would issue more notes again for 2013 and so on or until city tax revenue came back.

First, the revenues will not come back to pay for existing city services since pension obligations as a percentage of the general fund will continue to grow faster than revenue coming into city coffers. Second, this bright idea is like a consumer who charges up one credit card and then gets another credit card to pay off the previous one and so on. Issuing commercial paper to cover ongoing operations would hurt our bond rating and banks that provide San Jose with Letters of Credit will look at the city as irresponsible. I cannot recommend this type of borrowing/financing for city services as it passes on the problem to another eneration. We are partly suffering now because of the lack of tough decisions by previous elected officials at all levels of government.

“We should avoid ungenerously throwing upon posterity the burdens that we ourselves ought to bear.»—George Washington

Different Viewpoints on Medical Cannabis

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Last week, the Council finally discussed my memo and voted to have staff come back with a draft ordinance for final review regarding medical cannabis. Currently, 14 states have legalized cannabis for medical purposes and 14 other states are considering legislation now. I attached a memo from the US attorney general saying that the federal government will recognize state laws regarding legalization of medical cannabis and additionally, I provided an 11-page document from State Attorney General Jerry Brown that provides guidelines to municipalities on implementing ordinances that regulate medical cannabis collectives/cooperatives.

Even if San Jose chose not to adopt an ordinance, people have the legal right to cultivate and form marijuana collectives for medical purposes under Prop 215 today.

Since my memo was heard at the Rules Committee meeting last October, I have spoken with many San Jose residents. Their comments have commonalities that could be broken into four different areas.

One viewpoint from a handful of residents is that cannabis is a terrible drug that ruins people’s lives, and all efforts should be into keeping it illegal even for those that have painful afflictions like AIDS, cancer and MS. Some felt that under no circumstances should anyone use cannabis to numb the pain since we have prescription drugs for that. Their views are strong and are often not open to discussion, as in the case of a gentleman who held this view who hung up when I called him after receiving his email.

I understand that people may have experienced a friend or family member that abused illegal drugs or they are morally opposed to their use; however they do not seem to have a problem with alcohol or tobacco since they are legal. These folks also did not find a problem with prescription drugs. In the cases of alcohol, tobacco and prescription drugs we know that some people abuse them and this abuse comes at great cost to themselves, family and law enforcement.

Others called with personal stories of family or friends who had died of a painful disease years ago. They were told by a doctor at that time to get some marijuana and so they went out and purchased marijuana from a drug dealer for their ill family member. One 80-year-old resident told me that his family bought marijuana for his brother 25 years ago. He said the last 10 months of his brother’s life was good because of cannabis and his brother only went to the hospital just a few hours before he finally died of cancer.

Another group of residents were supportive of medical cannabis or indifferent but they did not want to see these facilities adjacent to residential areas and felt that there should be some regulation in addition to zoning. My direction in my memo was to place the dispensaries in industrial areas which are away from residential neighborhoods, but Council gave planning staff some leeway for the June ordinance that might include medical offices or areas zoned commercial, but definitely away from adjacent residential. Alcohol is distributed in nearly 1,300 places in San Jose and over time seem to just blend in with the rest of our commercial business.

As far as regulation, one that I am keen on is open book accounting of these collectives that allows for financial audits as needed.

Others were in favor of legalization of cannabis for any purpose. They felt that our country had tried prohibition of alcohol from 1920-1933 and was unsuccessful. The only thing prohibition did from their view was to make organized crime wealthy and create health issues with moonshine. They had strong feelings that people will do as they wish and the wars on drugs has been unsuccessful which has only filled the pockets of organized crime. Therefore, they wanted legalization and taxation like alcohol.

They felt prison cells should be reserved for the those committing violent crimes and not possession of marijuana. A mother told me about her 20-year-old son in college, and said that it is easier for him to get marijuana then it is alcohol, since alcohol is regulated.

Which ever viewpoint, issues like this stir up interest in local government. Which viewpoint do you hold?

3%—100%? 250%!

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Monday: No Impact Man Film at City Hall
Nearly 300 San Jose residents attended to watch this documentary, which portrays a family that adopts environmentally friendly choices over the course of a year.  For example, they bike instead of driving, buy only locally produced food and give up their television. The main point of the evening was that we do not have to wait for government to mandate behaviors that help the environment but that collectively we as residents can choose to compost, use less electricity, bike vs. drive today, etc…
A reporter from the San Francisco Examiner attended and wrote about the event. Read the report here.

Tuesday: City Council Meeting
Council waived the business license fee for the first 1,000 business under 35 employees retroactive to Jan 1,2010.  Some on the Council commented that it was symbolic and would not create jobs. The Council does not create jobs; private individuals do.  If the Council wants to do something symbolic lets get rid of the Labor Peace regulation and allow Starbucks to open at city hall as planned. Nearly five years and still empty.

During public comment on the Mayor’s Budget message, a lobbyist from the union chided the Council for even thinking about 2nd Tier benefits that the taxpayer can afford since it would be unfair to have people working side by side who have different retirement benefits. The next non lobbyist speaker stated that people in private sector are compensated differently from each other today and they survive. The current pension system is unsustainable and must be changed for new employees.

A couple of SJI readers asked last week how retirement works under the city charter.  Here is the response to that question:
Each employee puts $3 and the city puts an additional $8 into the retirement fund. On top of the over 200 percent match, the city guarantees an 8 percent net rate of return, but the fund needs to gross 9 percent to cover investment fees. (Average rate of return the last 10 years is 4.4 percent) If the retirement portfolio (stocks, bonds, real estate,etc.) does not return 8-9 percent, then the taxpayer covers the difference.

Any changes to the current system requires a vote of San Jose residents.  As we hopefully implement 2nd tier benefits I would suggest an option for new employees of a one-to-one dollar match up to the federal 401K limit of $16,500 and no guaranteed 8 percent return.  This way the retirement funds will continue to get funded by new employees much like social security is funded by younger workers.  The newer employees will draw less benefits but then we will not have to close more libraries or layoff more police in future years.

A dollar-for-dollar match (100 percent) is extremely generous in comparison to the average 3 percent match of private employers to 401K’s. If there are specific positions in our city that are tough to recruit then raise the entry level salary since young workers want more money up front to buy a home or fancy car.  Same time if there are positions with many qualified applicants then those entry level salaries should be frozen indefinitely or lowered.
Wednesday: Grand Boulevard Committee, Member
Attended meeting at SamTrans in San Carlos. The purpose of this committee is to provide a venue for cities and transit agencies from South San Francisco to San Jose to plan transit-oriented developments all the way up and down the El Camino Real.  The thought is through density, the El Camino will gain the improvements to add large sidewalks and pedestrian friendly accoutrement’s the entire way creating a Grand Boulevard.
Thursday: Public Safety Committee, Member
The committee received a verbal report from staff on why hiring retired San Jose Police Department (SJPD) officers is problematic. Staff response seems odd. We have many qualified retired SJPD in our area that it seems silly not to hire them to do background checks for new recruits instead of pulling police officers off patrol to do this work. But then again we have postponed the police academy indefinitely yet we fund a community center in Los Gatos for $80K out the $11 million in tobacco funds that goes towards charities.
Friday: Diridon Joint Policy Advisory Board, Member
First meeting of the Diridon Joint Policy Advisory Board whose goal is to create a Grand Central Station of the West by collaborating with state, federal, transit districts, adjacent residents and business owners over the next 10-20 years. We elected Mayor Reed as the Chair.

Click this link and vote for ultra-high broadband networks from Google for San Jose.

What Would Cesar Chavez Do?

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Below are a few observations from last week.

Monday: Council study session on Airport
Overwhelming majority of Council thought outsourcing of janitorial to save $3 million was a bad idea so it looks like we will lay people off and consider getting rid of the night time curfew in the future.

Monday Night: General Plan 2040 Task Force Meeting
Although the General Plan board members were informed that the City’s budget problems are partially due to most of our land being dedicated to housing instead of jobs, the Task Force voted in favor of adding 300,000 people with a 14-11 vote. The two options were 200,000 or 300,000 new residents. Several task force members shared that they voted no because they wanted to see higher growth of 500,000 more residents to San Jose! I voted for the option that added 200,000 people by 2040.

Tuesday: Council Meeting
After 18 months of staff and paid consultant “research” regarding my Sept. 18, 2008 memo proposing that developers of affordable housing projects be required to pay park fees, as market-rate developers are required to, the question finally came to Council. I believe that people of lower income are deserving of 100 percent park fees/land dedicated, the Council decided to support the Housing Department’s compromise that developers pay only 50 percent. To date, the City of San Jose has lost approximately $90 million in park fees from developers because of this park exemption.

Are you familiar with the term, “What Would Jesus Do?” Well I wonder as we come up on Caesar Chavez Day, “What would Caesar Chavez do” if he was alive and on the Council. Considering that affordable housing provides for people of lower incomes and is often located in areas that do not have parks, would he vote for equity when it comes to parks in San Jose for all people?

The next agenda item on the council agenda that day was the Habitat Conservation Plan where it seemed that the Council had more sympathy for the checker spot butterfly then parks for people of all income levels.

Wednesday: Visit Medicinal Marijuana Collective in Oakland
One collective is on target to write a check to Oakland for $360,000 in city taxes and another check to the State of California for nearly $2 million in sales tax of which approximately $200,000 will come back to Oakland; therefore Oakland will be receiving approximately a half a million dollars from one legal medical collective that employs 80 people with an average hourly pay of $43.

Thursday Night: Neighborhood Association Meeting
I talked about the budget and announced to the audience that the City would be suspending the $750K aquatics program for the 2010-2011 city-wide. I shared that the City could restore the entire program if we chose different ways to do city services, like outsourcing janitorial services at City Hall for example.  There were many in the audience that felt that they did not care who cleaned city hall but they would rather have a summer aquatics program for youth or a library open.

Friday Morning: American Leadership Forum-panel discussion titled, “A new recipe for regional job growth.”
Panel discussion of private sector and labor spoke to how the region can create jobs going forward. A business person asked the labor panelist, “What if public employees would take less in pensions to help balance the budget and avoid layoffs? Response from labor panelist was that, “Most of the deficit in San Jose is not pensions but debt service on City Hall.”

Actually, the debt service on City Hall is $24 million of which $17.1 million is from the general fund out of a $116.2 million general fund deficit. $52.9 million is the amount the general fund must cover this year in increased pension contributions since the taxpayer must cover any losses in the pension funds. The $52.9 million to cover pension losses is only a portion of the total amount devoted to pensions this year which is $200.2 million.
Looking back in history on 5/14/02 the only votes against new city hall was Linda LeZotte and Chuck Reed.

Keep the Airport Curfew

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This afternoon at 1:30 the Council will gather for a special meeting to discuss the City’s airport. The expansion was voted favorably by the council in 1997 with then-Councilmember David Pandori casting the only vote against. The airport, with the hands artwork that is visible driving on Highway 87, was approved in 2005. Through the selling of bonds (borrowing) the city of San Jose has spent $1.3 billion on the renovation.

Since 2007, the airport has experienced a 25 percent decline in the number of passengers and 33 percent reduction in number of flights. The airport competes with San Francisco and Oakland airports and is one of the few city assets that competes with other cities. Airports and airlines have been impacted negatively from terrorist threats, web meeting solutions. spiking fuel costs that pushed companies to adopt new web meeting technologies faster and of course the Great Recession.

Take all of these factors listed above into consideration and then add on government “feel good” measures like the new city of San Jose living wage policy that was passed by the council last year (I was the only no vote) that requires private companies at the airport to pay private sector workers above-market wages. It may “feel good” for politicos but it raises costs to the airlines and to the taxpayer as the city now has a city employee who makes $156,000 to oversee the living wage policy just at the airport.

In fact, we have a total of 11 full time people ($1,414,941) at City Hall who oversee that private sector workers are paid a certain wage. Personally, I would rather have 11 code inspectors or 11 planning dept staff. Another “feel good” measure is that the airport must spend $3 million extra every year on janitorial services because of another council policy that does not allow outsourcing, which again raises the costs to the airlines. (Well, technically we “allow” outsourcing but it takes nearly two years and multiple highly charged City Council votes that require at least six votes…so essentially NO). As Marvin Gaye said, “Mercy Mercy Me.”

If you put yourself in the airlines’ shoes and you know that the Bay Area has three airports and that residents will drive the short distance to fly, then you might be more likely to choose the airport where you can maintain a higher margin of profit that has the lowest cost. If you choose to not maximize your profit then consumers, mutual funds and even retirements funds may sell your airline stock and eventually you may get fired.

Some suggest that eliminating the curfew would solve the airport’s financial dilemmas. It is a big unknown that if eliminating the curfew would be the salvation of our airport. Will flights at 3am generate more revenue then the $12 million of savings that outsourcing would deliver at the airport as outlined by the airport director? I don’t think so.

What I do know is that approximately 100,000 people hear the airport flights today and they would prefer not to be awakened in the middle of the night. Now there are some areas of San Jose that do not hear the airplanes during the day, but I think that residents of Almaden Valley and Evergreen might start to hear the planes if they are arriving and departing at 1am, 2am, 3am, etc. The economic value of getting rid of the curfew is unknown however we do know the Council has the power to allow the airport to start saving money today without upsetting many residents.

My viewpoint is we need to have a successful airport and by that I mean a successful daytime airport that operates up to what the Environmental Impact Report (EIR) allows. The airport should be allowed to run itself like a private business, competing with San Francisco and Oakland without all of the city policies, while maintaining its successful curfew as other cities do so in the USA.

On another note: Tonight the General Plan 2040 Task Force will choose a scenario to recommend to the Council for San Jose’s growth by the year 2040.
Here is a link to a General Plan 2040 Task Force web survey prepared to solicit feedback.

Why Free Parking is a Bad Idea

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Professor Donald Shoup of UCLA visited City Hall last week. He was in San Jose to present a lecture titled, “Why free parking is a bad idea.”  The information he shared is based on his book and research.

There are approximately 700 million parking spaces for 230 million cars in this country and 99 percent of cars trips have free parking.  Prof. Shoup showed an aerial picture of the Cisco Systems campus with its empty asphalt parking lots. He felt that these empty parking lots are not a good use of land and that it creates higher-than-needed vehicle miles traveled (VMT). He then continued to share what he thought would be a way to better utilize the land, which was to allow Cisco to build housing on their parking lots and waive all parking requirements.  He felt this would provide housing close to jobs, reduce VMT and bring a more appealing look to the current parking lots.

Another point that Prof. Shoup spoke to was metered street parking. He told the story of Old Town Pasadena and how it was dilapidated. The city of Pasadena started meter parking and put all of the metered parking money collected back into improvements of Old Town. At first there was opposition to metered parking but when people heard that the money would stay local and be earmarked directly to Old Town improvements the community supported the metered parking concept and asked that the City to keep the meters on till midnight and even on Sundays! Over time Old Town Pasadena’s private property owners improved their buildings since the city was investing into those blocks that had metered parking.  It has now become a very successful business district and generates more sales tax then other business districts that have free parking.

His main points are that street parking should be priced to where 85 percent of the spots are occupied but there is still some empty spaces. This allows someone to park quickly on the street but at a higher price for the convenience. The alternative today is we have inexpensive on street parking where people circle the block (cruising) countless times (unnecessary VMT) to try a find that one inexpensive magical parking spot.  He felt the money generated from the parking meters should be spent in those blocks doing sidewalk repair, tree maintenance, pedestrian lighting, under-grounding utility lines, sidewalk cleaning, landscaping etc…

I asked the question, “What about parking meter districts that border residential neighborhoods?” He felt permit parking was one way to make sure cars did not overtake residential areas however that the neighborhood should allow employees to buy a parking permit pass so they could park on residential blocks. His reasoning is that there is ample open parking especially during the day when residents commute to work. The employees would pay a higher price then the residents and the employee would only be able to park on a certain block. All of those funds collected would then be spent on those blocks and spent on things the residents want.  His idea was to let specific blocks choose if they want to allow employee permit parking and receive the benefits.

Since councilmembers typically hear “there is not enough parking” as the main complaint about any development, whether it be residential or commercial, I asked the following question: “What about new developments that want to have lower parking ratios?” He felt that the creation of permit parking areas around adjacent streets was good but more importantly he said the less cars allowed to park at the new development the better because it creates less traffic.

What do you think?

Are these pie-in-the-sky academic theories, or should San Jose curb parking and allow for a different lifestyle choices to emerge?

Finally I hope you will join me for the showing of the film, No Impact Man. The documentary follows a family that tries to live a zero-carbon footprint for a year; no water bottles, no soda cans, no magazines, no TV, no car.  Think you could do it?

When: Monday March 15 at 6:30pm
Where: City Hall Council Chambers
Limited seating please RSVP to Pierluigi.Oliverio@SanJoseCA.gov

http://www.youtube.com/watch?v=1fITT6rVPds ” title=“Here is a YouTube link to the trailer.”>Here is a YouTube link to the trailer.