Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

When Times Get Tough Just Borrow More Money

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Mayor Reed shared a candid and honest view of city revenues and expenses at the State of the City Breakfast last week. (Personally, I miss the State of the City speeches in the evening as it led to dinner after the speech and spending money Downtown.)

As we already know the City is walking the plank, with the sharks swimming below in the ocean (sharks = bankruptcy) and a sword wielding pirate (pirate = hard choices) is forcing us to walk down the plank off the ship. Walking back up the plank in not an option unless tough decisions are made now. However it seems that another alternative being heard more and more at city hall is borrowing.

This week the council will vote on an RDA budget that proposes to borrow $10 million from the Park Trust Fund, Ice Center and Water Pollution Control Plant to be repaid in approximately six years. Six years of risk. What if there is a major repair needed at the Water Pollution Control Plant or the Ice Center?

Six years of not being able to make a strategic purchase of property for a park or trail connection. The Park Trust Fund comes from fees paid by housing developers who build market rate housing (affordable housing is exempt from paying park fees). In turn, they want to see their money spent on what it was intended…parks! Actually if we do not spend Park Trust Fund money within a certain amount of time the city must return the money.

The Library Parcel Tax reserves were considered for borrowing but spared since it would kill the chance of getting the voters to continue the tax in 2012. (A point I brought up at the Neighborhood Services Committee.) The alternative to borrowing this $10 million would be to borrow this amount from the Housing Department as allowed by the State Legislature, which I support.

Borrowing of these funds today limits the city’s options tomorrow when the state will grab more money from the city. If we are forced to borrow then let’s do it to maintain core services like police and libraries, not more affordable housing, most of which does not pay property tax.

The City will also be issuing $25 million in commercial paper to pay a portion of the State’s raid of San Jose RDA. Commercial paper is the equivalent of a home equity line that must be paid back. The collateral for the $25 million in commercial paper is our beautiful California Theater, home of San Jose Opera and Symphony Silicon Valley. Again the other option would be to borrow this money from the Housing Department instead of borrowing more on our equity line. Borrowing in both cases is due to the State Legislature taking $75 million away from San Jose RDA funds.

At the budget study session last week a union lobbyist touted the idea of risky pension obligation bonds. Pension Obligation Bonds (more borrowing) are used to fund the unfunded liability of pensions, so as to lessen the large amounts coming out of the general fund in future years when there will be losses. This year $38 million is being transferred from the general fund to cover the pension investment losses which is equivalent to over 200 police officers or staffing for 17 fire stations or paving 24 miles of road. This arbitrage scheme would have the city issue taxable bonds at say 6 percent and then take that money and invest it with the city Retirement Funds. The hope is that the city Retirement Funds would have a greater rate of return than the 6 percent we would have to pay the bondholders. In the last 10 years the average rate of return for city Retirement Funds has been 4.4 percent. (While doing my taxes on Valentines Day I noticed my own mutual funds had returned 3.5% percent over 10 years.)

If the Retirement Fund investments do not perform over time then we could lose more money or possibly break even or make a higher return. Positive investment returns would be restricted to paying off future retirement liability. I think outside of the risk, Pension Obligation Bonds may give the council a reason to not seek second tier retirement benefits the taxpayer can afford for new employees.

The other idea suggested by the union lobbyist was bonding construction and conveyance tax (C&C) funds so that we could spend more now so cuts do not have to be as deep. There again you have to gamble on the future tax receipts and the total amount of C&C funds will shrink since you have to pay the costs associated with bonds. However this borrowing would allow the Council to avoid the question of outsourcing.

It is just another day in local government. Perhaps one way to raise money for the city is to sell bumper stickers that read, “Why do today what you can put off ‘till tomorrow?”

Candid Camera

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Photo radar helps augment traffic safety, as well as that of pedestrians and neighborhoods. A tweaking of the current policy to improve safety will not cost the state any money, and in fact will raise money while at the same time lowering emergency room health care costs. Speeding cars in our neighborhoods continue to remain an issue. The City of San Jose does what it can to manage speeding on our streets with the dollars we are able to allocate.

The City deals with speeders cars in two ways. One is enforcement with our Traffic Enforcement Unit (TEU). TEU are police officers on motorcycles that split their time in neighborhood “hot spots” where speeding is reported. You can report speeding in your neighborhood by clicking this link.

The SJPD aggregates the complaints and then tries to prioritize them as a way to identify the hot spots. The other portion of traffic enforcement’s time is spent at intersections with the highest rate of car accidents. Of course, as pointed out last week on my blog, we only have a limited number of police officers covering a city of a million people.

The other City tool is our Department of Transportation (DOT), which has a small but dedicated group committed to traffic calming who work with a limited budget and are mandated to follow state law. The state determines signage, street markings and the actual speed limit on San Jose streets.

San Jose previously had photo radar: a van parked on streets that took pictures of car license plates that were speeding. However, due to issues at the state level, the program was eliminated. Data from the DOT showed that photo radar reduced speeding on neighborhood streets. Gov. Schwarzenegger has recently proposed an expansion of photo radar.

Drivers who speed are dangerous. Time and time again we have a tragedy of some innocent pedestrian getting killed by an irresponsible driver. Currently, red light running cameras are legal in California; the idea is to also allow that same camera to give out speeding tickets. There is also speculation of allowing mid-block radar as well.

If you believe speeding is a problem in your neighborhood please contact your state representative this week and tell them you support the expansion of photo radar.

Police cannot be on every street 24/7, but technology can help fill the gap. We need our limited police resources for actions that only a police officer can do like investigating violent crime, property crime, gangs and community policing.

On to other matters: On Friday, we released the mid-year budget review. We had less revenue than expected so we drained $4.5 million out of our $10 million economic uncertainty reserve. You may remember an October 2009 blog when a Lobbyist came to the council meeting lambasting the City to spend the reserve instead of saving the money. Individuals are told by financial planners to save six months of living expenses in case of unemployment, so our City, having a one percent reserve is the minimum and should be higher. Going forward we will have $5.5 million left out of an approximate billion dollar budget.

Also worth noting from the report was the annual Hayes Mansion subsidy from the city was $5.9 million which is equivalent to approximately 50 police officers or approximately 40 police officers and opening all of our libraries citywide on Sundays. Take your pick.

Finally our Building & Structure Construction Tax decreased 50 percent—from $8 million to $4 million. It’s important to note that affordable housing in San Jose is exempt from paying these fees that go towards the paving roads. As market rate housing is in the tank the only housing going forward are affordable housing projects that sadly do not provide parks either, again an exemption made by the city council.  Think of that next time you buy new shocks or tires for your car.

The City of San Jose Budget Prioritization Survey, available by clicking this link, closes Feb 5.

The Thinner Blue Line

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Due to the structural budget deficit and the decline of tax revenues coming into the city, the January police academy has been postponed indefinitely. By postponing the academy the city saves money but risks neighborhood safety.

To be fair, it is a balancing act of what you would like to provide and what money you actually have on hand. However as I and others have pointed out, the city continues to spend money on items that are not in the city charter. In addition it does not require cuts in these “nice-to-have” items, as our core city departments have done in the past and must do again now. This is clearly problematic.

I think we all understand that a police force is expensive, but it is important to have fully vetted and qualified police candidates who provide safety and trust to San Jose residents. Other positions in our city may have an abundance of qualified candidates who apply, but when it comes to police there is a smaller pool with far fewer qualified applicants. It is a position that deserves to paid well, and within the limits of what taxpayers can afford. With that said, other city staff provide value to the organization and residents, but police put their life on the line at any given moment. One can be cynical about the old police doughnut-shop stereotype but in reality police are killed in this country every few days so there is inherent risk. (Click this link to see a report illustrating that fact.)

The problem with pushing out the new police academy class is that we are trying to keep up with retirements, not add additional police but just keep up. We have 80 officers retiring this year (some due to low morale) and the same number next year. It takes 18 months to get a police recruit out on the street. Our police force, much like our professional city staff, is starting to peak on retirements. There will be massive turnover in the next five to eight years for the entire city workforce.

This turnover is why 2nd Tier Pensions (benefits taxpayers can actually afford) for new hires is so important to do now. So by pushing out the academy the ratio of police to residents will decrease even more. What does that mean to you? Well maybe it is fewer police officers that are giving out speeding tickets in our neighborhoods. Maybe it is fewer officers investigating a homicide, rape or burglary. Maybe it is fewer police working on gang prevention and suppression. Certainly it will lead to more police overtime which is an additional variable cost that is tough to budget.

The Council has discretion to ensure that a police academy does occur now, as it only takes six votes.  The Council in the short term could simply allocate $4.5 million from the anti-tobacco funds (Healthy Neighborhood Venture Fund) and designate the money towards the police academy for 45 new officers. We have $7.8 million in this fund that has not been spent and could be directed on anything the Council wants.

Others would like to consider using these same funds to allow for more affordable housing and others would like to keep the status quo and continue to fund charities/non-profits which are not in our city charter. The remaining funds could be part of the longer term strategy to hire civilians to swap out police officers from desk duty and get them back on the street. The Police Chief, City Manager and City Auditor agree on this as stated in the report linked here.

I cannot be everything to everyone nor can the City be everything to everyone. We have to make choices that inevitably have trade-offs and make some unhappy. I was elected to vote on issues and make tough choices.

Here is a link that summarizes the peak year, recent year, and projected year performance for the City’s major revenues. Scroll to the right for big negative numbers.

The City of San Jose Budget Prioritization Survey is still open till Feb 5.

Budget Prioritization Survey

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The City of San Jose has contracted with a public opinion survey company to poll residents on the city’s budget in a project fondly known as “the City of San Jose Budget Prioritization Survey.” The control group of the survey is 900 residents representing the entire City. They will be contacted by home and cell phones.

In the end, the survey company will try to ensure that the demographic breakdown of survey respondents mirrors the demographics of San Jose, with a certain margin for error. This data will be shared at a public study session at the City Council Feb. 16 at 9am.  This will give the Council scientific polling data on budget priorities from San Jose residents.  In addition to the phone survey we will be holding a Neighborhood Association/Youth Commission Priority Session this Saturday at 10am at City Hall in room 119 to discuss the budget deficit. Both meetings are public.

Since you may be one of the 1,006,000 residents who will not be getting a call, I wanted to share some of the questions via a web survey and then share the results on San Jose Inside on Feb 8.

On another note, the Council passed a citywide inclusionary housing policy which Councilmember Constant and I voted against. Then a few minutes later, the Council made an exemption to the policy for one section of the City. So although a citywide policy passed for every developer, the City made an exception that one development did not have to comply with the inclusionary housing policy. Makes me wonder; if inclusionary housing is such a good idea then why make an exception?

Here is a link to the City of San Jose Budget Prioritization Survey.

Recycled Water: The Next Step

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I am one of the members who sits on the South Bay Recycled Water Committee, representing San Jose. This committee has investigated and is now recommending a partnership with the Santa Clara Valley Water District to move forward with recycled water and jointly build an advanced water treatment plant.

(I blogged on the topic of recycled water and water scarcity in the past.)

Now, after six long public meetings and a visit to the Orange County advanced water treatment facility, we have reached a tentative agreement that will span 40 years. We will be build an advanced water treatment plant on five acres right next to the existing water pollution control plant in San Jose.

The estimated cost will be $42-$47 million and the costs will be shared:  $20-25 million will come from the water district, $11 million from San Jose, $8.25 million from a federal grant and $3 million from the state (Prop 50). The City of San Jose’s portion will not be coming from the General Fund but rather from money set aside from fees for just this purpose. Unfortunately, this is also the money that some would like to borrow so we can build more affordable housing although we have already built 18,000 affordable units in San Jose.

This plant will produce 10 million gallons per day of membrane-filtrated water, eight million gallons per day of reverse osmosis-treated water and 10 millions gallons per day of ultra violet light-treated water. What does all this mean? Well first, we will be able to demonstrate to regulators and the public that we can take wastewater and turn it into drinking water where we are able to remove particles in the parts per trillion level. This facility will allow for public demonstration of how wastewater is transformed into potable water. People will be able to drink the water after it goes through the many steps of advanced treatment, as they do in Orange County. We will also be able to enhance the recycled water quality for existing industrial customers who would like less salinity in the water which is good as it creates more demand for non-potable uses.

This plant is the first step for the facility. There is land adjacent to the facility to expand and produce even more clean water. However, the thought is to build the larger facility over time, as we need acceptance of advanced water treatment from residents. I recall when touring the Orange County facility that we where told that their water has traces of jet fuel left over from the defense industry and they were able to remove it to less then three parts per trillion. That’s amazing when you think about how the technology can get down to cleaning the water at that level.

It is important to remember that almost all the water you and I drink is recycled as only 3 percent of the water on earth is pure.  Interesting thing I learned about San Diego is that 95 percent of their water is imported.  by contrast in San Jose 50 percent of our water is imported. Imported water is always a risk since it may not be there in the future; however, if we have advanced water treatment, then we would have less risk about imported water being diminished.

Oftentimes people ask, «Why not just desalinate the water from the ocean and make that drinking water.» The cost to desalinate ocean water is very expensive. In addition it takes a lot of energy to clean water. The following is how many KWH per hour for one acre foot of water (a year supply of water for two small families):
1,500 KWH for Advanced Water Treatment
3,500 KWH for importing the water from the Delta
4,000 KWH for desalinization

Our water supply is at risk since there is a finite supply. Are you willing to pay a little more for reliable and clean water?

This will be voted on by the water district board in January and city council in February.

San Jose’s Native Gen X’ers

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2009 was a challenging year. San Jose government had its decline in revenue in addition to suffering from an overall structural budget deficit. Many families in San Jose lost their jobs and still continue to struggle in finding another one. All of us have been impacted by the Great Recession of 2008-2009 in some way.

With the eye of the Great Recession’s hurricane ideally behind us, I look to 2010 as a year that government gets back to basics and provides the needs of the community, not the “wants.” For example, government should concentrate on how it will replace retiring police officers,(100 police retiring this year, which is double the normal rate) keep our libraries open and simply pass a budget that takes care of the basic things you would expect the city to provide as stated in the city charter. Basically, the things that you pay for as taxpayers.

I turned 40 in December. I spent my birthday with family and long-time friends. Many of my friends I have known since age five, from kindergarten in San Jose Unified School District, which equates to knowing most of my friends for more than 30 years. The majority of my friends are not political in their occupations and nearly all of them have never been to a San Jose Council meeting. Instead, they are teachers, nurses, Realtors, attorneys, tech folks, blue-collar skilled tradesmen, stay-at-home parents and—as my Mom likes to point out— most are married with children.

Many of my native San Jose friends have a very positive outlook towards San Jose. Their views are somewhat different than what I hear in my council office, where, typically, I hear alot about what is wrong with our city or questions as to why things aren’t done differently.

My friends income levels vary—some own the homes they live in while others rent. However, they all share similar dreams of San Jose’s future. Although they strive for a better city in many ways, they strongly believe that San Jose is a great city today. They are proud that we continue to have one of the safest big cities in the United States, and of our supportive of our police department. They like the small-town feel throughout the City even though we are a City of a million people, enjoy the great weather and, even with a recession, believe this region is still the best place to be by their standards.

When I spoke to my friends at my birthday and over the holidays in December, there was consensus that building the Arena and bringing in the Sharks were great decisions and because of that both female and male are positive on the chance of major league baseball in Downtown.  They enjoy going to our Downtown for the Children’s Discovery Museum, Tech Museum, Christmas in the Park and look forward to the reopening of Happy Hollow Park and Zoo.

Most importantly, is they said that they have a choice of where they can live which is why they chose San Jose. That is an important point to remember, since if a person really dislikes where they live then they can simply relocate as many people do all the time.

2010 will carry its challenges and there will be many tough decisions for the council and for individual families. However, I hope the worst is behind us. They say flat is the new up and with that we don’t expect big growth next year but maybe over time. The city on the other hand will take 2-3 years to recover as it takes awhile for revenues to return to municipalities.

I wish you and your family happiness and health in 2010.

Saturday, Jan 9 at 9am is the next volunteer day in our San Jose Municipal Rose Garden. 600 bare root roses will be given away to volunteers who arrive before 9am compliments of Star Roses. See you there.