Budget Planning for 2011-2012

Last Thursday, the council had a study session for San Jose’s 2010-2011 budget. The public meeting received little media attention. Perhaps, since the holidays are near, we only want to hear the good news…and next years budget is far from good. There is no dispute on the data—just the direction we shall choose to balance the budget. 

Here is a link to the 88 page presentation given to Council by the budget office. (Click on “2011-12 Organizational & Budget Planning” to view the presentation.)

The Council was challenged by the grim financial data and gave direction to continue with the 10 percent total compensation cuts that was requested last year. This is not an additional 10 percent but rather a request to keep the current 10 percent concession that was already agreed to by some of the labor unions. The 10 percent concession that several of the unions agreed to last year were “one time only,” meaning only for this fiscal year (2010-2011) and not ongoing. The three largest unions did not accept the 10 percent reduction last year and one actually got a raise.

If the Council chose not to ask for 10 percent pay cuts and spare public safety we would layoff two of every five non-sworn positions. So two out of five librarians, attorneys, IT staff, finance, auditors, code enforcement, planning department, public works, department of transportation, economic development, community center staff, etc….This would result in 81 percent of the budget allocated to public safety. If however 10 percent total compensation cuts were achieved then 72 percent of the budget would be allocated to public safety. (Slide 32)

Outsourcing is back on the table as a way to reduce costs and keep other city departments from having more layoffs. Last year we outsourced janitorial services which resulted in a $4 million savings and the facilities are just as clean.

I made several statements from the dais that included:
• not converting employment land to housing
• eliminating discretionary funding of charities with Healthy Neighborhood Venture Funds
• not raising fees so we become uncompetitive with our neighboring cities,
• keep the jobs/revenue team in place for companies locating to San Jose,
• Council should be limited to how many memos (flavor of the day) for new policies they can submit in a year
• rank current staff workload on what is most important (selling Hayes mansion and getting out of golf business)
• allow for union negotiations to be done in public
• instead of closing fire stations or laying off police officers reduce staffing at the slower fire stations to the same staffing levels as our neighboring cities
• finalize a new retirement system for new employees
• new facilities not be opened with full staffing
• outsourcing park maintenance or look at outsourcing by attrition where we hire private contractors as people retire
• look at new revenues once Council makes the hard decisions
• over time look at taxes that have positive environmental results and not only focused on property owners like parcel taxes instead look at solid waste dumping fee and the utility tax (water, electricity & gas)

We are suffering from severe financial duress; however, we do have options, as I have shared above. Perseverance and goodwill are not dependent on budget numbers, therefore “this too shall pass.”

35 Comments

  1. And yet you just approved building tens of thousands of “affordable housing units”, and continue to annex thousands of new residents from the county. Also, Pier, which of the unions agreed a couple years ago to prefund GADSB retirement funds by 5%?

    • Which Councilmember(s) are you talking about?
      Oliverio constantly chronicles on this blog about voting against housing that does not pay taxes and fees.

      • Kirkland?
        Let’s start with Pier’s recent vote to go ahead with the process to annex Cambrian-36, which DOES NOT want to be annexed to San Jose. “You”, in the sense that I used it, refers to the collective group. Pier is part of this collective group. If he has a good point, then his job is to convince the others, which apparently has not happened. I do not have his voting record during his tenure handy, but are you saying every affordable housing unit he has voted for pays it’s entire share of taxes and fees and did not provide any extra burden to the city?

      • Pier?
        Ok, so I guess you didn’t vote a couple weeks ago for this neighborhood to be annexed to San Jose, when they were screaming and yelling not to be annexed. Guess the news had it all wrong.

      • John, just take a look around the city and see the massive “affordable housing” projects that have been built in the last couple year and the projects being built. In addition, the city council has approved annexing over 20,000 new residents in the past few years.

  2. It’s getting tougher to add or increase taxes and fees.  With the recent passage of Proposition 26, the noose around the collective necks of our government spendthrifts has become even tighter.  I’d suggest developing a budget baseline without new revenue sources – that may very likely be reality.

    • The State of Michigan was all over TV this a.m. touting the new plant that would build Volts, and the 63k jobs created statewide.  Now they can be price-competitive with worldwide manufacturers.

      Those 63k jobs are probably $15-$25/hour jobs, replacing the $75/hour jobs lost.

      Maybe CSJ and other cities/states should follow that example.

  3. • eliminating discretionary funding of charities with Healthy Neighborhood Venture Funds

    The city shouldn’t be giving to charities in the first place.

    Back in the day, when we were into things like waking up early saturday mornings to watch cartoon versions of 80’s shows and Menudo on ABC fireworks were banned. Our internet of the day was the Mercury News.  I would read it cover to cover while chewing on a bowl of Raisin Bran, sitting at the kitchen table in my batman underoos and Bobu, Clash of the titans iron on T-Shirt.

    I remember when the city ramped up doling out money to charities.  Right after the fireworks ban.  They promised to keep giving charities money, in lieu of the ban.  They did some magic accounting that somehow showed giving them money cost less than putting out fires.

    As a kid, I was sad.  All the stupid fun stuff we used to do with fireworks was now gone.  Families in the neighborhoods did get fireworks for a while, but eventually street shows died out (until recently)

    The old proverb of “Give a man a fish, he eats for a day, teach a man to fish, and he eats for life” holds true here.

    Our charities no longer have the tools necessary to find their own funding.  I’ve been hearing things like school bake sales are gone because of health regulations. Charities used to have quite a few tools in their arsenal to get funding by working for it, instead of doing the equivalent of standing on a freeway offramp with a “WILL WORK FOR FOOD” sign.

    BULLSHIT I say.  Fucking bullshit.

    PLO don’t cut off the charities without leaving them with some tools to raise money on their own.  It’s not your fault that the city took them away in the 80’s and 90’s but try to set things right again, ok?

    • new facilities not be opened with full staffing

    Oh man shakes head

    OK, I’m going to try and do you a favor here.  Try and listen for a minute.

    You need to get that Bascom AV library open quick.  If there’s something your opponents have in their political weapons cache it’s this.  They are already plotting against you. They already have a candidate, and from meeting him if you don’t straighten shit out now, you’re sunk.

    I’m going to lay out why they’re pissed.  Every week they see you voting to send money to other districts.  They want to see you take a stand, and not wimp around on this one issue.  Just one issue.

    Another complaint, is you’re not as responsive as Ken was.  A lot of them feel like if Ken was still leading your district, that library would be open.

    Again, I’m not telling you this stuff because I want to rag on you.  This is what people tell me about their councilmember PLO.

    You have a few good years left.  You can turn it around. If you want to advance to the next level, take care of these things.  I’m trying to give you some good, honest, heartfelt advice here.  Do what you want with it. 

    Robert

    • “…Clash of the titans iron on T-Shirt.”

      LOL!  That’s a blast from the past.  I remember seeing that movie with my mom at the Century 25 (now the “Retrodome,” apparently).

    • Robert, assuming you mean Clark Williams, you might want to consider that D6 is likely not the friendliest place to labor-oriented and labor-endorsed candidates at the moment, although it is likely that he would get a great deal of SBLC, SJPOA, and IAFF support to run the race. Regardless of whether a potential replacement would promise the world on opening all stalled projects, the question would be whether a labor-oriented potential swing vote could effectively scold the 66/72% of voters who said yes on V/W (with D6 likely higher than the citywide average) while winning voter confidence by stating with a straight face that he still would have voted to those measures on the ballot (remember, they almost failed to make it). It will be an interesting test of ethics for a candidate to smile and collect funds and volunteers from SBLC and yet tell the voters that he would have used his Council vote to allow SJ voters to eviscerate pensions. Only time will tell, and the next D6 election will solve this riddle!

  4. I’m only 3 hours and 15 minutes into the 5 and 1/2 hour budget study sessions and I do appreciate the pickle the city finds itself in. 

    The drop in revenue has nothing to do with the city, the council or the unions.  Wall Street and their MBS, CDO’s, black pool trading and sloppy account caused the financial system to melt down to cause a global recession.  Regardless of the cause, the city does not have enough revenue to pay for all of its services. 

    Much of the budget shortfall has to do with Retirement pensions.  Part of the problem is temporary.  The 2008 stock market crash forced the city to spend general fund money to make up the difference last year.  A less then robust recovery is forcing the city to add more money to the fund this year.  A large part of the pension problem is actually structural.  This is being addressed by the pension board reform and props V & W.  Having said that, I do not believe that any pension board could have anticipated the scale or depth of market loses, nor defend against the fraud from Wall Street.  Wall Streeters drank the kool-aid as well.

    We spend the largest part of the General fund on PD and FD salaries.  We can close down all of the libraries, parks and community centers, Mexican Heritage Plaza, Golf Courses and soup lines and not come close to balancing the budget without some concessions from public safety.  Since the start of the Great Recession of 2008, the PD budget lost 3% the FD nothing.  Meanwhile all of the other department went through 35% cuts, that mirrored cuts made to the private sectors.

    Defenders of the Status quo say that we have to keep these benefits really generous to attract the best talent.  That may have been true before the Great Recession.  My guess is that the city can attract and retain a lot of good people with far less at this point. 

    I agree with Pete Constant when he says that not all city dollars are equal.  When he said it, he meant that some programs, like the libraries, are part of the city charter so must have a higher priority then nonchartered charities. If an ounce of prevention is worth more then a pound of cure, how much is it worth to avoid a ton of trouble?  It is better to pay for the things that keep people good and healthy, then to pay when their lives has turned bad.

    • “Defenders of the Status quo say that we have to keep these benefits really generous to attract the best talent.  That may have been true before the Great Recession.  My guess is that the city can attract and retain a lot of good people with far less at this point.”

      Before you venture a guess which can be easily proved to be false, why don’t you do a bit of research. I did, and in 5 minutes of searching the web, I found that Redwood City, Palo Alto, Fremont and Santa Clara all have pay and benefit packages which are presently superior to that offered by San Jose and all appear to be hiring. Furthermore, those agencies appear to have a higher officer/citizen ration which suggest that, in addition to better pay/benefits, the work load probably is lighter and cases don’t go without investigation as much as they do in San Jose.

      I have said on other blogs and I think it’s worth saying here: Public safety wage/benefit packages don’t exist in a vacuum and they aren’t random numbers arrived at by the bargaining parties. They were agreed upon because the involved parties agreed that the packages in question were sufficiently competitive that public safety could compete with other agencies in the process of attracting and retaining the best candidates.

  5. Thank you Pierluigi for the link to the budget presentation.

    Page 15 shows the city has not only failed to manage its expenses, the city has also failed to manage the income side of the ledger. 

    Cupertino brings in $291 of sales tax revenue per capita while San Jose brings in a measly $124.  This huge discrepancy shows what a poor job our planning department and the council have done managing San Jose’s growth.

    What is the council’s plan to increase revenue?  Will the council finally start saying no to general plan exceptions?

    • What percentage of sales tax revenues go to the city, because my wife and I are flat broke (we never spend money on ANYTHING), and yet I’m pretty sure just the taxable items we buy at the grocery store would generate the majority of that $124 annual sales tax (at 9.5 percent).  I know people (lots of them) who spend several hundreds of dollars every month buying useless junk at the Camden/Hillsdale Target, and whatnot (not to mention all the sales tax revenue generated from restaurants & fast food joints), so that $124 figure seems quite low, but perhaps that’s because most of the money is allocated to Sacramento?

    • Trying to catch up on retail by moving retail projects along like The Plant on Curtner and The Market Center on Coleman.  These help however I would much rather have the good jobs that were at GE Nuclear where the The Plant shopping center is today however that decision is out of San Jose’s hands. Also trying to clear red tape when a company is looking at locating in San Jose like Atheros that moved from Sunnyvale to San Jose and several others through the Office of Economic Development and the RDA.

      Historically SJ did not build for retail as prior to Prop 13 the City had good revenues from residential and residents disliked traffic from retail.  The other thing is that consumer patterns have been established. So if people think Los Gatos is nice then they may continue to shop and dine there unless something breaks the paradigm like Santana Row. Or if you live on the border of SJ and there is a certain store you like in Milpitas, Santa Clara or Campbell people may continue to shop there. Also if many people are buying iPad’s, iPhone’s and iMac’s at apple.com then that point of sale is Cupertino and it takes a tremendous amout of retail to come close to those Apple sales.

      Finally to your question the most important thing the Council can do is not convert land for jobs to housing.

  6. San Jose budget problems in last 10 years are self inflicted by

    Council spending recklessly giving of long term city employee benefits without taxes to pay for them, wasteful and unnecessary spending while ignoring budget problems for 7 – 8 years

    – city owned buildings and property rented out at $0, $1 or way below market rates to political insiders and friends – losing 10’s millions in revenue – arts, theaters, sports, hotels, museums and vacant land – wasting $ millions year

    – political campaign givebacks – developers, downtown property owners, former politicians, lobbyists and corporations where city gets little taxes or few jobs – wasting 10’s – 100’s million on unnecessary tax spending for non city services

    – Paying city managers and employees more than competitive pay and pensions – excessive costs billions in taxes SJ psys most premium wages for 1000’s employees average performance and few 100’s outstanding employees

    – subsidizing for decades money losing private or non profit activities, events and organizations

    Voters if given vote would not approve 100’s millions of wasteful or low city benefit spending compared to more important city services

  7. Kevin:

    Sales tax evasion is rampant in this city.  I’m sure the major chain retail and grocery stores are paying their taxes, but the smaller chains and mom-and-pops?  With all the cash-only businesses in SJ?  No way, no how are we going to get anywhere near full compliance on sales taxes.

  8. The average compensation for city employees has jumped 87 percent since 2000, while city revenues grew by only 21 percent.  For police and firefighters, compensation doubled in the same time.

    We still have room to cut pay and benefits for city employees.  If they don’t agree they can always go work for Redwood City, Daly City, Kansas City or New York City.

    • I’m confused about some of these numbers.  Does the 87 percent increase in 10 years mean that every employee saw there paycheck grow 87 percent?

      Or does it mean they hired lots of people and the total payroll grew 87 percent which includes new hires as well as raises?

      If its the latter, maybe its time to realign priorities and close some departments/programs and refocus on core services.

      Let’s be honest, pay raises and pension costs are a big part, but so is the rapid growth of city government.  We’ve grown small programs into large operations with more staff coming on board to inflate our ego as a big city.  Let’s refocus on core services and contract out the rest (with performance contracts that can be canceled or renegotiated easier than laying off a unionized city employee.)

  9. I recommend that we lay off 100 police officers and 50 fire fighters. The AMAZING budget impact we would realize would really close the deficit gap and that is the bottom line, period. When crimes rises and the city bleeds we’ll commission a study to determine again if residents consider their lives important. If crimes does not rise we gambled correctly. If wrongly, and the city is not reeling from lawsuits, we can consider a measure or tax that will help fund or support this effort. Until then let’s skate toward the thin ice quickly and see if we skate over without crashing through.

  10. By the way, the 10% cut is a lie. The 3 unions that just attempted to negotiate were imposed upon with 3% June cut, 10% August, retroactive making current paychecks 16% less. Do the math (Police 4%, Fire 8.5%. Reed and company are full of it. This is analogous to McDonalds reducing its debt by cutting counter employees wages already at minimum. Yes, Land for jobs? Ohlone towers rezoning just passed UNANIMOUSLY! Like I have said before, per AA, you have to want to quit before you can be helped. Council is a band of happy drunks.

    • 10% total compensation includes salary, pension and medical benefit. 

      The Ohlone mixed use development was zoned housing in our General Plan 2020. However in that same area the former Del Monte Cannery and former Lou’s Village were not zoned for housing in the General Plan but were rezoned via a General Plan amendment by the Council prior to my tenure.

  11. In the City of San Jose the sales tax rate is 9.25%.  The City of San Jose gets 1% of that.  For example:  if you buy a $100.00 taxable product, then you pay another $9.25 in sales tax.  Of the $9.25 collected in sales tax, the City of San Jose gets $1.00.  So for every $109.25 you pay, the City of San Jose gets $1.00.