January 15, 2009

State of the City address

Reed focuses on accomplishments, but doesn’t spare bad news

By Carol Rosen
Editor

Mayor Chuck Reed presented the State of the City at the Jan. 14 Community Breakfast and didn’t spare the bad news.

Mayor Chuck Reed makes a point in his State of the City speech, which outlined a grim forecast for jobs and wage increases during the coming year. Photo by Kymberli Brady

Beginning with a list of accomplishments, he noted that the “best days of San Jose and Silicon Valley are ahead of us…but we still have some big problems ahead of us.” Among these could be layoffs.

“It is highly unlikely that we can close the [budget] gap without layoffs and significant service cuts. I am sorry to say that, but it is reality,” he told a packed Convention Center audience.

Most of those problems can be tied to the budget. While Reed said the city is fortunate, “…other cities have it much worse,” San Jose continues to have a budget shortfall. With the current outlook for revenues and expenses for next year, the city can expect a budget shortfall of more than $60 million or “the entire budget of Parks, Recreation of Neighborhood Services…and more than twice of budget of all the city’s libraries, plus a deferred maintenance backlog of nearly $500 million.”

Reed cited several factors driving the trend. Because the city spent hundreds of millions of dollars on new libraries, community centers, parks and fire stations, “each adds to our annual expenses for staffing and maintenance.”

A second category, salary and benefit growth has and will continue to outpace this year’s revenues, he said, echoing part of his 2008 State of the City speech calling for smaller wage increases last year.

“We have contracts for general wage increases with nearly all of our unions for this year at 3.75 percent. When you layer those increases on top of increases in costs for retirement benefits, and health care benefits and step increases, our personnel costs are increasing by more than 6 percent this year. That rate of growth is not sustainable…” He thanked unions that understand fiscal reality and agreed to smaller wage increases for next year.

Finally, the nation’s economy is hampering San Jose. “Many of our revenue sources are slowing down or shrinking. Sales taxes are headed down. The rate of growth in property taxes is slowing as construction and conveyance taxes did through September.

He suggested that employees or teams that devise ideas that save substantial amounts of money be rewarded significantly as the city works for economic growth to increase tax revenues.

A direction toward growth, Reed said, is to “swim against the tide of the national recession by following our Green Vision and implementing our short term economic stimulus plan.” He mentioned three ways to do that. First is with Clean Tech growth opportunities including expansion of the BioCenter. Second is to make efforts to keep downtown vibrant by filling the new high rises with residents, possibly with marketing programs as well as neighborhood improvements making these areas “more attractive, more interesting and more walkable.”

The loss of the American Musical Theater was large, he said, expressing concern that the recession may further reduce ticket sales and contributions to the arts and art programs. He suggested that the city use funds it would have given to AMT to help build audiences for other groups. In addition, he plans to hold a summit with all organizations with a stake in downtown to recognize steps that will help “keep downtown active and vibrant despite the recession and the budget shortfall.”

Finally, Reed suggested that San Jose’s residents “house the homeless, feed the hungry, support our schools and keep arts organizations alive,” noting that nonprofits have seen steep rises in the need for food, shelter and charitable donations.

Looking back at the city’s accomplishments for 2008, he noted that while many companies throughout the country are laying off employees, there are still many that are creating jobs. Within the past 12 months, for example, companies within San Jose added 1,500 Clean Tech jobs working toward the city’s Green Vision goal of 25,000. Currently, the list of Clean Tech companies is growing, with SunPower, NanoSolar, SoloPower, Stion, Sunwize, Sopogy, Fat Spaniel and SVTC locating here as well as Underwriters Laboratories.

Another feather in San Jose’s cap is the growth in police officers, with 15 just out of the Police Academy and another 25 officers authorized to join the force this year. Gang violence is down by more than 20 percent. Homicides also are down thanks to increased funding for the Mayor’s Gang Prevention Task Force and increased spending in summer programs that keep kids healthy and busy.

However, while the figures are impressive, Reed doesn’t see them as enough. “We must continue to build our police department. We still have too much violence and too many property crimes.” He wants to add another 25 officers next year and push to the goal of adding 100 new officers by 2012. Reed also wants to make sure to continue investing in gang prevention and intervention.

Shopping in San Jose is growing with The Plant, the new center at Curtner and Highway 87, Lowes and Costco opening new stores and Santa Row expanding. He went one step further and noted that because the city council turned down requests to convert lands zoned for business to housing, we’ve gotten more jobs and generated more sales tax revenues.

He listed a number of other accomplishments from BART to San Jose and the new high-speed rail that will make San Jose a hub city, to improving traffic signals, Highway 101 in South San Jose and evaluating public/private partnerships. He also cited collaborating ventures with the county, the governor, the mayors of San Francisco and Oakland and with businesses allowing innovation and improvements.

Reed’s fellow council members agreed with the gist of his speech. “I share Reed’s enthusiasm for a better tomorrow,” said District 10’s Nancy Pyle who added that the city has a number of advantages for the council to tap into.

Newly seated District 8 Council-member Rose Herrera added that she was “inspired by the speech” and the fact that the mayor was honest, allowing residents to “know what to expect about the budget.”

“He laid out the realities we have to deal with along with the strategies to get through these challenging economic times,” added Vice Mayor Judy Chirco, “while allowing us to know there is hope and to have to do the work that needs to be done.”

“Despite the potential for layoffs and service cuts, Mayor Reed offered an upbeat prediction for San Jose, citing similar economic times in the past where we have used innovation to emerge as a leading city,” said Pat Dando, president and CEO of the San Jose/Silicon Valley Chamber of Commerce. "Once again we are going to have to tighten our belts and do what we must to ensure our success going forward. I believe we are headed in the right direction by investing in the clean tech and biotech industries, while working together to achieve a better permitting process."

“It was a pragmatic and sober look at the gap in the budget,” said District 6 Councilmember Pierluigi Oliverio, who added that Reed made it clear that if we don’t change the way we do business there will be severe layoffs and services will be cut.”