March 20, 2008

Mayor Reed presents budget message

By Carol Rosen
Editor

Mayor Chuck Reed presented his budget message at the March 18 evening Council meeting and council members unanimously approved his suggestions.

Reed asked the council to agree to a three-year general fund structural deficit elimination plan stakeholder group to determine a plan to be presented to the City Council in November. The group would include a group of up to 30 San Jose residents providing a balance of city employees, labor, business, non-profits, taxpayers and members of neighborhood associations.

Those selected to the task force would spend six months “to look at the advantages and concerns of the top priority strategies identified by the city manager as well as identifying advantages and concerns for other strategies. In addition, they will develop alternatives and options for consideration in the three-year general fund structural deficit elimination plan and their feedback will provide City Council considerations when they review the plan in November,” the mayor said in his memo.

With the approval of the plan, Reed asked council members to gather names of community leaders to serve in the stakeholder group by March 25. He asked each council member to submit one representative from labor, city employees, business, nonprofits, taxpayers and neighborhood associations.

Reed plans to submit names of the stakeholder membership for council approval on April 8. He expects the group to being working immediately afterward.

Problems with the city’s budget started after the dot.com bust in 2000. This year, the deficit will be compounded by the state’s $14 billion deficit, he said. The city’s four-year deficit is expected to be $75.1 million based on the delivery of existing services and accounts. Unmet needs and deferred infrastructure needs total $40.2 million with unfunded liabilities for retirement benefits of $21.6 million, which are not included in the city’s budget forecast model.

And, the deficit doesn’t include the $500 million backlog to put streets, sewers and community facilities into “adequate” shape.

In the past, Reed said, the city balanced the budget with “one-time solutions hoping the economy would bounce back. He asked the council and the city staff to “be realistic about the challenges we face,” this year.

“Even if we benefit from an economic recovery, even if all of our economic development strategies are successful, there likely would not be enough revenue to eliminate our structural gap. Just closing this year’s $22.3 million General Fund deficit would require the sales tax revenue from five more Valley Fair shopping centers, 10 Oakridge Malls or a couple dozen big-box stores.”

The mayor described the top priorities from the community budgeting process, the council priority setting results and the mayor’s budget shortfall advisory group. He proposed budget guidelines asking that reductions or augmentations be measured against the impact on essential public services, adherence to council approved priorities, relative importance to operational efficiency, effect on fiscal integrity and flexibility and economic impact and jobs.

He suggested the city manager:

- Develop a proposed budget that is balanced upon the city’s current forecast

- Set aside funds in the May 1 proposed budget that are adequate to fund each appointees office and the mayor/council offices equal to the average non-public safety city service area expenditure reduction

- Maximize ongoing reduction strategies to help solve future deficits to the fullest extent possible

- Require all personnel-related reductions to be ongoing cuts and not one-year freezes to better overcome future deficit projections

- Coordinate and aggressively pursue grants for support programs in priority areas

- Avoid budget cuts that could lead to loss of grants or the ability to leverage other resources

- Include all council appointee—except independent police auditor and executive director proposals that are part of public safety and community and economic development—budget reduction proposals under the strategic support city service area (CSA) for the May 1 proposed budget, and

- Identify new proposed additions with in a CSA’s department proposal

While addressing potential budget cuts, he wants to continue to ensure that San Jose remains a safe city. To that end, he requested funding to hire an additional 15 police officers for the budget year to help eliminate property crimes and improve community policing and traffic calming. He recommended no reductions in the police department’s patrol services and asked that the city manager minimize reductions in the gang and violent crime investigation areas.