May 13, 2004

City Council scrutinizes proposed budget

By Lorraine Gabbert
Staff Writer

San Jose City Council members recently held the first of eight budget study sessions, focusing on how to deal with a potential $70 million shortfall. Scenarios for the 2004-2005 budget could include more cuts and dipping into the city’s capital reserves.

Council members discussed budget reports presented by City Manage-ment and the Redevelop-ment Agency regarding the 2004-2005 Proposed Oper-ating and Capital Budgets on Monday in the City Hall’s council chambers. The budget study session focused on city service expenditures including economic and neighborhood development, recreation and cultural services, aviation services, environmental and utility services, transportation services, public safety, and strategic support.

Representing the perspective of City Management, Director of Finance Larry D. Lisenbee presented council members with the city’s operating budget, reviewing revenue changes and trends that might continue. “The key indicator to economic recovery is job growth,” Lisenbee stressed during his overview presentation. “There’s the sad story of 230,100 jobs lost in this valley since their peak in 2001. There are signs that it’s leveled off, but no real signs that significant job growth has resumed,” he cautioned. “That’s what I’m waiting to see before I’ll be ready to predict future revenue growth. Similarly, with the unemployment rate, we still lag far behind the national rate, and will for some time. As revenues have fallen, expenditures have continued to rise, so it’s no surprise that we’re in the situation we are.”

General fund sources were estimated to amount to $725 million; the largest of these being gained from sales tax, property tax, licenses and permits, and utility taxes. However, the Proposed Operating Budget for the city’s general fund reflected a shortfall of about $70 million, with their largest expenditures in the areas of public safety, recreational and cultural services, and strategic support. Other contributing costs were accrued in economic and neighborhood development, and environmental and utility services. A shortfall of $25 million is also predicted for the 2005-2006 fiscal year.

This disparity has unfortunately resulted in an enormous shuffling of city employment positions and proposed layoffs based upon seniority. Since July 2003, the elimination of 476 positions has been proposed, including the 285 in this budget, resulting in a 10 percent decrease over a two-year period. “As personnel services make up 70 percent of the budget, it’s no surprise that when we reduce expenses, it means reducing people,” Lisenbee noted. The current budget calls for laying off 67 employees, reshuffling 188, and reducing the salaries of another 54.

“The last place we want to go with reductions is closing fire stations, and reducing the number of police officers,” Lisenbee asserted.

“As we look at the budget and revenue for the future, we need to look at how we manage the budget, and tie increases to revenue so we don’t keep impacting people,” expressed Councilmember Forest Williams.

Vice Mayor Pat Dando questioned if the number of years a person was employed by the city was considered before he or she was let go. “Is it fair to say that if you have over 25 years of service with the city, it is most likely you will not get a notice?” she inquired, “Because I heard at least a few such people did.” The vice mayor was also interested in exploring early retirement options for city employees. “I know that in the private sector and other government organizations, early retirement opportunities seem to provide not only benefits for employees, but financial savings for the organization,” she noted, “and I’ve been asking for that for quite some time. Our city manager feels that there would not be a savings for the city of San Jose, but I want to see his analysis. I’m curious how other government organizations have saved substantial amounts of money and we can’t,” she stated. “If we can save $20 million, $10 million, or even $5 million, it will have a huge bearing on any [budgetary] decisions we make.”

Councilmember Gregory agreed with the vice mayor’s comments. “I don’t want to jump to Tier 2 cuts or release employees until we look at whatever else we can do,” he stated. “We should have an early retirement plan in place, which may save jobs.” He also requested that they await the governor’s May revised budget before making any final decisions.

Councilmember Cindy Chavez inquired as to why the vacant positions were being assigned monetary value rather than eliminating them, and transferring the money to the General Fund. “The [budgeted] positions left vacant are critical and most will be filled,” contended Lisenbee. “If you de-fund it, you’re making the decision that these services won’t be provided.” The funds allotted to the vacant jobs also allows for a cushion which may later be needed in the future, he added.

In following the City Council’s budgetary guidelines in proposing its operating budget, the City Service Agency strove to protect core city services, revive the economy, build strong neighborhoods, work with employment bargaining units to limit the number of layoffs, and stabilize the city budget. To solve its budget deficit, the city plans to utilize $10 million of its capital reserve, and raise revenue through emergency dispatch fees, increased storm sewer fees, sewer service use fees, garbage recycling fees, and water funds.

Economic and neighborhood development
Besides providing an overview of the Redevelopment Agency Operating Budget, economic and neighborhood development was also discussed, and included community and fire safety code compliance, budgeting the convention center, private development, and neighborhood improvement strategies.

Community code enforcement was one area focused upon in the City Council’s neighborhood development discussion. “We receive lots of calls from residents, which we refer to the Code Enforcement Department,” mentioned Dando. “Which is responsible for neighborhood safety, including fire safety code compliance, and also keeps our neighborhoods clean and well-maintained. The ‘Drive-way Team,’ which is made up of representatives from various code enforcement departments, will go into a neighborhood where they have had complaints, and as they drive by, they can assess the areas that need to be addressed, such as abandoned cars and shopping carts, graffiti, lights that are out—anything that detracts from the value, security and safety of the neighborhood—and move quickly on the problem.”

Fire and safety code compliance is of extreme importance to the city, but can be a financial strain. “So often, the state gives us mandates that we have to follow without any of the funds that go with them,” commented Dando. “A few years ago, all schools were required to have annual safety checks by local fire departments, but there’s no funding to do that, so we are responsible for it. Certainly, we want to have safe schools, but we need to know what it costs.” As funding one area results in reductions in others, Dando was concerned about which related programs would be targeted, and noted among them the loss of a hazardous materials inspector. “When you’re dealing with high-technology firms, a company may have to have something checked to make sure it’s safe, or we may need to regularly ensure that firms that use certain chemicals are using and disposing of them in a correct manner,” she expressed. “I asked that as a result of our not filling the position of a Hazardous Material Inspector, if it would put businesses at a disadvantage which require assistance, or endanger employees or the community.

When you’re dealing with a budget that affects so many lives, as the city of San Jose’s budget, you have to be sure that you’re not going to generate unintended consequences.”

Neighborhood development, including how the city operates its parks, libraries, and community centers was also touched upon during the budget study session, and is of concern to the vice mayor. “One of the areas I’m going to be looking closely at is the proposal by the city manager to close restrooms in parks,” mentioned Dando, “so I’m looking at other ways we can maintain our parks while keeping restrooms open.”

“In regards to the Convention Center, we are trying to determine how it can be operated more efficiently and effectively, so that it costs less money and generates more business,” Dando said. “At this point, the annual mortgage costs are not included in the budget along with marketing expenses. The lease payment is about $12 to $13 million, and the marketing cost is over $2 million annually. We need to know all of the expenses, so that we know what it truly costs to operate, which will help us determine how much we have to charge for people to use it, and areas in which we might be able to reduce cost. The mayor has requested the same information.”

The presentation and discussion of the City Management’s 2004-2005 Proposed Operating Budget provided the City Council with an opportunity to plot a course for the future development of the city of San Jose. “The main thing I wanted to get more information on is why certain reductions were recommended while others were not,” commented Dando, “and what the impact of both may be. It was also an opportunity for councilmembers to point out areas that they think work well, and in which the city has invested in.” For instance, Vice Mayor Dando mentioned the Almaden Business Association, which was a project that with some public seed money, developed a partnership with the Chamber of Commerce and the city of San Jose to assist local Almaden Valley businesses.

“That’s a great example of how a small amount of money has energized a group of businesses and helped them become more effective in advocating for themselves, as well as doing things as a group, which can be more effective and efficient financially, such as developing marketing plans, sales, and community outreach programs,” Dando observed. “Although they used some public dollars to get started, now, one year later, they are keeping it going themselves. That’s a good example of a public-private partnership, which should happen across the city. I don’t believe that government should pay for everything, and business, especially small business, is the ground rock of what healthy communities are built upon.” In this regard, Dando also worked with Westfield Shoppingtown to develop the meridian island landscaping along Blossom Hill Road by combining public and private funds. “As I go through the budget, I’ll be looking for places where we can leverage our city dollars, especially when it comes to working with businesses,” she asserted. “Another area we talked about is how the city can be more business-friendly to retain businesses as well as generate new ones.”

At 7 p.m. Tuesday, May 18 and Monday, June 14 at the City Hall Council Chambers, residents will have an opportunity to voice their views on the 2004-2005 Proposed Operating Budget, Proposed Capital Budget, and Proposed Redevelopment Agency Budget. The budget study sessions will continue through May, with the City Council making policy decisions through June, and casting a final vote on June 29.