August 30, 2007

Council approves pilot program for cost-benefit analysis

By Carol Rosen
Editor

The City Council voted unanimously on Tuesday to approve actions related to a cost-benefit analysis pilot program for businesses receiving $1 million or more in subsidies. The vote was a win for the Sunshine Reform Task Force, which recommended the procedures.

The task force determined a number of criteria for the pilot that would calculate whether the city receives a return on its subsidies in the form of economic or social benefits such as jobs; specifically it encouraged receiving information on salary ranges and low-income housing data.

City staff had suggested limiting or dropping such information retrieval from those two areas because of concerns the city would lose business to other competitive cities not requiring such data. Paul Krutko, the city’s chief development officer, offered a “partial” recommendation. He claims that collecting wage, salary and benefit data would force businesses to look elsewhere because they don’t want to release proprietary data. No other cities in the county require those numbers, he said.

Harry Mavrogenes, redevelopment director, agreed with Krutko. “It [getting the wage and job information] will make our job more difficult. We won’t be able to compete with other cities seeking these businesses and some companies won’t be able to provide the information,” he told the council.

However, Councilmembers Nancy Pyle and Nora Campos disagreed and presented a memo dated Monday, Aug. 17 to ensure that the entire set of Sunshine Task Force recommendations be included in the pilot analysis program.

Their idea is to examine the tax revenue generated from a subsidized project as well as the housing required or demolished with such projects as well as the effects it has on surrounding neighborhoods. Additionally, the program seeks to determine the projects other funding, and, after approval, if the city’s expectations are met.

“From its beginning the sunshine Reform Task Force recognized the ‘significant public interest’ regarding major public subsidies of $1 million or more. Also it indicated its intention to require disclosure of a minimum level of information to the public with adequate notice for taxpayers to fully assess the rational for the subsidies,” the memo stated.

No one knows the current direct and indirect costs of the city’s public subsidies, according to the memorandum. That’s why the pilot program was suggested, to determine if there are “fiscally sound, publicly defensible rationale for subsidy decisions.”

After council members questioned Krutko and the reasons behind the pilot program, members of the public took the floor with the majority of the nearly 25 people expressing support for the Sunshine Task Force recommendations.

“What kind of jobs are we getting for public money?” asked Jean Cohen of Sacred Heart Community Centers. “Openness immunizes against [poverty] problems,” she said.

“It makes no sense for the government to subsidize low-paying jobs because it creates the need for more social services,” said another speaker who also advocated giving the public 30 days notice for such decisions. “The public needs 30 days to become informed and educated and so the council can get critical public feedback.”

A handful disagreed. Pat Dando, CEO and president of the San Jose Silicon Valley Chamber of Commerce, said that officials from a number of companies, including the Sharks, Adobe, the Montgomery Hotel and BEA Services, told her that if these recommendations had been in place, they would not have located here.

Pyle later said that the purpose of her recommendation “isn’t to chase away jobs and not to make it harder for jobs to come here. Up to now we’ve had no input on subsidies…We can’t ignore the task force and no one wants to negate business deals, but we owe the public a chance.”

“If companies value the subsidies, then they will do what is necessary to get the subsidy…This is not a mandate, it’s a pilot program and only for businesses asking for $1 million or more in subsidies,” said District 6 Councilmember Pierluigi Oliverio.

The pilot analysis program is expected to be used on up to six upcoming projects including the proposed soccer stadium.