September 20, 1995
by Yolanda Reynolds
On March 28, 1995. San Jose Mayor Susan Hammer convened a group of 28 valley residents to “develop strategies to restore fiscal stability to City government.” The study group is known as the New Realities Task Force. Mayor Hammer explained that the, “City’s tax base does not generate the resources we need to maintain current levels of public services and an adequate economic infrastructure.”
Mayor Hammer asked that the Task Force consider, whether the City government offer fewer programs to residents, whether it is necessary to raise fees or taxes and “whether San Jose can expand its tax base with new economic strategies.” Mayor Hammer has asked that the Task Force find $20 million in new funds to bridge a gap in the General Fund Budget – the budget that pays for police and fire protection, the maintenance of most of the City’s streets, parks, libraries and the myriad of other services add to the quality of life of City residents.
The Task Force is faced with a daunting responsibility. The group has decided to take a close look at some of City functions such as Environmental Services (garbage and recycling), Public Works and certain aspects of police services.
Little time remains for them or anyone else interested in the budge to become informed before the City Council will have to adopt the new year’s budget.
The Task Force has been meeting almost every two weeks. After a general briefing was conducted for each of the major City departments, the task force membership was broken into three subcommittees attending to Revenues, Organization and Efficiency, and Personnel
Before breaking into their subcommittees, the membership held a general brainstorming session to generate as many ideas as possible for further study into the possibilities of bridging the $20 million budget shortfall.
The City’s total operating and capital budget is over 1 billion dollars. Sales taxes and property taxes provide 31% of the City’s General Fund revenues. Another 27% comes from franchise fees, fines and forfeitures, transient and occupancy taxes, licenses, permits, and utility taxes. Another 11% of the funds come from State and Federal Government Agencies of which the largest contributors is the City’s share of the auto license fees ($27m.) collected by the Slate. San Jose’s population exceeds 835,000 residents.
Suggested strategies range from; “privatization of city services,” discontinuance of selected services, increasing fees and fines, the formation of assessment districts, establishing zero based budgeting, eliminating or condensing city functions and the corresponding staff, selling off city properties, etc.; in a long laundry list of ideas, some of which were quickly discarded as impractical or as having little or no impact on the City’s budget.
0ne of the City programs that was asked to explain its activities and justify its role in the city was the controversial Redevelopment Agency. Frank Taylor was invited to appear before the Organization/Efficiency and Revenue Subcommittees last Thursday afternoon. Taylor did not attend the meeting but two other Agency officials were present, Jim Forsberg and Michael Eschoff.
They presented the committees with more than three pages of projects which the Agency has initiated or completed and for which they have borrowed money. The presentation took almost the entire two hours of the scheduled meeting but, even so, most of the committee members remained to ask numerous questions or seek additional information.
The Agency operation is of great interest since it collects $72 million annually in tax increment dollars.
Were it not for Redevelopment, approximately 19% of that sum would go to the city’s General Fund, 31% would go to the County and 48% would go to the State (this until recently was used principally to fund education in the State).
There were many questions. Amy Dean, Business Manager and CEO of the Central Labor Council, asked for the standards by which the Agency determined the success or failure of is revitalization program. Forsberg replied that it was determined by the “return on investment.” He added that the Agency achievements included a major role in inducing a private investment of $5 billion in the North First street industrial area of San Jose. $900 million was spent in renewing downtown San Jose. He said that for every dollar spent by the Agency, 3 private dollars were generated, and that there had been a 34% increase in employment in the industrial area of north San Jose. Forsberg did acknowledge that there were critics of their claims for success. Critics argue that the area would have grown without Agency assistance, since the enormous growth in the Valley eventually made moving to north San Jose seem very attractive.
Forsberg credits the tax increment dollars generated in North San Jose for producing the money that was spent to revitalize downtown San Jose.
There were no cost figures attached to any of the projects on the multi-page list. The absence of such has caused critics to challenge the Agency’s claims of success and such vagueness has caused two different County’s Grand Juries to criticize the accounting system, credibility and accountability of the Agency.
There were questions regarding sales tax revenues in downtown. It was pointed out by a committee member that Valley Fair, in which there is no Agency participation, generates almost $5 million per year in sales in sales taxes for San Jose alone, while downtown businesses‚ after almost a billion dollars of public fund investment generates only 1.6 million per year.
There are questions regarding the “sunset” or ending date for Redevelopment activities in San Jose. Forsberg explained that those dates vary from (project) area. Some will end by the year 2001 and others, he explained, will not end
by the year 2030. The debt Eschoff stated, “might be paid by the year 2040.” Neither Eschoff or Forsberg were clear on an exact date by which there would no longer be debt or a Redevelopment Agency.
Questions were asked regarding the impact on the General Fund when the many Agency projects were turned over to the City. Other questions were asked regarding the amount of inter agency budget transfers for services that are rendered to the Agency by the various City department particularly Public Works and Planning. Historically the City and the Agency have disputed the amounts of these transfers.
A memo recently prepared by city manager Regina Williams, warns that, the proposed (1996 to 2000) capital (building) projects pose serious problems to the City, not only from additional operating methods proposed. The Agency is, by law, precluded from more tax increment financing beyond the year 2001. The City’s General Fund is at risk if the anticipated income is not realized for revenue repayment. There have been a number of such projects whose debt is supposed to be covered by increased revenues, such as the Pavilion, the Fairmont Hotel, the Convention Center, the Hayes Mansion but have required debt repayment
assistance from the City’s General Fund. The Agency staff did not have time to answer these and other questions, even though the group remained in session for almost 45 minutes beyond 5 p.m.
New Realities Task Force co-chair Frank Fiscalini promised the Task Force committee members that the Agency would be scheduled for a follow up meeting.
Another meeting of the Organization and Efficiency committee is scheduled for September 28, 3:00-5:00 p.m. The Revenues Committee will meet September 20. 9:00-11a.m. The Personnel committee is scheduled to meet September 22,
8:00-10:00 am. All of the meetings take place in Room 106 of City Hall at 801 North First Street. The Task Force members have much left to study and review. It will be difficult for the Task Force. Any suggestions for increased fees or taxes including the formation of assessment districts or a greater reduction in City services will likely have serious political repercussions.
A final hearing before the City Council is scheduled for November 13. The three subcommittees will gather for a joint meeting of November 3. The public is invited to attend all of the meetings. There is an opportunity for public comment at the end of every meeting. © La Oferta Newspaper.