October 25, 1995
Text by Yolanda Reynolds.
Photo by John Martina.
There is excited talk in City Hall of offering the Golden State Warriors $43 millions of public money to entice them to make San Jose their home. The almost lone outspoken official supporter of this idea is Susan Hammer and some sports fan.
Others in San Jose are questioning where the money will come from and why discussions have not been made public since most of those millions will come from public funds.
Just this last summer, Mayor Hammer convened a group she named the new Realities Task Force in order to find an answer to the “structural impediments facing project expenditures and revenues. In other words, there is not enough money to pay for all of the services that have been promised the residents of Jose.
The city has cut many programs and has slowly added a few new programs but only by developing new and creative ways of generating the funds to do so.
Between 1991 and 1994, the City increased in fees and permits by almost 3 percent for a dollar increase from $25.3 to $44 million. Proceeds from fees and permits flow to the City’s General Fund, which pays for police, fire protection, libraries, parks and recreation, among other expected community services. The City’s General Fund Budget in 1994 was $471.3 million.
The Task Force membership has taken the request seriously and tried to overcome the “structural impediments” to the General Fund’s ability to accommodate the funding needs of the City and address the level of concern that has increased over the lack of funds for such services as proper street and park maintenance, youth programs, library programs (including the long promised permanent and currently and currently unfunded home for the Biblioteca Latinoamericana), among a host of other unmet promises – many of which were made in the heat of campaigns for election.
So far, there has been scant official communication to the public as to the precise method of funding the giant give away to the Warrior team and its owner Christopher Cohan.
There has been limited public discussion and much speculation regarding new sources of revenues for the ailing, or some might say over extended, General Fund.
In the Task Force there has been discussion of in-depth audit reviews of several departments, such as the police and fire departments where scheduling and overtime issues have been pointed to as possible areas for some savings. The environmental services department is mother department whose budget has grown dramatically since the “Recycle Plus” program was established and is scheduled for an in-depth City audit.
However, it is the impact various projects, some built in the late1980’s and developed by the Redevelopment Agency, that are given major blame for causing this structural shortfall.
Critics say that several elements contribute to this shortfall. The Agency, by law, can engage in capitol projects but cannot fund operational costs. One element is that there are numerous Agency projects that now require General Funds for operation such as the Convention Center, costs associated with the entertainment businesses and the Arena in downtown San Jose. The other is the huge amount of property tax revenues that have been diverted to Redevelopment until the year 2040 at the least.
Furher, Billie Wachter, a San Josean and long-time advocate of the poor, in particular the working poor, and others as well point to the unwillingness of the Mayor to take seriously the recommendations of the last Grand Jury Report, which strongly recommended that the San Jose Redevelopment Agency be held accountable by a process that would begin with an accounting system that would follow acceptable accounting practices and be subject to audit.
The Grand Jury also questioned some of the expenditures incurred by the Agency. Included was a recommendation that the Agency/City keep the public better informed and included in the decision making involving Agency projects.
The fiscal status of the City seems to be extremely fragile. There is talk among certain quarters that San Jose is following the lead of Orange County. A poor investment strategy in that County led to a financial fiasco wherein default of payments to lenders was the only alternative, if the taxpayers/voters refused to increase taxes. They were forced to default with a loss of almost $1.3 billion.
In response to a query by this writer to a City Hall official regarding the possibility of bankruptcy and a similar fate as that of Orange County, the answer was that it could not happen and the explanation was given that the “City would cover its expenses by either cutting services drastically or it would increase taxes or fees or implement all three options to meet its debt payments.”
The debt repayment for the new Convention Center alone is alarming. That debt is paid out to the General Fund which is then reimbursed by the Redevelopment Agency, which gets its money from the tax increment revenues of the merged Redevelopment Project Areas. The annual sum of that bond repayment (debt) is $12 million this year, by 1999 it will be $13 million, $15 million by 2006 and $17million by the year 2022. This is only one of the many projects that have been constructed by the Agency. According to some reports, the annual debt service for the Agency at this time is almost $80 million annually. It is extremely difficult to get any sort of project total from the Agency itself.
The Agency City Council is now considering the refinancing of some of its debt. At an Agency Finance Committee meeting last week, they explored the pros and cons of obtaining a variable rate debt reissue in the form of a Bond Anticipation Note, which would allow the City/Agency to sell a bond note of “$15 million or so.” The Agency staff advises this, even though it requires that there would then be a subordinate lien on Agency tax increment revenue. It is explained that the, “lien would be junior to Agency parity debt but senior to the Convention Center debt.”
Such a possibility should alarm the residents of San Jose, since the General Fund would not be first in line for redevelopment reimbursements regarding the debt service payments for the Convention Center. Another matter is the City’s recent admission that it is short $55 million to construct the Agency projects that have already been approved for the 1996-2000 Agency Capitol Improvement Program.
It was several weeks ago that the New Realities Task Force was further given the charge of finding‚ “$20 million in new revenues” to replace a $20 million loan to the Agency to continue its projects in addition to finding new sources of money to pay for City services currently provided for by the General Fund
It is with this backdrop of financial difficulty that the City has announced that it has offered the Warriors at least $43 million to move to San Jose. This does not include other giveaways of City funds as well as yet unknown concessions to the Sharks to get them to go along with the deal. Unofficial reports are that the total give away will exceed $100 million.
The Mayor has promised sports enthusiasts that her plan to move the Warriors will insure that “no new taxes will be paid by our residents, that there will be no cuts in existing City services, that there will only be minimal future risk to the City’s General Fund and that the name of the team will be changed to the San Jose Warriors.”
It came as a surprise to City Hall watchers to discover, on Saturday morning, a meeting notice for a Special 10:00 a.m. meeting Sunday morning in the Mayor’s conference room, posted in the kiosk at the front door of City Hall.
According to the Mayor’s chief of Staff, Gary Robinson, the emergency meeting was scheduled to give direction to the staff in the negotiations designed to bring the Warriors to San Jose. He reiterated that the public would not be allowed to address the assembled City Council, even though there were at least 20 people who had hoped to address the Council at the “Special Meeting.”
The small contingent of media pressed for more information as well, but were also rebuked. District 3 David Pandori left the Special Meeting within minutes. Since the public was barred, it was uncertain what prompted him to leave early.
The public was ushered out by George Shirakawa Jr., who the Mayor had asked to escort those present outside the “security doors to the Mayor’s offices.” Questioned on his actions, Shirakawa responded that this was not his wish m but that he had been asked to do so. This writer asked why he did not instead say that this was not his desire and tell whoever felt such drastic action was necessary to do it themselves. He did not respond.
The discussions have been swift and private. Gertrude Welch, a long-time housing advocate and community leader was at City Hall with hopes of addressing the Council. She said, “I am very concerned with the fiscal crisis the City is in and its inability to address the needs of homeless people and those searching for affordable housing.
Ron Johnson, a San Josean and a housing advocate, pointed out that the Mayor, claiming a money shortage in the Redevelopment Agency budget, had several months ago reduced the Affordable housing budget by $7 million.
Welch asks, “Where is the money coming from?” She explains, “I am concerned with the lack of accountability of the Council to the public.” She adds, “There is a lack of public input again and that reminds us of the patent dismissal by the San Jose City Council Grand Jury report.”
This cavalier attitude on the part of the City Council is causing greater and greater concern.
(See a Letter to the Editor on page 2 from “Choose: Millions for Kids Not Millionaires,” a community group that is questioning the purposed Warrior subsidy.) © La Oferta Newspaper.