October 31, 2008

District 8 Report

City’s financial health gets an A +

By Vice Mayor Dave Cortese
Special to the Times

No doubt the number one issue on everyone’s minds is the economy. The rising rate of foreclosures, the stock markets under siege, the warnings of a second depression – we are constantly reminded about how bad things are and how much worse they are going to get. It occurred to me that good news is seldom reported and if we do that a little more, people might have hope and faith that if our community sticks together, we will pull through. So how about some positive news about the financial health of the City of San Jose?

I feel like I am leaving the City of San Jose in good financial condition – it’s in better shape than you might imagine. Don’t get me wrong - there are still challenges. The city relies upon revenues from businesses and property taxes that are lower than what they should be. The good news is that the City has been proactive – during good years we built up our reserves to see us through the rainy years and, well, rainy years are here.

Each year when we look to plan the following year’s budget, we evaluate spending in a prudent and fiscally responsible fashion. We are careful with our reserves and we try to see how we can deliver city services in a more cost effective way. While other cities might draw down almost a quarter of their reserves to balance their budget, we don’t have to do that. Most families wouldn’t want to budget that way unless they absolutely had to and certainly they wouldn’t want their government to!

To demonstrate our budget successes, I’m happy to report that in May 2008, Standard & Poor’s, one of the three national credit rating agencies, raised the City’s general credit rating to the highest level – AAA. Moody’s reaffirmed the City’s high general credit ratings of Aa1 and AA+. This is the highest rating of any major city above 250,000 in population.[1] Compare this to what we constantly find in the newspaper about lowered ratings for companies and cities and the state of California. This is quite an accomplishment.

But more about the city’s financial health. Our total assets exceeded our total liabilities by $6.793 B – yes that’s billion!! These are the City of San Jose’s net assets. Included in this amount are unrestricted net assets of $377.4 Million.[2] These funds can be used to meet the City’s ongoing obligations to citizens and creditors. As I stated earlier, these are difficult economic times. Despite the difficulty the revenues for the City’s activities increased 9.6%. Any revenue gain in these tough times is amazing. On the expense side, I’m pleased to report that the City reduced its expenses by 9.7%.[3] These reductions were the result of thoughtful discussion about ways the City can operate better and more efficiently.

In certain areas we even increased funding. Given the state of the housing market the City recognized that we could help in spurring activity. Many of the projects developed over the past several years have experienced difficulty in sales. The City of San Jose, due to its financial health committed funds to potential buyers in the form of second mortgages. We could only do this because of our financial condition.

In the end, I want to assure you that there are no rose colored glasses here. Things in the overall economy will likely get worse before they get better. Families, neighborhoods, cities and the nation – we will all need to be part of the solution. We need to work together and help each other to get through this crisis. In addition, we need to have brave leaders at the helm, who understand the delicate balance between financial risk and fiscal prudence, so that we can continue to budget soundly, deliver services efficiently and effectively, and in the end, continue to make San Jose the best place to live in America.

It remains my pleasure to serve the residents of District 8. Please don’t hesitate to contact me at dave.cortese@sanjoseca.gov or (408) 535-4908 if ever you feel I can be of assistance.