March 9, 2009

District 8 Report

Tackling the Deficit

By Councilmember Rose Herrera
Special to the Times

District 8 is a dynamic community made up of diverse neighborhoods, unique shops, beautiful parks and sprawling hillsides. It is a great place to call home. Our strength is rooted in our shared commitment to protect the quality of life of our community.

Whether you are around your kitchen table balancing your family’s budget or at City Hall balancing the City’s budget, we are all making tough choices. I am writing this column to provide you with a clear and concise explanation of San Jose’s current budget deficit, factors contributing to the shortfall and opportunities that can help reduce it.

Ever the optimist, I believe the challenge to close a $61.2 million budget gap provides us an opportunity to find efficiencies and cut red tape. The quality of life for San Jose residents does not have to be sacrificed. This situation provides us an opportunity to review how we do business at all levels. Stakeholders and residents are sharing creative solutions on how the gap can be closed. I look forward to reviewing the Mayor’s March Budget when it is released on Friday, March 13.

How did we get here? The structural budget deficit is the result of revenues not keeping pace with expenditures. In short, we are spending more than we are taking in. As a result, the City began the Structural Deficit Elimination Plan in 2007 to help address closing the gap. Unfortunately, more still needs to be done. As we hear in the news, the economy continues to decline. That decline negatively impacts the City’s budget and the changes made to eliminate the structural deficit are still not enough.

This year’s budget deficit is projected to be $61.2 million dollars. Through 2014, San Jose expenditures are projected to reach approximately $1 billion annually while our total revenues are only expected to reach $921 million. This creates an $86.3 million shortfall. This figure represents a potential deficit if the City were to do nothing and stay the course.

Fortunately, the City Charter requires us to balance the City’s budget. Unlike the gridlock we saw at the State level, we are dedicated to balancing the budget without ‘politics as usual.’ Instead, you will see an open process that involves stakeholder input and thoughtful debate. If we are successful and the economy gets back on track, we could see a surplus as early as 2013.

Reviewing the budget we can identify three major cost areas:

Deficit as a result of operational costs: This is comprised of City personnel costs and the operation/maintenance costs for new facilities that are opening up – both of those costs are rising faster than operational revenues.

With the economic collapse, the annual City contributions to the City’s two retirement plans are expected to increase.

The growing backlog of infrastructure and maintenance needs based on the City’s inability to completely fund replacement and renewal projects.

While identifying these problems, we also received input from residents. A Citywide survey identified several areas of concerns for citizens. Two-thirds of residents said the following were “somewhat” or “completely” acceptable to cut: reducing the size of pay increases for City Employees, reducing benefits packages to City Employees, reducing library branch hours by one day, closing some City pools and aquatics centers and deferring maintenance of City buildings.

During the same survey, residents gave input on revenue generating ideas. They were favorable of a one-quarter cent sales tax increase, a ten percent tax on parking facility rates, a modernization of the Business Tax to adjust for inflation and revenue pricing plans. They also told us what cuts they do not want to see. One-half of residents found that eliminating crime prevention programs, closing bathrooms in parks, reducing street maintenance, and closing senior centers are “not at all” acceptable.

Several departments in the City are looking at reducing expenditures while increasing revenue streams. For example, the Parks Recreation and Neighborhood Services Depart-ment is actively engaging in a “Revenue & Pricing Plan” that is trying to recuperate costs on sports fields, pools and other venues.

All of these considerations are coupled with reducing overhead expenditures. Overall, the City has already cut 140.5 positions this year and will continue to make adjustments to address the deficit.

The City Council votes on the final City budget in June. There will be many tough decisions ahead and my colleagues and I are working to ensure that we have an open budget process allowing input at every step. While the City is working to find savings, we are also positioning ourselves for when the economy turns around. The City must be “open for business.” We must direct economic development resources to attracting and retaining employers of all sizes. I have had several meetings with department leaders and business owners to discuss bringing more jobs to San Jose and to Evergreen.

While the budget deficit is no easy mountain to climb, I want to assure residents that we are doing everything in our power to balance the budget. I am optimistic that with all the great minds we have working on the budget and with the thoughtful input from residents, we will craft a budget that protects the quality of life for San Jose residents while positioning the City for future growth.

I encourage all residents to provide their input on the budget process. Please e-mail suggestions to me at: district8@sanjoseca.gov, calling 408-535-4908, and attend upcoming public hearings listed below.

Important Dates in the City’s Budget Process:

March 17: Council hears the Mayor’s March Budget Message

May 12: Initial Public Hearing of the 2009-10 Proposed City Capital and Operating Budgets and the 2009-10 Proposed Fees and Charges Report

June 15: Final Public Hearing 2009-10 Proposed City Capital and Operating Budgets and 2009-10 Proposed Fees and Charges Report