Borrow or Pay Out of Pocket?

The Council last week made the second SERAF payment to the state. SERAF is where the State raided all RDA coffers in California—again—in our case taking $75 million from San Jose. 

The state allows payment of the SERAF to come from the housing department if a city chooses to do so.  This second payment of $13 million is due this week so Council had to decide to pay or perhaps not pay or even to cease RDA operations.  I have advocated paying the state with housing department funds. 

What was decided, however, was to issue commercial paper to replenish the housing department as a way to finance the payment. Yet there is more than $13 million on hand in the housing department that would not require borrowing. 

Ultimately the general fund is at stake for commercial paper, in the same way that the general fund is on the hook for the Hayes Mansion and golf courses.

I voted no, since I felt “Why borrow when you have cash in your pocket?” We do not get “miles” or some other reward for borrowing.

I understand that we would not be able to continue with two more affordable housing projects if we did not borrow, but felt that was OK since neither project will be paying property tax to pay for city services. I could contemplate borrowing if we were going to get something like road repair but in making a payment to the state I would rather just pay it and be done with it.

RDA was not meant to last forever but the recent settlement with the County of Santa Clara, which included the old city hall and was approved in closed session, makes closing the RDA even more complicated.


  1. Pierluigi,

    I agree 100%, we’re tapped out here in SJ in terms of adding more housing without incremental funding to pay for the necessary infrastructure. 

    You mention road repair.  Because you’re the only council member with any sense, I’ll ask you here in SJI to do the residents of SJ a giant service. 

    As I recently read in the “Murky-News” and the “WG Resident,” street resurfacing can add many years to the life of the underlying road.  I believe the article mentioned that the life may be extended by as much as 20 years! 

    I believe that any good accountant or financial analyst would classify that sort of a life extension as a capital improvement, rather than maintenance only.  Think about it – when a business rebuilds a piece of machinery, the cost becomes a capital item and is posted on the balance sheet as such.

    That being the case, I don’t see why the SJ Capital Budget Account cannot be used for much of the work needed to fix our poor streets.  I know that our politicians, lobbyists and developers favor using capital money for pet projects only, but that’s simply not fair.

    Please do look into this matter.  We taxpaying residents would like to be on the receiving end of some City services that are rapidly disappearing.  Thanks in advance for taking up this issue.

    • Excellent point about treating roads as a capital improvement, and while we’re at it, let’s look at what else in the Capital Improvement account and the “Special Funds” accounts can also be appropriated more sensibly.  I live in Willow Glen, where we have a brand new playground getting built over a perfectly fine existing one, and a new fire station slated when the existing station works fine.  No private business would build “nice to haves” while slashing necessary services.

      • Glad you agree.

        Guess Pier doesn’t take this seriously.  It does, after all, torpedo the Council’s ability to stash money for their favorite projects.

        • BP & Greg,

          The funding for this new playground came from the construction and conveyance tax. The source of the tax comes from the selling of homes in District 6. These funds are restricted by City law to park equipment, library materials and fire dept equipment.  This allowed a new/safe playground for kids. For the first time the playground will allow children in wheel chairs to participate. 

          Changing how the construction and conveyance tax is allocated could be changed by San Jose voters however last time there was a poll likely San Jose voters did not want to change the allocation.

          New fire station construction are paid for by a voter approved bond. State law does not allow a City to allocate tax exempt bonds to other types of spending like wages.


        • Pier,

          I don’t give a whit about a park.  You completely overlooked my request about looking into treating substantive road repair as a capital improvement, which would allow the capital budget to fund the cost.

          If you or other council people choose to keep the capital and special funds locked up, don’t be surprised if we, the voters, take measures into our own hands in terms of initiating legislation to do what you won’t.

  2. Governments at all levels have been mortgaging our childrens’ and grandchildrens’ futures for decades to finance one feel good program after another, most of which have been abject failures; or, in the case of the federal government, financing wars with the Social Security “Trust Fund”.

    Decades of welfare and educational experiments, leaving the recipients no better off than when they started.

  3. Incurring more debt is absurd though it sounds as if this decision has been made. Paying with cash on hand WOULD have been the right call by the council. The affordable housing projects are “liabilities” with respect to services. They will generate calls for police service yet not pay for same in any way. Considering that the CSJ will lose 100+ police officers come July 1, and if you believe the saber rattling of Reed, 250 police officers, this was an easy decision. I would love to see the votes on this issue made public.

  4. I feel better with RDA money going back to the state, instead of lining the pockets of real estate developers.

    There were so many mom and pops restaurants and shops that the RDA used eminent domain on to get the AXIS tower up.  That, and the city gave the property up at a substantially reduced price from it’s assessed value.

    Jerry Brown is a pretty sharp guy.  Some are going to poo poo on my choice of governor, but he knew that RDA’s across California were nothing more than a pig feed trough filled with dollars. 

    Considering that some of what went to Axis was for “Low income housing” it comes as no surprise that Mr Brown is on a mission to rid the state of any and all organisations that misappropriate our tax dollars.

    I would just consider these warning shots.  This goes not just for SJ, but any municipalities.  You want to stop having the coffers raided?  Stop irresponsibly wasting our tax dollars.  Mr. Brown sees through your smokescreen and will call you on it.  He will shutter you down to Chinatown.

    It’s not a State vs SJ issue Mr Oliverio, Mr Brown is on the taxpayers side.  It’s a taxpayer VS San Jose issue.

  5. Pierluigi,

    I have two questions, if we build more affordable housing ad annex other cities into SJ, how on earth do you plan to provide public safety to everyone? Secondly, when giving stats on the number of citizens in SJ, are you adding in the number of people being annexed to SJ?

  6. Our current Mayor and Council are not interested in solving our budget problems. They only create more problems. Look at the fees and charges. They are REDUCING fees. Revenue was low so we had to cut positions. This fiscal year (10-11) revenues are actually up and yet instead of buying back some of the cut positions and improving customer service, the Budget Office is recommending to reduce fees and cut more positions. It makes NO sense! Even in the dot com boom we did not reduce fees, yet they want to reduce them next year. They blame everything on City employees and retirement and yet they are reducing fees.

  7. Sorry.  I was banging my head on the computer desk after I read that the City Council was actually contemplating borrowing money to build “affordable housing.”

    > I understand that we would not be able to continue with two more affordable housing projects if we did not borrow, but felt that was OK since neither project will be paying property tax to pay for city services.


    There’s PLENTY of housing already available for “affordable housing”.  Building even more affordable housing is such a stupid idea that only a government could think of it.

    Just puck up the phone and call Fannie Mae and ask them if they have any excess housing stock that they would let go of for cheap.

    For criminy sakes.  YOU PEOPLE ARE NUTS!!!!

  8. ” the Budget Office is recommending to reduce fees and cut more positions. It makes NO sense! Even in the dot com boom we did not reduce fees, yet they want to reduce them next year ”

    San Jose decades of highly restricted land use and anti business polities along with highest taxes and fees in SCC and SV has lost our city 1000’s of businesses, 100,000’s jobs and $100’s millions in tax revenues causing much of city’s budget problems c

    Not enough businesses and jobs for residents

    Reducing San Jose fees and taxes makes very good budget sense since over 50,000 residents go to other cities for jobs because San Jose has less businesses and jobs per population than most other local cities meaning we lose $40-100 million or more in business related tax revenues

    Not enough Retail stores and shopping centers

    We need 3- 6 additional large shopping centers like GE or Coleman Centers for our residents who drive many miles to nearby cities to shop   We could add 10- 15 large box stores and each generates $1 million in sales taxes SJ has for al lease 10-15 years lost over $30 million a year in sales taxes to other SCC cities because of years of restrictive retail shopping land use and anti big box store polities

    Not enough business Hotels outside downtown near high tech companies cost city $15-20 million per year due to decades restrictive land use policies

    San Jose needs to becomes business friendly, lower business taxes to competitive for business / jobs, and restrict housing until jobs catch up to balance jobs / housing ratio or we will never solve our budget problems since housing service costs more than taxes paid while jobs pay more than city service provided costs

  9. Yep we need more housing so we further tax the Police and Fire! Murders are high, fires everywhere! We need a strong Couuncil! Oh yea that’s right they are busy being Drunk! We need more Public Safety! Oh yea no strong Council!  Well I guess I will take my family to the Sewage plant for a picnic and see the $6 million art project. Hopefully it will be safe there! You guys are all fools! Wake up citizens! It is time for a change! “Dale Warner for Mayor!”

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