The State’s Ginsu Knife

Do you remember the commercial for Ginsu Knives from the late ‘70s?  It would show a sharp knife on TV cutting through everything from tomatoes to tin cans. The announcer would repeatedly say: “But wait! There’s more!”

Well, just when you thought we had a balanced budget for the City of San Jose, the state of California has said “But wait! There’s more!” The state’s own Ginsu Knife just slashed our gaunt budget’s belly. The newly passed state budget will hurt the cities and counties. As much as local municipalities think they are independent from the state, this budget should serve as a wake up call and reminder that the state can take from us without permission.

Counties and cities are not Sacramento’s primary constituents; they have other interest groups that apply more pressure.

As a result of the state’s recent action, San Jose will lose property tax revenues of more than $20 million out of the general fund—which is equivalent to operating all the neighborhood libraries citywide. This will equate to fewer services from the city as there will be fewer city employees providing some type of service, whether it be code enforcement or neighborhood watch, etc.

$74.8 million will be taken from the Redevelopment Agency (RDA) (However, the $40 million of RDA money for affordable housing was not touched by the State, since Sacramento wants San Jose to continue building more affordable housing). Headline projects like the Convention Center expansion, proposed baseball stadium, locating clean tech jobs in San Jose and Strong Neighborhood Initiative projects will be thrown into a casket.

In looking for a lemonade-out-of-lemons solution, I thought maybe we could just make a quick $74.8 million lump sum payment on the outstanding RDA bonds and dodge the state, since there would be no money, and we would at least have less debt down the road. Not an option. The state would force RDA to borrow the money to pay the state or make the City of San Jose liable.

However, there is one option that might allow for projects to go forward. RDA is one of the only tools cities have for economic development which provides genuine stimulus to the economy with construction jobs, and, more importantly, future revenues to the city. The state this year would allow RDA to borrow money from the $40 million affordable housing funds as long they were paid back by 2015. This would simply require a majority vote of the city council.

If San Jose would do this then it would allow for economic development that could bring long-term revenues to the city of San Jose.

It is time for the Council to prioritize what is most important in 2009 and moving forward. The choices are more affordable housing during a time of current housing affordability in both rental and for ownership housing OR economic development that could build the tax base of our city to pay for city services like public safety and libraries. This would mean less affordable housing units built this year; however keep in mind San Jose has been the number one provider of affordable housing in the state of California.

Affordable housing does not pay park fees or fees to pave streets and in many cases does not even pay property taxes for ongoing city services. So it’s a net loss on the balance sheet.

What would you choose, more affordable housing or economic development? Do you think it’s time that voters started voting on how much affordable housing is built in San Jose?

On a separate topic: Last week, I was asked why I did not sign the Police Union pledge. I do not sign pledges for interest groups, period.  I believe signing pledges can be problematic. For example, many of our state legislators signed pledges to never raise taxes. However, we have a state that is mostly dependent on personal income tax and capital gains tax to pay for services, so a recession can hurt the budget quickly. So maybe during times like this it is prudent to cut spending but also to reinstate the vehicle license fee or raise the tax on gasoline while dropping taxes on personal income.

It might be any number of scenarios; however, signing a pledge can get in the way of doing the right thing at the right time. As far as my support for public safety, I have two years of votes, two years of public statements, 121 City Hall Diary blogs on SanJoseInside.com, and a public safety page on the District 6 website that San Jose residents and the police union can view to ascertain the level of my support.

 

19 Comments

  1. The inability of our state legislature and the governor to do their jobs should not allow them to raid cities, counties, etc. to make up their fiscal shortfalls.  They continue to mandate feel good programs with no funding source.  The inefficiency of CalTrans is unbelievable.  The state “leaders” routinely raid gas tax money for things other than roads.  The state takeover of K-12 education has been a disaster from day one.

    Please remember this next election day.  We all gripe about the legislature, senate, Congress, ,etc; but the incumbents keep getting re-elected.  They have proven they cannot lead, govern, even pass a budget on time.  Throw the bums out, and let’s start fresh.

  2. Calling it affordable housing blurs the issue.  “Affordable housing” does not actually make the average renter’s housing more affordable. 

    Call it “subsidized housing”.  That is what it is: a housing subsidy for the small number of people who get one of the subsidized units.

    If you don’t like to call it “subsidized housing”, think about why that is.  Then get to work on policies that actually make housing less expensive for the average renter.

  3. I hate to sound like one of the anti-downtowners here, but I’d rather see places like the DeFrank Center saved over stuffing the coffers of the RDA. The proposed stadium (hardly a reality at this point) will be privately funded, minus a few peripheral details. The downtown housing market is still forging ahead (slowly) with new condos selling now and still to be built, according to the monthly progress reports. I think we can loosen the leash on nurturing downtown and allow it to take off like any other capitalist market while saving libraries and the late-night 22 line.

    As for affordable housing, neighboring valley cities need to start picking up the slack. San Jose has carried them while they attract lucrative jobs to their idyllic burbs with well-kept parks and pristine streets. Let’s protect what we have right now and disperse the burden to other municipalities.

  4. John #1 – you know very well that one can’t blame the inability to pass a sensible budget on the incumbents.  It’s the ridiculous constraints under which they work, primarily the 2/3 requirement for a budget to pass.  As long as members of the opposite parties fundamentally disagree on the role of government and members of the minority are required to vote for a budget, there will be no good plan.

    Unshackle the legislature and let it operate by majority rule.  Then the voters will know who is responsible for the solutions and/or mess and can vote them out of office the next time.  At this point, I blame the legislators from other districts, but if my legislator could vote their conscience and the budget failed, I could hold them accountable.

  5. I won’t be shedding any tears for the RDA.  Their projects seldom, if ever, have contributed substantive revenue for the City.  Downtown must finally stand on its own after sucking up billions of tax dollars over many decades. 

    As for affordable housing, residential construction never pays the associated infrastructure costs. We’d do well to demand that Mello-Roos assessments be a part of any project.  While that will add expense, it’s only proper that such projects pay their own way.

  6. “What would you choose, more affordable housing or economic development?”

    Why must we choose? the money needs to go to pay down the enormous level of government debt.

  7. Hugh, I had to laugh when I read your comment.  The old “what/when or what/when” routine, commonly used in sales pitches. 

    The salesperson attempts to deflect any judgment you might have regarding the desirability of the product or service.  In the extreme, it goes like this: “So, may we come over to remove your kidney on Monday or Wednesday evening?”  Remember, politicans are salespeople.

  8. Pat,

    Yes, that’s my solution – do you have a better plan or would you be comfortable in picking up the incremental tab for roads, schools, libraries and safety officers?  I must admit, I’d sooner see you open your wallet and pay those bills. 

    All kidding aside, the money must come from somewhere.  Mello-Roos is a tried and true solution.  If the added burden is too much, then don’t build the affordable housing because, obviously, it’s not really affordable… now is it?

  9. #6, Greg, so your answer to affordable housing is to increase it’s cost by increasing fees?

    #7, Hugh, I think you’re on the right track. It’s time to start paying the piper, rather than passing it on to later generations.

  10. Agree w/#1’s comment about the next election. Didn’t go far enough, though. Most of the City Council is every bit as corrupt and in need of replacing—especially with regard to the author of this article.

    Anyone who defends a tax increase during a severe recession is doing it for only one reason: his special interest pals are tugging at his sleeve, begging him to keep the taxpayers’ money flowing into their pockets.

    And he’s listening to them, not to us.

  11. Greg Perry,

    And we could then be forced into a draconian water rationing program.  As well, we’d have spare the air days for half of the year.  And traffic, fagedaboudit… allow for four hours of public transit time each day, or be tied up in freeway gridlock.  What a wonderful place SJ could be if only….

  12. #15 G. Howe,

    People always make those arguments (water, traffic, air quality, public transportation) for not allowing housing markets to function freely.  The problem is that those very people who want to control the population also position themselves as “affordable housing” advocates.

    How many times have politicians supported open space laws and building restrictions, then turn around advocate for more “affordable housing”?  People should advocate for whatever restrictions they want, but be honest about why you want it and what the consequences will be.

  13. #5, David said:

    “Unshackle the legislature and let it operate by majority rule.”

    What, are you, NUTS??

    David has lost it. The ONLY thing keeping the gang of self-serving ravenous hyenas from attacking and expropriating the SJ residents’ hard-earned money is the 2/3 majority requirement.

    What these BureaucRatic tax-suckers are saying is this: Hey guys, make it real easy for us to majorly jack up your taxes. “Don’t you people understand that you’re just sheep to be sheared for our convenience? Get with the program! Open your wallets for us.”

    The attitude of these elected thieves is plain to see: get owned by an out of town developer, do his bidding 100% of the time at the direct expense of the residents, then mouth meaningless, self-serving and hypocritical rationalizations about why the residents just had to be screwed over by their “Representatives”.

    Is there any limit at all to the shameless, ravenous greed of the council members? They routinely sell out the local residents by accepting money and favors from their out of town developer cronies.

    These out of town developers [P. Oliveros’ Summerhill new best friends come to mind] come to town, extract $multi-millions from the local residents, then vamoose, moving on to the next targeted city, where they can extract $Millions more at the direct expense of that city’s residents.

    They have learned to game the system. Where are our Representatives on the council, whose job it is to get the best deal for the city, instead of the out of town developer??

    And the despicable City Council goes along with the WHOLE THING. Why? Because they are bought and paid for by Summerhill.

    The residents have been COMPLETELY left out. We’re screwed.

    Next election, remember these incumbents who sold out the city’s residents.

    I’ll be around to remind you about how these city bureaucrats and council members have SOLD OUT the residents—in return for becoming the out of town developers’ tame pets.

  14. Joe Average,

    You hit the nail on the head… politicians are nothing more than chameleons, pandering as they do to this group, then that. 

    Lobbyists, however, are members of the “oldest profession.”  They’re just on the very high end of the pay scale.

  15. #4-  Housing costs are determined by supply and demand.  If you think the price is too high, then we need to either increase supply or decrease demand. 

    Decreasing demand is a bad idea.  By definition, it means making SJ a place people don’t want to live.

    So, if you want lower prices, you have to increase the overall supply of housing.  That means changing zoning to allow enough new construction to balance supply and demand.  To cover current employment, we need about 150,000 more homes in the valley.

    You aren’t going to build that many subsidized homes, but you could build them market rate.

  16. All this weeping and knashing of teeth over the Legislature’s raid on Redevelopment funds to help balance the State Budget, as if it were some sort of injustice, is puzzling.

    For decades the cities have been enabled by the Legislature to set up entities such as Redevelopment Agencies, Business Improvement Districts, and San Jose’s upcoming Distinctive Neighborhoods Program.  These allow the cities to trash property rights, sieze substantial control of local business, and keep, through Tax Increment Financing, significant chunks of property taxes which might otherwise go to pay for schools and streets.

    Now, in a time of need, the Legislature is asking for its cut of the proceeds.  What could be fairer?

  17. #13, Roberto, follow the money. Developers aren’t the only ones who benefit from rampant development. Development creates construction jobs, hopefully for San Jose citizens. That’s not necessarily a bad thing, but creates another interest group pushing for development, putting more pressure on our representatives to allow further development. Which, as #14 points out, can be one way to solve our housing “problem.”

    Unfortunately, for residential development (which is where most of the pressure is) once the construction is complete, the jobs disappear. We need to be careful how much land is converted to residential, at the expense of future employment…

    As Mayor Reed has mentioned more than a few times, it’s the “special interests” who attend meetings and make noise. “Normal” citizens aren’t making their voices heard. That’s what needs to change.