CITY COUNCIL STUDY SESSION

PROPOSED 2002-2003 CAPITAL BUDGET

PROPOSED 2003-2007 CAPITAL IMPROVEMENT PROGRAM

and

PROPOSED 2002-2003 OPERATING BUDGET

May 20, 2002

PRESENT: Council Members Campos, Chavez, Cortese, Dando, Diquisto, LeZotte, Reed, Shirakawa Jr., Yeager; Gonzales

ABSENT: Council Members: Williams.

STAFF: City Manager Del D. Borgsdorf, City Attorney Richard Doyle, Assistant City Manager Mark Linder, Senior Deputy City Manager Darrell Dearborn, Budget Director Larry D. Lisenbee, Assistant Budget Director Jennifer Maguire, Mayor’s Budget and Policy Director Joe Guerra, Mayor’s Budget and Policy Assistant Jennifer Galliart, Assistant City Clerk Nancy Alford, and Legislative Secretary Rachel Thrower

Documents filed: Proposed 5-Year Capital Improvement Program and Proposed FY2002- 2003 Operating Budget

The meeting was called to order at 8:40 a.m. in Council Chambers, City Hall, for the purpose of completing the review of the Proposed Capital Budget for Strategic Support, City Facilities and Equipment CSA, and to review the Proposed Operating Budget for Fiscal Year 2002-2003.

PROPOSED 2002-2003 CAPITAL BUDGET and PROPOSED 2003-2007 CAPITAL IMPROVEMENT PROGRAM

Strategic Support CSA – City Facilities & Equipment

Director of General Services José Obregon, Team Leader for the City Facilities and Equipment CSA, accompanied by Terry Roberts Deputy City Manager for Capital Projects, and Acting Deputy Director of General Services Randal Turner, provided comprehensive summaries of the CSA’s activities involving projects that allow for repairs and maintenance of City facilities with the utilization of three elements: Municipal Improvement Program, Service Yard Program, and the Civic Center Program, each included in the CIP Program. Director Obregon stated the

Municipal Improvement Program incorporates those programs which are not linked to any of the Specific CIP Programs. For FY 2002-2003, Staff is proposing funding for four ongoing projects: Arena Repairs, Fuel Tank Monitoring and Replacement at City facilities, Methane Monitoring and Control Program at City Landfills, and appropriations for unanticipated emergency maintenance needs in City Facilities. He noted this particular program is also intended to address deferred maintenance needs of the City facilities; however, with the recent implementation of specific programs such as the Parks and Library Bond Program and the recently approved Public Safety Bond Measure, many of the deferred maintenance needs for City facilities are being addressed in those specific programs, and the Service Yard Program is intended to provide money for projects that will do maintenance and repair at the five Corporation Yards. Regarding the Civic Center Project Budget, page 59 of the CIP, and amounts included in the Parking Budget on pages 454 and 455, Deputy City Manager Terry Roberts presented actual and expended funds identified in Fiscal Years 1999-2000, 2000-2001, and 2001-2002; $300 million in construction and land acquisition costs categorized for the Civic Center; implementation strategy for the Council-approved $5 million reduction in the total cost of the Civic Center Project; contract award schedules for the first of seven bid packages, the excavation contract to be awarded in June 2002, and the remaining contracts to be awarded within FY 2002-03.

Council Member Chavez stated Staff is already working with the Redevelopment Agency regarding impacts of the Service Yards Study Strategic Plan; encouraged Staff to work more closely with the Redevelopment Agency in the completion of the Historic Landmarks issues and the construction of more parking. She recommended Staff look at the area along Guadalupe Park for opportunities to house certain service equipment used in the Park; and stated that when the final phase is developed, discussions should occur with Staff regarding linking all of these project elements to the Specific Plan. She stated Staff should continue working with Redevelopment regarding the Parking Study, plans for the lot and the impacts of vacating the property and any future development of the property, and the redeployment of some of the Main Yard uses to alternate sites to meet operational needs.

PROPOSED 2002-2003 OPERATING BUDGET

City Manager Del D. Borgsdorf presented a comprehensive overview of the Proposed Operating Budget, and Budget Director Larry D. Lisenbee provided the introduction to the overall budget as proposed for FY 2002-2003, identifying specific funds, the net operating budget, and the development strategies in each of the seven City Service Areas (CSAs) used in the preparation of the budget. He discussed projected declines in revenues, the five-year forecast and basic General Fund balancing strategies, and established budgetary guidelines. Using a slide presentation of graphs and tables, he noted resource changes and outlined the next steps in the scheduled Operating Budget Review.

Council questions and comments on the Overview and the Introduction: Regarding the chart of the Annual Budget Process, Council Member Reed asked Staff to add in the “Manager’s Column” the “Manager’s Budget Request” which was distributed as part of the forecast. He expressed concerns about the Business Plans and understanding what a Business Plan for a government entity should do, and that he had difficulty tracking the Business Plans in the

Budget. He noted some of the performance measures deal with things outside Council’s purview and others do not deal with the things which Council has the ability to impact. He stated the Business Plans do not reflect the fact that a shortfall is likely for the next five years; they address the challenges, but not how they are going to meet the challenges, other than efforts to be more efficient, which he stated is not specific enough for a Business Plan, and noted that projected revenues are insufficient to pay for public safety needs.

Economic and Neighborhood Development CSA

Senior Deputy City Manager Darrell Dearborn identified the Departments of Planning, Building and Code Enforcement, Housing, Public Works, Conventions, Arts and Entertainment, the Office of Economic Development, the Redevelopment Agency, and the Fire Department as Primary Partners in the CSA. He commented on the areas of community code enforcement, development plan review, building construction inspections, and long range land use planning. He presented strategies to increase the affordable housing supply, maintain the existing affordable housing supply, provide services to homeless and at-risk population. He presented recommendations to promote and implement neighborhood improvement strategies, institute and facilitate private development, and to enhance the quality and supply of the City’s housing stock, convention facilities, business/job attraction, workforce development, and recommendations to regulate/facilitate private development and fire safety code compliance.

Using slide presentations of graphs and tables, Director of Planning, Building and Code Enforcement Stephen M. Haase, Director of Housing Leslye Corsiglia, and Director of Economic Development Paul Krutko, Jr. provided high level summaries of trends, issues, and opportunities driving the City’s investment decisions, discussed outcomes and CSA investment strategies, summarized the progress of Strong Neighborhoods Initiative priorities and expansion of housing opportunities, highlighted major corporate and new retail developments, and discussed the Workforce Investment Network (WIN) investment proposal.

Mayor Gonzales suggested Council Members restrict their questions on the CSA to pages VII-15-28, and then each Department’s Budget will be reviewed separately. Regarding page VII-20, Mayor Gonzales asked Staff to report back to Council with an explanation of the percentage of housing units targeted in year 2002-2003 compared to the estimated goal in 2002-2007, and whether this appears to lower the bar, stressed the need to continue to aggressively pursue the 1,000-unit objective targeted in 2001-2002; given the performance standards, the goal will not be raised before 2010. Regarding page VII-21 B. 4 – Disperse Affordable Housing Throughout the City (Dispersion Policy), Mayor Gonzales asked whether the Hensley Historic Restoration project needed the assistance of a consultant; and suggested focusing a great deal of attention on this areas as more services are moved into the neighborhoods through the SNI programs. He stressed the need to make sure people feel very positive about these programs, and to make sure that the workforce that goes out into the neighborhoods is trained to achieve results greater than 55% in A-2 – Increase the Number of Housing Units Developed in Greater Downtown Area. He stated a one-year target of 7% is inadequate and should be higher and requested Staff review that issue.

Council Member Chavez stated Council should to consider how much the City’s role impacts the cost of doing business in San José; i.e., when developers come to the City of San José, is the City helping them, how long does it take Staff to “turn things around”, and is the City is contributing to high-rise construction opportunities. Where the City does have a role, she questioned what elements can be contributed to the budget document, and asked where the BioScience Initiative is found in the Budget document. She asked if the goals for retail in the Downtown are comparable with the infrastructure of the City; and are the goals related to all the programs in the budget.

Noting his comments regarding the Business Plan and its application to all the CSA’s, Council Member Reed stated the Administration should start with a Business Plan and then develop the Budget and go back to the General Plan; that’s not stated in the Plan or in the Performance Measurements, but it could be reflected in how the money is appropriated. He stated one of the purposes of the Economic Development Strategy is to improve San José’s jobs/housing balance to maximize its ability to provide adequate urban services to its residents. He stated revenue and the need to provide services has driven the City’s economic development strategy for the past 20-30 years, and the jobs/housing balance is a shorthand measure of that and is mentioned in the Business Plan, but since it is not reflected in the Performance Measurements, you cannot determine whether economic development has lost or gained ground. He state Performance Measurements should tell whether the City is making progress economically.

Council Member Reed commented on the amount of empty space in District 4 and suggested a short-terms strategy of focusing on tenant improvements. Regarding facilitating retail development in the downtown, he suggested tracking the Business Improvement District numbers of new businesses or rate of growth. On the economic base, he stated there should be a measurement of infrastructure as a performance standard.

Regarding Outcome 1: Strong Economic Base, reflected on pages VII-27-28, Council Member Reed noted the intensity of commercial and industrial land uses within the Intensification corridors within the General Plan, and the retention of existing land with “heavy industrial” designations, he stated this should not apply only to the intensification corridors, but to all industrial categories because that’s the future funding for City services. Regarding Outcome 3: Safe, Healthy, Attractive and Vital Community, he stated the added Performance Measures in this Outcome should belong to the first category, which is where the economic development occurs, and pointed out the competition factor provided by Santa Clara, Milpitas, Fremont and the surrounding cities and their abundance of vacant lands available for development.

Staff responded to remaining questions and concerns expressed by Council without any further requests for information.

Conventions, Arts and Entertainment

Regarding the overall Budget summary, Mayor Gonzales stated his March Budget Message included specific direction regarding Small Business Mentoring Program, which seems to be omitted from the Budget. Secondly, he noted there is no reference regarding direction to the City Manager and the Director of Planning, Building and Code Enforcement to work with the

Child Care Commission on a number of very specific issues, including City’s Zoning Code so Childcare Facilities may be open during non-traditional hours, and directed Staff to report to Council the status of the Mentoring Program and provide an MBA regarding the Childcare Program.

Council Member Chavez asked Staff to expand on the collaboration between the Departments of Conventions, Arts and Entertainment and the Office of Economic Development and Convention and Visitors Bureau as relates to marketing strategies, and to provide additional information on funds attributed to activities in and out of the Core area, specific event developments, marketing approach, and asked Staff to compile a summary of the tools needed to accomplish this. She questioned where to locate a line item for marketing promotions or a detailed breakdown of marketing efforts, and stated she would like to know how much funding is for marketing only, dedicated to the increase in activities as relates to events, cost recovery relating to fees and permits for small events in the Core, and whether the marketing strategy is at “cross purposes” with the goal of “Reunite/Reconnect with San José”. She requested City and Redevelopment Staff explore the numbers regarding contributions to arts and parades, etc., in the Core as well as outside, and to identify and summarize the resources and tools to promote those types of activities, and to align that with the goals to be accomplished.

Referencing Page 122, Council Member LeZotte stated the Mexican Heritage Plaza is being underutilized and asked to what extent does the Department of Conventions, Arts and Entertainment have a responsibility to help move multi-cultural events there, or to increase use of the facility, and suggested Staff get involved with the management and Director of the Mexican Heritage Plaza to expand their bookings and earned revenues and to decrease staff turnovers.

Council Member Reed requested when Staff provides a summary of marketing, he would like to know the impact on the festivals and cooperative efforts.

Referring to Page 119 and marketing efforts, Council Member Dando expressed interest in the number of events being held at the Civic Auditorium, the Montgomery, Center for the Performing Arts and how they relate to revenue and marketing, and stated that pending receipt of the results of the Study on the Fox Theater, Staff should return to Council with a report and recommendation regarding management of the Fox, operations of the Opera, the Tech Museum, and the Children’s Discovery Museum.

Office of Economic Development

Council Member Yeager asked regarding new retail development along commercial strips and the plan to get new businesses to locate there, how the City can be more proactive in that area. He stated Staff needs to identify the need and reach out to the appropriate companies, and asked Staff to report back to Council on outreach efforts for small neighborhood business opportunities, which he does not see in the budget.

Council Member Dando referenced pages 132-133 pertaining to the Revolving Loan Fund and asked how to increase use of the funds and requested Staff report back. Commenting on page 140, she asked Staff to identify job centers that have employment centers and stated she would like to see more of a coordinated effort of all City departments to work with youth employment issues, especially with summer approaching and she suggested marketing the City’s programs at high schools and City-wide.

Trudi Burney addressed the Council representing the Wildlife Center of Silicon Valley, and asked that funds be added to the City Budget that would support the WCSV site.

The Council recessed the Operating Budget Study Session at 12:00 Noon to meet again on Wednesday, May 21, 2002 at 7:30 a.m., Council Chambers, City Hall.

NANCY ALFORD, ASSISTANT CITY CLERK