FINANCE AND INFRASTRUCTURE COMMITTEE

Meeting Report

October 10, 2001

PRESENT: Chair Pat Dando, Councilmember Chuck Reed, Councilmember John Diquisto, Councilmember Nora Campos

ABSENT: None

STAFF: Kay Winer, Bill Hughes, Jerry Silva, Larry Lisenbee, Nancy Johnson, Scott Johnson, Wandzia Grycz, Ralph Tonseth, Terri Gomes

The meeting was convened at 2:30 P.M.

a. Consent Items:

1. Monthly Investment Report for August 2001 (Finance)

2. August Monthly Report (Auditor)

3. Sales and Business Tax for Quarter Ending June 2001 (Auditor)

Upon motion of Councilmember Diquisto, seconded by Councilmember Campos, the Committee approved the Consent Items.

b. Monthly Financial Report for August 2001 (Manager)

Larry Lisenbee, Budget Director gave an overview of the report. He stated that it has been four months since the last Financial Report was presented to the Finance Committee and the world has changed significantly since then. The events of September 11 will have an impact but staff can not predict how bad it will be. This report is not an indication of the future because it only covers the period prior to September 11, but the August numbers do indicate a slowdown. This year’s budget was built predicated on a slowdown but was based on a temporary slowdown only. As a result of the downturn, some of the actions that staff is taking include:

§ Hiring freezes in isolated areas, particularly in the development areas, the Airport and Convention Center

§ Holding on to some of the year end fund balance for reserves that might otherwise have been recommended to commit to other places

§ Holding on to TOT money until mid-year (TOT money that is normally distributed to the Convention and Visitor’s Bureau, the Convention Center and to arts groups.)

§ Looking into other options and recommending that the City remain cautious.

Larry added that the City of San José is better off than most Cities and Counties in terms of Sales Tax decrease, but worse then the State as a whole.

Chair Dando asked if the Federal Government would reimburse the Airport’s security costs.

Ralph Tonseth, Airport Director answered that staff does not know at this point. There may not be any money left for reimbursements after the Airlines and the City of New York’s needs are met. Currently the Airport is spending $175,000 a week for extra security. The Airport Department will reimburse the Police Department for $100,000. He added that the Airport revenue is currently at 50% of what it was prior to September 11.

Councilmember Reed asked where the City would stand in the event of a bankruptcy filing by the various airlines.

Ralph responded that there are options for making up the lost revenues, including charging the remaining airlines. Another option would be to draw down on the Airport’s enterprise fund. In no case would the City’s General Fund be affected.

Councilmember Reed asked for a status of the Airport’s accounts receivable.

Terri Gomes, Deputy Director of Aviation answered that the Airport is 85% current in its collections and is actively monitoring the airlines and rental car companies.

Councilmember Reed asked how the Convention Center was impacted.

Nancy Johnson, Director of Conventions, Arts and Entertainment stated that shows were cancelled in the weeks following September 11 but have been rescheduled. Attendance is still down however. It is too early to revise revenues.

Councilmember Reed asked if there were any efforts to fill hotel rooms.

Nancy answered that Councilmember Chavez has held a series of workshops with the Downtown Association, the Chamber of Commerce, the various cultural groups and members of the community. The objective of these workshops was to brainstorm on ways to get the community to stop “cocooning”. A marketing tool kit will be distributed throughout the community. The goal is to restore San José’s economy.

Chair Dando stated that she feels that the majority of people feel safe but that layoffs are keeping them from spending their money.

Councilmember Reed suggested that the marketing efforts be focused on locals since people are not flying right now.

Kay Winer, Deputy City Manager added that the Convention Center consultant found that a large segment of Convention Center users are local people. She agreed with Councilmember Reed that focusing marketing efforts on locals is a good idea.

Upon motion of Councilmember Diquisto, seconded by Councilmember Reed, the Committee accepted the staff report.

c. Report on Due Diligence Work Performed on e-Government Initiatives (Information Technology)

Wandzia Grycz, Chief Information Officer gave some background information and an introduction to the report.

Steve Ferguson, DMG Maximus gave a presentation which summarized the report. He stated that the three highest priorities were:

§ Organizing Web information by Customer Service Area (CSA) rather than by department as is traditionally done by cities. The “Resident Wizard” software tool would allow this

§ A Service Request System which would track the City’s response and the eventual resolution

§ Online payment capabilities

Steve then gave a Due Diligence Summary which included:

§ Cost estimates are determined reasonable by Arthur Andersen’s previous report.

§ Some costs were not included in the plan, including infrastructure and staffing.

§ Aggressive schedule with overlapping tasks were assumed by Andersen, which Maximus recommends be slowed down.

§ Active City participation may extend the project schedule

Steve then covered the recommended next steps on the staff report.

Chair Dando asked if there were any other cities that had a “backbone” in place for this kind of software.

Steve answered that he is not aware of any other organization that uses this and that the City of San José has set the bar higher.

Chair Dando replied that if there are no other cities that are doing this, then San José might find it difficult to move aggressively. She asked how the City could move towards something that doesn’t exist.

Steve answered that there are promising prototypes on the market.

Councilmember Reed noted that there were no cost savings projected.

Wandzia replied that this would be a service level enhancement that would focus on customer delivery. It would eventually enhance turnaround time as well as the ability to access information but there are no specific cost savings.

Steve added that the savings would be long term but are not an immediate benefit.

Councilmember Reed stated that he liked the concept but would be unwilling to approve $1 million a year for it. He said that he might approve $2 million up-front but that he feels it is not a good investment. He suggested that the e-Government Team focus on offsetting benefits (cost savings), especially since the City is heading into a down budget. He also added that he feels this is a duplication of what the Call Center is supposed to be doing.

Councilmember Campos asked if any Public Outreach had been done.

Kay answered that this is just an initial report to the Finance Committee. If this were to be implemented, then there would be extensive public outreach to assure that the public would be aware of the programs and how to utilize them.

Councilmember Reed asked how the money would be spread throughout the project.

Wandzia answered that ¾ of the money would be dedicated to the Resident Wizard and the Service Request system. ¼ would go towards Online Payments.

Councilmember Reed stated that he would move approval of this report with two modifications on the recommendations:

1. Report on both on-going costs and up-front costs for each of the 3 recommendations

2. Quantify cost savings and potential revenue sources

The Committee requested a report back in January.

Upon motion of Councilmember Reed, seconded by Councilmember Diquisto, the Committee accepted the staff report with modifications to the recommendations.

d. Oral Petitions

Bill Garbett, public spoke about the City’s financial shortfalls and about his lack of access to the Internet.

e. Adjournment

The Committee was adjourned at 3:45 P.M.

Councilmember Pat Dando, Chair,

Finance and Infrastructure Committee