RECOMMENDATION

It is recommended that the City Council adopt the following Appropriation Ordinance amendments in the General Fund:

1. Increase the Housing Assistance Program for Council Appointed Officials and Senior Staff Appropriation by $500,000.

2. Decrease Contingency Reserve by $500,000.

BACKGROUND

The City’s Housing Assistance Program for Council Appointed Officials and Senior Staff was approved by the City Council on April 4, 2000. The intent of the program was to protect the City’s ability to attract the most talented and experienced senior officials from around the country, and to encourage Department Directors and Appointed Officials to live in the City of San José.

The program parameters require that loans are fully secured by the property, and interest-only payments are made to the City on a bi-weekly or monthly basis. The interest rate of the loan shall be no lower that the City’s average annual rate of return on its investment pool at the time the loan is secured. As such, the loans represent secure investments for the City with no loss of principal or interest earnings. Due to the continuing decline in general market interest rates, loans issued under this program in recent years are currently bringing in returns well above alternative investment options.

ANALYSIS

In the current fiscal year, due to turnover among the Senior Staff, there have been two more Senior Staff hires from outside the area that wish to avail themselves of the loan opportunity than anticipated when the 2002-03 budget was approved. In order to ensure that there is adequate funding available through the remainder of this fiscal year, an appropriation adjustment in the amount of $500,000 is necessary. The recommended source of this funding is the General Fund Contingency Reserve.

LARRY D. LISENBEE

Budget Director