City Council - Regular Meeting

Hi. Good morning, everyone. Welcome. Good to see you all this morning. We have quorums, so I think we'll get started and hope that our other colleagues arrive shortly. Tony, would you please call the roll?

Kemay Campos? Tordios? Here. Cohen? Ortiz? Mulcahy?

Here.

Dwan? Candelas?

Here.

Casey? Here. Foley? Here. Mayhan?

Here.

You have a quorum.

Okay, great. Thank you. Once again, good morning everyone. Thank you for joining us for our first budget study session of the year. I have some opening remarks and then I'll turn it over to our city manager, Jennifer McGuire to share her opening remarks and then we'll jump into the staff presentation and and get our study sessions underway here.

So, I want to start by thanking city manager Jennifer McGuire, assistant city manager Lee Wilcox for their leadership in delivering this balanced proposed budget. This fiscal year, we face the most challenging conditions in my time on the city council and I'm very thankful to have a former budget director as our city manager to help lead us through the process. I also want to thank budget director Jim Shannon, deputy budget director Bonnie Young, and assistant budget director Claudia Chang as well as the entire city manager's budget office for their dedication and long hours worked. I know you guys are pulling long days and and have for many months now to shape this budget and help guide us. This process is the foundation for our everyday operations.

Your attention to detail and expertise are critical to our success as a city as we serve the residents of San Jose. So colleagues, the purpose of these sessions is to allow staff to present the current state of each city service area, allow the city council to weigh in, and the general public to also learn more about the state of our city's budget and fiscal commitments for the coming year. As a reminder for everyone about where we are in this process, the city manager released the proposed budget on May 1 and it's publicly available online. On June 1, I will release the June budget message after we've gone through these budget study sessions. We're also doing community town halls and hearing directly from residents.

And the June message will then go before the council for a vote on June 9. And then, of course, city staff will do final cleanup and bring us the final budget for a vote before the end of the fiscal year. The study sessions are organized by city service area service areas with focus area overviews woven into each relevant presentation. We will also cover specific topics like fees and charges to understand the cost recovery for essential services and programmatic costs for our residents. I want to thank my council colleagues and commend them for maintaining focus in the five focus areas: increasing public safety, reducing unsheltered homelessness, building more housing, growing our economy, and cleaning up our neighborhoods.

These focus areas still very much reflect our residents' top priorities as shown by our annual resident survey. One interesting note is that beautification has risen to a top three concern for our residents. I would encourage everyone to review our focus area dashboards. They are regularly updated to reflect our progress. We've also spent time ensuring that we spell out our theory of change for each of these focus areas so everyone is aware of the link between strategy and the investments we're making in this budget.

The proposed budget, as you all know, has a revised shortfall of $50,300,000, which requires us to make difficult decisions. The good news is that we are turning a corner on our homelessness response. We are nearing the end of the era of large encampments in San Jose with the final large encampment clearing underway as we speak at Coyote Meadows. And our expected interim housing system has now expanded to over 2,000 beds, and we've continued to sustain critical investments in prevention to reduce the inflow to homelessness. As the circumstances on the ground have shifted, we can redesign and optimize services like Beautify SJ to better respond to smaller encampments in a more mobile unhoused population.

We are also seeking new ways of partnering with the county and the housing authority to reduce pressure on our general fund. We're lucky that this pivot and these partnerships will result in more agile response as well as cost savings. This optimization will save approximately $5,400,000 in fiscal year twenty six-twenty seven and even more ongoing. A few other notable aspects of the proposed budget I just want to highlight, and I'm sure the city manager will reinforce. I think she and the and the budget office, the team have done a really commendable job of minimizing impacts for our city workforce.

And I just want to highlight that. While there is a net loss of 85 roles, a majority of these positions are currently vacant and of those that are filled, most will be moved to a different role within their department and so again, I just want to thank the city manager for really putting an emphasis on supporting and protecting our workforce even during difficult budget times. The proposed budget recognizes new revenues of $19.1000000 dollars in 2627 of which $184,000,000 is ongoing. While the proposed budget offers the city council a solid foundation to work off of, there is a level of uncertainty that we are currently facing and there are three challenges that I just want to highlight that will be with us in the coming months and potentially years. First, this budget assumes the passage of measure A, which is the transient occupancy tax or TOT modification passage by voters.

Should this not occur, we will have a deficit of approximately $9,000,000 which will require us to reevaluate departmental level reductions. Second, educational revenue augmentation funding, quite a mouthful, also known as ERAF, 20% of the city's ERAF funding, roughly 9 to $10,000,000 annually, is at risk as well as a potential one time clawback on the order of 35 to $39,000,000 is possible. There's an anticipated audit from the state controller's audit that will assess Santa Clara County's calculations and therefore, some of our funding is at risk. So, we should be mindful of that and then third and finally, card room revenue. The California Bureau of Gaming Control recently approved regulations that limit card room operations.

Certain industry leaders are estimating this could result in an 85% reduction in operations and a correlated $25,000,000 loss of revenue to the city. The timing and magnitude of these impacts are still uncertain. We're hopeful it won't be that bad, but it's something again for the council to be mindful of. The cumulative risk of these three items equals over $75,000,000. This eclipses the current structural shortfall, which means we must exercise great fiscal restraint.

As we continue to develop the budget, we need to monitor these structural risks and avoid making commitments that imperil our solid financial footing. I want to thank all of our community members who have participated in the process, both here at council and through the budget town halls we've hosted. Thank you again to my council colleagues for their engagement throughout the process and hosting their own town halls through their offices and ultimately, just I believe that with more voices, we will create a stronger and more responsive budget to support our 1,000,000 residents. So, thank you again to everybody for getting us this far in the process. I look forward to the last couple of months here and I want to turn things over to city manager Jennifer McGuire.

Thank you very much mayor and good morning to you all. And that was an excellent overview mayor of the budget so I think- you're making Jim's job pretty is easy when he goes over it so it'll just be reinforcing a lot of things that you just went over- today we are proud to deliver the 2627 proposed operating budget. A fiscally responsible and balanced budget that meets the important objectives of the city council while also structurally aligning the general fund. With minimal community or employee impacts as you just said. This budget follows the direction provided by the mayor and city council with their approval of the March budget message and considers other city council and administration priorities, recent community outreach and surveys and the impacts of service reductions to the community.

While the 2627 shortfall represents a relatively modest portion of the general fund base budget at 3% This shortfall comes on top of the funding realignment reduction actions taken last year to balance the 2526 adopted operating budget and make progress on closing the early forecasted shortfall for 2627. Making further cost cutting actions all the more impactful. Nevertheless with continued economic certainty. Uncertainty and the potential for conditions to worsen thoughtful decision making is essential to address the structural shortfall this next year and position the city to meet the challenges expected for 2728. Keeping these considerations in mind the proposed budget follow city council direction to focus on targeted strategic spending while fully resolving resolving the ongoing shortfall and preserving critical core community services to the maximum extent feasible.

Is important to note that even with a number of cost reductions, service delivery efficiencies, and position eliminations necessary to address the shortfall, again only a handful of employees will be impacted from actions in this proposed budget. However as the mayor mentioned should major ace transient occupancy tax increase not passed on June 2 the contingency plan included in the transmittal memorandum would necessarily result in a more significant and noticeable reduction of city services with the resulting impacts on our community and our employees. Throughout the study sessions today tomorrow and next week which will cover not only the proposed operating budget but the proposed mid biannual capital budget and capital improvement program and proposed fees and charges, I encourage you all to ask questions of department staff to better understand the various components of the budget documents, Including existing service levels new or expanded initiatives costs and service reductions as well as performance measures. I'm very grateful for all the hard work of all of our departments and the budget office to produce such a comprehensive budget document that's before you today and that you will see it go over early next week. With that I will turn it over to our budget director Jim Shannon to get us started with an overview of the proposed operating budget thank you again.

Thank you very much, Jennifer. Good morning, mayor, members of the city council. Jim Shannon, city's budget director. Thank you for that excellent framing that allows us really to just kind of dive right in in here. I'm gonna provide a brief overview of the overall proposed budget.

Most of that presentation is gonna focus on the general fund, but it will also provide highlights regarding key actions of other city funds that are also recommended for twenty six-twenty seven. Details about all these items will be provided in the budget study sessions and are detailed in the budget document itself. And so just to set us for the next little bit here, we're gonna go through the proposed budget, talk through some of the high level budget balancing strategies, look at the next steps. And then I'm gonna turn it over to Jen Baker, our director of the office of economic development and cultural affairs to talk through the economic outlook that we're seeing. So first though, I do wanna start with the forecast.

As the mayor had mentioned, we've got a $50,300,000 shortfall for 2627. And how this works, if that was resolved through all ongoing solutions, which our proposed budget does, the following year shortfall would be an additional 27,000,000. And so any shortfall that's reduced in 2627 on a one time basis would then get added to the next year shortfall, making that worse. That's why it's really important that we stay as structurally balanced as we possibly can as we go through this process. Post budget balances all of the city's funds, our general fund, special and capital funds.

We are fully resolving that $50,000,000 shortfall on an ongoing basis, minimizing those impacts and still making some target investments, both in the investment priorities identified in the March budget message, as well as some other select areas for important ongoing core service work within other community services, strategic support services, and some important infrastructure and technology investments. Overall, our budgeted positions across all of our funds decreases from 7,009 to 6,924. This is a high level look at the city's overall budget for proposed is 5,500,000,000 across all of our funds. That number is gonna go up as we get through the adopted process when we re budget funds at the end of the year for projects and programs already in process. And so when you see the final number in the June, it'll probably be that close to a $6,000,000,000 number that we have in the current adopted budget.

But across all of our 150 funds, you can see that only about 25 or 27% is really the general fund. We spend a lot of our time talking about the general fund because most of the resources in there can be used for any governmental purpose which is where the trade off discussion becomes really important. But most of our funding is spent on restricted uses where those revenue sources can only be spent on certain things. So think about your water bill or your garbage bill. You can't use that to buy library hours or to to pay for police services.

So those are restricted funds both on the operating side, which we have for our special funds and our rehabilitation of public infrastructure, which we have for our capital funds there. Just a quick snapshot of the different funds that we have. And while the general fund is not the biggest piece of the budget, it is the single largest fund that we have. And so this shows all of the expenditures within several fund categories. If you exclude the transfers, reserves, and fund balance, this is a little bit more of a net picture of what the plant expenditures is going to be.

So the general fund is the largest, followed by our underground utility funds, and then our energy fund for the procurement of electricity, airport, and so on. At a very high level, this slide shows the budget by the total budget across all funds by city service area with environmental utility services being the largest followed closely by public safety. Then we get into neighborhood services, our transportation and aviation, strategic support, which also includes a lot of our benefit funds and our debt service funds, and then some for our housing and community and economic development roles. Moving over to the general fund. This slide shows the various categories of general fund revenues.

We've got over four fifty individual accounts for different revenues coming in the general fund. So do have a nice diverse stream of general fund revenue even though we wish we really would like to have more. They do have a nice diversity. I'll note though that property tax and sales tax, we're super reliant on how those perform. Not only are they the largest portions of our general fund.

You know, it's it's what's important to be kind of I I like to or we often like to point out is that, you know, property tax and and sales tax almost face pays for the cost for police and fire services, which is not unusual because as cities are those providers of those emergency services. But that means that sort of the rest of the revenue category sort of pay for everything else, which is why it's so important to maximize the revenue approach that we have. And that's one of our strategies in the proposed budget. Looking at the expenditure side, this shows the different types of expenditure uses. As a city, we provide services and most of our services are provided by people.

So most of our budget in the general fund is to pay people. So that's over 70% of our costs in the general fund. Followed by our non personal equipment, which is a category describing supplies, materials, contractual services, utility costs, things like that. Our citywide expenses are multi departmental charges and our major grant programs. Just a little bit of funding for capital contributions.

A little bit of support to support other funds with our transfer category. We have our specific earmarked reserves and our contingency reserves which is set by council policy. And then we have an encumbered reserve which is funds that have been encumbered but not yet spent. Then by department, I want to just kind of show the how it looks if you just look at the various departments and the non departmental expenditures, how they sort of stack up. And there you can see police and fire right at the top followed closely or followed next, which is actually a fairly significant gap with PRNS, a public works transportation library.

So this just gives sort of a sense of scale about where the general fund budget is by department. Now getting into the proposed budget strategy itself. You know, there are a number of competing community and organizational needs that we need to figure think through while ensuring that resources contained within all of our city funds remain in balance and thoughtfully deployed. While the budget development process was informed by a variety of factors, the inputs shown on this slide are the key drivers that provided the strategic approach to address these needs. That includes council's approval of the mayor's March budget message, which also included our budget balancing strategy guidelines and service delivery framework, various city council administrative priorities that are surfaced throughout the year.

And we have our city council policies and our budget principles. But equity considerations really need to remain central to the development of our general fund budget to mitigate the impacts that service reductions ultimately will I'm sorry. To mitigate the service impacts that will ultimately arise, we wanna make sure that we're optimizing as much as we can for service delivery changes to get ongoing cost savings without an impact or minimize impact as much as possible, and then maximize our revenue strategies, which are outlined here. So the two categories resolves over 75% of our general fund shortfall. And we can, so using these strategies, we're able to minimize the service impact.

So we're resolving 75% of our shortfall before we even get into the cost reduction portion. So as the mayor had mentioned, with the transition of the end of large encampment abatements, we can shift a little bit of our homelessness spending without compromising outcomes within reducing unsheltered homelessness focus area. That is includes a reduction of BSJ for contractual services primarily. And so we can reduce $4,200,000 in 2627 and $6,400,000 ongoing. We have some reductions in our interim housing portfolio of 1,200,000 in 2627, which is related to the closing of the Taylor Hub site effective in January.

That increases to $14,200,000 ongoing as we're looking to leverage some other housing funds to purchase two of our motels that we're leasing to reduce future lease costs in 2728, and working with the county to take over operations of two of our interim housing sites also effective in 2728. So that's over $20,000,000 in that category. Then looking at the new or increased revenues again, per direction, we are assuming that passage of measure A, although we do have a contingency plan, which we'll talk about in a few minutes. So that generates some significant revenue. Then we had some opportunities and some few other funds that are unrestricted funding sources that can be transferred back into the general fund.

That includes some funding from the construction excise tax fund because development taxes are higher than previously anticipated. We've got some transfers coming in from the muni golf course fund because of the improved operations and the net profit in that fund that can be taken back into general fund. And then we have recommendations to include a parking meter rate increase in downtown and extension of hours, allowing us to transfer some funds from the general purpose parking fund into the general fund. So really important strategies along with, you know, really diligent about all of our fees and making sure they are as cost recovery as possible while still being mindful of the impacts to our community. So, we think we did a good job there raising about $3,800,000 for our fees and charges.

But then we do get into cost and service reductions. Although they are minimized, they're still real. And so we definitely spent a lot of time thinking through that. Of that $19,400,000 ongoing, 2,000,000 is from organizational realignments optimizations with minimal service level impacts. But one of those larger impacts is for our public safety area. Again, because that is such a huge part of our general fund, we do need to look to public safety services as part of our reduction strategy. We do have a two year deferral then of fire station thirty two, as well as the police training center. Although we do want to say that subject to reevaluation. So if budget conditions improve sooner, we want to bring those back online sooner. But those are part of our strategies we want to make sure that we're being transparent about.

Then And we're being very strategic about the use of our budget stabilization reserve, which I'll talk about again in a moment, allocating $35,000,000 for capital maintenance and technology investments, key city priorities, and some bridge funding in twenty six-twenty seven to make sure that we can phase in and get the full ongoing benefit of the BSJ and interim housing portfolio reductions by year two. The very high level strategy then is you see our $50,000,000 shortfall. We're bringing in $66,000,000 of additional sources in twenty six-twenty seven. Dollars 18,400,000 of that is ongoing. The rest of those That $66,000,000 is really the budget stabilization reserve again of 35,000,000.

We're cashing in $6,600,000 from our IT sinking fund reserve to then turn that in and replace a bunch of IT equipment that needs to be replaced. We got some savings from our business tax replacement system project. And so we're gonna cash that in as well at about 2,500,000. And then some other adjustments make up the bulk of that. On the change of use side is really reflected in this chart, which is what we're gonna spend the next hours and days talking about in-depth.

So I won't go too much in-depth here. But how these categories are made up is if you wanted to get super deep, you can check out Attachment B to the budget, which kind of goes through which individual proposals are slotted into these categories. But we've got a number of investments as we in any given year, we need to make investments in technology and capital rehabilitation. We have some limited service level enhancements. We have the few reserves for our police swarm backfill, our essential services and our children and youth master plan.

A few services previously funded on a one time basis that will recommend it to be continued in some form. We have services that are offset by revenues for our fees, grants, and other reimbursements. We've got a little bit of funding for new capital projects that come online that need to be operated. So we set aside that money in the base, and then we spent it in the proposed and offset that by taking down the use of reserves. Then we've got that $18,900,000 $19,400,000 ongoing reduction for service reductions, service delivery efficiencies, and fund shifts besides BSJ and interim housing, which are also listed below.

And then we had several reserves that we set aside as part of the base budget that we can liquidate and then propose to pay for various items up above. Thinking about the budget stabilization reserve. So as part of the mayor's March budget message approval, we had a budget stabilization reserve framework to work with. And the first direction there was do not rely on the budget stabilization reserve to address an ongoing shortfall. Because the budget stabilization reserve is a one time funding source, it should be used for only one time uses.

And so we abided by that. We do have funding to address some one time urgent unfunded capital rehab and technology projects at 8,300,000. And we've got some limited targeted investments for one time services projects, forty year long term savings or efficiencies at 11.5. And then $15,200,000 again for that phase in allowing us to phase in the reductions for BSJ and interim housing. Without this phase in of $15,200,000 that's $15,200,000 of other cuts we would have had to make make sure that the budget balance.

So the individual components that make up these numbers in the table are shown in the city manager's transmittal memorandum. If you wanna see how they add up. But as the mayor said, there are other needs out there that we might need to We need to make sure that we are prioritizing the reserve for. We think by the end of the current fiscal year, by July, we'll have roughly $32,500,000 remaining in the budget stabilization reserve. And we have continued litigation between the county and the state regarding the state's interpretation of how ERAF should be calculated.

They differ from the county. And so they're currently in court on that. That could be a pretty significant impact to us both on ongoing basis and as a potential one time clawback. We've got the regulations for the card room business tax with potential loss of up to $25,000,000 beginning sometime next fiscal year potentially. And then we of course, as we talked about a couple of weeks ago, we have a number of one time critical capital needs and revenue losses or expenditure needs can fluctuate based on need.

And so we could have some unexpected situations arise where we need to make sure that we have some capacity to address. And a reminder there in bold, we do have a city council policy to make sure that our general purpose reserves, which is our budget stabilization reserve, our contingency reserve, and our workers' compensation and catastrophic loss reserve should be 10% of general fund operating expenditures. Right now in the current budget, they're about 4.99%. So anything that we can do to sort of bolster our reserves is gonna be important to meet council policy and to just deal with these unexpected potentials that could arise. And then finally, we do have our contingency plan.

And this is, again, this little bit more detail is provided in attachment E to the transmittal memorandum. These are not included in our proposed budget balancing strategy, but most of them almost were. So we worked really hard to keep these types of reductions out of the proposed budget and feel really proud of the budget that we have for you because of that. But if measure A doesn't pass, or if we get some unexpected revenue shortfalls or unexpected expenditure needs, we may need to look at this contingency plan to make sure that we remain in structurally in balance. And so these service impacts are significantly more impactful than what is currently in the proposed budget.

It includes reductions to library hours, reductions to various recreational and parks access, some references to the police department, as well as strategic support appointee and mayor and council reduction. So, even it's not the largest dollar amount in the world, it is a pretty significant service impact that will be felt for sure. And then the rest of these slides, I'm not gonna go through them just really for documentation purposes. These are also mentioned in the city manager's transmittal memorandum. Just to note that, you know, if you want to go and understand what the individual proposals are, you can see the title of the proposal here and the section in the budget document where you can find more information about them.

And then if you're online, you just go on the city manager's budget office website. You click onto that department or the citywide section. You search for that title. And boom. It's right there for you. And you have all the detail you need to understand what that proposal is going do. And we have these organized by city service area. And there's a lot. And so again, I'm not trying to shortchange any of these by scrolling through. Just we have are going to spend the rest of our time talking about these. So I just want to make sure that they're documented here for the record. But we'll talk more about them in-depth later. And just highlight, we do have a few. We have a whole document for our fees and charges. We'll go over that on Monday.

We're documenting here the utility increases that we have and some adjustments for our development fee programs that are shown here. Again, that are also discussed in our fees and charges report. Our study sessions will be continuing. So after we're done here with this overview, we'll get into community and economic developments. Then tomorrow we'll do transportation aviation and environmental utility services. Then we'll get a break on Friday. And Monday, we're gonna be back at it for the entire day going through the rest of the CSAs plus fees and charges and hopefully get through capital. But if we don't get through all of that, that's okay because we also have time spent on Wednesday and Thursday. The next steps for review, input, and approval. We've got our study sessions.

The mayor's organizing a virtual town hall on May. We've got our public hearings on May 12 and June 8. The mayor's message release on the first. We have again, I really drove it home. Have our final public hearing on the eighth. And then we've got our review and approval of the June budget message and the proposed budget on the ninth and formal appropriation adoption on the sixteenth. And with that, I just really want to thank my senior management team here and the budget office staff who's sitting right front and center who are I'm very very proud to be the director of for a number of years. And I'm always really grateful for the work that they do and very proud of the work that we create together. So thank you very much for that. And with that, I wanna pass this to Jen to get us through the economic context, and we can come back for questions for everything.

Unless, you wanna jump

Let me just since we're ahead of I really appreciate the overview. I I'd be happy to entertain, like, ten or fifteen minutes if there are any just before we go deep on our first CSA, if there are any questions on the high level points Jim outlined around the budget context that might be useful. Let me go to, councilor Casey first.

Hey, Jim. Thank you. Appreciate it. The report acknowledges a significant deferred infrastructure liabilities. Yet only a relatively modest amount of one time fund funding is proposed for the backlog reduction. What's our long term plan to prevent infrastructure backlog from continuing faster than our funding is available?

Yeah. I that's, you know, a really important question. You know, we've we do have you know, one of the largest projects that we have, we're getting started on is the City Hall water intrusion project. That's probably a 45 to $50,000,000 project. We have 2,000,000 in the budget this year to get award for a design build contract. We'll be coming back to council later in the fiscal year with a strategy to fully fund it with probably a mix of one time and financing proceeds. You know, I think the long term strategy is gonna have to be at some point we're gonna need to have a more significant and ongoing general fund commitment to some general fund capital. That

will

just be, at some point the buildings just stop working. And so then the money needs to get spent there anyway. So I think that'll need to be a priority a couple of years. And we won't be able to get at the backlog for the entire system without some more general obligation bonds. And as assets are supposed to be there for fifty years, financing that across a couple of generations is a smart way to do it. So I think as soon as it looks like we got some viability out there, I think council, we would be recommending councils to go forward with the general obligation bond. We're probably not not there yet but that's gotta be part of the strategy.

How does that impact our out year surpluses that we're projecting?

So, if we were to do more ongoing general fund obligations capital. Let's just say that would increase the shortfall because that is we don't have that baked in yet.

Okay. Thank you. Yeah.

Great. Thanks, council member. Let's go to council member Candelas.

Thank you. Jim, I appreciate the work of your office and and the entire and the entire team. One of the I guess, at a real high level, one of the concerns I have is on the contingency plan that we that we have, and it's on one of the slides, but, you know, I guess my question for the administration is, is there anything outside of these this contingency plan or or is or is this everything in this table or in this slide reflective of what's what's gonna happen should measure a or or our TOT measure fail? Is there anything outside of this, or is this all we're talking about here? You know, like a menu of options.

You know, I I I hate to be pessimistic person because usually I see the glass half full, but I I guess my question for the administration is, is this all we're is is this not all. Is this what we're looking at? Or is there other things other other than than, you know, essentially getting rid of, like, summer youth services and or, you know, overtime operations for for any community based requests?

Yeah. I think so. The the process that we would we would go through so if if, it's clear that Measure A fails on June 2, we've got, we're gonna hustle to be able to bring forward MBA to say, hey, here's the implementation of the continuous plan. There's an administrative process that we'll go through to recommend those. If I would say that I would, this is, you know, we scrubbed this list and we worked really, really hard to keep everything sort of off. And so we went through a bunch of budget proposals. So, you know, we'll take one final look before we make our final recommendation to council as we always do. Like what's our best information available? Do we have any other alternative strategies that have materialized in the last forty, forty five days? There probably will be something.

But but I would imagine most of this would would still be our primary recommendation.

Great. Yeah. And I I guess this is essentially, you know, alternative scenarios would I was looking to help me sleep better at night. But, essentially what I'm hearing is probably not and and which which paints, you know, a a scenario that we, I think, all are rowing in the same direction in. And hopefully we can, we don't have to make that decision and outside of that I look forward to diving deep in the different CSA areas and the questions I have pertaining to specific budget, budget actions. Thanks.

Thanks, council member. Vice mayor.

Thank you. Jim, this is the final time that I'm gonna hear you make this presentation. But thank you for bringing forward a balanced budget, taking into consideration really all the risks and the need to preserve and and to use city manager too to save as many programs and staff positions as possible. But I am very concerned about the list of question marks that are big ticket income generators that if they don't come through, we have to go to contingency plans, which is very, very concerning and will keep us awake at night. So my questions for you are about the ERASH.

We've been talking about these funds for a long time as to the instability of them? Does it look like that will be resolved this fiscal year? Or what's it look like that this will happen?

We think it's unlikely to be resolved in 'twenty six, 'twenty seven, or probably at the very end. Think so they did go to court. So they went to court in April. So I think there's no decision yet. It's likely that any decision that comes forward would likely be appealed. So we don't have a firm timeline. I mean, the county's been worrying about this for a while, but you know, we've You know, if we had surplus funds, we would just been setting this money aside and just say, well, we'll just, know, we'll put aside and great. But we're not in a position to put that money on the sideline. And so we've just been spending it. But knowing that it's out there is going be important for us to make sure that we can manage that appropriately if ultimately the decision. But I don't think we'll get a decision until probably toward the end of the fiscal of next fiscal year.

Okay. So the the concern about eRAF is not necessarily income for 2627. It although that is a component. It's the clawback provision that is of concern to me. What's your feeling, your crystal ball about the clawback provision or possibilities?

I don't know. Mean, I'd be speculating. I think I'm maybe the reverse of you. I think the ongoing hit is going to be harder us to figure out. Okay. One times, sometimes we get strategies or something else comes up. And I think we put the outside clawback figure out there, but there's not a guarantee that no one is saying you're gonna owe us all of this money back. That'll probably be a process to go through. Like, hey, what should really be paid back? But, yeah, I'm speculating a little bit. But I think the ongoing hit will be challenging for us.

Okay. Thank you. And then, of course, the TOT, that's a question. But then the card rooms, we don't know where that's ending up. And to, the the revenue side of 25,000,000, that's that's a big number. The last question is about UAL. Does it look like our unfunded liability number will increase in the fiscal year? Or we're comfortable with the current number we're budgeting?

Well, the twenty six-twenty seven, it's going to be where it's going to be at. So no matter so we've already got the contribution set from the retirement board for twenty six-twenty seven. Really how the market ends up this year is going to impact our contributions for twenty seven-twenty eight. So right now, I think the systems are doing pretty well, but it doesn't count until you get to June 30. And so whatever we're at June 30, that's what the actuaries use to calculate what the contribution would be for 'twenty seven, 'twenty eight. Right now, our forecast does have UAL going down in the out years, which is one of the reasons why you see a surplus there. But that's all depending on, you know, the markets returning what the assumptions are.

Okay. Great. Thank you very much. I appreciate it.

Thanks, Vice Mayor and Council Member Campos.

Thank you, mayor, and thank you for, you know, all the work that's been done. City manager, department directors, Jim Shannon. I know that preparing this balanced budget is a full team effort, and so I just want to express my gratitude to all of the staff who have been meeting with my team to walk us through some of the key components of the budget and the recommendations. And so Last year, we had a pretty long and detailed MBA regarding the workload for virtually all departments. My question is, will there be a similar MBA prepared for this budget cycle, And will it be just as comprehensive as last year's or will it be different from the MBA we saw last year?

Yeah, we have an MBA coming forward for talking about our focus areas. So we've got an implementation plan and the different goals for our various focus areas. As part of that work, the teams are looking at which previous, which prior city council referrals may need to be dropped or deferred to accommodate that work. You will be seeing that in the coming days or week. But it won't be as exhaustive as the memo that you saw last year. It is still, you know, it's a lengthy memo, but there's not nearly the number of rows that you had to wrestle with last year.

Thank you. With there being proposed policy in the March budget message, will the MBA provide a workload analysis for every policy item in the March

budget budget message? Message? No. It'll really focusing around the focus area components.

Okay. I provide just want to uplift that because as we have, you know, as a council conversations about trade offs, the workload analysis is important in helping us understand the staff capacity impacts that are included in those trade offs that we'll have to potentially be making. And so just as a follow-up from the overview and thinking about how the city administration is implementing budget principle number three, which reads, any request to develop or implement new policies using existing resources shall provide sufficient information for the city council and staff to understand the required level of effort for implementation and any trade offs that may be necessary prior to city council approval. So how are we implementing that?

Well, I I think that's what the proposed budget rep represents. So, the proposed budget is showing us. So, for the direction that that we received from from council, here's the proposed budget that would make that happen. That is a combination of additional resources that we're recommending to increase, some new revenues, some cost reductions to take down, as well as any specific deferral of items that doesn't require a budget decrease, but is recommending staff sort of shift their attention from certain areas to these other areas that were more recently So I think that's what the proposed budget tries to encapsulate. So we do a lot of work.

So this is proposed budget sort of represents that. And I think it's baked into all of the different components that we are bringing forward and going to talk to you about over the next

few Thanks, Jim. I have one more question. Given that we have really aligned our budget timeline with our priorities, How is the city administration thinking about our approach to the city council area focus areas and are there some key changes that we should anticipate given that I know that we'll have the CSAs coming up to share more information, but as we make progress and are achieving measurable goals in these CSAs, how are we thinking about when it might be the right time to look at a new emerging focus area? For example, we've heard affordability become one of the top concerns for our city residents in addition to addressing homelessness and affordable housing, which have remained top concerns for our community over the past five years. And so with the cost of living and unaffordable and affordability or unaffordability of, you know, San Jose that is not just an emerging but pressing and urgent issue for us to address.

I'm curious how how we as a city council, in partnership with the city administration can be thinking

about that.

I can answer that council member. Thanks for the question. I think you're right to highlight it because it is top of mind for our residents. And what what I would suggest in the current framework given the direction the council gave is that we make sure we are baking an affordability agenda into our focus areas, especially related to building more housing and growing the economy, which really ought to be about expanding economic opportunity, income, upward mobility. The time for the council to potentially modify or expand focus areas would be a conversation we can have throughout the year, but would really be direction the council would need to give through a majority vote, ideally through the the March message each year.

Not to say the council couldn't collectively choose to to make decisions elsewhere, but because that's early in the budget process, it helps give the city manager and the and the administration time to shape a budget to align with our focus areas and goals and have that baked into the budget we pass in June, which, of course, starts the fiscal year in July. By then, the department staffing models, programmatic goals, and performance measures are are pretty locked in, and we don't we don't wanna mid year kinda, you know, jerk them around and create a lot of waste unless there's something really urgent to respond to. But typically, it would be the through the budget process starting with the March message.

Thank you, mayor, for opining on that, and thank you, Jim, for your answers to my questions. I'll just end with us looking at the very sobering reality of where we're at with our current budget. In our city manager's opening letter, I I was really struck by the sentence. Due to the nature of the city's work, service reductions have the potential to disproportionately impact already disadvantaged communities. So at a time where we're having to make really difficult decisions, I think we should be very honest about what expenses are not paying a return to our city and how we can consider those luxuries.

Because when we are using our public dollars, we really need to be stewarding those investments into building our social infrastructure, wealth throughout the city, and what's going to help strengthen San Jose's local economy because no one's coming in to save us, not the county, not the state, not the federal government. It's important that we're really being thoughtful about what needs to change so that people can have better lives in San Jose. Thank you.

Thanks, council member. Appreciate your comments. I wanna move us on, councilor Candelas. I know you have your hand up again if you can be brief and then, I think I misunderstood that part of the overview was actually some economic analysis from gents. We are not in fact ahead of schedule.

So No worries, mayor. I'm I'm I'm known for being brief. Great. But I I I guess, the I I I just wanted to uplift something that you both said, just now on on the opportunity for, you know, the March budget message being that that vehicle, the the the proper vehicle to basically assess the evaluation of what we should be focusing on as on as a council and and our city and subsequently our city. I did want to also, you know, piggyback on an opportunity that maybe during the the June budget and and subsequent direction to the administration to start laying the framework for as we start you know basically getting getting our arms around these really really difficult issues around beautification, around cleaning up our neighborhoods, or reducing the unsheltered homeless population, or or whatever one of our priority areas is to what the next iteration of what we should be focusing on as a city.

For example, affordability has been has has has jumped in every every public opinion poll on our residents. And so we should be capitalizing on that opportunity to be to hear our community and and it's a it's a it's a it's a to to borrow, city manager Maguire's term, it's a wicked problem that we have to work in conjunction, not just within the city, but with our partners in at every level of government and if we if we're truly serious about helping that upward mobility for everybody in our city especially those those most historically disadvantaged in East San Jose and in all parts of our city. I think we need to have a a tangible conversation is how do we how do we include that as a priority for our city council and and how do we start integrating that conversation now in June so we can have and be primed and be ready to to adopt something the following March budget message opportunity, if that makes sense. So I appreciate I appreciate that and I appreciate, both of your comments on this and I I think it's not an either or. It's it's a yes and and how how can we do that given given the the the cost of living and and the cost of everything, frankly, which we'll hear right now, Jen.

So, anyways, I think I just queued you up.

Yeah. Well, and I think it's yeah. Think you're right. Think it's an ongoing conversation. I I would guess that we're most likely to tackle affordability through focus areas like housing and economic opportunity, but it's not to say it couldn't become its own focus area.

I think to your point, part of the reason I I feel so strongly that it's important that we have this quarterly cycle every 90 days of checking in on the focus areas, understanding what we set out to do in that ninety day period and what we're learning is it allows us to have that more iterative conversation and not just have to wait for March once every 12 months to have a big conversation about priorities. Every 90 days, twice a year at council, twice a year through the committees, we're checking in on focus area progress, able to ask questions, learn together in public, and reflect on, hey, could we bake an affordability goal into one of these focus areas? Or is there something here we're doing that isn't isn't actually delivering the impact? And can we learn that without having to wait twelve months to to get there? Okay.

So we're gonna we're gonna continue on. Couple of notes. So, Jen, I know you're gonna speak to kind of the macroeconomic picture and then go into the community and economic development CSA, and you can just flow straight through, and then we'll do questions on the economy and economic development at the end there. I also it came to my attention that I unintentionally demoted Bonnie. So, Bonnie, I'm so sorry. You are the assistant budget director, not the deputy budget director. And, Claudia, I'm sorry. You are not, in fact, promoted. My apologies. I always think of deputy as, like, the number two, but in this city, the assistant is is is the the right hand to our budget director.

So, Bonnie, my apologies. And, Jen, I will turn it over to you.

Alright. Good morning, mayor and council members. Jen Baker, director of the city manager's office of economic development and cultural affairs. And it is my pleasure today to do a swift scene setting of the economic context and backdrop against which we can be digesting these budget considerations and the proposed operating budget that I will know know we will discuss vis a vis the focus areas moving forward. So this presentation provides an overview of the current conditions in San Jose and the key trends shaping our local economy.

The goal is to be swift, clear, data driven, and provide a snapshot of where we are today and what we're seeing across major sectors and how those trends may impact the city moving forward. The presentation is divided into four sections. We'll take a look at the economic landscape, corporate trends, employment dynamics, and lastly, city revenues. So moving right into San Jose's economic landscape and levels of analysis, wanted to acknowledge that there are macros that the city itself does not control, right? So at the national level, we see a considerable amount over the last eighteen months of variability in trade and tariff rates that are impacting exchange of goods and services internationally, and definitely impactful to our local environment.

What we see on the ground is more companies are pursuing foreign trade zone implementation in our footprint. And that is a noticeable bump up. Also that program is undergoing increased scrutiny. We know at national level because of ongoing geopolitical conflict and war that the energy market right now is also considerably variable, and immigration patterns likewise. So companies and industries love predictability, transparency, and an opportunity to operate and invest in known environments.

And at the national level, we see quite a bit of fluctuation across key considerations for company investment. At the state level, since I was a little kid, generation and demand in California has been top of mind and something that the state continues to grapple with. We are fortunately positioned in San Jose with forthcoming power and some diversification of that power that will serve us as a competitive advantage. The regulatory environment is not the same as the regulatory environment across a lot of states in America. And so important for us to take that with some reflection and know that we have to be that much more competitive in other arenas.

So some of the ways that that is impactful to us include the unfunded mandates, which I know we have looked at in previous study sessions. And likewise, pressures for growing housing stock, which is a challenge statewide. Where we are seeing the state lean in, in a really positive way is through their go biz efforts. So the state of California more than in recent years is really looking at its competitiveness vis a vis other states that are seeking to be a magnet for investment. And in this past year and the year looking forward, GOBIS will be bringing a team to Japan, a team to Taiwan to really be courting in the international marketplace for to try to attract domestic investment.

So this is more bullish than we've seen in recent years out of the state, and I think a really positive trajectory to try to underline the Golden State's competitiveness vis a vis the rest of the country. At the local level, AI investment continues to be pervasive. AI and tech firms at large, the Mag seven are composing 41% of the S and P 500. So that is a really large amount of market share from those firms of a handful of which have a pretty significant footprint here in San Jose, and then more broadly in the Bay Area. A dynamic tech sector will continue to impact us locally.

We'll talk a little bit more about jobs in that arena. Population and labor market, I have some statistics there for you, the development pipeline. And of course we know as council members have raised already today, the proportionately higher cost of living in California at large and in the city of San Jose. This is a quick snapshot look at benchmarking performance statistics. So you'll see population in Santa Clara County has grown a little bit, whereas the population in California has decreased.

And at large, the population in The US has increased. Gross domestic product is showing favorably also in Santa Clara County. Gross domestic product as a reminder is the sum total of goods and services that are being produced in a region. So we are seeing positive activity there more than what the country is seeing at the national level. Employment is also just a teeny smidge up, and certainly we would like to see that number grow.

Housing stock also up a little bit, and unemployment is tracking pretty common to what we would see at the national level. California unemployment is a little bit higher, Santa Clara County unemployment registers at 4.2% and San Jose is at 4.1. Where there continues to be a tremendous amount of opportunity is across our landscape. So San Jose is uniquely positioned as a major West Coast city that has quite a bit of developable acreage and opportunity that is outlined at our general plan to facilitate growth. So what you're seeing on this slide across the different regions in San Jose is not necessarily vacancy, it is opportunity with statistics of where we would like to anticipate job growth and further development.

Moving on to some of the corporate trends, I'm pleased in the last year to eighteen months to share that the post COVID messaging of sort of mass layoffs and industry shift, industry negative downturns and shifts have somewhat neutralized in a considerable way. Unemployment by way of data is tracking steady for the last three years. That's not to discount that there aren't current layoffs in our present marketplace. But those we have tapered down from what was a peak in 2021, 2022 and 2023, 2024 of 4,000 jobs and are moderating down more closely to roughly 2,500 jobs. One of the positive stories in San Jose is that we have a pretty strong reabsorption of unemployed workers.

And so the skill of the workforce and the capacity to reabsorb workers who have been laid off is a positive attribute for us. And layoffs have cooled from recent highs. I think I was one ahead here. Corporate trends and back to office, it's a little bit difficult to discern, but San Jose is the gray line roughly in the middle of West Coast cities in the metro area. So we would like to continue to see back to office and more office occupancy.

And we're middle of the pack, which is an okay place to be. Certainly Dallas Metro and Houston Metro, New York are tracking ahead and San Francisco and Philadelphia Metro are lagging where San Jose is. Office vacancy rates. So this is looking at how our real estate is being subscribed. We know that office of the real estate types office vacancy remains higher, although it has recovered a little bit from the post COVID highs.

And industrial and retail are tracking in a really strong trajectory. So we may see churn in the industrial space, but we're seeing that space get re subscribed swiftly with an average of covering right around 5% in recent quarters for industrial. That's definitely the hottest real estate product on the market, which is R and D space, lab space that can take advantage of the power commodities that we have coming online, the ability to be able to scale around that power. And retail space is also hanging in there right around 5% citywide. Some of the positive trends that you will be seeing are in our headlines.

So a number of our local companies right now are masterfully capturing capital, like series capital funding rounds to the tune of hundreds of millions of dollars. So that's speaking to the innovative environment, our ecosystem of patent making and the notion that if you can dream it in San Jose, you can build it here. So both from a venture standpoint and a private equity standpoint, we're seeing a lot of money come into the city to try to spur innovation. And then likewise, we're seeing some of the anchor companies who have had investments here, aggregate their workforce and really double down on populating existing infrastructure to the tune again of hundreds of millions of dollars investment coming into the city. So that is definitely positive and we want to continue to capitalize on that.

From a business development standpoint, as we don't have eyes and ears on every single transaction that's going on in the city, but we wanna be able to help soft land those investments and be facilitative and make sure that companies who are choosing to be here in scale here are having the most positive experience. Next slide, you can see the, some of the largest companies who have a footprint and a legacy footprint here in San Jose. And again, emphasizing that the capital funding around those companies continues to be strong. And lest we forget, definitely not forget small businesses. So in our environment, being able to zoom in and out from the macro and micro scale businesses is important.

The small businesses contribute to place making, they give our community members a sense of pride in neighborhoods, and they create outlets for entrepreneurship and expression and community in ways that differs from what the large businesses present. So you can see on this slide, a number of new small or family owned businesses that are landing across our districts. One of the headlines here is the hottest toy of the year. Those are local innovators who were able to scale and around the holiday season gained market traction for a gaming console, that company is next playground. A lot of great small business activity, we see more business starts than closures by a considerable margin here and want to continue to support businesses both large and small.

Now shifting to employment dynamics, the chart that we're looking at here on the left side would show coming out of the pandemic, kind of the high of 6.6% of employment variation unemployment, and then kind of a shift in right sizing. Part of that is the way employment data and statistics are captured, where you see the dip down to 2.7% in 2022, where some people who are unemployed rolled off of the official counts because they timed out of their unemployment cycle. And then now in December 2025, we've regulated to right around 4%, which is very competitive. We could certainly point out that not everyone is hovering, not all demographics impacted the same way. So we see a higher margin of unemployment around Hispanic and Latino populations, around black and African American.

And then also what is somewhat more uniquely to this perspective is the 25 29 year olds where we tend not to see higher levels of unemployment, because those young people are entering into the Census Bureau's prime working age of 25 to 54, and really launching into the workforce. So that is a higher 8.5% than we would like, or we would typically see, but that is tracking with the national average. A quick look at sectors where we see growth losses and dynamic activity, sector gains around healthcare and social assistance, in the largest margin, construction and manufacturing sector losses around finance, transportation and warehousing and accommodation and food service. So I wanna share that accommodation and food service is not because we're seeing a decline in accommodation and food service companies, but as those companies are reinventing and coming back online, they're hiring fewer people. So we see a lot more electronic point of sale, order on a tablet at the counter sort of services that don't find those small businesses in particular, bringing on as many employees.

And then the tech sector, we do not have a magic button with tech sector to be able to look at exactly how many employees across a lot of different job classification types are coming online. We see a lot of churn in this sector. So across some classifications, we will see a decrease and across some classifications, we will see an increase. That is averaging out to be about the 1,900 positive tech sector employees that you see here. This is a great slide in that it demonstrates the diversity of industry and therefore resilient economy, right?

If we had two thirds of the slide or three quarters of the slide occupied by a given sector, then that would create a vulnerability for us. And here we have a really amazing diversity of inputs into our economy and employment. So that creates some opportunity for upward mobility, definitely some resiliency as we take different shocks are absorbed by budgets or investments at the national and state level. So this is a great slide. The average wage per job in San Jose is 128,000 plus per year, but 20% of the population notably lives on less than 60,000 less than $55,000 per year.

Of our residents, 49% hold a bachelor's degree and 22% hold a graduate degree or higher. This is a really high education ranking for our city employees and also helps us be a magnet as we attract industry investment. The last bullet on this slide refers to the amount of time that workers commute. So 31% of workers commute 25 miles or more. And imagine a scenario where those workers were not spending time in the car, but otherwise spending time in their workplace or celebrating non work quality of life opportunity.

Definitely that is an opportunity for us given the amount of land and capital space we have to be able to build out. The next slide for us here is looking at how the employment demographic is spliced across employers. So the gold box is the first 1% of employers, which represent 39% of total employment in San Jose. The gold and the seafoam box taken together represent the largest 35% of employers and 90% of total employment. So 35% of employers, 95 of employment, and the remaining, percentage of employers, 65%.

So the larger majority of employers account for 10% of total employment. We see, some of the, larger employers per employee headcount and tax certificate here on this current slide. And then moving forward, also an important data point for us is the variation of resident income and state tax paid in the decade between 2013 and 2023. So you can see we grew 20,000 by 20,000 taxpayers. That's just short of the 500,000 tax returns that was a high in 2020.

As the population of resident income taxpayers grew, the aggregate income grew almost twofold. So 35,000,000,000 to 71,000,000,000, you can see what the average taxable income is across our employees, and then how much the state yields from that residential income tax. So state tax has grown from 1,700,000,000 to 4,300,000,000, quite a sizable benefit from that 20,000 employee swing, and a decade. Population demographics also are shifting for us. So you'll see in the limey green, 14 under population.

In the sky blue, 65 and overpopulation with the darker bars representing transition of younger people into the prime age workforce, which is that the middle green color. Important to look and notice that 21% in, let me zoom back. In 2024, we are down from 21 to 15% of young people aged 14 or younger. In that same time period, we are up 6% from 10 to 16% of what the icon would denote to be active seniors who are entering into the retirement prospects and possibility years of 65 and older. So we're aging a bit as a population.

We're still younger than some of the larger city populations up the way. But something to think about as we see that prime age workforce experience some compression and prime age workforce is what grows jobs and what helps us retain and grow industry. We're winding up here with the last section which is city revenue trends.

And

what you can see from this slide is really a considerable inflation rate factor. So revenues at large have grown since 2020, but are down in real terms almost a percent 0.8% after inflation. Sales tax trends show uneven growth across sectors and the county pool share of sales taxes increased significantly from 12% to 25% largely driven by online sales. So everything in the solid line is what we have data for. And then the dotted line is what is projected.

Another look at the sales tax revenue trends. So the black line on the bottom is construction and you can see that dotted line of inflation and then the sales tax revenue by sector. So sales tax revenue decreasing and that is a reflection of the inflation being considerable for construction costs between 2022 and present. You'll see a little bit of the inverse for transportation and fuel costs and food where food consumption patterns and tax revenue are increasing, but inflation is not quite as extreme. Employment lands and how employment lands support jobs.

So you can see in our pie charts the percentage of land area, employment land through the general plan occupies about 14% of the total land mass, 49% is public and open space, and then about 37% is residential. And then you can see conversely how much property tax revenue and roles are created based on those segments. What is important to know is that the property tax role doesn't necessarily reflect the fee to serve those different property types. So conventional economic developer wisdom would show that single family housing at the most extreme comes at the highest cost to the city as fee, as services that we must extend. And then industrial creates a net value gain per acre in a considerable way.

So as we think about economic development, how we try to create some changes and shifts in the structural deficit, the employment lands are creating a lot of opportunity for us and how do we seize that opportunity is something that the team will be working on. Just to sum it up, our takeaways are that the economy is stable, but definitely under pressure and not all of those pressures are ones that the city controls, right? A lot of macros out in the universe that are impacting our dynamics and we just have to work that much harder to transcend. Large employers are the anchor to the economy. We're seeing strong growth and investment from our large employer base and small businesses create a pocket of resilience and also give our communities the personality and the envelopes for entrepreneurship that are important across workforce types.

Revenues are being supported by structural shifts. And as our last couple of slides pointed out, preservation of employment lands is essential. So look forward to continuing on to the city service area discussion and a deeper dive into focus areas with you all. And with that, I think we can invite colleagues down to the box who are also peer directors in the city service areas for community and economic development.

Great. Thanks, Jen. Thank you, Jim, budget team. We'll give folks a moment to transition.

As

folks make their way down to the box, I can share who will be joining today for our community and economic development service area. Again, Jen Baker, director of the city manager's office of economic development. Joining today is deputy city manager Rosalyn Huey, Chris Burton, director of planning building code enforcement Matt Lesh, director of public works Robert safety Sapien, our fire chief and Eric Sullivan, housing director. Digging in here, the community and economic development city service area includes economic development and cultural affairs, the planning and building divisions of planning, building and code enforcement, fire, public works and housing. Our core services center on expanding businesses and arts and cultural development, public real estate services and services including permitting and inspection and land use planning as well as housing production, preservation and tenant protections.

Here we can look at a couple of different samples of the types of programs that the community and economic development CSA digs into. I know as we look at logic modeling and the opportunity for interdepartmental collaboration, these program samples will change over time and very excited about what that means for economic development. But here under economic development and cultural affairs, you can see business district and small district support, business retention, expansion and attraction activities. Some of the cultural investments and special events, sports and entertainment, etcetera, under planning, building code enforcement, the development services, environmental review and historic preservation, fire, fire development services, public works, development services, utility franchise agreements, and downtown construction management, and then housing, affordable housing, development loans, apartment rent ordinance administration, CDBG infrastructure investments, and then property maintenance and inspection. We measure across a lot more metrics than what you'll see on this dashboard, but here we have a sampling of some of the performance that can be visited.

So the first two boxes of the top are looking at retaining, expanding and attracting jobs, jobs growth numbers in 2025 and 2026, as well as downtown foot traffic and mobility. The next box to the right and in the bottom corner box and metrics show planning, building timelines, and for permitting and on time reviews and then for the planning process and for the building and construction processes. And then finally, the two metrics that we're showing here on the dashboard for housing are for housing production and rent stabilization rates. But these are again just a sampling of a much broader cadre of metrics that we are monitoring. I want to take a look at how the department budgets are shaping up.

So you can see here the 2025, 2026 adopted budgets, the forecast for the upcoming year and what is proposed, and then the deltas across our different programs, which I know we will have the opportunity to dig into more together. As part of the community and economic development city service area, building more housing is a key focus area. And you can see here the long term goal to meet residents housing needs across income levels by making San Jose a great place to build housing. And underneath the problem areas which we will be able to discuss with you more. Likewise, another key focus area for us is the growing the economy focus area and the long term goal for that focus area is to meet resident, I'm sorry, cultivate an environment for thriving businesses and resident prosperity.

And then within that, we have identified four problem areas. So good to note that the focus area activity is doing what it's intended to do. It is an iterative process and we are really honing in on the areas where interdepartmentally we believe we can make an impact also with your direction to really drive community and economic development. Here is a summary slide of some of the priorities and service delivery that we are anticipating in 2026, 2027. So among those priorities, the economic strategy work plan, the experience economy financing tools, which are called out in the March budget message, 2027 celebration strategy and dialing that in.

We have affordable housing alternative financing strategies, a look at ministerial planning and how that interfaces with the permit process, local building codes and administrative policies, evaluation, development fee framework policy, and electric grid updates and capacity enhancements. So these are some pretty amazing priorities to wrap around and which can make a difference. And then lastly, revisiting again the proposed budget slide deltas, you can see the title of the proposed project, the amount, and whether or not this is one time funding. To sum it up, as the community and economic development CSA, we are eager to work together to cultivate a thriving business development ecosystem, advance the experience economy, facilitate housing production, and increase certainty in development services processes. And with that, we're happy to, engage in some discussion about the operating budget.

Wonderful. Thank you for the overview. Looking forward to the discussion. Let me turn to colleagues, and we'll start with council member Ortiz.

Thank you, mayor. I wanna thank, you, Jen Baker, for your very informative presentation as well as the entire staff who, helped put this data and information together. I I truly believe as a council, if we want to turn our budget shortfall around, instead of simply just shuffling chairs on the Titanic, I I believe we must double down on improving our city's economic standing. And the one area I think that sometimes gets lost in this subject is workforce development. I was surprised to see that here even in in Silicon Valley, despite being, you know, a lot better than national trends, but here in Silicon Valley, have ongoing disparities, with employment for, communities of color, both our black and brown community, and our our youth, opportunity youth, individuals who have been disconnected from the workforce.

I'm sure many of those individuals are in in my district, but I'm sure they exist across the city. And we have so much wealth being generated here in Silicon Valley. But our youth don't know where to get started and how to access that wealth or even the jobs that lead to that that type of wealth. And then I I saw, you know, and I'm I'm all for providing incentives, you know, breaks for employers to come to to the city of San Jose. I support that.

I'll keep supporting that. But I also wanna have a conversation in regards to, you know, what sort of, skin in the game are the the employers bringing to the table. And and, you know, just to talk about workforce development. Right? Looking at that slide, you know, it was kinda like looking at a slide of who's who in Silicon Valley in regards to corporate trends.

We see Apple, Google, you know, Super Micro, PwC, you know, many many companies that are, you know, amassing a lot of this wealth, how are they contributing to our workforce development pipelines? What conversations at OED or our corporate outreach team having with them to make sure that they're investing in, you know, pipelines at our local community colleges or at San Jose State. Because I I know a lot of individuals who I used to work in tech. I I was at eBay. I was at PayPal, who, you know, get good paying jobs with a a plus certification that you could get at, San Jose City or Evergreen Valley College.

And I I believe the city as, a partner should be playing a role in convening these conversations. And so I guess I'd like to ask the office of economic development how the how those conversations are are being held.

Well, it has been a a great achievement of our Work to Future team and the local workforce board which was just commended for being a highly functioning workforce board. So that was an announcement that came out this week. In placing individuals who are some of the highest need individuals into positions where they can adopt and matriculate into a higher wage, higher skilled job trajectory. So our proving point around the resources that the city has through WIOA funding from the department labor primarily does show a strong track record of engagement with the most sort of under supported community members or those with the most desperate need in placing them into sustainable career growth trajectories. That's something that we will continue to lean into.

I appreciate that. Having come from a workforce development background and I've worked with workforce development boards, most of them are dysfunctional and most of them don't have good performance. So I appreciate that we're a high functioning one. But at at the end of the day, a lot of employers don't don't really look to workforce development boards to pull their their recruitment. And I guess I guess I'll be more intentional.

So I'm I'm glad that in spite of that, we're we're still moving the needle. But how are the you've mentioned like Google, Apple, Nokia. How are they working with the city? Are we having active conversations to say like, hey, are are you actively employing our residents or are you overly relying on, you know, visas to fill your your ranks? What what what are we or what can we do as a council to legislate to make sure that happens?

Well, one of the interesting approaches that private industry in particular has helped us advance is in what skills unemployed people will need to be reentering the workforce. So if somebody leaves the workforce now, we know that the likelihood of them needing to have a baseline level of AI literacy to reenter the workforce will be that much more important. So in initiatives like AI for all, where there are opportunities for training, for self directed training, if you have a library card, anyone can be able to come to the library, upskill. And I think there's been a strong amount of private sector support in that arena. But I think there is always an opportunity to invite more public private partnership.

There was recently a partnership announced between Teradyne, which is a company that is scaling in our footprint in San Jose State University. And so creating those direct ties for, graduates or young people who are pursuing a career and and how they can land in a company that is scaling here.

Okay. Great. Appreciate that. I know that, you know, don't mean to, you know, ask tough questions, but I appreciate organizations leaning into programs, but I wanna start seeing some data. You know, a company could come and say, oh, we're giving a $100,000 to this pipeline. Okay. Well, how many youth are you actually, hiring? Where are you sourcing these jobs from? Are you looking at community colleges as a viable employment strategy? Because individuals could, you know, participate in press conferences, can say, you know, good things about workforce development, programs like Work the Future.

But if we are not seeing them hire our kids, if we are not seeing them hire our youth or our black and brown youth, we're going to continue to see wealth disparities in this valley. And then those individuals, because there's a double cost of this, right? There's a double cost of this. Those individuals who aren't being able to seek these opportunities, who don't have uncles that work for tech or own companies, who don't have a father who, you know, made all the right decisions and, you know, connect these individuals to, you know, quality private schools or whatever. These individuals aren't gonna be reliant on our public services safety net.

Right? They're gonna continue to rely on the city and county for and the state for services. And and so in in in theory, we are subsidizing these employers' lack of commitment to hiring our our youth because we're the ones providing food stamps and housing, affordable housing, and other types of things to these residents. And so I I believe we need to have a high support and high expectations outlook as we as we look for bringing in corporate employers. Yes.

Let's provide incentives. Let's look at breaks for for companies to make sure that they're doing business here in the city of San Jose. But let's let's also have that tough conversation of, okay, what are you doing to make sure you're hiring our youth? And I I I wanna be clear. I know I think some people can easily say, well, you know, this is a failure of the k to 12 system or this is a failure of the community college system.

And and all those are are fair, you know, fair fair statements. However, if the city just sits on our sidelines and says, okay, that's for, you know, Eastside Union High School District or San Jose Unified or that's for, you know, the community college system to continue to to fix. We're not gonna be able to to move the the needle on this. And then we we then turn see issues in our neighborhoods. Individuals who aren't employed, they're gonna be participating in crime or or or other types of activities.

And so I continue to say the number one the number way number one way to stop a bullet is with a job. And if we are not being intentional with the employment opportunities in in our communities, we're we're not gonna see improved outcomes in that in that arena. And so I'm gonna be looking forward to leaning in with your department to see real return on investment and and real employment outcomes, not not just, you know, employers coming for, like, PR events or anything like that. Thank you.

Awesome. Thanks for the questions and comments. Great points. An important issue. Let's go to Vice Mayor Foley.

First gen, thank you for your first presentation before the City Council on the budget and your CSA. It was, very well done, very, helpful. And, call to Council Member Ortiz, thank you for your comments. I think it's important that we think about all of our employers and our employees and how we're all benefit by economic growth, which is really an important focus area to bring in new businesses, but we need to make sure that we're employing or working to employ all of the people who live here and lift everyone up. I appreciate your comments, Council Member Ortiz.

This is an important CSA as it not only builds housing and does all the things we need, addresses all of the issues that are important to livability in the city, but it also brings in businesses, and the more businesses we bring in, the better our revenue is and the better our income is for the city. I've looked over the budget, and, I have some questions for you later about that, probably not going to ask them now. But I want to get really specific on an issue related to something that was in the mayor's budget message as it relates to funding for the Momotaro statue. And if you'll recall, in his message, city manager was directed to locate funding within the budget for the Momotaro statue. And for those who are listening or who have no background on Momotaro, that is the gift from our sister city, Okema, that was installed by the Center of Performing Arts many years ago and was stolen and probably melt down for the medals.

And we are working on a partnership now with Okeyama to create a new statue and place it again in the city of San Jose. And, I, thank the mayor for including that in his budget message, but I don't see it in the budget. So can you tell me where that is accounted? How will it be addressed?

Well, thankfully with the budget director support, the office of cultural affairs has identified some TOT funding to support the reinstallation of Momotaro with a contingency to also account for variability in the tariff environment.

Okay. So do I since it's not in this budget statement, how do you recommend that we memorialize that? An MBA, Jim, what's

Yeah, think that's a good question, Vice Mayor. I think in the transmittal memorandum for the capital, we had previously identified potentially using public art funding for that. I think after additional analysis, we identified a more appropriate spot and availability would be the cultural arts funding in the TOT fund. So I think we will do, we will just memorialize that change as part of our rebudget cleanup. MBA, since it's very technical, we will just document it there, and then the transmittal message will then be updated to reflect where that funding source is coming from.

Great. Thank you. I appreciate that. And I think this is a culturally significant statue. It's very important to our relationship that is a long term sister city relationship, seventy years next year, where we will be traveling to Japan, and then they will be coming here in 2028. So it'd be great to have that installed. I'm sure I will unveil more details as we move along, but the funding was the critical piece right now. Thank you. Look forward to more discussion.

Thanks, Vice Mayor. Let's go to Council Member Condellis.

Thank you, mayor. Excellent point, Vice Mayor on all the all the more reason why the TOT needs to needs to be successful in June. But I thank you, Jen, for your for your presentation and in your study session introduction. And I I I'm I'm really excited to see the business outreach and development staffing continued again for another year to the tune of half $1,000,000, and I guess my my you know, we we we've all everyone on this diocese has supported expanding our business improvement districts citywide and in both uplifting our our respective council districts and and with our votes supporting the passage of these business districts in our in our respective districts. As part of this authorization or the workload essentially, What would this also allow us to expand, let's say, a business improvement district as part of their work plan in my district or or or can you walk me through the capacity of of of what their work plan looks like, and and whether this is to allow us to continue our what I would consider our our our prudent and say an aggressive expansion of our bid program in the city.

Yes. Thank you for the question, Council Member Condellas. There are three limited dated positions that are proposed for extension as part of the corporate outreach and small business and neighborhood teams. So we have currently have two corporate outreach officers who are working on outbound business attraction retention expansion. And then we also have a position that supports bids in neighborhood development. So indeed this would be a resource that can help continue to build capacity among the Evergreen Business Association and and build momentum on route to forming a bid.

Oh, excellent. No. That that's that's exactly what I what I wanted to to hear. And essentially, you know, getting getting that bid ready for it to come to us as a council. I mean, we've we've laid the the groundwork.

And, I mean, last year, I I believe I did a budget document for that as well as county supervisor arenas from the counties. So so I think we're we're primed and ready, and and I hope supporting this could lead to the fruition of a of a bid and and more bids citywide, not just speaking selfishly for for my district. But that's that's that's that's wonderful. The next area I wanted to to to ask about, is, workforce development as well as, you know, council member Ortiz brought up something and a recommended action that I you know, I briefly mentioned to Jim, thank you for your time yesterday, Jim on this, but the San Jose works action with the youth job initiative. Specifically, we are you know, I see the the ongoing savings to the tune of $203,000 with the vacant staff specialist position elimination, but there's also non personnel equipment funding that goes towards 25 students having approximately or about $1,800 in a summer stipend to work somewhere and and do exactly what we're doing or what we're trying to do in our city.

So is is is there a reason why in addition to the staff elimination, we are we are essentially reducing our capacity by about 25 to 30 students if I if my if my math is right.

Yes. So there would be a reduction from 325 placements to two ninety five. And non personal services were previously assigned to that staff level position to help facilitate the placements and recruitment and contracting for those services. Part of the evaluation has been a restructuring on some levels of that program. And I'm informed by staff that conceivably we could reaccommodate non personal funds to support 30, those 30 students. So that would be within the realm of possibility.

Thank you, Jen. And that's exactly my next question is for some reason if so, if that staff specialist position is eliminated to the tune of about a $154,000 in savings or a $150,000 in savings, would, we be able to if we identify that source of fundings, know, add that to give 30 young people an opportunity to have a summer job and I think we I've seen lot of our colleagues at the at the giveaways to launch the program in the summers, in the summer for the students. Would we be able to do that essentially without that staff specialist position is my question?

We would be, it would require extra staff effort from the existing staff to try to be able to, to wrangle those additional placements.

Okay. Okay. Yeah. Fair. Fair enough. Okay. Alright. Thank you. Thank you for that question. And then, the last, my next point is on the 2027 celebration strategy. And and, you know, with with San Jose's birthday coming up next year, it's a big one, February is important. I I guess, could could you maybe shed a little bit of light into, what the administration's plan is with regards to this funding and maybe outside of what's in the descriptor?

Certainly. So there $350 0 outlined as part of the budget proposal to support 2027 celebration activities. Right now, that is split out between a temporary staff or contract position supported by about $250 0 and $100,000 in program output to be able to help realize event and events and build or any event and build momentum around the activities we know are forthcoming. Now, it is the intent that there will be an advisory group formed and part of the role of that advisory group would be to help amplify and springboard raise funds and help define the appropriate scope of 2027 celebrations forthcoming.

Got it. Okay. Alright. That's that's that's exciting. Guess part of what I want to see and you know, I was in downtown for the NCAA tournament. That was that was great. Super Bowl. I saw it on TV. I didn't come to downtown. But, you know, one of the things that, you know, I I I'm mindful of is, you know, how are we how are we as a as a city facilitating opportunities outside of of essentially San Pedro Square.

And I know, you know, it's a it's a popular destination, you know, FIFA, we have FIFA coming up in a month and I know I've talked to several folks in the administration about what we're doing and how we're utilizing, you know, the the the investments we've made and the investments we're going to make to make sure that folks outside of downtown are also seeing these investments. And, you know, I I did not lead a Super Bowl watch party in my district. You know, nothing happened. Fair enough. But, I am leading a FIFA Super Bowl watch oh, no.

Super a FIFA World Cup watch party thing, whatever that looks like. And and so but if I if I am not leading that, would we see, you know, these thing these these kind of activations happening outside of downtown? And and, I mean, I I I just I can throw a good party and I know that, but, you know, I just wanna make sure that the administration knows that there's other venues and other places outside of downtown to to throw a good party. And and I I that's something that just really sticks with me, if that makes sense. And I'll just stop talking about parties. And the the next the the last thing is, on the EIFD assessment, the $100,000 would go primarily towards what?

So there are two technical prongs of exploration in looking at an EIFD or other enhanced infrastructure financing district or community facilities district tools that can help be can help seed public infrastructure to bring online broader development projects. One of those lines of funding would be for financial analysis and bonding support. So really understanding the tools, our ability to leverage tools and our capital capabilities to execute on those tools. And then another aspect is really looking at what sort of overlay or perimeters make sense vis a vis each of those tool types. So there is a technical element of property and parcel ownership that would need to be conveyed to define an eventual district.

And so the $100,000 on some level would be split between financial, technical capacity, and then land and property ownership capacity, and how that land is zoned.

Yeah. And this is not new. I mean, I worked on the bill that that helped essentially enable EIFDs when I was with Jim Bell, especially the the the voting threshold. However, you know, LA is doing EIFDs. I mean, several entities across our state are doing them.

I would just implore, know, as we go through with this, if we don't have that buy in from, you know, one of the other biggest entities that has to agree to to any I FD, the county, without changes in state law, would it would make, you know, this this fairly, fairly difficult to to put it kindly. But, I see the blinking light, first time I've seen it in a while, that being said, I'll I'll let I'll go of the mic for a bit, let my colleague speak, and then I'll come back if I have any questions. Thank you, Jen.

Thanks, council member. It has been noted in the record that you know how to throw a party. That was that was clear. Council member Kameh.

Thank you so much, and thank you for the presentation. I really think that a lot of the information and data that was given is, so key, to our decision making process. So, I appreciate all the work that that went into it. I know it's one of those things that it's it looks great and easy when you just have it in the presentation, but it takes time to be able to capture that information. So thank you so much for that.

I was actually, curious, you know, I mean, if it if one third of the workforce has to travel more than 25 miles, that's quite a bit, you know, and, you know, I don't know what the trend has been in the past, but I but I think that it it it says a lot about our area and and and what needs to to change here. The one area that I, wanted to, ask about is something that has been persistent for a very, very long time. And on, slide 55, you talk about preservation of employment lands as essential. Because we've had such pressure on the housing side and on the development side and looking at, well, what are the areas of opportunity? That that whatever 13% or whatever percentage it was seems to keep shrinking and shrinking.

And I don't know what kind of strategy is coming forth that we would do maybe even both. I know a lot of developments have been looking at mixed use and that kind of stuff, which can work. But there's a danger that there will be no more. Certainly, I just was wondering, what is a strategy?

Well, I think this is a good one for Director Burton to take on as we are in the process of the general planning cycle and also as his team has looked at some of the policies coming down from the state like SB 79 and where we've had to file specific exemptions to protect industrial land.

Thanks Jen. Chris Burton, Director of Planning and Building Code Enforcement. And you're right, certainly council member, we're not creating any more employment lands. And so really our focus is on preservation. When we wrote the general plan in 2011, we understood the pressure that was placed upon our employment lands.

We'd seen a considerable amount of conversion over the previous decade that resulted in this sort of diminishment and this constant reduction. I think part of the challenge we've seen over this last five years, as noted, is the introduction of many state laws that not only continue to put pressure on areas where housing can go. So, as Jen noted with SB 79, we excluded considerable amount of our key employment lands to ensure that we're preserving them. But other state laws have come through and continue to really push the bounds on that and limit our ability to do so. So we're trying to sort of approach that in a number of different ways and be clear.

I think the point on mixed use is an important one. Ultimately, what we've seen certainly in our commercial areas, so more of our sort of neighborhood retail areas where we've looked at the interaction between residential and commercial uses and seen the opportunity for a mix of uses is that the residential markets just don't seem to be interested in effective mixed use. It's challenging from a financing standpoint and they have vehicles through state law to eliminate any requirements that we may have to actually produce that. So, unfortunately, the move has been away from the tight integration of uses, where we're having to really take an exclusive approach to land use to just say housing can go where housing can go, and we're doing everything we can to preserve what little employment we have left.

Yeah. I think that, it might be worthwhile to think about how how we're able to do a bit more in terms of when things get done to us by the state because, you know, there seems to be sort of a misunderstanding in the community. When I go to the budget meetings and all of that, or I've gone to the general plan updates, people in the community do not understand how it is that these laws are getting passed. And, you know, they look at us and say, what are you doing? Why aren't you doing something about it?

And so I just think that we need a better strategy to either push back or do something because 13% is very little. So I really think that more needs to be done, just, you know, my thought, because others are saying, you know, like the community just doesn't understand. And I think that there are a lot of other things that the state does to us that, you know, I mean, we just continue to suffer and it's like, well, you know, keep taking it, keep taking it. And I know we do what we can, but I think that there needs to be thought of different strategies to combat some of these things that get done to us, including the sales tax. Because I think that it's great that, you know, we have these companies and everything, but if CDTFA comes in and says, hey, this is really the state's money, what are we going to do?

I mean, I just think very differently in terms of defending ourselves against some of these things that impact a general fund. And so, I'd like to think about that too. I also want to mention that Peter's idea of how is it that we provide better ways, better opportunities for our youth is really, really key. When you look at the unemployment figures that you showed and that whole sort of young people who are unemployed, We need we need to we need to also have a a better strategy for that. And, San Jose City College just opened up a brand new building.

It's absolutely fabulous. And, you know, the Schools and Cities Collaborative with the library does very, very well in terms of connecting with the local school districts. I'm wondering if there's a way, and I don't want to create more work, but being able to better connect, Work2Future with our local community colleges or even San Jose State. But West Valley, San Jose, Evergreen, and Foothill De Anza, there are great opportunities there. And I wonder if there is a better way to do something with them and letting the youth know that yes, in fact, there are opportunities. Thank you.

Thanks, council member. The

staff who presented on this, Jen. You know, welcome to San Jose in your first city council budget with us. I I think that the information you've provided really helps us understand the full landscape of what we have to consider despite significant financial constraints. I appreciate staff's effort to adequately resource development services and achieve the council's ambitious goals as it relates to housing, land use, and economic development. I wanna boomerang back to council member Ortiz's comments on workforce, which I love the discussion with council on.

We named preparing residents to successfully participate in the local economy, but then we're looking at cuts in areas that that are doing that work as council member Candelas mentioned, dollars 200,000 cut to the San Jose Works youth jobs initiative. And we're we're seeing trends that are telling us that entry level jobs like in the food service industry, server, cashier jobs are being lost to advances in technology. We're seeing mid career professionals with alarming rates of unemployment, when we have equity concerns around the racial demographics of who is most impacted by these trends. And so I just wanna caution how we're looking at workforce development and make sure that we're not putting all our eggs in one basket with one sector. Because let's be real.

We were we were here last month when the data center's item came and we saw how packed the chambers was, there is, I think, a split between young people who want AI and those who don't want AI and data centers. So again, I I wanna caution us to not put all our eggs in one basket because we need to make sure that we are providing a diverse set of opportunities to our youth. And so here comes my question. I I see a lot of support for businesses that provide jobs, but we know that the minimum wage has not gone up and workers are struggling. We need real solutions for building wealth and prosperity at the individual level, and I trust that our staff is up to meeting that challenge.

So what are we doing or what can we do?

Across the country, a growing trend of wealth disparity is notable in The US. Think as we look as a city, we have a shared goal of helping people approach a pathway of self sustainability. And with finite workforce dollars, many of those workforce dollars coming with very specific rules from the Department of Labor, A lot of our investment is on training and being able to help people keep pace or get a foot on the ladder to be able to grow with industry. So I think that is one of our best tools and it definitely comes with a significant rule book that is outlined by the federal government.

Thank you, Jen, for that answer. I also want to just bring in the the issue that I've raised the most on on this dais, and that's childcare. Just some food for thought for my colleagues and city staff. Studies show us that at the Santa Clara County level, we are experiencing a $1,300,000,000 loss in earnings, productivity, and revenue by not investing in childcare. And so as we're thinking about all the cuts and where we might want to improve our investments so that we can strengthen our local economy, we can't overlook the role that the city can play in making childcare access more affordable and available to our families so that we can generate a stronger local economy.

For the last theme that I want to ask some questions about and just learn more about how we as a council are thinking about our approach. Under building more housing problem area three, we acknowledge that we don't have all the right tools to build affordable housing. But on slide 46, we are only acknowledging 20% of the population lives on less than 55 roughly 55,000 a year. So that is families who are extremely low income. That is folks who are in the zero to 30% AMI.

But we know that over 50% of San Jose renters are housing cost burdened, spending more than 30% of their income on rent. So I'm curious why we didn't see data on low income at the 50 to 80% AMI and very low income at the 30 to 50% AMI because these are workers who are experiencing poverty and represent a much larger portion of our population.

Thank you, council member. Eric Sullivan, director of housing. So is the question about sort of what are investment types for lower income of the households?

The the question is why are we only looking at the 20% that are an extremely low income, but not including the number of everyone who is, you know, living in poverty and working in our city? Because I'm trying to understand what is the goal of telling us that 20% of the population, is earning less than 55,000. We have more families struggling. So I'm just trying to better understand the relevance of that data point.

Okay. I can just provide, broader context based on the information memo we released on cost burden households in March in response to council member Ortiz's memo from earlier in the month as part of the budget message that talked extensively about cost burden households across the income scale, but more most specifically at 50% or below on the AMI scale and also recognizing some key facts within our affordable housing portfolio. So if you look at it in terms of the three tranches of work that the department does, one on sort of our work on in prior investments into affordable housing, primary and local housing tax credits, our work with rent stabilized programs, including mobile home, ordinance, and then our work around inclusionary housing units. And that provided a lot more detail about the needs of our cost for households and also acknowledging that the majority of our cost for households over 80% live in current income restricted or rent stabilized units. So there's a broader sort of context and recognition of the needs that across the lower AMI scale down to 30% that was captured in the memorandum.

And I think the single data point from today's presentation was just iterating on a particular subset.

Thank you, Eric. I appreciate that context. I asked the question because as we're looking at the progress that we're making as a city, I I think it's also important that we are being, very truthful about, what work is is still, needing to be done. And so I have a few, more minutes. I'm gonna boomerang back to council member Kamay's comments because they really resonated with me in terms of the, PBCE work that needs to be done, especially, you know, during in this moment of a general plan for four year review. Does this budget anticipate scope changes for the four year review or will this planning work be constrained by what's proposed in the operating budget?

So, thank you council member. The scope for the four year review, was brought before council prior to starting the task force. So at this point, we don't anticipate changes in scope. Our intention is to wrap up our task force process by the June. And then we'll be before the City Council in August to discuss that scope, which will then sort of kick off all of the work in the supplemental EIR that sort of comes once we've sort of set the direction. That's what's currently anticipated in the work plan.

Thank you. And I just wanna call attention to two big funding commitments. The Tri Elemental General Plan Update Consultant and the historic building, buildings inventory. Do these two budget commitments help lighten the workload or was this work that was already baked into staff's, capacity assumptions?

So the tri element is actually something that we put on pause through that prior year MBA that you'd previously mentioned. There is state law that requires us to update three elements of the general plan. It's our safety element, our open space element, and our environmental justice element in the general plan. So we have been deferring that work. It is work that we need to start because there is a sort of a clock ticking.

So that was already in the work plan. I think there's always been a reference to additional work that we need to do around historic resources. Working on the inventory is work that we know we've needed to do for multiple years. Again, because of limits on resources, it has been pushed back. We do have capacity within historic preservation sort of resources to actually accommodate that work. So this doesn't create an additional burden on the work plan as it stands.

Got it. Thanks, Chris. And I'll wrap up with this last question because it was included in the presentation and it it reflects what council member Kamay was mentioning as our city priorities threaten to get pushed out by mandatory work. What is being done to boost staffing levels? Because my concern is that proposals for the CSA aren't really moving the needle, especially as you're constantly re shifting and reprioritizing work.

Yeah. So we'll we'll be bringing forward an MBA on the citywide planning sort of work plan and fees. So most of the work that's sort of accommodated by our citywide policy team is supported by our citywide planning fee. It's a general plan update fee that's across sort of most permits that we issue. And that represents about 75% of our funding source. So we've started to take a look at that. There's more work that needs to be done. So we're bringing back an MBA hopefully very shortly that will outline more of that and more of the work that's to come.

Thank you. I appreciate staff responding to my questions and my colleagues hearing my comments. Thank you.

And I just wanted to add in council member because that's a very important question that you've asked. We wish we could do more with obviously, as you know, with the constraints of this budget because there is a lot more work to that we could do in this area. So, hopefully, we will be looking forward to better times, but we will definitely try to maximize with with what we can with this budget, to your point.

Thanks, Jennifer. Thanks, council member. Let's go to council member Doran.

Thank you, mayor. Thank you for the presentation. Regarding the community and economic development, growing our economy focus areas, I feel like we've done a not a great job in the past in order to really aggressively bring in in business or advertise what the C and San Jose should be. In order to build more housing, we have to have investment. We have to have even if the housing was a $100,000 from some miracle to happen, if you don't have a job, then you can't pay for the house.

So can you give me a little bit of your thought process, how are we going to be aggressively recruiting the investors, businesses through leveraging, you know, like in Arizona, they leveraged their university and done a great job at it, I think we could do much better.

Yeah, thank you for that prompt Council Member Duan. I would say that there has been sort of a natural gravitation from post COVID very neighborhood based and small business based lifeline work, which was necessary in that moment and a gravitation back to center where we're focused both on large industry growth and investment prospects as well as supporting neighborhood districts. So it definitely is a telescoping activity. This year, I'm very proud that our business development team has been at industry events on the ground planting the seeds and sharing about San Jose as an investment opportunity. So they have been to NAOP photonics conferences for the first time in many years, they were attending semi con west in Phoenix, this next year it will be in San Francisco.

And we are tasked with putting together a more formalized business development strategy that can look at how we're marketing the city, our real estate assets, the assets of talent, the power capacity we have to be particularly bullish and be in the field and inviting each of us to lean in as we market the city for broader investment.

Thank you for that answer. I have a question for PBC. In the report here that stated very clearly that some of the problem is about the permitting process is not predictable and not optimized for speed. In order to attract investor and job here in the Silicon Valley, especially to San Jose, how do we move that forward?

Yeah. Thanks, council member. Obviously, you know, this is something that we tried to illustrate a little bit more through the recent study session that the sort of diversity and complexity of permitting that we do across the departments that touch direct permits is significant. And so we're catering to a lot of different needs within our community with the resources we have. That being said, a considerable amount of our work around process improvement is around transparency and in particular sort of clear communication and education of our customers so they can come into the process prepared Because inevitably that's what makes it quicker is if they understand the requirements, they know sort of how to submit, what to submit, it allows us to move through quickly.

And by doing so, especially focusing on a lot of the smaller projects that are relatively simple, we've been able to move a lot of that work online. And it preserves more of that capacity to focus on those bigger, more complex projects, whether they're multifamily housing, whether they're economic development projects. So we can respond to the needs of those critical projects that are really making significant investments in the community very quickly and dedicate the resources where they're needed.

Well, I look forward to that acceleration and diversion. I have a good question for the fire chief. I know that we we almost finished with building Station 32, even though with the economic downturn and the and the cuts, do you have any plan to staff Station 32 with, for example, maybe a truck company from Station 9 or Station 30? Because in in in a district where the critical needs is there for our underserved community. Have Station 33 has already been shut down for about fifteen years, and now we just built a brand new station, and then we're thinking about keeping it shut down as well.

Hi, council member. I'm just gonna I'll start and the chief can certainly add in. So that will all that will that actual proposal will come up in the public safety city service area meeting on Monday. But in early answer to your question because it's an important one we are continually evaluating that proposal so I don't think- the chief has an answer yet but he has been working very hard during this entire budget process to figure out if. There is another way to even do a slightly modified opening just to have it opened at a very, very low cost.

And so, that's under evaluation right as we speak. So, we may have more to share on Monday when we actually have the public safety CSA. I'm not sure if we'll be ready yet, but, that's that would be the goal, if we could. And so it's right now in under analysis. Those those different options are under analysis with the budget office.

And so if you can hang on, a little bit longer as we're doing that analysis, we'd appreciate it. But, we might be able to give you I think Jim on Monday, we might have a little bit more information, from your analysis. But, yeah, the chief's been working hard all along to fight try to figure out if there's another way to do that. Of course that is a very important fire station to open I mean I personally was part of the organizational review back in the mid. The 2015 was a chief, with the chief, and I understand very, very much and very deeply how that will positively affect service levels across this organ, across the city, actually, because that's such a busy area, but so we didn't take that proposal very lightly in any way, shape, or form, so it would, as Jim said, even if we can't find a way, because we don't want to trade one problem for another in other areas of the community, but if we can't find a way to do some sort of soft opening of it or something's modified, we, it certainly is on top of list for me to recommend to the city council to get it open.

Thank you, Jennifer. Well, look forward to further information on that. And same as, council member Condales, you know, I think it's important that we fair and equitable, especially I'm leading the entertainment center right there in Little Saigon, which every time we've done an event over there, our ROI is incredible. We invested $15,000 in the night market where it draw over 80,000 people and it's continue by private funding every two weeks that we have a night market. That bring enormous amount of people to visit in District 7.

That's not that's including the

San

Jose Giants, the Shark Eyes, the Barracuda, and the South San Jose State University. And I would hope that with all the funding, you know, not only racially equity, but equity as a whole. And it was kind of I I would hope that we shared those funding. And I know the the the shark have invested over a about a $100,000 in in in funding to to help out. And I wanna make sure, and I'm fighting for District 7 to have that same equity as downtown or any other district.

And it's only fair and equitable because the taxpayer in District 7 pay the same taxes as anybody else. And I expect, just like council member Condelas, that we get the same amount of funding so that way we can make the business around there thrive. That's including the Tropicana, the Monterey Corridor Business Association, Story Road Business Association. With that, I yield my time. Thank you.

Thanks, council member, and I I do appreciate the, the night market was a huge success, and I I hope, you know, as we look at the essential services reserve and council members apply for grants to take on special events and projects in their district that that'll be one of the types of uses that folks bring forward because it was a huge a huge success. I would caution colleagues though and I'm I'm not sure this is necessarily what's being stated, but I also would note that we we don't have 10 downtowns, and there is something unique about downtown. That doesn't mean it should get all the focus and attention and funding, to be clear. We also need to activate in the neighborhoods, invest in our parks and our public spaces. We obviously have our libraries and community centers situated throughout the city for a reason.

But I I wouldn't say that it's simply a matter of taking large events and dividing by 10. I do think there is something unique about a big city's downtown, and there and there is value and tax base, and folks from all over the city and the region come to our downtown for a variety of reasons and are and benefit from the density and dynamism of it. So it's not either or, to be clear. Certainly not either or. I think it's an important tension and discussion for us to keep having. Okay. Councilor Mulcahy.

Thank you, mayor. In the interest of time, I'm gonna kinda pop around a little bit. I'm gonna start with you, Jen, and wanted to talk about the business improvement districts, right? We've approved some this year. We've got some more kind of moving forward.

I'm wondering from a staffing perspective, are you both, staffed up, for capacity for the ones we've approved, the ones we sort of intend to, approve, but also those that we have in place today? As I've stated before, both with like the Alameda Business District and so forth, that, you know, our work isn't done when we, you know, birth these bids, right? I mean, I think the work is ongoing, even if they've been around like the Willow Glen Business Association has been around a long time, you know, they have enough capacity for some staffing, but that evolves over the years as people transition in and out, but we have several bids that are not able to afford or not affording, you know, committed staffing. So I think our job to continue to help facilitate the success of those is important. So I'll just, you have any comment on whether there's anything in this budget that's allowing you to do more in this area or do you still have some gaps that we should know about?

Well, the proposed budget before you does help backstop two positions that are limited dated positions that have small business and neighborhood focus. So the short answer is yes. If those positions are approved as part of the operating budget moving forward, then we will sustain our capacity to support technical assistance to the bids, help them grow their capacity to be self sustaining and to have a lasting impact. I think this is a really great example of where the city has invested seed funding over the last couple of years. And now we are bearing the fruits across districts, Alum Rock, Santa Clara, Story Road, East Village, and the Alameda to invite the private sector also to lean in and have that co investment in a vital neighborhood life and retail scene.

So the longer short answer is yes, with the proposed budget, we have the staff. I think in terms of contract support in the near term, we also have the capability to be able to be building capacity among bids that do not have that traction yet in their organization or in their community mobilization, as well as as continuing and ideally tapering off a little bit the support for existing bids as they continue to gain momentum.

Well, I think it's, you know, what we've heard is some comments about inclusion in all the activities around, you know, entertainment, know, activations and so forth, and one of the conduits for that is our business improvement districts and our, you know, business associations. And I think that is one of the ways, just an example of what I see the role moving forward as your shop is to not just keeping them in the loop on these things that are economic drivers that the city is sponsoring, but also whether it's the, you know, you know, out of Chris's shop, the expediters for opening a business, right? One of the first places that a business owner or prospective business owner is going to go is that local business association, and the more they are connected in knowing the services that we are providing, I think the better. So for those even those more mature associations, I mean, downtown associations very unique, they're highly staffed, you know, would say they're not staffed enough, but as we know that they have a broader staff, I just think having our team available to continue to connect them to what we've got to offer is helpful.

Just an idea that I was thinking about, especially for this group as well, when we did the ABA CBI or the yeah, the CBIID, one of the things we took out was all the home based businesses, right? There was no reason I thought for us to be adding more tax on to them, but it's fertile ground. There's 500 plus businesses, you know, at home in that sector in the broader Alameda Business Association area. That is fertile ground for the possibility to be continuing to communicate with those businesses. I'll give you an example.

I have a tenant that we did a lease with ten years ago. They came out of their home. They took 4,000 square feet and they were there for ten years. They just bought a building and they're moving out. And you know that came from a home based business who bought a building in San Jose, made a conscious decision to stay in San Jose.

So just like we were talking about our jobs lands, right, we always think about, oh, this is all about real estate. We have other fertile ground in my view, and that's where I think your operation can be super helpful by staying connected to these, you know, business associations and those other affiliated, you know, at home businesses in that same area, and for that matter throughout the city. I know Vic's probably doing the math right now about how many of those are out there, but I want us to make sure that we're being mindful about communicating with those as well. That makes sense. I don't know if you wanna react to that while I find my next question.

Sure, I would say, well, notably among the home based businesses in the Alameda Business District, a number of those businesses are situated in with owners of the homes, right? And so there is a base level foundation of security that comes with increased property value and revenue stream from being able to have a business based at home in a neighborhood that has a lot of vitality and an opportunity to patronize the, and what we call linger time, right? To be able to access the community and spend time there. I think the partnership with the bid boards is particularly important in how we're helping bid boards mobilize to gain that legitimacy and traction with all business owners that are in proximity. So I would agree with you there that there is definitely more support work to do.

I would say with the momentum that we've already gained with the bid boards.

So switching gears a little bit to the public art program. I know the vice mayor just raised the question about Momentaro Peach Boy. So is the the plan with our public art that, you know, there's gonna be a, you know, that's gonna need to be installed. Right? So I assume public works would be involved in something like that.

And then obviously, you know, we have a, you know, a staff in our public art department. Well, you know, is is a situation like this gonna require, you know, a public art, sorry, a public works, you know, installation fee, and at the same time, would our, public art program through ROCA actually take a fee for accommodating that work as well? Is that a typical way of doing things?

That is typical based on how our budget is modeled. So our staff charges time to be able to steward assets into the public art inventory. And then likewise solicits the input of other departments to help make sure that the installation of any given art asset is seismically retrofitted, is engineered in a way that it won't tip over or create a liability for us. And, and that is, think since the great recession, how the city has been operating. So we don't have a general fund amount that otherwise supports overhead for public affairs staff.

So, but I mean, I get public works as a cost recovery program. I don't see how, if we have staff, you know, from general fund or TOT or however you're staffing public art folks who are doing that work, I don't understand why there's a fee taken for that kind of thing. Doesn't compute. Is that something, Jim, you want to talk Yeah,

to elaborate, mean, are some staff that are funded in the TOT fund on an ongoing basis. There are also some staff that are charged to public art funds on an ongoing basis, but it's a project to project funding source. So if they are pulled off a project to work on something else that's not part of the public art program, for example, they don't have a place to charge their staff time to. So they can't charge their non public art staff time to a public art project. And so that's that's the reason for the some of these projects require funding sources to make sure there's resources for staff to do the work that's required.

And that came into place when?

For decades? Yeah. Maybe?

Least thirty five years ago.

Oh, okay. So that means that if the Japanese consulate, I I can't remember, vice mayor, you talked about it the other day, that they're actually building that for us now and bringing it back. Who who's burdened with that cost to do that? It's a sort of an example of, you know, we've got people doing really nice things for San Jose, especially when the thing unfortunately got stolen, that then there's sort of a bill to pay to actually put it in. It seems a little counterintuitive to encouraging more of this goodwill to happen in our community.

Excuse me, that's a good point to make. I think there are no easy solutions here. Mean, that's why we can't say that how thinly staffed the city is. We've gone through iterations and iterations of reductions. And we have departments that are essentially work like a contractor where you bill for service because there is no general fund support for that work. Certainly it could be prioritized, but that would be part of the budget and the trade offs with everything else that we have going on in the budget process.

All right, that was a quick ten minutes. So I'm gonna sign off, but I have five more questions that I'll come to some of you each individually. But I'm not gonna give up on this topic. I think we have to do better to encourage more investment in our city, especially when it's philanthropic, and we need to be good receivers of goodwill from our community and set an example for allowing more. Thank you.

Oh, yeah. That's right. Well said. Colleagues, I I don't see additional hands, so I'm gonna move to public comment. Let's see what ended up burning Okay. Final So, Tony, do we have public comment?

I have no cards.

Okay. Well, then, I wanna thank everyone for the presentations and substantive discussion and we'll see you all tomorrow for the next study session. Have a great day.

And just a reminder, we start at 09:30 tomorrow.

We'll see you at 09:30 tomorrow. We are adjourned.