Senate Bill 521

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Transit village bill sparks land-use decision worries

4/21/2005 7:33:11 AM

"It's a tool cities will have in order for them to do development around transit, relieve freeway traffic and air pollution and, for many people, allow them to live closer to work," said Torlakson, D-Antioch.

By Kiley Russell
Contra Costa Times

State Sen. Tom Torlakson's bill to spark a building spree around commuter rail stations is moving through the Legislature, but a provision giving regional transit agencies and the state greater control over some local land-use decisions could ignite fierce opposition.

"It's a tool cities will have in order for them to do development around transit, relieve freeway traffic and air pollution and, for many people, allow them to live closer to work," said Torlakson, D-Antioch.

The bill would allow cities to form redevelopment agencies to build "transit villages" -- high-density, mixed commercial and residential projects with affordable and market-rate housing -- around rail stations.

Before the plan can be implemented, however, the city would have to win approval from the transit agency that runs the station and the California Infrastructure and Economic Development Bank.

Once those two agencies sign off on the proposal, the new redevelopment agency would be able to lure a real estate developer using property tax dollars. That money would be spent as a subsidy to reduce the initial building costs.

The redevelopment agency then would collect the difference between the original property tax income of the area and the higher property taxes the area generates after it's developed, money that would otherwise go to county and state coffers.

"(The cities) initiate this. They're in the driver's seat. They have to approve (the transit village plan) to begin the process. They have to make sure the local community is OK with it," said Kerry Hamill, a legislative analyst with BART, one of the bill's sponsors.

"Then they bring it to BART or another rail provider and say this is what we've got, now you guys have to approve it," Hamill said.

Builders support the bill because it allows them to avoid planning commission and city council votes on each phase of development.

"As long as they conform with the plan, they can do it. There's not a series of discretionary approvals that need to be achieved," said Guy Bjerke, a spokesman for the Home Builders Association of Northern California.

"Neighbors and others will have their voices heard in that process. After the plan is adopted, hopefully then people will come in and build to the plan and the debate will be over and we won't be debating on a project-by-project basis. Builders wish that was the way the world worked," Bjerke said.

Republicans, however, appear not to love the bill, SB521.

"To folks on my side of the aisle this is a continual, incremental encroachment on the land-use planning done by local entities, cities and counties, by state government," said Sen. Dave Cox, R-Carmichael.

"It's a situation where, by and large, Republicans believe land use ought to be done by the local authorities and my colleagues on the other side of the aisle believe the state of California knows best," Cox said.

Walnut Creek City Councilman Charlie Abrams echoes Cox's concerns about the bill and says he's "basically suspicious" of it.

"The state needs to stay out of land-use decisions because they botch it up with all the politics involved," Abrams said.

The bill just adds more bureaucracy to an already complicated planning process and "just adds more people whose hoops we'd have to jump through," Pittsburg Mayor Nancy Parent said.

Still, not all city officials are skeptical of what would be a new land-use role for transit agencies and the state.

Dublin Mayor Janet Lockhart says she likes the idea and thinks her city, which is planning for a new West Dublin BART station, could benefit from it.

"We are the classic example of where that would work well since we don't have a redevelopment agency and there's no reason for us to form one except for around the BART station," Lockhart said.

"You're siphoning off tax dollars that go to the state and the county, but if you're doing that to benefit a specific project that benefits the goals of the state and county that makes sense," she said.

Land-use experts see the bill as a creative, if not particularly radical, departure from existing rules.

Local governments already must win state approval for development projects' environmental mitigation plans and for plans to meet state-mandated housing goals, and BART already insists on high-density, mixed-use projects around its stations, said Paul Lewis, a researcher at the Public Policy Institute of California.

"This (bill) makes sure that what the city does isn't in its own interest alone, but in the interest of the region as a whole," Lewis said. "It's pretty clever."

The bill is also raising some eyebrows over a provision that expands the definition of "blight" to include areas around commuter rail stations that don't already support high-density development and that aren't predominantly urban.

Redevelopment agencies have the power to take over private property in order to build a new project if that property is declared blighted.

The California Redevelopment Association believes in smart growth and high-density development around transportation hubs, but is worried the public won't support the new blight definition, said David Jones, the group's Sacramento lobbyist.

"Calling a neighborhood blighted simply because it doesn't have density is very, very troubling," Jones said.

Gov. Arnold Schwarzenegger has yet to take a position on Torlakson's legislation, which is scheduled for a hearing Monday in front of the Senate Appropriations Committee Monday.

http://www.tomtorlakson.com/CMS/PublicationDetail.aspx?PublicationID=124

Better listening improves results

Silicon Valley/San Jose Business Journal
EditorialMay 13, 2005

Government should be run more like a business, the argument goes. Public officials should be more circumspect in handling the taxpayers' money. They should manage more efficiently and keep their eye on the bottom line as if they were operating in the private sector. They should recognize the citizenry as both the stockholder and the client.

That all sounds pretty good in this sound bite world.

But there's a corollary that San Jose city officials seem to have missed -- In some cases, they are competing with other jurisdictions and adopting practices and pricing structures that aren't competitive can be a deal killer in the end.

A few developments this week put a fine point on that lesson.

A Cisco Systems vice president fired off a letter to the city saying that the proposed development fee planned to finance infrastructure upgrades in the North First Street area was simply too high. At $10.44 per square foot, it would have a chilling effect on Cisco's interest in expanding here, a potentially devastating blow to the city's hope of growing its way out of tax revenue problems.

Down the road in Coyote Valley, developers staggering under the prospect of carrying well over a billion dollars in infrastructure costs also were grumbling. Here, the city grudgingly seems to acknowledge that in this economic environment, the expressed desire to plant jobs in Coyote Valley before housing just wouldn't fly. Only by spreading the upfront costs over many residential buyers in this superheated housing market does the deal come close to penciling.

The unifying theme here is that neither of these responses should have come as a surprise. All the city had to do is listen to the customers, the people trying to do business here. And that seems a worthy addendum to the list of things government could do better.

Apologists for the status quo will point with pride to the political dog and pony show staged this week next door to PF Chang's downtown restaurant. There, Mayor Ron Gonzales unveiled a new bit of finery in his ongoing bid to dress up City Hall's relationship with small business. We'll now have a corps of ambassadors who will personally guide a business through the maze of red tape, he proclaimed. No detail on how that'll work or what success will look like. No talk of actually reducing the red tape.

Those same apologists will point to the seemingly endless string of public hearings, arguing that stakeholders have ample opportunity to influence decisions. We'll disagree. Some of those hearings are conducted as window dressing after the decision has effectively been made. Anybody recall a hearing on that baseball stadium plan, for example? Others involve officials listening but not hearing.

Listening is a skill that can be both taught and learned. If public officials want to get things done, they need to improve their listening skills. Only then will they hear what the customers are saying and only then can they become accomplices rather than hindrances in building a brighter future.

http://sanjose.bizjournals.com/sanjose/stories/2005/05/16/editorial1.html

Budget woes put brakes on projects

Silicon Valley/San Jose Business Journal
Timothy Roberts, Sharon Simonson and Robert Mullins
May 13, 2005

After three years of multi-million-dollar budget cuts, San Jose this year faces more of the same. Only this time it is running out of stockpiled cash to soften the impact.

Is the sky falling?

"The sky is continuing to fall," says San Jose Mayor Ron Gonzales, "and it will probably continue to do so for another two years."

Redevelopment is stymied. Accident prevention is on the skids. Road repair has hit a rut.

Even the Mineta San Jose International Airport, funded not by taxes but by fees charged to airlines, has had to whack its expansion plans. It is cutting its five-year capital plans by two-thirds -- from $2.1 billion down to $723 million.

Those plans maintain spending on a new North Concourse, but gone from that five-year schedule are a South Concourse, a Central Terminal and a double decker roadway.

"We've run out of the easy stuff to cut," says San Jose Budget Director Larry Lisenbee.

"We've been able to get by by raiding the reserves," says Councilman Dave Cortese.

The city manager has recommended a 4.1 percent cut in the operating budget to $1.41 billion. The capital budget, not including the airport, would see a 23.3 percent cut to $938.4 million. The combined budget would drop 12.9 percent to $2.3 billion for the year beginning July 1.

The city has had to cut road maintenance to a third of what is was four years ago. One of the eight police traffic teams will have to go, and half of the city's community centers will either have to close or be taken over by nonprofit groups.

"This is real life stuff," says Mr. Lisenbee.

More threats could lie ahead, says Councilman Chuck Reed, an announced candidate for mayor in 2006. "We've made a lot of assumptions to get us through," he says.

Negotiations with the police and firefighter unions have not gone well and are headed to arbitration. Both have worked without contracts for 14 months and a significant raise made retroactive could take a further toll on the budget.

Mr. Lisenbee won't talk about how big a raise the city is prepared for. Salary contingencies are camouflaged in the city budget.

But there is a contingency plan for budget cuts of up to $35 million that would make major cuts in services, including reduced police patrols and the closing of at least one firehouse.

One thing that would force the city to make some of those deeper cuts would be the loss of up to $20 million in revenue from a fee on phone service to fund 9-1-1 service that the city approved last year. SBC is challenging the fee in other locations, charging that it is actually a tax that should have been approved by voters, not council members.

Council members say that through it all, the city will keep its priorities, including safety and economic development, but will have to do that without some of the particulars, if police and fire face budget limits and the Redevelopment agency has no new money to encourage the development of North First Street.

Vice Mayor Cindy Chavez worries that if the city can't invest in public safety, libraries, parks and other amenities, businesses may have trouble recruiting the people they need to remain competitive.

"Will we be able to attract young entrepreneurs if we can't make the city attractive to them?" she asks.

There is a little light ahead.

The real estate investment craze, both in commercial and residential development, is producing sales that will increase the taxable value of properties in the city.

In a recent report explaining why it lowered its ratings on San Jose RDA debt, Standard & Poor's Ratings Services noted that the value of residential properties in specific areas of the city is rising, offsetting in part the fall in commercial property values.

In addition, new development also should boost the tax base. A case in point is the new 385,000 square-foot Cousins Properties' retail development on the northern outskirts of downtown. That development is valued at $80 million and is supposed to be finished next spring. The city estimates that the project will generate approximately $1 million a year in property taxes and $1.7 million in new sales tax revenue or a total of $77 million in city revenue over the next 20 years.

But overall, redevelopment agency property tax revenues fell the last two years and are expected to fall again next year. At its peak, the Redevelopment Agency had $190 million in property tax revenue, its primary source of income. Next year it projects $145.7 million in revenue, most of which goes to pay for existing debt.

The drain on the city's Redevelopment Agency (RDA) funds has put a squeeze on neighborhood business districts trying to promote their collections of small retailers and restaurants.

The San Jose Downtown Association would see the RDA's contribution to its operating budget cut by more than half to $125,000 in fiscal 2006, from $278,191 this year, according to the proposed city budget.

Other neighborhood districts are slated to receive the same $10,000 through their local business associations as they received this year, plus the free services of an RDA employee who serves as a manager to the associations. But not too long ago, the city gave each $20,000 a year.

Unable to rely on the RDA, associations have created Business Improvement Districts (BIDs) funded by an assessment on the business licenses of businesses operating within the district.

http://sanjose.bizjournals.com/sanjose/stories/2005/05/16/story2.html

Court asked to nip San Jose's Strong Neighborhood Initiative

Silicon Valley/San Jose Business Journal
Sharon Simonson
May 13, 2005

San Jose's wide-ranging Strong Neighborhoods Initiative continues to face legal challenge, this time from the San Jose attorneys who last month beat the city in a separate but related case, forcing it to relinquish redevelopment control over 31 downtown acres.

In a 22-page argument delivered May 6, San Jose attorneys William Brooks and Virginia Hess of Brooks & Hess P.C. are asking the California Supreme Court to overturn superior court and appellate court decisions against Elaine Evans.

Ms. Evans seeks to prevent the San Jose Redevelopment Agency from including in the Strong Neighborhoods' project area her roughly 8,000 square foot parcel and neighboring 21-unit apartment complex at Saint James and North Third streets.

The RDA has no specific plans for her site, Ms. Evans says and RDA staff confirm.

The lower courts' decisions largely turn on the city's argument that Ms. Evans failed to "exhaust" her "administrative remedies" by complaining loudly enough and specifically enough during public hearings before the San Jose City Council or in letters to the city before the project area was established.

The stakes in the case are large. If the court were to deny the San Jose Redevelopment Agency jurisdiction, it would have to give up its control over more than 10,000 acres -- about a tenth of San Jose's land mass -- and would not be allowed to spend money or collect taxes in the region.

The RDA has begun spending $69 million earmarked for the roughly two dozen neighborhoods covered by the initiative; it has plans to spend $120 million total.

Ms. Evans says the legal fight, which has cost her more than $100,000, has put her in the poor house. Indeed, in an odd bit of irony, she says if her financial situation doesn't improve, she may be forced to sell the apartment complex at the center of her dispute.

Ms. Evans says she has pursued the fight because she believes that her property rights are slowly but surely evaporating. The Strong Neighborhoods Initiative and the threat of losing her holdings to the RDA's power of eminent domain struck her as the final assault against which she had no choice but to react.

So strongly has she felt about the principles in the case that she rejected an offer from the city of San Jose about a year ago to relinquish its powers of eminent domain over her property if she would drop the suit, she says. There have been no other settlement offers since then.

"What I'm really disappointed about is that more people don't see that the city and the RDA haven't met the (state's) requirements to establish blight. I do not think we have prevalent blight in a tenth of San Jose's geographic area," she says.

Under state law, for the RDA to establish a project area, it must show that a region suffers from blight that is so pervasive and entrenched that it cannot be remedied by the private sector alone. The law lays out conditions that must be met to prove physical and economic blight exist.

The city has not yet received a copy of the document and cannot comment, says Nora Frimann, chief trial attorney in the city attorney's office.

Ms. Evans, through her attorneys, argues that a last-minute change to the downtown boundaries of the SNI project area allowed the city to exclude from its formal deliberations about SNI a nearly 50-page letter that challenged the lawfulness of a blight study completed by consultant Keyser Marston Associates of San Francisco on the city's behalf.

That letter, were the court to allow its inclusion as part of the administrative record in the SNI proceedings, would preserve Ms. Evans' right to challenge the city's actions in court, her lawyers argue. Without it, Ms. Evans' remedies through the courts are limited.

In particular, the letter would maintain her right to question the thoroughness of the Keyser Marston study. That study is crucial because it is the basis by which the city established the all-important blight finding for the Strong Neighborhoods' district.

Mr. Brooks and Ms. Hess' legal success in the related case, which involves the so-called Mitchell block and 27 surrounding acres downtown, turned on what Santa Clara County Superior Court Judge Joseph Huber ruled was the inadequacy of the Keyser Marston study in that case.

His ruling determined that Keyser Marston had not established blight, therefore undermining the legal rationale for making the 31 acres a redevelopment project area. The consultant used much the same methodology in its study of the Strong Neighborhoods project area, Mr. Brooks says.

Judge Huber, who initially issued a tentative decision in the Mitchell case, has now issued a final one. Ms. Frimann says that no resolution has been reached by the city whether to appeal.

The Supreme Court's decision whether to take the case likely won't be known before June or July, Mr. Brooks says.

http://sanjose.bizjournals.com/sanjose/stories/2005/05/16/smallb4.html

S&P trims San Jose RDA debt rating

Sharon Simonson
Published: May 9, 2005
Silicon Valley/San Jose Business Journal

Standard & Poor's Ratings Services has downgraded $1.53 billion in San Jose Redevelopment Agency debt and changed its outlook for the bonds from "stable" to "negative," citing substantial reductions in the agency's revenue and concern that the situation could get worse.

The change in outlook reflects the region's economic reality and its repercussions for the agency. The RDA enjoyed huge, annual increases in its tax revenue in the late 1990s and early 2000s followed by precipitous annual drops. Its tax revenue is largely derived from assessments on business equipment and commercial and residential real estate within agency project areas scattered throughout the city.

Since the end of the high-tech boom, declining occupancy in commercial properties, particularly in North San Jose, has reduced agency property tax revenue from nearly $190 million in 2002-03 to a projected $145.7 million in the fiscal year that begins July 1. That decline reflects not only the drop in value for real estate but the declining value in business equipment as companies have failed, left the region or stopped re-investing in capital goods.

The combination of declining revenue and bond covenants that set revenue-debt ratios have forced the agency to stop issuing new public debt. That puts a brake on the start of new capital projects. The narrowing of the margin between revenue and required debt payments, which in the upcoming fiscal year are expected to reach nearly $110 million, has caught the attention of the debt-rating agencies.

"(S&P) lowered its underlying ratings to 'A -' from 'A' on San Jose Redevelopment Agency... outstanding bonds, reflecting a leveraged position that, combined with declining project area assessed value, has seriously eroded debt service coverage," the new report says.

"The outlook is negative, and a further lowering of the rating will occur if the project area's assessed value trend remains negative," it continues.

The agency expects the debt service-revenue squeeze to tighten in its next fiscal year but projects it will ease thereafter.

S&P of New York City is the second of the nation's three large debt-rating companies to temper its enthusiasm for San Jose RDA debt. Moody's Investors Service (NYSE: MCO) of New York City, advancing much the same observations as S&P, lowered its rating in December 2003. Both agencies continue to consider the debt investment grade.

Fitch Ratings of New York City, the third large debt-rating agency, has not changed its "A" rating. It, too, considers agency debt investment grade.

As recently as 2004, the agency enjoyed $1.24 in property tax revenue for every dollar in debt service it owed, S&P says. Next fiscal year, the city expects the ratio to fall to $1.08 in revenue for every $1 in annual debt service. If a revenue source like Cisco Systems Inc., the RDA's largest taxpayer, were to be lost, the agency would no longer have enough revenue to service its debt, S&P says.

Agency Finance Director David Baum and Assistant Executive Director Sharon Landers say the agency retains enough money to finance its current projects, including the second phase of the so-called Heart of the City redevelopment in downtown San Jose. The first, $31.7 million phase, to which the agency committed several million dollars, is under construction and will bring apartments, condominiums and retail space to what had been a surface parking lot.

The second phase, however, has yet to break ground. That $250 million project, which involves two towers with more than 330 for-sale condominiums and extensive parking, includes a $26.5 million agency contribution. A tentative agency budget, which will be revised this summer after Santa Clara County Tax Assessor Larry Stone releases the final assessment roll, includes capital reserves of more than $100 million from which that obligation will be met, Mr. Baum says.

"I would say beginning in about the 2006-07 fiscal year, they (the RDA) need to see some positive growth or they are going to have to look at some debt restructuring," says Matthew Jones, an analyst in Moody's public finance unit who has tracked the RDA.

"I think it is likely they would see growth," but it's difficult to know what to anticipate until Mr. Stone releases his tax roll each year, he adds.

The assessor's office has lowered the taxable value on thousands of properties by billions of dollars in the past two years. These reductions, which are mandated by Proposition 8, have been a large source of unpredictability, Mr. Jones says. "I'm not saying those reductions have been inappropriate," he says. "I am saying that he (Mr. Stone) has been aggressive."

City Councilman Chuck Reed says he is not surprised by S&P's decision. "I think it's what you have to expect when revenues go down, and you're living on borrowed debt."

The agency issued a $135 million bond in late 2003. Its current cash flow is insufficient to cover its debt service obligations and operating expenses, meaning that it is essentially using that $135 million debt to bridge its revenue gap until the economy improves.

"We're not out of money this year or next, but after that, I don't know," Mr. Reed says.

Councilwoman Cindy Chavez says the RDA has been a large source of economic stimulus for San Jose and that without it, the city will face tougher times.

"The good news is that we have a history in San Jose of being creative about raising revenue and how we spend it," she says. "I think of it mostly as a bump in the road, but something that we are going to have to keep our eye on."

http://sanjose.bizjournals.com/sanjose/stories/2005/05/09/story2.html

Gentrifying S.J. neighborhood puts in pitch for retail

By Tracey Kaplan
Mercury News
May 9, 2005

Frank Penrose would like to do at home in downtown San Jose what he does as a tourist in San Francisco -- stroll down the avenue 30 feet and sip a cup of coffee at an outdoor table.

In a busier downtown, that might be a no-brainer.

But even as Penrose's once-seedy neighborhood near St. James Park undergoes a radical face-lift, oodles of cafes and small businesses like dry cleaners or nail salons are unlikely to spring up there anytime soon.

Despite pressure from Penrose and other affluent new condo owners, the city's redevelopment agency is balking at forcing developer Barry Swenson to put ground-floor retail in two high-rise condominium towers planned for the Oasis block at First and St. James streets.

Instead, the agency is requiring Swenson, in exchange for a discount on the land, to restore a historic church on the site for use by a single business, which officials are hoping will become a destination restaurant. The ground-floor units will be two-story, live-work spaces whose owners would have the option but not be required to convert them into retail shops.

``It's very challenging to make retail work,'' said Vice Mayor Cindy Chavez, whose district includes St. James Park. ``We don't want empty storefronts. We don't want to contribute to the blight we're trying to fight.''

The city council has yet to decide the Oasis issue, but the wariness about retail is a marked departure from the old days. Traditionally, one of the cornerstones of redevelopment was requiring many developers to put in ground-floor retail ahead of the market, especially if the project was being subsidized by the agency.

Now, just when parts of downtown are gentrifying and the new residents are clamoring for stores, the irony is the agency is taking a more focused approach because of its previous mistakes

Even though the retail vacancy rate in the South Bay remains a low 2 percent to 3 percent, ``not every street is a retail street,'' said redevelopment agency Director Harry Mavrogenes.

Nationwide, so-called mixed-use projects -- which typically include high-density housing above or behind stores -- are trendy in planning circles. But developers and lenders often are leery because retail is financially risky. The location, design and signage of the space has to be spot on to attract sufficient customers. In some cases, projects have had to be ``reconstituted,'' that is, converted into offices after the stores failed.

``Developers see retail as another exaction, an amenity like a park,'' said Bill Fulton, publisher of the California Planning & Development Report. ``They often have no intention of renting it, but just put it in as a sop to planners.''

Locally, there have been some notable mixed-use successes -- and flops.

At the east end of Japantown, lines of empty storefronts on Taylor Street between Seventh and Eighth streets attest to the potential pitfalls of a mandatory approach. The stores that front the Pavona apartment complex on the north side of the street have largely been vacant since the project was built more than five years ago.

Among the problems: The shops are too narrow and also lack the depth necessary for back-room operations or storage space, and there is insufficient parking for restaurants, though the city eventually waived the rigid parking requirements in vain hopes of attracting food retailers. Now, officials have more or less given up on there ever being stores; they decided recently to allow the space to be used for doctor's offices.

Across town in South San Jose, another mixed-use project at the Ohlone-Chenowyth light-rail station silently mocks the notion that putting retail near public transit and housing is a surefire winner. The idea, promulgated by the Valley Transportation Authority in this case, was that commuters and residents from a 200-unit affordable housing development at the station, as well as from about 300 other market-rate units, would easily support about 4,500 square feet of retail space. In turn, the store rents would help support the low-income housing.

Instead, one business after another has failed there, partly because light-rail traffic is down, and also because the shops are not located close enough to a major street to attract passing motorists.

In contrast, the city considers the Avalon on The Alameda mixed-use project near Lenzen Avenue a success. Some retailers there complain that it is hard to build a regular clientele because the renters move in and out. But there is also the wealthy Rose Garden neighborhood nearby to draw from, and stores in front of the apartments include a Blockbuster and a Starbucks, as well as a European bakery, two salons, a store that specializes in running shoes and a florist.

Retail expert Randol Mackley, who worked on the project, said retail works at Avalon because there is sufficient street traffic and surface parking, either at the curb or behind stores with back entrances.

That is not the case near St. James Park, he said. Another black mark against the Swenson site is that despite the hundreds of pricey new condos that have been built recently and the hundreds more in the works, the property is located in one of the two poorest zip codes in Silicon Valley.

Penrose, president of the St. James Historic Neighborhood Association, said residents are affluent enough to support a cafe, dry cleaner and the like.

``Granted, we're in 95112,'' Penrose said, ``but it's a big area, and we qualify for homes that are half a million dollars or more.''

But a study by Swenson's firm found that it was unlikely the spot would generate sufficient traffic, Chavez said. Mackley said retailers are generally risk-averse. ``They're not much on pioneering,'' he said.

Land has probably become much too expensive for Penrose and his neighbors to try nearby Naglee Park neighborhood's solution to its lack of retail. Fed up with the rundown appearance and vacancies in a strip center at San Carlos Boulevard and Eleventh Street, five couples pooled their money and bought it in 1996 for $400,000.

They still have trouble keeping one of the stores leased, but the center is generally thriving. The way it has turned out is what's driving Penrose to keep pushing the city to install retail in his neighborhood.

``You can't go to House of Bagels,'' said co-owner Marianne Salas, ``without meeting four people you know. It's so great.''

http://www.mercurynews.com/mld/mercurynews/news/local/11600603.htm

County counter sues San Jose over agreement breach

Silicon Valley/San Jose Business Journal
Sharon Simonson
April 28, 2005

Santa Clara County has filed a cross complaint against the city of San Jose and its redevelopment agency in San Mateo Superior Court, alleging that the city has failed to live up to its side of the bargain under a May 2001 agreement.

In particular, the county contends that the city has failed to meet three stipulations of the agreement -- that the city annex unincorporated urban pockets within the city's limits; that the city and redevelopment agency work cooperatively with the county before seeking changes to state redevelopment law; and that the city acknowledge that county-owned land and facilities and existing county land-use plans are not subject to the annexation or land-use procedures set out in the 2001 accord.

City Attorney Rick Doyle was not immediately available for comment.

Among other things, the county complains that the city is eager to annex territory in Coyote Valley, where it plans massive new development.

But it is not interested in annexing the county pockets, as it has promised, where residents are "poor and minority," says County Counsel Ann Ravel.

Ms. Ravel says the county hasn't decided whether to oppose the city's annexation of thousands of acres in Coyote Valley.

But, she said, "It is possible that the county would do it."

The city and the county have a history of friction. The county has complained that the city's redevelopment agency collects property taxes at the county's expense. More recently the two governments have argued over county plans to build a theater at the county fairgrounds.

The county's suit was filed in San Mateo County Superior Court because of pending litigation between the county and city already filed there, Ms. Ravel said.

http://sanjose.bizjournals.com/sanjose/stories/2005/04/25/daily45.html

San Jose claims county suit has no merit

Silicon Valley/San Jose Business Journal
Sharon Simonson
April 29, 2005

A lawsuit filed by Santa Clara County against the city of San Jose and its redevelopment agency has no merit and is based on false information, says City Attorney Rick Doyle.

"(County Counsel Ann Ravel) told me they were going to file it earlier this week. She thinks we breached (an) agreement. There is nothing to it. Nothing to it," Mr. Doyle said April 29. "I'm at a loss to understand why they are doing this."

Santa Clara County filed the cross complaint against the city and its RDA in San Mateo Superior Court on April 28, alleging that the city has failed to live up to its side of the bargain under a May 2001 agreement.

In particular, the county contends that the city has failed to meet three stipulations -- that the city annex unincorporated urban pockets within the city's limits; that the city and redevelopment agency work cooperatively with the county before seeking changes to state redevelopment law; and that the city acknowledge that county-owned land and facilities and existing county land-use plans are not subject to the annexation or land-use procedures set out in the 2001 accord.

Among other things, the county complains that the city is eager to annex territory in Coyote Valley, where it plans massive new development. But it is not interested in annexing the county pockets, as it has promised, where residents are "poor and minority," says County Counsel Ann Ravel.

Ms. Ravel says the county hasn't decided whether to oppose the city's annexation of thousands of acres in Coyote Valley.

But, she said, "It is possible that the county would do it."

Mr. Doyle counters that the city has annexed approximately 450 acres of county pockets divided among nearly 50 parcels or combinations of parcels over the last several years. While he concedes that some annexations have been slowed by legal issues, he says the pace of progress depends not only on city resources devoted to the task but also county resources dedicated to getting the job done.

"If they are suing us because we haven't moved fast enough, it's a two-way street," he says.

The city and the county have a history of friction, particularly with regard to the redevelopment agency. The county has complained that the city's RDA collects property taxes at the county's expense. Ms. Ravel says that the new businesses and residents brought to the region by RDA efforts often don't mean more revenue to the county even though the county is expected to provide services to them.

More recently, the city has lobbied in Sacramento to get state redevelopment law changed in ways that would broaden its jurisdiction and lengthen its tenure, something the county isn't likely to welcome.

But, Mr. Doyle says that RDA tax revenues are a direct result of RDA's efforts and that there wouldn't be more tax revenue generated if the RDA hadn't done its job. Besides, part of the 2001 agreement was the city's agreement to forward more than $50 million to the county.

"This is taxpayers suing themselves," he said, "and that's not a good use of resources."

Recently the two governments have argued over county plans to build a theater at the county fairgrounds. The city has supported a rival project in downtown. Neither has gotten off the ground, but there is general agreement that the community can't support two such similar developments.

The county's suit was filed in San Mateo County Superior Court because of pending litigation between the county and city already filed there, Ms. Ravel said.

http://sanjose.bizjournals.com/sanjose/stories/2005/04/25/daily54.html

San Jose considers across the board budget cuts

Timothy Roberts
Published: May 3, 2005
Silicon Valley/San Jose Business Journal
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Facing a $58 million budget gap for the fiscal year that begins July 1, the city of San Jose is looking at making cuts in everything from public safety to redevelopment.

"The proposed budget successfully closes a $58 million shortfall but not without significant reductions in nearly every service area provided by the city," said City Manager Del Borgsdorf in a statement.

The proposed budget calls for cutting the General Fund by 8.3 percent. The cuts in public safety are the lightest -- 1.5 percent. Cuts across other city services average 8.2 percent. To meet the budget, the city would lay off 78 people and eliminate 62 unfilled positions. The personnel cuts will leave the city with 6,620 positions, about the same number that it had in the 1998-99 fiscal year.

Other proposed budget cuts include $1.1 million that would have gone to the Silicon Valley Workforce Investment Network. The cut is based on the assumption that local job cuts have leveled off.

"While downsizing has been a significant issue in the past few years, the rate of job elimination is flattening out," Mr. Borgsdorf's budget message says.

The proposed budget holds off on most development fees, but the manager's budget message warns that increases are likely in the 2006-07 fiscal year. Code enforcement faces a $278,000 budget cut, which would shift from "proactive" to "reactive," the budget plan says.

The Redevelopment Agency, funded through increases in property tax revenue from its redevelopment sites, will cut its operating budget by 7 percent to $19.5 million.

http://sanjose.bizjournals.com/sanjose/stories/2005/05/02/daily11.html

Whose House Is It Anyway?

When a city's quest for renewal means the death of an old neighborhood

By Barry Yeoman
AARP Magazine

Wilhelmina Dery has lived her entire 87 years in a blue sea captain's house near the banks of Connecticut's Thames River. From the ground floor, her family ran a grocery where the neighborhood's Italian women congregated Saturday mornings, buying freshly stuffed sausage and wedges of Parmesan cut from large wheels. Across the street, the river was thick with traffic: swordfish, tuna, and lobster fishing boats; Coast Guard ships; and, during Prohibition, the rum-running vessels that gave New London its reputation as a crossroads of the illegal liquor trade.

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http://www.barryyeoman.com/articles/stealthcrusade.html

Benefits study makes comeback

Timothy Roberts
April 29, 2005
Silicon Valley/San Jose Business Journal

A controversial proposal that once threatened to derail the 'Heart of the City' development is back. And that news is coming as an unwelcome surprise to the business community.

At issue is the South Bay Labor Council's plan to require developers that receive subsidies from the city of San Jose to meet labor concerns over jobs, wages, affordable housing and other issues. The idea could be headed back before city council in a matter of weeks.

When the highly charged Community Benefit Assessment issue first arose in December 2002, it provoked a clash between union and business interests, and heightened concerns that the Labor Council was expanding its influence on the city council and that its agenda would make San Jose less competitive for new business.

The issue was so divisive that the council appointed Mayor Ron Gonzales and council member Dave Cortese, a lawyer with experience in mediation, to bring labor and business interests together.

The committee formed for that purpose, however, has never met. Yet amid evidence the plan is advancing, there are rising concerns that the matter is now being decided behind closed doors.

"We want it to be done in a public process, not a private process," says Jim Cunneen, president and CEO of the San Jose Silicon Valley Chamber of Commerce.

Phaedra Ellis-Lamkins, executive director of the Labor Council, says the Labor Council has been meeting with the mayor's office to keep the issue alive and expects the issue to come before the council in six to eight weeks.

"Business has not been a part of discussions because it says it is philosophically opposed and won't negotiate," Ms. Ellis-Lamkins says. "We can't live with that."

One reason for the recent push was legislation that would extend the life of the redevelopment agency, which provides most of the subsidies that fueled labor's concerns. With funds running low, the redevelopment agency wasn't doing any large projects. With the RDA maneuvering in Sacramento for legislation that would extend the life of its project areas, Ms. Ellis-Lamkins says she decided to press ahead once again with the project.

Ms. Ellis-Lamkins says her conversations in the mayor's office have been primarily with Joe Guerra, the mayor's budget and policy adviser. Mr. Guerra did not return phone calls, but the mayor confirmed the discussions have been taking place. He says he has not set a date for reintroducing the issue before council.

"We are still looking at her request," the mayor says. "We're still trying to reactivate the committee. Quite frankly, we've had other priorities we've been working on. We hope to get back to that issue as soon as possible."

It was in late 2002 that the Labor Council pressed its case for the first time before the city council. Its program, called Community Benefits Assessment, came out of a lengthy study by the Labor Council's Working Partnerships foundation into the impact of developments built with public subsidies. The stated goal was to make sure that the public's money, in the form of subsidies for development projects, is well spent.

But the measure was introduced in a memo that few even on the council had seen. It called for each development project to produce a community benefits assessment that developers likened in its complexity to an Environmental Impact Review, a document that can take months to complete.

The Dec. 10, 2002, proposal also would have set goals for affordable housing, worker pay and green space and required the city to make sure that developments would meet those standards. Business tenants of a development, for example, would have to pay employees the so-called Living Wage -- $9.50 per hour with health benefits or $10.75 without. (The California minimum wage is $6.75.) The Labor Council itself would have been given a role in enforcing the provisions of the proposal.

All of this mortified the business interests in the room, especially developer Shaul Kuba, a principal at CIM, which was expecting the council to approve its $184 million 'Heart of the City' development at that meeting.

Asked what he would do if the retail tenants in his building would be required to pay the living wage, he said, "I would have to walk, if that is required."

The surprise memo was written by council member Cindy Chavez and signed by members David Cortese and Linda LeZotte. Ms. Chavez amended the proposal so that the most draconian demands would be left up to negotiations between the city and CIM.

Mr. Gonzales was livid that the CIM project had been threaten by the last-minute demands from the Labor Council, and he voted against the project that he had previously championed. Also joining him was Councilman Chuck Reed and former council members Pat Dando, John Diquisto and George Shirakawa Jr.

Mr. Gonzales later created a committee that included himself and Mr. Cortese to help mediate the differences between business and labor on the issue. Mr. Cortese says he has not been notified of any meetings on the issue.

Other council member were similarly surprised by the news. "This is the first I've heard that it was still alive and coming back," Mr. Reed says. Ms. Chavez says she doesn't know what form the proposal is taking now, adding, "There were elements to the (original) plan that I liked."

A chamber-organized group, The Coalition for Jobs Now, hasn't met in months, but it has scheduled a meeting in May to talk about how businesses will respond to the return of the Community Benefits Assessment.

A member of the jobs coalition, Bob Hines, calls the original proposals "overreaching and outrageous," but says he wants to keep an open mind about the proposal. "We're not sure what's in it this time," he said.

The original proposal, however, "sent the message that San Jose was not a good place to do business," he says. "We don't need this type of development controlled for certain social issues."

The biggest surprise for many is that there is sudden action after such a long period of hibernation.

"I am very surprised that there is a plan to bring something forward to council in the absence of good faith discussions with the business community," says attorney Joan Gallo, who had been appointed to serve on the mediation committee. But she added, "I don't have any doubts that we will have those meetings before any specific plan goes to city council."

http://sanjose.bizjournals.com/sanjose/stories/2005/05/02/story2.html

San Jose RDA borrows to pay its state bill

Silicon Valley/San Jose Business Journal
Sharon Simonson
Published: May 2, 2005
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The San Jose Redevelopment Agency is borrowing $21.4 million to make a state-mandated payment to support California schools.

The agency's so-called Educational Revenue Augmentation Fund payment is exceptionally high this year because of the state's fiscal woes. Last year, the RDA annual payment to ERAF was only about $10 million, and in some years the agency has had to pay nothing at all.

But as part of the state's efforts to balance its own budget this fiscal year, it has required the state's approximately 350 redevelopment agencies to make a collective payment of $250 million to the school fund. Each agency's payments under the plan are based on how much in property taxes it collects proportional to the total property tax collections of all RDAs statewide. San Jose is the largest RDA in the state.

It is the only new debt that the San Jose agency will issue this year and, if all goes as expected, it will be next year as well, says David Baum, RDA finance director. The agency has more than $1.5 billion in outstanding debt. It uses debt to finance its capital projects.

The new debt has a term of 10 years and carries an interest rate of less than 5 percent, excluding the cost of issuance. The agency will have annual payments of $2.5 million or less to retire it, city documents show.

"It was a cheap form of financing, and it makes it more affordable," Mr. Baum says.

The city's RDA was one of only eight RDAs statewide to have issued debt to pay its bill, says James Hamill, lead program manager for the California redevelopment Association ERAF program, which was created by the state legislature as part of the $250 million plan.

At least one debt-rating agency, Moody's Investors Service, has raised concerns about the San Jose agency's finances, saying that it lacks sufficient cash flow to service its debt and maintain its current operations and other obligations. That warning, issued last year, does not take into account the debt issued to finance the ERAF payment.

While the agency expects to re-pay the ERAF debt itself, the security for the loan is a first lien on the city of San Jose's property tax revenue, according to city documents.

The agency's annual property tax revenue, which is largely drawn from assessments on business equipment and commercial buildings in North San Jose, has fallen precipitously since the 2002-03 fiscal year, when it reached its peak of nearly $190 million. Property taxes are by far the agency's largest source of revenue.

Commercial buildings in North San Jose have become increasingly vacant, lowering their values and thus the property tax revenues they produce. The city itself now estimates that a third of the 42 million square feet of commercial property in the area is obsolete and will never again be used for its intended purpose.

This year, the San Jose RDA expected to receive about $149 million in property tax revenue. It projects an additional 1.6 percent fall this year.

However, Mr. Baum says he has gotten no solid word so far from the county assessor's office on what to expect for taxable property valuations for the upcoming fiscal year.

The assessment roll, the official list as prepared by the county assessor of all taxable property countywide, is closed July 1. The assessor's office releases the assessment roll total immediately thereafter.

"They (the assessor's office) are always interested in telling us about significant projects coming on line, and right now it's mostly housing projects," Mr. Baum says. "But in the past couple of years, it's been a little surprising to all of us, including them, that (assessed) values have dropped like they have. It seems like they are just scrambling to create the roll and that it's not until everything is in that they will know" exactly what is happening.

Despite the tough times, Mr. Baum says he believes better days are just around the corner. "We've had five straight quarters of sales tax increases," he notes, "and we feel we're bottoming out and we're going to bounce back."
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