All right. Good afternoon, everyone. Welcome. I'd like to call to order this study session of the

2026-2027 Preliminary General Fund Forecast and Budget Priorities, also known as priority setting,

to order for the afternoon of February 5th. Tony, would you please call the roll?

Kamei? Campos? Present. Jordios? Here. Cohen? Here. Ortiz? Mulcahy? Here. Duan? Here. Candelas? Here. Casey? Here. Foley? Here. Mahan? Here. You have a quorum. Great. Thank you. I was about to do the Pledge of Allegiance and then I realized we don't do that in our study sessions. All right. Well, welcome everyone. Thank you all for being here. I'm just going to offer a few opening remarks and then I'll hand things over to our city manager.

for her opening remarks and then we'll get to the staff presentation before we

go to council discussion and finally public comment at the end of the study

session. So I want to just start by thanking City Manager Jennifer McGuire,

Assistant City Manager Lee Wilcox, their Deputy City Managers, and the Office of

the City Managers, Budget Director Jim Shannon, Betty Young, Claudia Chang and

the entire team, I think most of whom are here. I want to recognize the extraordinary work that

staff has put in over the last several months behind the scenes, not maybe obvious to us in

public meetings, but the team there has been working a way really with teams across the

organization to prepare for both the mid-year budget review, which we will hear next week,

and today's priority setting and all of the budget work that comes ahead.

That effort shows, and I want to thank you all for your professionalism, hard work, and commitment to the city.

So the purpose of today's session is to hear directly from the city council about priorities and values

that will inform the development of my March budget message

and ultimately guide the entire budget process we go through together,

culminating in a final adoption of the budget in late June. Today is not about

final decisions, it is about general direction and priorities. It's about

grounding our next steps in a shared understanding of the fiscal reality we

face and the outcomes we want to deliver for our residents. The city manager is

preliminarily estimating an ongoing general fund shortfall in fiscal year

26-27 of 55 to 65 million dollars. While I know that the administration will get creative and think

critically to identify cost efficiencies as they are already doing and we've already supported,

we will have a lot of work to do to balance our budget. And by the way, that work by the

administration isn't just about identifying cost efficiencies, it's also optimizing existing

services so that we can make them more efficient without losing quality,

generating new and generating new revenue sources. But collectively as we

head into this process we will collectively have to discuss service

reductions which requires us to have an honest conversation about our capacity

and the trade-offs we're willing to make. None of the necessary trade-offs will be

easy and none should be approached lightly. Our city manager will be very

focused on minimizing community and workforce impacts.

But service impacts are likely, and today gives us an opportunity to align on principles

and approaches for responsibly and sustainably addressing this shortfall while maintaining

focus on what matters most to our community.

Even in the face of these fiscal constraints, our responsibility remains the same, to deliver

tangible and visible results for the more than 1 million people who call San Jose home.

That means continuing to prioritize the services that most directly affect residents' daily lives,

while also positioning the city for long-term stability and growth. I also want to note that

I'm excited to be working with this year's Budget Brown Act group, including Vice Mayor Foley and

Council Members Cohen, Kamey, and Tordios. I appreciate their collaboration in this process,

but today is really about hearing from the entire council. For today's session there will be,

following today's session, there will be multiple additional opportunities for both city council

and the general public to provide input. These include the city service budget study sessions,

budget town halls that I'll be leading across the city, and the public hearings on the March

and June messages. Today is one step in that longer process, but it is a critical one. The feedback

shared in this chamber today will shape how we move forward, how we balance difficult choices,

and how we stay accountable to the people we serve. I'm excited, colleagues, to delve into

the seven questions at the end of the presentation and confident that they give us the structure we

need to gather actionable information on what issues matter most to you and your district. So

I thank you all for your engagement.

With that, I'm going to turn things over to our city manager, Jennifer McGuire, for some remarks before we get to the staff presentation.

Wonderful. Thank you very much, Mayor and city council members, for the opportunity to begin the first of many meaningful discussions on the 2627 budget development process.

Our goal here today is to allow for clear and meaningful input from the city council to inform the mayor's development of his March budget message for fiscal year 2627.

This, in turn, gives formal direction to me for the preparation of my 26-27 proposed budget documents that will be released on around May 1st.

To help set the stage for the conversation, we will review major general fund revenue and cost drivers, share information on community priorities as expressed in recent survey data,

review focus area alignment, core services and budget programs and organizational risks,

and offer some preliminary budget balancing strategy considerations.

Before I turn it over to Budget Director Jim Shannon and then Assistant City Manager Lee Wilcox to get us started,

I want to acknowledge up front that while there are no easy answers here,

and there will be real service trade-offs to consider,

You have an extremely talented and thoughtful team across departments who will make every effort to be creative and strategic to minimize impacts to our community and to our employees.

We will absolutely be looking for efficiencies, service optimizations, business model changes, contractual service reductions, vacant position eliminations, new revenue opportunities, and other low-impact proposals before we recommend significant service cuts and workforce disruptions.

I absolutely know we all have the shared goal of ensuring our budget reductions are as invisible to our residents and businesses as possible,

and that employee layoffs are minimized to the extent possible.

That is certainly a very important tenet for me.

While all ideals are welcome, what we need from the City Council is a discussion about service priorities,

what type of services should be preserved, what types of services should be used for reduction,

what types of criteria should be considered when considering reductions, or in very limited instances,

what are some targeted improvements we should be looking at over the next year that will come with tradeoffs in this budget.

Engaging in these types of questions today will not only help inform the Mayor's March budget message development,

which you all vote on in the mid-March time frame,

but should also ensure that the suite of budget proposals that are included in my proposed budget are not surprises at all.

In other words, we may not like the reductions that will need to be included, but we will

have a shared understanding of the priorities that guided their inclusion and no one should

be taken off guard by their inclusion.

Again, I very much know that these are not easy conversations.

I know that nobody wants to be here today and talk about budget reductions.

We would much rather talk about budget additions and what more we can do for our community.

But I want to assure you I have been through these situations many, many, many times before

and so have many of our budget office and department staff,

and we are prepared to meet this challenge.

With thoughtful conversations and hard work,

we will get through this together as one team,

and I mean that very sincerely.

With that, I'll hand it over to Jim to get us started.

Thank you.

Thank you very much, Jennifer.

Good afternoon, Mayor and City Council.

Jim Shannon, City's Budget Director.

Just one more shout-out to the budget office team

and my management team, who I made sit in the front row,

so thank you very much for doing that.

So here is the agenda that Jennifer talked through, and so we'll just jump right into

it here.

And we're going to just give like a little high-level overview of the grounding for what's

in the 26-27 preliminary general fund forecast and why we have a shortfall.

And we start with the economic conditions, and just this graph kind of is the key one

to think about, is that our local economy really right now is not conducive to revenue

growth.

The biggest influence for general fund revenues is job growth, and jobs have been pretty much

stagnant.

And so when jobs are stagnant, the revenue growth, it lags.

And so that's what we've certainly seen here.

Office vacancies also are remaining high, and that commercial sector is kind of weighing

down our property tax valuation, which we'll talk about in a little bit.

Residential real estate prices are sort of holding steady.

They slightly decreased a little bit, but we have seen the number of transactions go

down a little bit and the days on market have gone up a little bit.

So again, some softness there.

Private development activity is up from last year, but I wouldn't consider that strong.

So it's a bright spot, but not bright enough to offset everything else.

This slide is showing the overall preliminary general fund revenue estimates, the major

categories that we have.

I'm going to talk more about property tax, sales tax, and our utility and franchise fees,

which are our largest ones here.

So we'll delve into those in a minute.

But we also have as a major category our business tax, which is inclusive of card room taxes,

cannabis taxes, and our general business tax and disposal facility tax.

We've got a number of licenses, permits, fees, rates, and charges that reimburse for services

rendered.

about 55 million, a number of transfers and reimbursements that reimburses the general

fund for work performed for special and capital funds and other reimbursements that those

different funds provide for general fund work.

And then sort of we have a slew of other smaller revenue categories that, you know, are very

important but, you know, don't arise to the level of the other ones, including a telephone

line tax.

We've got interest earnings.

We've got our TOT taxes and a number of others that comprise the remaining 8% of our general fund revenues.

Driving in a little bit to property tax, which is our largest,

the city gets around 14%, the first two slices there, of every dollar that we have for that the property owner pays.

They're broken up into the categories you see on the right-hand side for secured, unsecured, and a few other categories.

We're going to talk mostly about the secured, which is the largest component.

And three main categories.

This is our general secured revenue category.

This is the main component for the valuation for all property.

We've got a segment here called Educational Revenue Augmentation Fund, ERAF.

This is the component of property tax that is initially there's a bucket that goes to fund school funding.

Once that bucket overflows, the overflow gets distributed to the various municipalities in California,

and the estimate is about $53 million for that portion of the revenue.

However, that is at risk.

The state sort of disagrees with how the county calculates that,

and so that is part of litigation that is currently underway.

Potentially at risk there is about $9 million to $10 million on an ongoing basis

and $35 million to $39 million on a one-time potential clawback.

So that's something that we've been keeping our eye on,

and it's probably going to be coming to head here over the next fiscal year,

so we'll have to watch that closely.

And then we've got the final category here on this slide

is our successor agency to the redevelopment agency, our SARA.

So there's a slice of property tax increment that the city gives

after the other expenses, mostly bond payments,

are made regarding the improvements that were done in the SARA area

or in the old redevelopment agency area.

And that is $24 million.

Notably, that's down.

So this is the first year in 25-26 where it actually it's going to be sort of lower than the previous year

So it's actually going to be down a couple million dollars from where it was prior

Which is an indicator of how weak the commercial sector is so Sarah is mostly commercial properties

And so I think we are starting to see sort of the the drag down a little bit of the commercial across the whole property tax category

Looking at our overall revenue estimates

I think it kind of bears out that we're seeing it grow at a slower rate, you know

the annual growth of valuation is capped at 2% unless that property changes hands.

So if properties are changing hands more slowly,

or if some of those properties on the commercial side are changing hands for a lower value,

that's dragging down the rate of growth.

So we're still growing there.

We're just growing at a slower rate than we had been in the past.

You can see we had some pretty strong growth there a few years ago.

That's been tapering off, and we expect that tapering to continue.

And, of course, this is our biggest revenue category.

So, you know, we got to be careful.

We can't underestimate this one because it means so much to the city,

but we also can't overestimate it because if we get too far behind where property tax is,

it really spells a lot of problems for us on a going-forward basis.

Then looking at sales tax, our second largest category,

the two main slices that San Jose gets is the Bradley Burns portion.

That's the main sort of general sales tax.

That's the 1% of the 10%.

And then our local district-only measure is our 0.25% local tax.

That is actually set to expire in 2031, so that was approved for a 15-year basis.

That expires in 2031.

It brings about $60 million of revenue to the city, so not in this five-year forecast,

but in the next five-year forecast, you see that revenue sort of coming out

because it automatically expires, and we'd have to go back to the voters to reauthorize that.

Break out by the different components of our general sales tax.

So this is generally, we talk about general sales tax a lot for economic data, because

that's where we have the best data to analyze.

And so we've got the different economic sectors, business to business, general retail, transportation,

food products and construction.

And then we have our county pool, which is primarily generated by online sales transactions.

For most of these categories over the last couple of years, you've seen a decline with

the exception of the county pool, which is higher, and food products.

But the other categories have experienced some weaknesses here.

And so, again, it's kind of more of a reflection of the overall economy.

We're not growing a lot of jobs.

We're not growing in a lot of purchase power.

Looking at our revenue estimates, again, it looks like I want to show some of the historical

growth and sort of where we've been.

Over the last few years, sales tax has really ended year over year.

In 25-26, we actually do expect to meet our revenue estimate, so it's performing as expected,

but it's not rallying to offset the slowdown in the other major categories that we have.

And so also our first quarter growth was pretty strong, but we think that a lot of that was due to sort of one-time corrections

in comparison with the prior fiscal year.

So we were really only anticipating some small economic growth on a going-forward basis, including in 26-27.

The revenue amount looks a little bit lower there because beginning next fiscal year, our estimates reflect an adjustment to sales tax revenues, but we're going to offset those by our revenue loss reserve.

So it looks like it's going to be lower, but that lower amount is going to be offset by plans we've already put in place to offset for that lower sales tax revenue.

And then finally, just the last big category I want to talk about is a combination of utility tax and franchise fees.

These generally reflect the cost for electricity, gas, water, telephone.

So there's either a tax or a surcharge on the bill related to those services.

It's been a pretty strong growth category, obviously, since we've been all paying increased rates when we pay our bills.

That is, you know, it hurts the pocketbook, but it has been good to the city's general fund revenue,

which has also been beneficial because it is a non-economically sensitive category.

So it's really not it's really more susceptible to what's going on with rates and what's going on with the weather as opposed to how the economy is performing

So it's a nice buffer there, but we do expect those revenue growth to slow off because we have seen rates leveling off again

That's a good thing generally, but it does have revenue implications for the general fund

Now we're gonna transition to the expenditure side and want to just talk through a few of the main components here

And of course this is again all these numbers are going to be preliminary

but it does give a sense of scale here.

And so all of the departmental, non-departmental costs,

like most California cities,

we spend a lot of our general fund on police and fire

because those are the services that the city has to provide

and no one else does.

And so a big chunk of the city's general fund

goes to police and fire.

And then you can see parks and rec

is our third largest in public works and transportation.

And then all the way on down.

So we put this there sort of as a sense of scale.

And then when we break it down by the different types of general fund expenditures, about 70,

a little over 75, about 76% of the ongoing general fund budget is related to people. So we provide

services, people provide those services, so that's the majority of what our costs are. And you can

see there between salaries and overtime, health and other fringe, and retirement contributions.

And then we break out the other component, which is our non-personal equipment, which are like

supplies, materials, contractual services, citywide other, which is sort of a broad category of

multi-departmental expenditures like workers' compensation, our San Jose best programs in

there, SJWorks, SJLearns, things like that. We've got our component for citywide, in citywide of

interim housing. We've got our contingency reserve, which is supposed to be three, three percent of

our ongoing general fund expenditures by city council policy. And then we've got a number of

of transfers there and only a shockingly small amount for capital expenditures.

Looking a little bit more closely at personal services, I wanted to show this because the

biggest cost driver for the city is wages and salaries and benefits and retirement.

So the cost of people is our largest driver here.

So I wanted to show what that's been doing over the last several years.

And so you can see if you look at the total cost that we have in the general fund, that's

increased by about 20%, 22% over the last four or so years.

Our position count though has only gone up slightly.

And so it's a reflection of,

we have to pay people to do the work and those costs go up.

And so that's one of the key drivers of the general fund.

And the key component of personal services

is retirement costs.

And we always like to show this,

show the history of where we've been

and the pain that the organization went through in the late aughts and the early tens when

we had to wrestle with the skyrocketing retirement costs.

So that has been sort of very much stabilized, but it's still stabilized as a much higher

percentage of our general fund and has implications on general fund capacity to do other work.

I would say the good news is though, a lot of those retirement costs is reflected in

our unfunded actuarial liability.

It's kind of like we've got a really big mortgage or even paying down to pay off that UAL.

And the good news is we are sort of at the top and should be going on the downward slope.

It's going to vary depending on what actually happens with the market

and what actually happens with the assumptions by the retirement boards.

But this is the going forward projection for the police and fire pension system,

which is primarily general funds.

So I'd like to show this one.

Federated doesn't look quite as good, but only about 45% of retirement costs are federated.

so in the general fund. So and I would do want to note retirement contributions next year are higher

than we previously projected because we are not going to get the benefit of pre-funding retirement

contributions given where the market's at and the restrictions that the boards place on our

pre-funding contributions and because of recent labor agreements the board is assuming some higher

wage inflation than they had in the past and that's having an impact too on our costs.

And then just briefly on those other costs which are minor, but they are important

We do spend a lot of time trying to figure out what they are. So our non-personal equipment

we do expect energy costs to go up based on usage

water costs to be increasing and we do set aside some amount of money in the

base budget every year that we

not automatically given, but we assume and we go through this really grueling process

to justify what should be increased. So we've got an estimated $2 million

for IT application subscriptions, facility services,

and various contractual adjustments,

but we have a very detailed process

where we review all of that one by one.

Committed additions are capital projects

that will come online later

that will have operated maintenance costs

associated with them.

The two largest in the out years

will be Fire Station 36 and Columbus Park.

So that'll increase from about $1 million in 2627

to about $9 million five years later.

And then going back again to citywide,

the largest component there

is our interim housing portfolio.

and so we have those out there as 17 million in 2627 and as we've been doing

for a number of years we've been forecasting stepping in so as the amount

of external funding fluctuates and is being spent down we're wrapping up our

ramping up our general fund contribution to be able to make sure we

have a fully sustainable system those contribution amounts are going to vary

based on external funding that we receive and so we're always very active

in trying to make sure we're maximizing the amount of external funding and our continued cost management.

So you'll see the full interim housing forecast as part of our five-year forecast

that we released at the very beginning of March.

You'll see a more detailed breakout of that.

And then we also make sure that we've got some cost of living increases

for those community-based organizations that we fund as part of citywide also.

And so because of that, we basically have revenue that is slowing up,

and we have expenditures that are still growing.

and that imbalance on an ongoing basis is what's driving our shortfall ranging from 55 to 65 million

dollars you know preliminary look at year year two shows an additional shortfall of about half

again as much although we haven't spent a lot of time yet on the out years we're going to start

that next week we're really looking at we're going to relook at everything as part of the forecast

including a more detailed look at the out years for the preliminary it's based on very limited data

we don't have all of our retirement data there's lots of other things that we need to sort of

build in there and so we'll be doing a detailed analysis over these next three weeks but that

forecast does not include other important stuff like any costs associated with unmet

deferred infrastructure, any maintenance needs, any one-time services or programs that are

currently funded in the general fund but automatically sort of come out.

That number is much, much smaller than it used to be but still needs to be considered

and if we want to do anything new for new service level enhancements that's also not

in that projected shortfall either.

So with that, I want to turn this back over to Lee for some community perspectives.

Thank you, Jim.

Mayor and Council Lee Wilcox, Assistant City Manager.

I'm going to spend a little bit of time on community perceptions in the context of what we're hearing from residents

and also what it means for our organization moving forward, but also what it's done over the last few years,

and then quickly shift to kind of organizationally how we're managed

and how we're starting to think about this year's budget from an organizational perspective.

So most of this council has seen this slide before.

The survey gives us one of our clearest signals of what matters most to our community over the last several years

without a lot of significant changes.

Year after year, cost of living, homelessness, housing affordability dominate,

underscoring what residents see as persistent and systemic issues in our community.

These issues compound each other.

When cost burdens rise, so does housing instability and homelessness.

Public trust increases when budget decisions reflect residents' lived experience.

This is a core principle in democratic responsiveness in our government

that is difficult to achieve with so many needs and a thinly staffed organization.

However, this council over the last several years with the administration

has been able to focus on that responsiveness.

This showed last week when Joe Roy showed us the annual city services report where we've seen increases in all of these areas that are on the slide ahead.

In addition, as part of our transit and occupancy tax item next week, the city conducted polling, and while it's not community polling, that is voter polling,

we saw increases of 13% from last year to this year on as San Jose head in the right direction, and 16% over the prior year in being able to align priorities.

These results are different because they're not about reacting to individual complaints anymore.

They're about proactively aligning strategic investments and organizational capacity

with the challenges people face every day in our community.

Public Policy Institute of California at UC Berkeley confirms what our own internal data shows.

Homelessness, housing, and safety remain top-tier concerns for residents.

There's also increasing anxiety about visual blight, graffiti, overgrown public spaces,

because these signal breakdowns in basic order.

Looking within this data, these concerns do span geographic and demographic groups,

including cutting across all age groups, income, and race within our city.

This gives us a clear direction on where we should prioritize.

Our focus areas weren't created in a vacuum.

actually came from the mayoral transition and questions from the mayor and councils,

what can we do to put the administration in the best foot forward, which Jennifer's response was

more focused. And it came from this council making difficult decisions to put limited resources

behind what our community was talking about at City Hall. We're not just funding programs,

but building staff capacity to achieve visible results here in areas where residents expect

to see leadership and progress. While we share many concerns with California overall, the intensity

and scale of these issues are greater in San Jose. Housing pressures, for example, are more acute here

due to our income to rent ratios, cost of land, and construction pipeline delays.

What that means for us as a city is that we don't have the ability to take generic solutions. We

need to tailor solutions and programs for our individual needs here. What this data shows is

that residents also look to local government for visible results. They may look to Washington,

D.C. or Sacramento and vote on their preferences for candidates based off of individual positions

or democratic values that all of you need to balance, but in local government, they're typically

electing leaders to move something forward in their city.

This raises the stakes for us to maintain both credibility

but capability as an organization.

We need to design local interventions that are both bold enough to meet local conditions

but flexible enough for us to adapt in our changing environment year over year.

The most recent satisfaction ratings

drawn from the annual report on city services

are the strongest we've seen since before the pandemic.

Every year, services, or every service measured

showed an upward trend in resident satisfaction

over the prior year.

Several core services saw the most significant improvements,

especially cleaning up illegal dumping,

providing emergency medical services,

creating a more vibrant downtown,

and improving animal control.

These are services directly,

these services directly interact with how people feel in their daily lives.

These are a result of sustained attention and resource alignment

in well-established operational areas throughout the city.

In many cases, they represent the work of frontline teams

that have implemented practical improvements without major funding.

This reinforces an important point that Jennifer brought up earlier.

Even in constrained budgets, in constrained budget environments,

Visible results are possible when conditions are well aligned, staff are supported, systems are functioning, and the organization remains focused.

At the same time, these gains remain extremely fragile.

Without continued staff capacity and coordination across departments and agencies,

we know from past experience how quickly service quality can decline, and progress here is reversible.

Luckily, our five core, our council-approved focus areas actually mirror the top concerns of our community.

This provides a rare level of clarity for us.

We don't need to guess where to aim.

The public and the policy are actually in sync here.

As I mentioned at the beginning, this is a result of this council making difficult decisions amongst the many needs in our community.

I should say, however, alignment doesn't necessarily mean capacity.

We must decide how to scale our focus to match what we can sustain operationally.

Focus doesn't always mean funding everything.

It means choosing the things that matter most and doing them well.

It also means that we should keep evaluating our impact, refining service models, and rethinking

delivery systems so that we can continue to maximize every single dollar.

An example of this is our city manager's directed service delivery optimization work plan,

where we're pulling out specific core services and programs where we believe additional gains

can be made to make it efficient and optimized.

Another example is conversations we've had for you for the last two years around reducing

unsheltered homelessness, where for the last two years we've been focused on additional

funding and growing capacity in our system.

Without additional revenue coming in we will shift from capacity building to one of optimization and looking at a system that is very efficient

So that the throughput matters so while it won't require additional a whole lot of additional extra funding staff attention and leadership will be greatly needed

And that does bring me to our favorite triangle slides the the 574 and 253 now are a five council focus areas

Just want to give background.

We as staff don't view these as traditional line-item programs.

They reflect complex strategic priorities identified by the council

that require a different kind of work, not just additional funding.

These efforts often involve standing up new services, piloting new approaches,

or coordinating across jurisdictions and different systems.

They are still under development in many cases,

which means we are designing for both efficiency and effectiveness from the outset.

Staff capacity plays a huge role here. Many of these efforts stretch across departments,

but more importantly stretch across different agencies. So the reliance on time to be able to

provide coordination, innovation, and rapid learning for leadership teams and frontline staff

is important. With resource constraints in this year's budget, we'll need to sequence and manage

how much focus area activity this organization can support at any given time.

This is not a matter of willingness, but one of bandwidth for the organization,

aligning the scope of strategic initiatives and actual delivery capacity.

So we get to the bottom half of our triangle.

This is what we refer to as the backbone of our city.

They're established, mature, and run with discipline, our core services and programs.

These include essential ongoing services such as water, sewer systems, libraries, parks, debt service, and administrative support.

Generally, these services operate with a high degree of competency and consistency.

Performance is strong.

Efficiency gains can still be available, and they're explored all the time,

especially through process improvement, technology, and workload balancing throughout departments.

However, they can't be ignored

For long periods of time

Or they become larger issues

That the community will begin

To have concerns about

And City Hall will need to address

But

Constant to focus

In contrast to council focus areas

These functions

Are not being reimagined

They're being optimized every day

For our community

They provide the stability

that allows the organization to absorb and push change elsewhere.

While the council focus areas and core services and programs

differ in maturity, they share a common dependency,

organizational infrastructure, and strategic capacity.

Risks such as deferred maintenance, limited reserves,

and thin staffing in areas like IT, HR, and finance

affect both day-to-day operations and strategic initiatives the council may want to explore.

These important functions often determine how quickly we can adapt, scale, and maintain performance under pressure.

As council considers budget direction this year, understanding these constraints will be helpful to frame what's feasible and where pacing matters.

This is ultimately about managing institutional reliance alongside

service priorities.

And with that I'm going to hand it back to budget director Jim Shannon.

Thank you assistant city manager Lee Wilcox. I'm gonna talk through some of our potential budget balancing strategies, but

before I do want to give a little historical context and I know these are slides that that many of you all have seen a couple times

but I think it's really important to really show this, is that we've resolved, you know,

over the last 20 years, general fund shortfalls exceeding 800 million. So we've, one, it shows

that we're experienced and we can go through this process and we've got, you know, good systems in

place to address it. Another thing, it identifies how, you know, revenue constrained we are as an

organization, but it also reflects, too, sort of how challenging it is on a going forward basis

to reduce even more because, you know, we've done a lot of the easier stuff and hard stuff,

and it kind of just only gets harder, really.

So I want to provide that perspective as well as this slide.

So over the last 25 years almost, we're still not back to the overall position count across

all funds that we were in 2001 and 2002.

Now, we definitely do services differently.

We have different business models, and so it's not a one-to-one comparison exactly,

but we also operate in a very much more complex service level environment.

So it's really a reflection of we have never been able to really to restore to where we had been even over 20 years ago.

So in looking at our potential budget balancing strategies, we are guided by a number of things, including some key documents.

So one is City Council Policy 1-18, which is our guideline standard, sort of like our high-level rule book for budgeting.

that's updated on a periodic basis as needed for various reasons.

We've got our city council budget priorities.

These are really some key principles that ensures a sustainable,

comprehensive approach to balancing our budget year in, year out.

They were last updated in September 2008.

They were created really at a time when the city had been in a terrible shortfall

and wanted to put in place a structure to make sure that we were never in that place again.

And even though we are, you know, having some challenges, we are not in that place where we were, you know, 15 years ago.

And it's because, you know, the adherence to some of these principles.

We got direction.

It's because it's been so long, we did get direction as part of the approval of the June budget message to say,

hey, why don't we take a look and refresh that?

It's been a little while.

And so we do have that.

That's part of your materials there.

So please take a look at that.

We'll probably have a version of that in the city manager's budget request that will come out at the beginning of March for your consideration.

And then we've got our budget balancing strategy guidelines.

These are our decision-making framework to the administration to how to develop the proposed budget.

Those are updated annually.

We also recommend those be approved as part of the March budget message.

And then, of course, we have the March budget message itself, which is really about the service level priorities,

the specific values, the trade-offs to how we get to the balance budget. A little bit more specific

on the policies and the priorities, whereas maybe the prior ones are really more about the structure

and the process of how we go about balancing the budget. So I wanted just to point that out there.

I want to just again reemphasize how critical your perspectives are in this process.

There's no silver bullets. There's no easy levers. There's just really a lot of hard work and hard

hard choices. And so we're, I think we're pretty good at an experience that, you know, figuring

out what are our revenue options, what are our cost reduction options, what are performance data

to evaluate the proposals. I think we're really good at the nuts and bolts and we're going to come

up with a lot of creative ideas, but we will need from you all those service priorities that are

going to be acceptable for some of those trade-offs. And so that will ultimately help us

inform what's going to be in the proposed budget. And as we go forward to balance the budget, again,

about a holistic approach, that there are a lot of things, as Lee was talking about earlier,

as Jennifer referenced in her opening remarks, that sort of go into providing services to the

community. Again, this is a framework that stood the test of time, and we've kind of included this

in our budget documents for a long time. And it's really important because it's highlighting you

have to have a robust service delivery framework to deliver the services that you want to. And key

there, you know, we always want to point out we need the support services in our back of house

functions along with the infrastructure, the right service delivery method, you know, talented staff,

we got the right performance data, and we've made sure it can be delivered sustainably. All those go

into us thinking about how we bring forward budget proposals to balance the budget before you.

And any given year brings new opportunities for us. So every given year, the departments are going

to be looking at opportunities to adjust our revenue streams, adjust fees and charges,

identify some cost efficiencies, look at redeployment or service reorganization that can generate

either more effective services for the same cost or for reduced costs or increased revenues

without a service level impact. Like that is top of mind and we're going to pursue those first.

So I want to just highlight that we are definitely thinking of that. We're just not going automatically

to cuts, we're trying to think of everything and we'll be as creative as possible.

But there's limits to that and so we will have to think about getting beyond that will

require some service reductions, but when we try to figure out which services to cut,

we have to realize that only about two-thirds of the general fund is what we would call

discretionary.

There's about a third of it that we can't really address, especially in the year in

front of us. A lot of that cost is related to our retirement unfunded actuarial liability.

We're going to have to pay that regardless of how many folks we have employed currently.

There are also a number of revenue offsets. So if we're getting revenues in to do a service,

you know, that's we can't cut that service, then we would lose the the revenue too. And there's

also certain state required spending that we have to do on certain services. So when we kind of step

back and look and look at it, we really have a smaller slice of the general fund that we can

really engage in when we think about budget cuts. Back in December when we had an idea

of what the preliminary forecast would look like, the city manager sent out direction to departments

to generate proposals so we could bring forward a balanced budget. We got to get started on that

process early. So this is the amount that we are targeting for to generate proposals totaling $60

million. Issuing targets by department does not mean we're going to apply a reductions uniform.

It's a way for us to inform us to generate ideas, to figure out what is the best suite of options we can bring forward to you in alignment with your priorities to balance the budget and make sure that we're meeting the critical needs of our community.

Part of this process really is our continued focus on the consideration of racial and social equity as the decisions we make to cut or decisions we make to not cut are going to be influenced by a variety of factors, including our most vulnerable community members.

This is a listing of, again, not recommendations we're making at this time, just to give a

flavor of the types of service reductions we're going to have to think about.

These are impacts that have previously been considered and enacted upon or considered

or not acted upon or may be considered in the future and sort of just runs the gamut

from back of house staffing to appointee staffing to police and fire services to parks and libraries

and a whole range of different options.

So just want to give a flavor of what we're going to have to be going through

and digging in with the departments over these next few weeks and months.

I want to highlight the approach that we used last year

that we thought was a very strategic and equity-focused approach

and will probably help inform council's discussion over this budget season.

As I talked about earlier, we're going to try to find efficiencies, cost savings

through reduction in consulting services, supplies, materials,

other contractual services to have minimal service impacts.

We had that last year, and I expect we'll have another sort of suite of those this year.

We also will try to minimize the impact on communities to look at are there, you know,

ways we can trim back in our strategic support.

But we're kind of reaching our limit here in some respects.

We cut back strategic support too much, and then we can't really support the basic operations

for a community-facing department.

So we're going to think about it, but we've got to be careful about how much we cut there.

Public safety services, as you saw in that slide before, you know, so much of the general fund is police and fire.

So if we can't generate meaningful savings from police and fire without significantly impacting public safety,

then the burden on the rest of the organization would be enormous.

And so we're going to have to try to find, you know, cost reductions on the public safety side.

Probably a consideration of, again, of deferring some opening of new facilities may be part of that conversation.

And then when we get to community services, we want to the maximum extent possible, preserve

our core basic services that we know are vital to low-income communities, community of color,

immigrants, and other historically marginalized residents.

The basics and the day-to-day of what we do, so much of that is aimed at those communities,

and so we have to think really critically about how we approach reductions to those

and preserve those to the extent possible.

And we'll also think about a couple of year, you know, reductions that may take place over

a two-year period.

We did that last year pretty successfully.

There may be opportunities here where, hey, maybe we can't get all that reduction the first year,

but maybe by year two we can give us some runway to make sure that we do those reductions in a responsible way.

So those are some considerations we took last year.

We may want to be thinking about those again for this year.

And as Lee mentioned, we also are going to think about preserving and creating capacity for our critical priorities.

We have our focus areas.

we know the importance of that and the importance of those to our community. There's other select

areas of important core service work and community service, institute support, and our deferred

infrastructure needs. And so, you know, we have to think about those for some potential targeted ads

in areas where funding is preserved. You know, we want to apply our recent lessons to service

optimization. Let's experiment. Let's get better. Let's improve the service delivery. But want to

to note again any ongoing funding we add here that is ongoing funding taken from somewhere

else in the organization so we just got to be really judicious about what we're going

to make improved investments in. And we do have a budget stabilization reserve which

is good news. The bad news is it is pretty limited and we've had to access it a pretty

decent amount over the last 18 months so we've had to use about 50 million dollars of our

budget stabilization reserve for various needs to make sure that we end the year in a positive

balance or meeting our fund balance targets.

And so it's been a really important piece for us, and it's there to provide a buffer

against the unexpected, but we can't rely on that overly to resolve an ongoing shortfall.

And so it's there for strategic one-time uses.

I do expect, you know, we'll probably need to use that again in 25-26 for our lack of

ongoing ending fund balance, which we always assume is part of any forecast.

There'll probably be some that will need for some one-time critical needs in 26-27,

and we need a buffer in case 26-27 gets worse than whatever we forecasted.

We've been fortunate to have that little bit of budget stabilization reserve,

but it's well below the council policy.

Our council policy for general purpose reserves has a target of 10%,

and I know we're south of 6%, and we're probably going to be even lower than that.

So something we want to keep in mind.

We will have some one-time funding that will come online for this budget process,

so that is also good news, but we have a lot of pretty significant one-time needs.

We are going to need to get started on a City Health Foundation improvement project

related to water intrusion.

That's roughly a $45 million project.

That's not going to be able to wait much longer.

I'm mentioning again here the ERAF that is at risk,

potentially on a looking-back basis, $35 million potentially.

Again, might need about $20 million to meet our ending fund balance target by the end

of the fiscal year.

Not to mention any other deferred maintenance investments we need, some technology investments

that are going to be critical as part of any budget process and any other one-time service

delivery needs.

So, sort of a lot of things that we're going to need to be considered as we look at what

kind of one-time funding we have and what we should be putting on the table and what

we need to reserve in the budget stabilization reserve for future years.

And as I'm almost done talking, we just have here our next steps in the budget process.

And so we are going to release our formal five-year forecast on March 2nd.

And so that will, again, we'll relook at everything, all the revenue, all of our cost data, and

we'll have a lot of detailed information behind it as opposed to just a range that you're

looking at today.

So please keep an eye out for that.

And then shortly after that, the mayor will release his March budget message that will

be deliberated on by council on March 17th.

And then we start cranking on our proposed budget documents, which we'll release at the

end of April through early May.

We got our study sessions, our public hearings, our community budget meetings, with ultimate

goal of having approval of the June budget message on June 16th and all the proposed

budget documents.

So that is our conversation to you.

And now I think it's back to you all for conversation amongst yourselves with some questions here

for potential consideration.

Thank you, Jim.

really appreciate you and Lee setting all that context thanks to the budget

office for helping to prepare the content and all the work you do year-round to

make sure we have all the best information we need we're gonna turn now

to colleagues I will just note we had memos with reflections from council

members Ortiz and compost I appreciate those and have read them and we'll look

to analyze what I can incorporate into my message

and or we'll discuss when the March message comes forward

and or today.

Really want to take this as an opportunity

to hear from colleagues your reflections

on the discussion questions that we shared,

which you see up on the screen.

I think the biggest question in front of us this year

is which services to protect

which community goals to prioritize, and ultimately what tradeoffs we're willing to make.

And of course, we want to do everything we can to find efficiencies and innovation and partner with the county and others to minimize the impacts of reductions.

But this is a significant enough shortfall that we will have to make some tough tradeoffs.

And the sooner we can find alignment around where we think those opportunities are and where there's the most alignment, the better.

So the questions are here.

They were circulated to the council quite a few days ago.

And hopefully everybody's had a chance to reflect on them.

I'm going to open it up to colleagues.

I will be mostly listening and taking notes.

Let me shift over here.

All right.

So I hope to hear from everyone.

And my team is here as well.

a number of members of our team, including Stephen Keynes, who's the budget director in the mayor's office.

So we'll start with Vice Mayor Foley.

Thank you, Mayor, and thank you, Jim and Lee, for your presentations,

and to Jennifer and Mayor for setting the stage.

As I reach the end of my council term, I realize that this is the last budget cycle

that I will have the opportunity to influence.

But while I'd like to end my term with expanding programs and perhaps implementing new programs, none of that will be possible this fiscal year.

This is going to be a tough year where really difficult decisions are made over priorities resulting from a projected shortfall of $65 million.

As if that deficit isn't enough, the challenges we face are made more difficult by back-to-back shortfalls in the past few years.

This is definitely the most difficult budget year I've seen in my over seven years on the city council and the largest shortfall.

But I am no stranger to tough budgets.

I was on the school board for San Jose Unified during the 2008 recession when our country faced the largest financial crisis we had experienced since the Great Depression.

As a school board member, and I know Council Member Cohen was there as well,

As a school board member, we faced massive shortfalls and had to make tough decisions on school closures and service reductions.

We made it through by focusing on our core business, which was to provide a high-quality, free and public education to our children.

We owed this to our children, our parents, and our staffs.

We made it through by staying true to our core services, and I'm confident that we as a city will make it through the other end through this shortfall by focusing on the same things.

As we go through this process, I ask myself these questions.

What is our core service?

What do our residents expect us to provide?

What are the services we must provide, and what are the services that are nice to offer but may be at risk to defund with a deficit?

How will these decisions affect our 7,000 employees?

As with my school board decisions, working to avoid layoffs is an important consideration.

We've been entrusted by our constituents to guide the city through these difficult decisions, and so we shouldn't shy away from this responsibility.

Unfortunately, we are in a situation where the question is what programs or services

we can or should we reduce and not how we can expand.

I know that there may be some inclinations to add new small programs or projects.

Given how tight the budget is, it will be very important for Council members to identify

offsets for any new programs being proposed.

Essential service funds are an excellent source of funds for projects important to council

members.

For example, every year I use essential services to fund traffic safety projects in my district.

I'd like to thank the mayor for providing a list of questions to help guide our discussion

and best inform the administration and the mayor's office when crafting the budget for

the upcoming year.

I'd like to offer some thoughts based on the questions provided.

setting has changed nearly every year since I began on council in 2019. Today we have focus areas.

Regarding the focus areas, I think we are starting to see some strong progress with this framework,

and we should maintain our focus so we don't lose this progress. We shouldn't modify the focus areas,

but instead explore opportunities to make sure that make that work more efficient.

In addition to our focus areas, I think we should preserve library hours, particularly Sunday hours, crossing guards, and Vision Zero resources.

We are seeing success with Vision Zero and Quick Builds, so let's continue to look for other resources to fund these projects, such as grant funds from MTC or VTA.

We should also explore alternative funding solutions for the automated speed camera program created by AB645,

as it seems federal grant funds that we had previously counted on are unlikely to come through,

but this is an important program for us to implement.

When considering reductions, the administration should explore services or programs

that are outside of our core service areas and focus areas.

Services or programs that are duplicative should also be considered for reduction.

For example, if a service is provided by the city, as well as a non-profit or another public agency,

we should consider reducing or eliminating that service.

To minimize the impacts of any service reductions,

we should also focus on reductions to services that are funded one time

or serve a relatively small number of residents.

further this is an opportunity for each department to revere their procedures and work to create more efficiencies thereby saving time and becoming more effective if a policy needs to be changed to reduce redundancies or inefficiencies then we the city council should help make that happen

I'd just like to close by thanking the administration, particularly Jim Shannon, who I have tremendous confidence in,

and the entire budget office for all of their work thus far to deliver the critical information this council needs to make budget decisions.

I'm confident that this council will be able to deliver a balanced, fiscally sound budget that minimizes impacts to the critical services that our residents rely upon.

Thank you.

Thank you, Vice Mayor.

I really appreciate all of that concrete and actionable feedback,

and I know we'll benefit through this difficult budget cycle

from all of your experience, both on the school board and here at City Council,

helping us make good decisions.

So I appreciate those reflections.

Let's turn to Council Member Ortiz.

Thank you, Mayor, and thank you for our city administration

for walking us through this difficult fiscal reality

and the tradeoffs ahead of us.

I understand the position our city is in and will be leaning into this discussion in collaboration with both the residents of our city, our city administration, and of course our municipal bargaining units.

I will not make these decisions lightly and understand that trade-offs in our budget will ultimately have an effect on all of our residents.

I'd like to begin my comments by discussing the memo I submitted outlining the East San Jose Economic Revitalization Framework.

Quick note, I know that I placed a projected cost of a consultant for that framework to be over $100,000.

However, I wanted to make sure my colleagues saw that I've also secured a soft commitment from local philanthropic partners

to fund half of the funding needed to develop that framework.

And I'm continuing to meet with other partners to secure further funding commitments.

But I would hope that the city can put some money into this process to hopefully have some skin in the game.

At its core, this framework is about taking a place-based approach to economic development,

one that recognizes that communities that have experienced long-term disinvestment require intentional, coordinated strategies to truly thrive.

This framework is not abstract. It is intended as a concrete, community-driven plan to reverse generations of disinvestment

and finally deliver real economic opportunity for East San Jose.

While finalizing the budget is a long way off, I wanted to use the priority setting to at least share this proposal with my colleagues so that they can understand what I hope to fund in this budget.

As it relates to the priorities of East San Jose residents, they are clear.

Safer neighborhoods, stronger small businesses in the local economy, support for our youth, accountability for blighted property owners, and real affordability for our working families.

First, public safety, particularly as it relates to our small business corridors.

In East San Jose, our small businesses are often family-run, immigrant-owned, and deeply

tied to their neighborhood stability and vitality.

When safety concerns go unaddressed, it directly affects whether businesses can keep their doors

open, provide well-paying jobs, and serve as community anchors.

Protecting these corridors requires maintaining investments and avoiding cuts to programs

programs and staff that prevent harm before it happens, including those that

support first responders, our Project HOPE program, and crime intervention

services. Second, youth intervention and of course crime prevention. Everyone on

this dais knows how personal this topic is to me. I grew up in a gang impacted

community and saw too many of my friends fall through these cracks. Programs

similar to New Hope for Youth and the City Peace Project changed the trajectory of my life.

And if we are serious about long-term safety and economic stability, we must invest early

and consistently in our young people and their families. The Eastside Union High School District

is going to be forced to roll back its funding for these programs at high schools across our

districts. We can expect to see the consequences of this decision play out in our streets and

neighborhoods. These programs save lives every day and unfortunately you don't see that in our

newspapers. Gang activity will only get worse if we shutter similar programs funded by SJYAP and BEST.

I also want to mention that this work goes hand in hand with the initiatives within the Children

and Youth Master Plan and of course the work led by Grail Family Services. These organizations

provide culturally competent services, family stabilization, and youth support that city

programs alone cannot replicate.

Cutting or destabilizing these partners would weaken the very safety net our neighborhoods

rely on.

Third, accountability for neglected property owners through a coordinated response with

PBCE and our city attorney's office.

And I know that we currently do this, but I don't think we're doing it to the best of

our ability.

and I think that if we move our focus away from this effort, we won't see any progress on this front.

It only takes one chronically neglected property to undo years of neighborhood progress through Beautify SJ.

If we want to effectively address blight and irresponsible property ownership,

we must ensure the city attorney's office has the capacity to enforce our codes

and, when necessary, pursue litigation against bad actors who harm surrounding residents and businesses.

We cannot simply be held responsible to clean up everyone's mess

without holding those accountable who treat our neighborhoods like a garbage dump.

And, of course, affordability.

Families across San Jose are being squeezed out by rising housing costs, utilities, and everyday expenses.

When the people who work in our neighborhoods can no longer afford to live in them, displacement becomes inevitable.

Our budget must remain funding and prioritizing stabilizing costs for our residents,

expanding affordability, identifying a new funding stream for affordable housing production,

protecting rent relief, and ensuring that working families can continue to call this city home.

I look forward to continuing this conversation.

I do plan on holding town halls in my district as well as partnering with bargaining units to have these conversations about, you know, potentially tradeoffs and cuts.

At this moment, I'm not proposing any yet, but I will be future on in this conversation.

Thank you.

Thanks, Councilmember.

Appreciate all that feedback.

And on your first point, your memo, which really helped lay out the rationale.

And appreciate that you're out there finding matching resources.

and as a one-time expense, it's a lot easier to find a way to get something like that done.

So it's good to have that context now.

Really appreciate that.

Let me turn to Councilmember Candelas.

Thank you.

Thank you, Mayor.

Thank you, Jim and Lee, for the presentation and the rest of the staff for the realities

of our upcoming budget and the difficult years ahead of us.

You know, I do want to say that I do feel confident, especially with City Manager McGuire at the helm, who's been through difficult budget years.

And there's a slide in the PowerPoint that showed some really, really deep cuts.

And you were here. So I do feel confident in our ability to get through this as painless as possible.

But, you know, the reality is we are facing a shortfall.

And that means hard choices.

And we have to be very clear about our values, especially as how we consider the well-being of our residents.

I think when resources are constrained, the question isn't just about what we could afford, but it's what we can afford to lose.

There are types of programs that I consider essential.

Youth programming must remain a priority.

These programs, in my opinion, aren't extras.

They're preventative.

They're public safety investments that keep our young people engaged, safe, and connected.

Funding youth programming reduces long-term costs related to public safety, keeps young people on the right track,

and whether that's scholarships or after-school programming, they're essential.

Second, I think the place that we often cut from is placemaking.

That includes Viva Parks and something that I also think is essential to creating stronger neighborhoods and bringing the community outdoors in together.

By activating public spaces, we create safe places, welcoming places for our residents, especially given what we're seeing at the federal level.

That's not happening as much as we want to or we're used to.

Third, again, I agree, Vice Mayor, on the library hours.

I think those are essential and something that I've heard from my residents that they

have seen a direct benefit from.

It's not just about inconveniencing people.

It cuts off access to education and the opportunity for workforce development and basic services

for folks who need them the most.

And lastly, something that is often overlooked, but it's senior services, especially nutrition

programs where we parlay federal dollars with local dollars and maximize the experience

for folks who we don't often hear from, the seniors in our community, because these programs

are lifelines.

Addressing food insecurity, reducing isolation, supporting health is something I've heard

and something I think we should be mindful of.

moving through this budget process. I obviously want us to be disciplined, thoughtful, and creative,

but I want us to be clear. Investing in our youth, seniors, libraries, and families should not be

quote-unquote discretionary spending. These are foundational, and I think that's what we

should be doing well as a city. You know, one area that was asked in those presentations, Mayor,

is where can we find efficiencies? I think the Beautify program is something where we've

made it clear that it's important for us as city leaders to see a clean city, and I don't disagree,

but I think we can definitely lean in because we've heard in NSC that we are investing,

but we are not seeing that drop in folks illegally dumping.

We are not seeing that, and so I think we can be more upstream of the issue,

educating folks is to see if we can curb the increase because we can do 12 dumpster days,

a dumpster day every month, and folks will still be lined down the block trying to get rid of

their possessions. But I think that program should be looked at and identified for efficiencies.

and and it's it's it's it's an opportunity for us the next area that I

think we can look at it's not easy but it's our also our response to in cam

and manage management and coordinated care integration with the county to see

how we can find efficiencies in that program and and and see how we can get

some accelerated investments from our partners in the county which would mean

difficult conversations but I think conversations that all of us have been

meaning to have with our with our colleagues in the county you know I I

have a few other points but I I just want to close with this at looking at

our focus areas we have five but I think there is one that's sorely needed and

And that is the impact to our families, specifically areas that I've talked about with regards to youth and seniors and are most vulnerable.

These populations cut across everything we work on from public safety, economic opportunity, and affordability,

which surveys have showed us over the last two years are especially top of mind.

And so I think making a dedicated focus area that ensures that our budget decisions are intentionally evaluated through the lens of those who are impacted and most reliant on city services should be key.

Under this focus area, obviously the children's youth services master plan should be something we look at and something we have supported and affirmed on this council in principle, but I think we have to match it with a focus.

and I think it's a challenge

and I'm not saying it needs a massive overhaul

but it's something that if we are serious and intentional

about protecting our most vulnerable in our city

this is something that we have to identify

and not have it as an afterthought.

But yeah, I look forward to hearing from the rest of my colleagues

and I look forward to engaging in the difficult decisions ahead

And actually, before I forego the rest of my time, you know, something you said, Mayor, is our focus on external dollars.

And the dollars we get from folks in the federal government and regional funding opportunities, while they are limited, they are still out there.

And so, you know, I'm hesitant to rely on the federal government with any source of funding nowadays.

but but with regards to our regional opportunities whether it's VTA Bafa or

any other opportunity to go get funding I think we should also be leaning in

heavily on that especially to move pilot projects or things that we can find

opportunities for in our budget so okay that's it thank you

thanks councilmember appreciate that and I especially appreciate you highlighting

a couple of areas where we might be able to find efficiency or reduce services

Unfortunately, while we're all loath to even suggest what we might look at, that's exactly what we're going to have to do and ultimately approve collectively here.

So it's helpful to have a sense of that and just, you know, reminding everyone as we go on those discussion questions, which include, you know, where should we consider reductions?

Where should we consider structural changes or service model shifts?

how should the administration, how should Jennifer and her team think about budget balancing proposals

and how should we think about services that are uniquely provided by the city such as a 911 response

versus those where there are public, non-profit and other entities.

So I appreciate that you highlighted a few examples and just highlighting that for all of our colleagues as we go on.

That's going to be at the heart of our difficult work this year.

Councilman Kamei, we'll go to you next.

Councilman Kamei, Thank you.

I also would like to thank Lee Wilcox and Jim Shannon for all their work.

And I really want to thank the team because I know that it takes many, many, many people

as we come forward with such a challenging year.

And although we do see it as a challenging year, we have a lot of faith in our city manager

to be able to go through this.

We've had hard times before,

but with hard times comes hard decisions.

And that's something that I think the last two years

have been avoided in terms of really going deep

and cutting deep.

I think that at the end of the day,

we will balance it all out and try to make things

workable for everyone involved,

including thus the staff as well as the community, because we are facing big challenges.

I want to say that I really think that over the last three years, this is my fourth budget,

we've been going incrementally in the right direction.

Certainly, we've learned a lot over the last few years.

And, you know, when I first came on board here, the one thing that I asked is,

what would you do differently next year, right?

And so I think that every year we've gotten better.

and I'm very, very proud of that.

Even though it's going to be a challenge this year,

I think that we will get to a good place

as we continue to look at our focus areas.

I do think the focus areas are the right ones.

Yes, we could probably find ways of being able to be inclusive

of how do you put youth and seniors in there.

I see it as part of increasing community safety

and really thinking about that,

but I think that that's certainly something that is on my mind.

I do want to say that community and public safety seems to be the number one thing in my district,

and certainly one of the things that I would like to have us consider is,

as we're thinking about cuts, we also have to think about more revenue generation

and ask why in some areas things are down.

The usual suspects is, well, the economy,

oh, the workforce is decreasing,

people are not coming back to work, or what have you.

There are many excuses.

The one thing that I will say that we have not really,

at least I don't recall, talking about

is who is rating our funds, right?

So our partners at the state have no problem looking at the local level.

I mean, Jim mentioned the ERAF, but, you know, there have, at least it sort of was brought to my attention,

legislation that changes the way in which sales tax from a retail store versus a dealership has changed.

And, you know, the numbers are quite significant, right?

So I think that as the legislation changes,

we need to be much more sort of like aware of who's going to raid our pocket, right?

Because these are sales dollars that we have seen over a period of time,

and all of a sudden, guess what?

They're going to go directly to the state entity for sales taxes.

So I think that being mindful and trying to get ahead of that is going to be important in many ways

because we're not the only ones who are going to have a shortfall.

Everybody is going to have a shortfall.

Therefore, it's not just the ERAF.

It's all of these other pockets.

And guess what?

I learned the other day that there's going to be a mosquito vector control benefit assessment on the line, right?

Open Space wants to put something on the ballot.

Everybody's going to start putting stuff on the ballot

because they're trying to close the gap

of where their revenue and expenses are.

So I think that as we start thinking about this year's budget,

maybe in the next two, three years,

we have to start thinking about, number one,

are there ways that we will increase revenue, right?

And I know that Jim mentioned that it wasn't until 31 that one tax is going to go down.

I don't know that, you know, I mean, I don't know what can be done,

but I think that just be wary that there may be other entities who will get in line first.

And so I just feel that we need to be mindful of how other budgets affect our budget

and who's looking after taking some of our money in other ways, right?

Because, you know, car sales, I know last year was down,

but, you know, was it because this new change in the law allowed money that used to come to us is going somewhere else, right?

So I think that we need to be a little bit more aware of some of those things.

And, you know, work with IGR to be able to get ahead of this legislation.

And I also think that we have to kind of continue to hold on to what we have

because, you know, I think that it's going to be easy as we start thinking about other measures

that are not just local but throughout the Bay Area have impacts or not on our budgets.

I also think that there are areas that we talk about constantly.

I know in my district, code enforcement and parking enforcement is a constant thing.

I get information from my residents about that all the time, all the time.

But I think that we need to think about how it is that we have our workload and how do we do our work.

And what does it take to do our work?

because we can't have just one attorney in the attorney's office doing code enforcement.

Just one.

How is that?

And yet there's so much we have to do.

And I would like, I'm really delighted to see the city manager's service and service optimization.

I'd like to add, you know, in terms of another item to think about,

As you're looking at processes for, let's say, food vendors out there, the police department cannot give you a citation.

I mean, they cannot give you a ticket.

They give you a citation.

That citation goes to code enforcement.

Code enforcement has to go through finance.

So there's a lot of little channels that you have to go through.

Is it necessary?

What are the risks of having it go directly or having the department do it?

When we talk about efficiencies and streamlining, are we thinking about how many times someone has to touch something, right?

And how long they need to respond, right?

Because if I'm waiting for something and, you know, it's like, oh, it's due in five days and I haven't gotten a response,

I'm calling, I'm emailing, I'm texting, I'm doing whatever I can, my staff is doing the same thing,

or if you have to go back and forth and back and forth, I don't know.

I think that if anyone gets something, they must respond, at least in my office,

respond within 24 to 48 hours, right?

And somehow these processes need to find a way to be simpler.

Why does it have to go through all the departments, these departments?

So I think that we need to think about how we do our work to see,

because time, time is what we're losing.

and that is a form of you know trying to figure out well what do you cut we cut the time and and

hopefully you get to a better place so I I just put that out there as what I am experiencing and

this is just one office right so we have to put that in the mix too and maybe we need a prize for

whoever comes up with the best processes.

But I think that it's certainly something that will do us really well if we minimize the time.

So there's a lot more, I think, that we will continue to discuss.

I want to thank you for the discussion questions.

And I'm sorry that I'm running out of time.

But I think that this is the beginning of good discussions.

Thanks so much, Council Member.

I appreciate all of your reflections, especially that last point.

you were making about service optimization, streamlining workflows, better integrating

work across different teams and departments. I think there's always room to improve in that area,

so it's a good thing to highlight and appreciate it. Okay, we're going to go on to Councilmember

Mulcahy next. Thank you, Mayor. Jim, I'm looking at you and your team, and the body of work is just

incredible and the available resources to really understand the challenge that we're in and just

so appreciate how much work has gone into this. I also want to acknowledge city manager work on the

budget principles revisions or the suggested revisions there. As I understand it they haven't

been visited in quite some time and I think it's important. I'm going to talk a little bit about

some of that in my comments and as the lone wolf in the budget cycle I am without a partner in a

in a Brown Act I don't know if that's a blessing or a curse for the rest of you but I am going to

take a few minutes to sort of air out some of the things that I'm thinking and hopefully

to influence how you all think in your Brown Acts of five I thought it was very telling that the

resident top concerns the top five fit very neatly into our lowest city service ratings

not verbatim but certainly resonate between them and I think that's very informative about

sort of the quality of the focus areas that we have chosen before and and assume will be

relatively the same moving forward. So, Mayor, I appreciate sort of the one-sided conversations

with your team prior to now, but also the fact that your team provided some questions to help

shape the feedback today, I think, was helpful. So, I'm just going to go through those questions

and read a little bit verbatim, but all the focus areas remain valid, as I was saying,

and in line with what we hear from residents about their needs.

So we've sort of done our own polling in District 6

and the top areas of concern direct from residents.

Now, when we got into office, we probably inherited about 2,000 e-mails

as well as, you know, the thousands of e-mails, texts, voicemails

that we've gotten throughout this last year.

And it's going to be no surprise.

Addressing homelessness and its impact on our community is number one.

traffic safety and parking especially in density housing areas that are by today's standards

under parked and not near transit that works cleanliness and maintenance of public spaces

number four general public safety and everyday crimes yes we're the safest big city in america

but people are still dealing with things that are just making them feel unsafe affordability cost

of living which our levers to address are very limited as we all know.

To make changes or cuts we have to rely on evaluating scope and sequencing to get at

what we know is working and prioritize our spending accordingly.

This way we narrow our scope to initiatives that are our core to the city's role, have

clear measurable outcomes and they answer the calls of the public.

is pretty new at working on framework and then sort of intentional data and goals.

We should consider phasing or delaying those that still need evaluation to give time to

focus on the area such as our top two to three resident concerns in each focus area as was

provided to us.

Can we right size or deploy who is playing a role in these focus areas such as we might

have learned that PRNS is more suited to pick up something that housing or SJPD is doing

and vice versa.

We have to get creative and be willing to make shifts based on what we've learned and

what we know.

Lastly, we as a council need to show great discipline, especially in 26, 27, from pushing

staff to study or enact new policy or programs so as not to distract from the very focused

work ahead in order to make cuts unnoticeable to the public.

So question two, which programs or services are the most essential to preserve?

Prioritize services that protect life, health, and safety and wherever we can, quality of

life such as libraries, parks, public spaces, while also seeing where we can streamline

services that prevent higher downstream costs.

For example, a big time suck in our office, and I know we're all dealing with this, Rosemary, you talked about this a little bit,

is the cost of interjurisdictional communication and coordination on homelessness response, waterways, public and private property cleanup, as just a few of the examples.

When we have to reach out to the county or Valley Water or Caltrans where there is no clear roadmap or codified agreement,

We end up going back and forth on who is responsible,

pointing back and forth about who and how an agency can or cannot, will or will not respond,

wasting time, resources, and at the end of the day, public funds.

And I'm certain that those same agencies are dealing with the same thing,

probably pointing the finger right back at San Jose, suggesting that we're causing them to waste funds.

I think I may have just given Joe Royce an assignment by saying this out loud,

but do we have any data tracking how much we're spending or in fact wasting of city dollars for this kind of coordination

and what potential cost savings would be with more MOUs and other less time-consuming agreements with these agencies?

I'd also offer that essential services does not mean untouchable,

but we should be cautious about cuts that create greater costs later.

For example, the two-week shutdown of homeless response during the furlough at the week's end of last year most likely takes more than the two weeks to catch back up for the lost time of enforcement and cleanup and an elevated redundant cost.

So question three, which programs or services should be considered for reduction?

Referring to the comments on the first question, we need to review programs that rely heavily

on the general fund that have limited measurable outcomes and do a deep dive on duplicative

services that are offered elsewhere.

Do we have any data on programs that were funded primarily on one-time fund dollars

that now require ongoing support and partially funding FTEs?

Has the city and I'm sort of asking these questions out loud and I know you're taking

notes Jim but these are questions that I think I think we need to get at.

Has the city conducted any review on programs that have grown incrementally beyond the preliminary

base increases year over year without strategic review.

And overall I'd encourage scaling back on programming before eliminating including reviews

on where programs are most impactful with analysis on equity and geographic impacts.

Question four, programs where the city council is willing to consider structural changes.

Now, I appreciate the question as it gets at the core long-term point.

Incremental cuts year over year are not sustainable and erode service quality.

And as I mentioned before, cities should explore overlapping programs and be aggressive in consolidation.

Another huge shift would be to realign our programs with present-day needs.

Can we identify programs that can be redesigned either with technology or potentially with partnerships?

Jim, you talked about budgeted positions on page 26, and I appreciate you saying that was for historical perspective.

But having said that, there's always reference to how many employees we used to have.

It has been a go-to crutch, I believe, for San Jose for many years.

I wonder if that's the right mindset or relevant to any of our decision making.

For example, I understand the headcount issue with SJPD,

and certainly more deployed officers can be a deterrent to crime

and so many other benefits from more sworn.

But with SJPD at 1,400 back in the day, should that be the goal now?

Continuing to invest in technology, aircraft, and other advances should inform what the adjusted goal should be to right-size SJPD for today's San Jose.

And I use that as an example, and I'd pose the same question to all city departments that previously enjoyed higher headcounts.

Five, what criteria should the administration apply when bringing forward budget balancing proposals?

Suggested criteria in no particular order, alignment with council focus areas and resident

priorities, legal or operational necessity, long-term fiscal sustainability, the ability

to scale up or down availability of alternative funding or providers, measurable outcomes,

and the impact on vulnerable populations.

So thanks to the budget office on your potential cuts, I'm running out of time.

I'd list my criteria as this.

Clear service impacts the who, where, and how.

Short and long term fiscal effects.

Will this reduction be for a single year?

Will it have lasting savings?

Equity and geographic analysis.

So I'm going to, I'm running out of time.

So I'm just going to finish with one other thing.

And I know we're not talking about our sort of other partners and the enterprise opportunities like the airport as an example.

But I do think that we have a significant opportunity to help be a part of the renaissance of what our new airport should be.

Travel has changed.

Business travel has changed.

Our airport competition has changed.

And the airport has land and strategic opportunities in front of us.

And I think as a city, we need to do a better job to support that strategic, creative thinking that the airport should consider,

like a hotel on site, like expanded FBO or HBO on the west side of the airport,

like the other autonomous flight that, you know, is coming faster than any of us want to acknowledge.

And so I think we have to do a better job of supporting the airport from the standpoint of how do we help them evolve to what the airport can be and should be moving forward.

So with that, I'll turn it back to you.

Thanks again for the hard work on the budget analysis.

Thanks, Councilmember.

I really appreciate hearing all of that constructive feedback.

I think a lot of it's actionable.

and while we focused primarily on the focus areas

and the general fund today,

we get to comment on, weigh in on

in the March budget message.

We'll speak to city enterprises as well.

So it's definitely not at all exclusive.

I think the commentary on the airport is well taken.

And since I won't get to talk to you

outside of public meetings on the budget

for the next quite a few months,

it's helpful to hear all of that detail today.

And my team and I will certainly be thinking

a little more on that as we craft the message let me turn now to councilmember compass

thank you mayor i appreciate the opportunity to provide input into the development of your march

budget message and want to thank staff for the presentation um also huge thank you as

councilmember mulcahy uplifted to staff's work on the budget principles draft revisions

we are entering a particularly challenging budget cycle,

and the commitment that we all share to transparency and public engagement

will serve us and the community well.

And so I appreciate and support the proposed changes,

including the clear process and requirement for budget requests.

Understanding these tradeoffs and the level of effort that is necessary

to implement new programs and policies

is what ultimately will help us make the best informed decisions possible.

And as we're seeing a constrained budget year after year,

I hope that our council can begin to recognize that this status quo is unsustainable,

and we do have to make some tough choices over the next several months.

So starting with the focus areas,

I would like the city to consider youth intervention

as an integral and strategic element of the community safety focus area,

So plus one to Councilmember Kamei for also referencing this.

Preserving high-impact youth serving programs in PRNS and the library will divert young people in our city from counterproductive activities.

And furthermore, with continued investment, our city will benefit from providing opportunities for economic mobility through educational and recreational programs.

Similarly, I recommended narrowing our reducing the neighborhood cleanup focus area.

Continued substantial investment is proving unsustainable, and the gains are temporary.

So at this point, the tradeoffs are untenable.

Cutting library hours or eroding core services like public safety and laying off essential staff are unacceptable to our community.

and we must rethink our approach to the neighborhood cleanup focus area.

I would strongly encourage us to consider bringing this focus area under the community safety umbrella.

As I've seen in my district and heard from my residents,

making sure that our youth have safe routes to school that are clean, that are accessible,

is part of the reason why this is such a key area for our community.

And so thinking strategically about how we can do more with less is the theme of our upcoming budget conversations.

Finally, I strongly encourage the city to explore refining the reducing unsheltered homelessness focus area.

Again, continued substantial and increasing investment in the EIH system is proving to be unsustainable.

Like neighborhood cleanup, there are gains which are limited and temporary.

The city has spent tens of millions of dollars to provide interim shelter for around 3,000 or 4,000 people, and there is a bottleneck in the continuum of care because those who are placed into emergency interim housing struggle to exit homelessness when there is no place to go that provides stable, affordable housing.

And at the same time, we see far too many households that are falling into homelessness for the first time because of the evisceration of the social safety net at the federal level.

And so looking at reducing unsheltered homelessness is an area that needs to be refined and should include a much more aggressive and focused attention on preventing families from becoming homeless in the first place.

And we should keep in mind that in the most recent community survey that we reviewed just last week, only 10% of our residents rated the city's efforts to address homelessness as excellent or good, meaning 65% rated the city's efforts as poor or very poor.

And while addressing homelessness remains the number one in our community's top issues, with minimal progress, we are provided an opportunity to rethink this focus area that matters so much to our community and how we can more effectively address the crisis and avoid breaking our city budget.

Regarding services that are most essential to preserve, I want to emphasize high-impact youth-serving programs.

These include the No Wrong Door Strategy, which is essential in implementing the Children and Youth Services Master Plan, the Safe Summer Initiative Grant, Rock After School, and the Bringing Everyone's Strengths Together or Best program funding among a few.

In the library, we should preserve educational and workforce programs which improve the quality of life for learners of all ages and across communities.

These include digital empowerment, college and career, and early education and reading.

And I'm grateful to our dedicated PR&S and library staff who provide these crucial programs that mean a lot for our families.

And I look forward to working with city administration and city council to preserve these and other high-impact programs.

Just yesterday, I was meeting with four principals in Oak Grove School District, and I asked them what city services matter most to our school communities, and they talked about the Youth Empowerment Alliance, walk and roll, safe routes to schools, our libraries, and access to public spaces as the key components that are bringing success to our students, our schools, and our community.

And so thank you to Councilmember Candelas who also spoke to these key services.

I am grateful to hearing from my colleagues about how we can work to protect the services that we are hearing from our families, our constituents, and our residents.

and on that same vein, we are seeing that the cost of living is a growing concern for families

now seen in the top 10 issues of importance and we've also seen housing affordability consistently

ranking in the top two. And so as families are struggling to pay bills, investment in reducing

the cost of living will generate a ripple effect in our local economy. These are real investments.

When we increase access and affordability to child care, it provides more parents with the

opportunity to participate in the workforce and empower local consumer spending, which we know

will in turn support our general fund. Regarding programs and services that should be considered

for reduction, I strongly encourage reviewing the allocations to encampment management,

neighborhood blight reduction and beautification. Certainly, these are important programs. However,

we must be prudent in how we approach investment in temporary efforts. And for similar reasons,

I will encourage looking at the cost effectiveness of programs like OLIVE, Homeward Bound,

and Outreach and Sanitation Services. Now, regarding program areas where I recommend

structural changes and service model shifts, I want to highlight the ongoing general fund

contribution to support EIH. Tentatively, it's forecasted at $17 million in this upcoming

fiscal year and increases to $30 million, then $48 million, and then $58 million in the following

years. This is why I am emphasizing that it is an unsustainable allotment of general fund dollars,

and we have to really have a hard conversation about whether the community is really asking us

to spend hundreds of million dollars in aggregate to support EAH operations that temporarily houses

around 3,000 people. It's a service model shift is necessary for the fiscal sustainability of our

city. And finally, regarding how the city should weigh services that produce substantial improvements

for small populations, you know, we just heard the challenge related to reducing unsheltered

homelessness, I will add that children, families, and seniors in the city need more support. With

around 150,000 young people under the age of 14 and nearly 100,000 over the age of 75, we have to

invest thoughtfully in the communities that are less or unable to advocate for themselves. So I

hope that you will consider the vulnerable residents, particularly those that are at risk

of falling into homelessness as we work together in preparing a balanced budget for the next fiscal year.

Thank you.

Great. Thanks, Councilmember.

I appreciate all the specificity and examples and clarity on where your priorities are.

So I've taken a lot of notes, and we'll certainly be reflecting on that as we write our budget message.

I will just note for everyone's context on the EIH system specifically

that we have had over five years of consistent council direction to build out and operate that

system. And I do think we have work to do to find efficiencies, make sure we're integrating the

system with the county to get better throughput and services for our most vulnerable neighbors.

Of course, we're all advocating through IGR and other avenues to ensure that the state shows up.

But I do know that over those many years of consistent council direction, we also were

very aware of the projected costs and that Measure E would be able to cover them.

So anyway, it's a conversation, obviously, for us all to have and can continue to evolve,

but I just want to provide that extra context.

Let's turn to Council Member Tordios.

Thank you, Mayor, and thank you to all of the city staff.

We've already put in so much work preparing for this budget season, and I know that there's

a lot of hard work ahead as we balance some really difficult decisions, so thank you.

I also appreciate all of the thoughtful comments from all of my colleagues, and particularly

I really just wanted to highlight Councilmember Kamei's thoughts on improving the efficiency

of our city bureaucracy.

You know, in my previous career, I liked the idea of having a prize aimed at improving

some of our processes.

We had an ongoing program called Bureaucracy Busters that was specifically focused on identifying

process improvements to increase efficiency.

And I like these sorts of investments because they allow our limited staff to do more with

less while hopefully minimizing, as was said earlier, actual visible impacts to city services

to our residents.

So to that end, I would encourage staff to continue to look at areas where we can hopefully

streamline areas where the city is putting more work on its own plate through the processes

that we impose.

I think in particular, I'd like to call out the opportunity to continue to expand the

ministerial approval permitting process.

These programs we know decrease time and costs for our project applicants while also decreasing

workloads for city staff.

And if implemented effectively, I think that they have the potential to foster additional

investment in our city, hopefully allowing us to make more progress on addressing our housing

shortage, supporting job creation, and at the same time, creating new durable revenue streams to

support the city in the years ahead. Similarly, I think that we should explore opportunities to

streamline and accelerate the code enforcement process. We have been navigating a tricky code

enforcement case here in District 3, so recently I had the opportunity to sit down with Director

Burton and kind of go through the full process, every single step in the process, between when a

code cases identified and when it hopefully gets resolved as an enforcement action.

And it is a very complicated process.

So to the extent that there is room for the city to streamline some of that process, get

us from identifying a valid code enforcement case through hopefully enforcement and compliance

more quickly, we know that we have a large backlog of code cases.

Hopefully some of this streamlining can allow us to move through that backlog more quickly

and again allow our staff to do more with less while providing improved service levels.

And then finally, I would just encourage the administration to consider additional areas

where technology may be able to help augment our limited staff resources.

We've seen in recent years how investments in technology have had really positive outcomes

in public safety, and I think that there's a whole host of other city services that could

benefit some similar investments in technology, from parking enforcement to traffic safety,

code enforcement cases, and other city services that, again, will allow us to do more with

less during lean times while hopefully even providing in some cases improved services to

all of our residents so thank you thanks councilmember appreciate those reflections

councilman duane

thank you mayor first of all i want to say thank you to our staff within the cities and my colleague

for their thoughtful input.

Today's budget is about investing in people

and continue to build a city that is safe, clean, livable,

and affordable where everyone can truly be proud of and thrives.

Our priorities should be towards our children and youth services,

including New Hope and City Projects Serving Youth

by reaching out to young individuals facing adversity and those at risk,

along with their family and their communities.

Our youth is our future.

We need to continue to invest in them.

A lot of these programs have prevention, mentoring, ship,

safe place for children to go, job training, job placement, it creates an impact upon our

youth from early on and a long-lasting impact to our community.

Two, I would like to say that our library is an essential community hub, a place where

learning, workforce development, digital access, and a connection for all ages.

We should not cut, especially the library services.

Three, this budget should also address housing with a focus on protecting our older adults

and creating pathway for younger generation to stay in our community where they can call

home.

A stable, affordable housing is critical to preventing displacement and gentrification.

We also should reaffirm our commitment to our immigrant communities,

ensuring access to services, resources, and opportunity that allow families to be fully

protected and participate in our city success and to thrive.

Finally, through pre-engineering modular shelter, we are working to reduce the cost and improve

services for our unsheltered residents.

focusing on optimizing of services by speed up the transfer from EIH and PSH via Amplify

services, including in there is job training, job placement, mentorship that show the dignity,

efficiency and the pathway for unsheltered residents to permanent housing.

We also need to make sure that other level of government to fulfill their obligation

by reimburse the city of San Jose for our work toward unsheltered residents.

Savings can reduce our budget deficit, keep our community safe, clean, and livable.

This budget should also reflect our value, equity, safety, and opportunity for us all.

Thank you.

Great.

Thank you, Councilmember.

Let me go back.

Have any colleagues who haven't spoken yet wanted to weigh in?

I'm not seeing any takers.

We'll go back to Councilman Campos.

Thank you, Mayor.

I just want to thank my colleagues who spoke on the importance of effectuating the Children

Youth Master Plan.

Also, Mayor, you mentioned the memo that I introduced for this study session and just

want to underscore how critical it is to ensure that as a council we are really looking at

every constituent, every age group that we are beholden to. And so this is a key

opportunity for us to make meaningful progress in the lives of our children, youth, and their

families. I'd also like to acknowledge the community members and chambers with us today.

I read the public comments submitted on today's study session and read what I interpreted as a

desire to see more investments in protecting our immigrant community and working to achieve our

climate goals. And so, Mayor, you began this conversation encouraging us to align city

priorities with the needs of the community, emphasizing long-term stability and growth

for our city. And I just want to end my reflections with our council taking this opportunity to think

differently about how we've been operating a budget that meets the needs of our community.

Do we want to continue managing a budget that is making slow and expensive progress, or can we reimagine a budget that truly reflects the rising cost of living, an affordability crisis that is moving more families into homelessness, and the investments that our communities, particularly our immigrants, our youth and older adult communities, are asking for to ensure that San Jose is the best place to live, work, start a family, and retire in for everybody.

Thank you.

Thanks, Councilor. I appreciate your additional reflections. Let me turn to Councilor Kameh.

Thank you. I wanted to say something in terms of some of us who had been on school board and

experience the terrible cuts that we had to make know that the first thing that gets cut are some

of the most valuable things such as art, music, sports.

And, you know, those are items of quality of life.

And I think that this week, you know, we've been experiencing some really great vibrancy.

I was here to see the beautiful umbrellas.

And, you know, those art forms really bring something different to us and our community.

so I just wanted to say something as we you know think about what's on the

chopping block really think about quality of life too because activating

public spaces art library sports and music really make a difference in in our

lives and considering all the challenges that we have and and I want to

try to think about not just I like Jim's approach in terms of things that you

could do over a two-year kind of framework you know in the budget you

what can you do this year, what can you do next year, so that you have some time to smooth it out a little bit,

as opposed to saying, oh, no, it's got to be cut right here.

And so as we move forward, if there's a way to transition some things, I think that that would be much more helpful.

I actually am more optimistic for the future, considering what's happening this week,

as well as what's happening over the next few months.

and next year with our ability to celebrate our 250th anniversary of the city.

And I was talking to someone yesterday,

and they mentioned that the Olympics are coming, the soccer Olympics are coming in 27.

And so I think that there's some momentum going in the right direction.

So while there's some doom and gloom in terms of where we are,

I really think that the mayor and the council really have pushed through to try to create revenue streams on the other side that really hopefully will offset some of these other challenges.

So I want us to think about quality of life as we're approaching the budget this year.

Thanks, Councilmember.

I appreciate that optimism as we start to bring at least our council discussion to a close.

And I agree.

I think it will take a few years to play out.

but I do think there are areas where we've positioned ourselves for economic growth and a more organic growth of the tax base.

I do think sports, entertainment, arts, culture, this experience economy that is emerging out of the pandemic,

particularly in and around downtown, but not exclusively there, is a real bright spot.

And it'll be interesting to see how that evolves.

And I think we have something to say about how that evolves in our city.

I also think the work that ESD and others have done to make us the most power-ready city in the state

and our ability to bring online manufacturing data centers, labs, and actually have power ready to go

at a scale that no other city does, at least for this narrow window of the next four to five years.

We have a really unique competitive advantage for a brief period of time.

And as we've talked about, each data center means another $3 to $6 million of net general fund revenue.

So that's a really significant fiscal impact and means less difficult tradeoffs.

I think there are many, many others.

I wanted to highlight one other just optimistic point as we close, which is I was looking back at the annual report on city services that our city auditor, Joe Royce, presented a couple weeks ago.

and I think it's really noteworthy that after a period of time, I think largely

corresponding with the pandemic and all the challenges there, we had sort of been

stuck in a rut in terms of resident satisfaction, trust in local government,

and a feeling that we weren't being strategic enough in driving better outcomes. And one of

of the things we, many of us together, you know, did on the council at the time was institute these

focus areas and rethink how we approach our biggest challenges. And as we saw in Lee's

presentation today, by focusing on our community's biggest priorities, setting goals, measuring,

and increasing the level of accountability, and therefore our ability to iterate and be innovative

in the five focus areas, we have significantly, measurably reduced or improved metrics.

Public safety, crime down over 20% in three years, unsheltered homelessness down about a third,

and it corresponds with an increase in trust in City Hall that we haven't seen in years.

In the last three years, trust in City Hall has gone up over 37% after slow declines for many years.

And I really think it's a testament to this council's work focusing, being more accountable for outcomes,

being more pragmatic, prioritizing solutions that move the needle in a year or two,

not a hope that maybe they'll change something in 10 or 20 years.

And so I think we've done, it hasn't been easy, but forcing ourselves to not try to be everything to everyone and really get down to the brass tacks of reducing crime, getting people housed, cleaning up the city, reducing friction and investing in housing, creating an environment where people can invest in jobs and grow the tax base is working.

and we see that. We have not seen an increase in trust in City Hall of 37%

any time I can see in the historic data here. And so I just, I want to end on that optimistic note

because while our costs have gone up faster than revenues, which are unfortunately slowing right now,

we're definitely on to something and people are noticing and giving us better and better

feedback as we go, which is really heartening. So with that, I appreciate everybody, all the

colleagues who gave feedback really appreciate it especially appreciate those of you who were

brave enough to suggest areas where we might consider finding efficiencies streamlining or

reducing services because that's going to be a lot of our discussion unfortunately over the coming

months but I know that we'll get through that together with the support of our professional

staff and we do have some time for public comment and I know we have some folks here who want to

share their thoughts with the council. Tony, how many cards do you have? Eight. Eight. Perfect. So

we can do the full two minutes for our public commenters. Okay, I'm going to call your name.

When you hear your name, come on down to the podium. You can go ahead and start speaking. The

timer is up above you. Jose Murillo, Jeremy Baruse, Ms. Rayan Mendoza, and Shannon. Come on down

to start? Oh, and Chris, we'll start with five. And you don't have to speak in the order that you're called.

Good afternoon, Jeremy Beruz with Amigos de Guadalupe Center for Justice and Empowerment.

And we're here today to urge the council to preserve the $1 million in funding for immigration

services, a program with very tangible results. Last budget season, this council made a bold

investment, and in today's political climate, we need to meet the moment to make sure our most

vulnerable neighbors are protected. As Councilmember Campos mentioned, we had community members send

letters because they don't feel comfortable speaking publicly in this political climate.

With this funding, we've been able to increase capacity with immigration legal services across

four agencies. Studies from the Vera Institute show that individuals who have legal representation

are 10 times more likely to have a positive outcome on their case. We've already had some

great victories where individuals have secured freedom from detention thanks to the work of our

attorneys, including one just last week. Fundraising is also a great idea. We're also hoping like

Councilmember Ortiz is doing for the revitalization plan the city can

fundraise for some of these funds as was discussed in our community meeting

with the mayor last year at Mexican Heritage Plaza. Let's invest in the

community that vests in us every single day and preserve funding for immigration

services. We need to beat the moment. Thank you. Thank you. Next speaker.

Good evening, Mayor and Councilmembers.

Tonight I'm here to read the words of a community member who wanted to be here but cannot stand before you tonight due to fears around immigration enforcement.

These are her words.

To the Mayor and Honorable Councilmembers, I am a community leader from Grupo de Justicia Innegatoria, Amigos de Guadalupe,

a part of a community that now lives in fear, anguish, and much uncertainty about everything that is happening.

I want to express that we feel panicked in these moments.

In the community, there are families living with constant terror,

fathers and mothers who don't know what would happen tomorrow,

children who feel the anguish of their homes.

The desperation is affecting us profoundly, emotionally and mentally.

I earnestly ask you to prioritize and treat us as an emergency

in our immigrant communities to complete the remaining half million.

This is not just a number.

It is hope, it is protection, and it is the possibility that a person will not be separated

when they have access to a lawyer.

And we face this crisis with a little bit more dignity and security.

Thank you, next speaker.

Also, it looks like Heine Gonzalez, come on down.

Go ahead.

Hi, my name is Shannon Zhang, speaking on behalf of the Silicon Valley Council of Nonprofits

and the Real Coalition.

We are excited to see the revised budget principles, particularly the addition of transparency and public engagement.

As the city gears up to face a difficult budget deficit, it is critical that the community stays meaningfully engaged as an active partner on how and why budget decisions are made.

In addition to these updated principles, we encourage the city council to center its racial equity commitments outlined in the city charter.

Budget decisions are by nature equity decisions.

The city has the power to address racial and economic disparities through its fiscal choices.

Real Coalition submitted an affordability, racial equity, and stability framework to the city

to constructively support its budget decisions in the upcoming months.

The residents of San Jose face a significant affordability crisis,

including but not limited to rising housing, health care, child care, and food costs,

which are only deepened by the actions of the federal administration.

Real Coalition calls on the city to focus on the challenges its residents face

and preserve their ability to remain in San Jose.

We thank the council and staff for their hard work, and we look forward to collaborating.

Thank you. Next speaker.

Damaris and Guadalupe, come on down. Go ahead.

Hello. Good afternoon, City Council Mayor.

My name is Ms. Ray Mendoza. I'm here with Amigos de Guadalupe, Center for Justice and Empowerment, and also representing Grupo de Justicia Migratoria.

Our leaders are very scared to speak up in public, so that's why they send you the letters. I hope you can read them.

We send them in our native language, in Spanish. So, I mean, I hope you have AI to translate it.

I want you to know, you guys got difficult decisions to make.

our community has been making those same tough decisions

every single day since this administration came into place.

Okay, so we all have to make decisions.

But the question is, as organizers, we ask,

who do you love?

Okay, who do you love?

And I think I asked you that before.

Okay, and your prioritization and this year budget,

you need to ask yourself that question.

Who do you love?

We cannot afford to have the things that have happened in Minneapolis and in Minnesota happen here.

We cannot afford that to happen.

So we need this funding to continue.

We as immigrants, we are not one-time deal.

We're here to stay.

We're permanent.

We're not going to go nowhere because this is our home.

and it looks like you are very good to raise money

because you got $5 million together for events for the Super Bowl.

So figure it out.

Raise the money for immigration legal services

or find them from the investments that you're going to get out of the Super Bowl.

But we need those investments even to go even higher

because we don't know what's going to happen.

So please invest in the people that have invested their lives in this city.

because we're not going to go nowhere.

So please, prioritize us and your message, Mayor.

Thank you. Next speaker.

Good afternoon, council members.

I'm Chris Rodriguez. I work here in San Jose.

So the central topic today has been the budget shortfall.

One thing that I've seen in the budget that I haven't seen discussed

is the year after year increases in the police budget.

So the police budget in the materials I've seen

will be $600 million,

much bigger than five years ago when it was $500 million.

So one of the themes that came up repeatedly was efficiency.

I'd like to ask you to look at

if there's a way to use the police more efficiently

and get it back to the lower budget that we had years ago

and then use that savings to fund other worthwhile things

like the immigration immigration support that the previous speaker asked for. Thank you.

Thank you next speaker.

Muy buenas tardes. Mi nombre es Heine Gonzales. Un placer estar acá con ustedes. Pertenezco

al comité de here. Que trata sobre los trabajadores excluidos por la justicia racial y social

I belong to the Tetra Committee, which deals with workers excluded by racial and social justice in East San Jose.

This is a committee that belongs to.

We are an organization that supports us and today we are here because it is important for us to ask you to help us make an investment.

As for worker cooperatives, they are meant to create our great true path and generate

community wealth and collective well-being.

Cooperatives allow us to take firm steps to support the economic well-being of all workers,

excluding our families and our neighborhoods.

At this time when migrant families are under attack, it is necessary to take creative,

courageous and concrete actions. We have the opportunity right now to defend and protect

all our workers and also build transformative solutions that create lasting change for our

future generations. That is why we want to emphasize the need for your support in this

great project. Thank you very much for your attention. Have a good afternoon. See you later.

Thank you. Next speaker.

I want to highlight the importance of supporting initiatives in the East of San Jose

where all the residents have access to a safe, democratic, sustainable and healthy life

for the good of our families and our community.

We deserve a safe life in the East of San Jose.

Good afternoon. My name is Demars Estrada.

I am here as the leader of SOMO's Mayfair,

an organization that works with families in East San Jose,

and I want to highlight the importance of supporting initiatives in East San Jose

where all residents have access to a dignified, democratic, sustainable, and healthy life for the

well-being of our families and our community. We deserve a decent standard of living in East San

Jose where we can rest, play, live fully and with dignity. It needs to be acknowledged that Silicon

Valley has been built on the work of those of us who live in East San Jose. However,

the benefits of that prosperity have not flowed to us. We ask that you support initiatives that

give the city of San Jose access to everything we need to thrive and create an East San Jose,

as we truly deserve.

I have the opportunity to work directly with families in East San Jose,

and now more than ever, with these messages attacking our communities,

we have seen that we need you to support the initiatives to build a better East San Jose.

Thank you so much.

Thank you, next speaker.

Good afternoon. I am Guadalupe Perez.

I am part of the knitting committee and I represent the knitting committee.

Knitting means workers excluded by economic and racial justice.

It is a committee of Somos made there that represents excluded workers, promoters, and

cooperative workers.

As an excluded worker, I have known.

I have experienced firsthand how difficult it is to pay rent and support our families

with dignity.

creativas, valientes y concretas.

El plan de revitalización es un paso...

That is why, at this moment, when immigrant families are under attack,

we need to ask you to take creative, courageous, and concrete actions.

Los trabajadores excluidos han aportado al crecimiento económico de esta ciudad,

del Valle del Cilicio, y no ha fluido la remuneración, la prosperidad y la abundancia hacia estas familias.

The revitalization plan is a step forward.

It's a step toward investing in East San Jose, because excluded workers have contributed

to the economic growth of the Silicon Valley city, and the rewards, prosperity, and abundance

haven't flowed to these families.

It is very important to always keep in mind that at the end of the day, we, the workers,

are the ones who sustain this community and this economy.

that

Excluded workers and cooperative workers deserve a city that embodies economic justice so that we can ensure prosperity well-being the right to rest and the right to be at peace not to live with the uncertainty

not only of immigration, but also not to live with the uncertainty of how I'm going to pay my rent.

Thank you. I want to thank all the members of the community who sat through a long meeting

and shared your perspective at the end of it. We really appreciate it.

Thank you, Jennifer Lee, Jim, and Budget Office for all the preparation for today's meeting

and all the other work I know you're doing.

And thank you to all of our professional staff for doing some very good and important work out there

with limited resources. We will get through this shortfall together.

Finally, thank you, colleagues, for all of your feedback. We're adjourned.

Thank you.

Thank you.