all right welcome everyone good afternoon

welcome to the city council meeting for the afternoon of february 10th i'd like to call

the meeting to order and ask our clerk

Tony to call the roll. Kim A.

Here. Campos. Present. Tordios.

Here. Cohen. Here. Ortiz. Present.

Mulcahy. Here. Dwan. Here.

Candelas. Here. Casey. Here.

Foley. Here. Mahan. Here.

Give a quorum. Great. Thank you. Once again,

welcome to everyone. If you are able,

please stand and join us for the Pledge of Allegiance.

I pledge allegiance

to the flag of the

United States of America.

and to the republic for which it stands, one nation, under God, indivisible, with liberty and justice for all.

Thank you.

We're on to our invocation.

Today's invocation will be provided by Jamal Williams, co-chair of the Sawa Bona Collective,

and Council Member Campos will tell us more.

Thank you, Mayor.

February is Black History Month, a time to reflect on the triumphs, struggles, and contributions of African Americans who have shaped our nation.

It's also a reminder that history is something we commemorate, honor, and respect.

We do this through the choices we make and the priorities we set.

Here in San Jose, black history is closely tied to questions of belonging, opportunity, and representation.

Over the past several decades, our city has seen a decline in its black population, inviting us to consider what it means to be an inclusive and affordable place for all.

Black History Month calls us to look at the past and the present to pay attention to whose voices are heard in our civic spaces and whose stories still need room.

As we pause for today's invocation, I invite us to reflect on how our work can help ensure every community in San Jose is seen, valued, and able to thrive.

We're joined today by Jamal Williams, who will lead today's invocation.

Mr. Williams is a respected leader whose work centers voice, participation, and the belief that no community should be rendered invisible.

Jamal serves as co-chair of the Black Leadership Kitchen Cabinet of Silicon Valley and co-chair

of the newly formed Saubana Collective focused on the political engagement and permanence

of the black community in Santa Clara County.

Please join me in welcoming Jamal Williams.

Appreciate that, appreciate that.

It's been like a year since I've been down here, so it's good to see everybody.

In 1926, historian Carter G. Woodson had the profound vision to establish Negro History Week

to ensure that stories, accomplishments, resilience, and the true experience of African Americans in this country

was being told, honored, celebrated, and remembered.

Woodson chose a specific week in February to honor the birthdays of Frederick Douglass and Abraham Lincoln.

In 1976, that lone week turned into an entire month.

For the past 50 years, Black History Month has been honored in numerous ways.

This month ensures that history is told, and those folks who have shaped society through

their works, words, and even their lives are not lost, but remembered and commemorated.

There are programs from small to large, including Black Family Day, which takes place downtown

in the Sofa District every last Saturday in February.

From theater to community awareness to festivals, there's no lack of food, fun, knowledge,

during Black History Month locally.

I encourage all of you to go to ourvirtualvillages.com

slash calendar to learn more and find out how you can support.

Unfortunately, even during such a joyous and reflective time,

we are once again confronting efforts to erase

or rewrite those very histories, stories, and accomplishments.

The systems and protections black people fought and died for

are under renewed threat.

The social progress black communities achieve,

not only for themselves, but for countless others,

other marginalized groups, is steadily being rolled back.

In a matter of months last year, over 300,000 black women lost their jobs.

In San Jose, we continue to see that black people are six times more likely to be arrested.

We've seen an approximately 20% loss in black residents over the past decade.

And black people have the highest rate of cost burden renters in the city.

The reality forces a difficult question.

What does it mean to celebrate Black History Month if black people in this country and in this city continue to struggle and face increasingly dire consequences?

There are a number of very impactful community-based organizations and businesses here that not only put on programs listed above,

but work extraordinary miracles with fewer resources to serve a black community that is often overlooked.

Organizations and businesses like Ujima Adult and Family Services, Island Taste,

to be at African American Theater Ensemble, Nirvana Soul, and the AACSA,

to name just a few, work tirelessly to provide San Jose with black culture, life,

and much-needed resources to stabilize a community that is slowly disappearing.

That is why the focus of the Saabona Collective is the retention, regeneration,

and permanence of the black community here in San Jose and Santa Clara County.

We realize all of that is unlikely to happen if, as a community,

we aren't heavily engaged in local politics.

On April 12th, 1964, Malcolm X spoke directly to that in my hometown of Detroit, Michigan.

Malcolm X stated, we must understand the politics of our community, and we must know what politics is supposed to produce.

We must know what part politics plays in our lives, and until we become politically mature,

we will always be misled, led astray, or deceived or maneuvered into supporting someone politically who doesn't have the good of our community at heart.

So, we will have to carry on a political program of re-education to open our people's eyes,

to make us become more politically conscious, politically mature,

and then that ballot will be cast for a man of the community who has the good of the community at heart.

So as we honor Black History Month, let us remember that black history is not only something we look back on,

it is something we are actively building.

It lives in our neighborhoods, our organizations, our families, and in every act of care, courage, and community.

Our history teaches us that when we are informed and engaged, we can shape our own future by

supporting black organizations, staying civically involved, and investing in the next generation.

We help ensure that black life, culture, and possibility continue to thrive here in San

Jose and beyond.

Black history is resilient.

Black futures are powerful.

And together we have the opportunity and the responsibility to keep both alive.

Thank you.

Thank you for leading today's invocation.

That was Jamal Williams, co-chair of Sawabona Collective,

and we all appreciate his community and political leadership in San Jose.

Thank you, Councilmember Campos.

We are on to our ceremonial items.

We'll start with Councilman Duan.

If you would join me at the podium,

we will recognize and proclaim February 17th as Vietnamese New Year,

also known as Tet.

Good afternoon, everyone.

I'm happy to recognize TET, the Whitney Lunar New Year, and what it represents for many families in our city.

TET is a time center on new beginnings, gratitude, and coming together.

is when family reconnect, reflect on the past year, and look ahead with hope and intention.

For our Vietnamese community, it is one of the most meaningful traditions of the year.

By recognizing Tet here at City Council, we are acknowledging the role of our Vietnamese residents,

immigrant play in shaping our city. Our culture, our history, and contribution

help make our community stronger, more vibrant, and more connected.

This recognition is also about inclusion, making sure that the people who live, work,

and raise family here feel seen and value.

Celebrating moments like Tet

help build understanding and unity across our city.

Thank you.

Would you like to say a few words?

Hello, hello.

My name is...

They didn't go.

My name's Rhee.

You.

I'm the master of the Vietnamese traditional martial.

The Crescent Lease Terry and Terry D and thank you.

Charlie Conmigo.

to help me to come to America to serve the community.

I am a proud member of all things in my work.

I will help people to study the age of 60 and older.

And I thank you so much.

America has made a very free use to help me to help me.

Thank you.

As a martial arts demonstration instructor,

my family has provided me with the opportunity to come to this land of America

to serve the community and dedicate everything I have to my profession.

I also teach martial arts to the elderly, middle-aged, and children, and I am deeply

grateful to the United States for providing me with this opportunity, this land of freedom,

and for allowing me to contribute. Thank you, been a while, had, given me the opportunity to

serve the, and Kyu Gwyn my passion with the Vietnamese tradition. And thank you, the United

States is the land of opportunity, and thank you for this opportunity for me to make my dream.

Again, thank you, United States.

Thank you all very much.

Thank you.

All right.

And Council Member Condellas, if you will join me at the podium, we will recognize and proclaim February as American Heart Month.

All right. Happy Tuesday, everybody.

Today, I am proud to recognize February as American Heart Month, a time to raise awareness, but more importantly, take action.

for ourselves, our family, and our community.

Heart health is about having the energy to keep up with your kids.

It's showing up for work.

It's being there for your parents.

And it's being able to live your life fully.

And here's why it matters.

Heart disease remains the number one cause of death in the United States

with nearly 700,000 lives lost.

That's a big number, and I don't share it to scare anybody,

but I share it because it's a reminder that prevention and early detection saves lives.

The good news is protecting your heart can start with small, realistic steps.

Know your numbers.

Blood pressure, cholesterol, blood sugar, and keeping up with regular checkups.

Move your body.

A walk after dinner, a few minutes at a time,

standing up during long items if you're a council member, it all adds up.

Eat a little better when you can.

more nutritious food, fewer sugary drinks, and obviously watching the salt. And don't underestimate

sleep and stress. I think my staff wrote this for me. But this is about community. And when we invest

in safe parks, walkable streets, and access to preventative care, we're building stronger

neighborhoods. And we're also making the healthy choice, sometimes not the easy choice. I also want

to recognize the work of the American Heart Association whose research and community education

helps families across our country as well as right here at home, as well as Eddie Garcia,

a survivor of a heart transplant and a strong advocate for a strong heart in our community.

And as a visible reminder of this cause, we will be lighting City Hall red from February 22nd

through February 28th in honor of American Heart Month.

And now it's my honor to invite Dionisio Palencia

from the American Heart Association

to share a few words before the mayor presents the proclamation.

Dionisio?

Thank you.

Thank you, thank you, thank you, Mayor.

Thank you, Assemblymember Cardenas.

Hello, I'm Dionisio Palencia.

I'm the Senior Community Impact Director

with the American Heart Association.

Thank you for recognizing February as an American Heart Month this year,

and for supporting our mission of saving lives from heart disease and stroke.

This year, we're once again focused on building a nation of lifesavers,

spreading the powerful message that you are the first responder until help arrives,

so that every one of us is prepared to react to a cardiac emergency by calling 911

and knowing how to perform CPR.

Over 350,000 people experience out-of-the-hospital cardiac arrest in the U.S., and every year,

90% of these are fatal.

We have a bold goal to double cardiac arrest survivor rates by 2030.

As a San Jose resident, especially from the east side, parent and member of the American

Heart Association's Bay Area team, I urge the people of San Jose to learn CPR.

I did it, so you can too.

We have also been proud to partner with the City of San Jose by working with its community

organizations.

We are so grateful to accept this proclamation and San Jose's continued support on the work

that we're doing.

Thank you so much.

Thank you, City of San Jose.

Real quick, Mayor, Eddie, you got one minute and seven, six, five, if you want to close us out.

Yeah, thank you, Councilman.

Thank you for bringing up Heart Month.

It's really important.

You heard the numbers from the Councilman.

You heard Dio talk about all the things we need to do.

I'm living proof that this stuff is important.

Sixteen years ago, I almost became a statistic.

I almost became one of those 700,000 annual deaths.

Six years ago, a heart transplant saved my life.

And now I'm going to do it right.

And I urge you all to do it right.

Go to the American Heart Association website.

They've got something called Life's Essential Eight.

Life's Essential Eight.

Go today, and it will show you how you can protect your heart beginning tonight.

Stop all the fun stuff.

I know, but it's going to save your life.

Thank you.

Thank you.

Thanks for that PSA.

All right.

Our final ceremonial item, Councilmember Kameh and Councilmember Casey, if you would join me at the podium, we will recognize and proclaim February as Black History Month.

Thank you so much.

Today we gather to proclaim February as Black History Month.

This year's theme, Community Fusion Reset, encourages us to reconnect, reimagine, and recommit to one another as a unified community.

Black history is foundational to our American story.

We see that history reflected in the resilience of those who endured injustice,

the courage of those who challenge inequality,

and the excellence of those who continue to shape our society

through leadership, creativity, innovation, and service.

These contributions don't sleep in the past.

They live in our institutions, in our neighborhoods, and our shared future.

Black history is not a separate history. It is part of the American history.

It is omnipresent, woven into our music, our movements, our laws and labor, our art, and advocacy.

A community fusion reset urges us to shift from acknowledgement to action.

It challenges us to strengthen our bonds across cultures, generations, and perspectives,

recognizing that we progress most when united by purpose, respect, and shared responsibility.

This year, the theme of Community Fusion Reset calls us to listen with intention.

It leads with equity and to create spaces where every voice is valued.

It moves us to address inequities not just as isolated concerns, but as collective responsibilities,

understanding that when one community thrives, we all move forward in unison.

As we observe Black History Month, let us honor the past by shaping a future rooted in justice, inclusion, and opportunity.

May this month serve not as a commemoration, but as a catalyst,

one that renews our dedication to building a community where we honor history,

we celebrate culture, and we shape the future together.

Thank you so much to my partners at the NAACP.

We will be having an event on Friday at the Rotunda at 5 o'clock.

Please join us for the flag raising ceremony as well as our program.

And now we'll have a few words by Mama D. Then our mayor will present the proclamation.

Mama D. What is it?

is it afternoon good afternoon everybody um I want to say first of all thank you so much

um to our city council and our mayor for acknowledging black history month um today was

kind of tough for me today because I had not only do we want to celebrate black history but I want

you all to understand just how trying times are in our community and how we need to come together

as a people and support each other I think I fed probably 400 people today so times are getting

rough in our community and NAACP and myself are trying to make a difference in our community and

understand that we do have to work together and that we have things going on like you know people

trying to erase black history trying to erase black folks if they erase us everybody disappears

let's be very clear about that if black people leave here everybody's going with us because we

are the creator of everybody understand that and it's okay again I appreciate being acknowledged

for Black History Month. I hope that all of you celebrate with us. Rosemary spoke of our

flag raising, so I hope that you all celebrate, come and celebrate with us on Friday. We have

a wonderful mixture of cultures, and I think it's going to be beautiful, and I'm trying

to celebrate all of our cultures as we should. And again, thank you so much for acknowledging

us and NAACP appreciates everybody.

Thank you.

And now our mayor will present the proclamation.

Thank you.

All right.

Thank you to my colleagues for proposing today's ceremonial items.

We're on to orders of the day.

Does anyone on the council have any proposed changes to the printed agenda?

Not aware of any requests.

Okay.

Wonderful.

We do have an adjournment today.

Today's city council meeting will be adjourned in memory of Ken Heredia,

who passed away on December 2nd, 2025.

A devoted husband, father, and grandfather,

Ken proudly served the San Jose Fire Department for 30 years

and also served as the IAFF Union President and Battalion Chief.

He is remembered for his steady leadership, compassion,

and lasting impact on the fire department and our entire community.

I would like to invite Councilman Duan to share a few more words about Ken's life and impact.

Thank you, Mayor. Today we gather to honor and remember Ken Heredia, a devoted husband,

loving father, and proud grandfather, and a respected firefighter who dedicated 30 years

of service to the San Jose Fire Department. Above all else, Ken's family was the cornerstones

of his life. He carried his role with strength, warmth, and quiet humor that left a lasting

impression on everyone he met. Ken proudly served the department not only as a firefighter,

but also as a battalion chief and as president of the San Jose IAFF Union.

As union president, he supported our firefighters, where today they reap the benefit of his advocacy.

But beyond his accomplishment, Ken will be remembered for who he was.

A man who showed up, who cared deeply, who led with integrity.

his legacy live on in his family, his firehouse,

and in every person who was fortunate enough to know him.

Thank you, Ken, for your service, leadership,

and example you have left for us.

You will always be honored.

I miss you, and our San Jose firefighter miss you.

Thank you.

Thank you, Councilmember, and I'm sure I speak for the whole council

in extending our heartfelt condolences to Ken's family

and the entire fire department.

Thank you, Councilmember.

We're on to our closed session report.

Susana?

Yes, Mayor, Council met in closed session,

but there's nothing to report out at this time.

Thank you, Susana.

We're now on to the consent calendar.

Any items council would like to pull from consent?

Not aware of any?

If not, we take a motion on consent.

Move for approval.

Second.

Great.

Thank you.

Tony, do we have public comment on the consent calendar?

I have no cards for this item.

Okay.

Coming back to the council.

Not seeing any hands, so let's vote.

Motion passes unanimously.

Great.

Thank you.

All right.

We're on to the report of the city manager.

Thank you very much, Mayor and City Council. Wow, what a week in San Jose and what a weekend we just had. Such a proud and happy time for all of our community. I think we all agree on that.

With my 3.1 today, I am honored to recognize the many City of San Jose employees who came together as one team to prepare for the 2026 sports events.

Hosting three major sporting events marks a major milestone for our region and is a truly historic moment for our city and the South Bay.

As you know, the Super Bowl this past Sunday was the first in a series of major events, which also includes the 2026 NCAA Division I men's basketball tournament March Madness and FIFA World Cup that will further establish San Jose as a South Bay's hub for sports, arts, and entertainment, building lasting civic pride while delivering meaningful economic benefits for our community.

For Super Bowl 60, the City of San Jose provided the infrastructure and support that was needed for this sporting event, which is the largest in the United States.

From coordinating our emergency readiness with federal and regional agencies, to preparing City Hall for major concerts and events,

to opening an entertainment zone, to ensuring a safe and enjoyable experience for all our residents and visitors,

The Super Bowl has been a huge undertaking for our city that reflects years of thoughtful planning, strategic partnerships, and dedicated public service.

First of all, I want to thank the mayor and the entire city council for their bold leadership and vision,

which created the strong framework that empowered the city administration to deliver an exciting year of sports in San Jose.

Couldn't thank you all enough.

I'm grateful for Deputy City Manager Rosalind Huey and the City Manager's Office 2026 Sports and Special Events Director Tommy O'Hare for their amazing leadership and collaboration with several city departments and offices, including the airport, economic development and cultural affairs, emergency management, fire, housing, public parks, recreation and neighborhood services, planning, building and code enforcement, police, public works, transportation and the City Attorney's Office.

along with our many key and wonderful community partners, particularly the San Jose Sports Authority.

Although today's overview will not capture the full scope of our preparation and work,

I would like to share a few examples that reflect the level of planning and coordination involved of these amazing city employees.

First off, the airport led the city's efforts with multiple marketing campaigns,

including the Fly, Stay, and Play campaign in coordination with Visit San Jose.

The airport marketing team also led the initiative in developing the unique and vibrant San Jose 2026 Browning, which we all love.

Through press announcements, the airport highlighted all the new amenities and services available at the airport.

Additionally, the airport operations team prepared for a large increase of travelers,

as well as coordinated with the NFL for the team arrivals and departures to ensure a seamless and successful travel experience for all.

The Office of Economic Development and Cultural Affairs staff helped small businesses throughout San Jose prepare for visitors through webinars and helpful toolkits.

Staff worked with stakeholders on multiple placemaking improvements in addition to collaborating with local artists on the Hometown Heroes exhibition in City Hall,

along with the City Attorney's Office.

Staff in this office were also integral in bringing forward the Entertainment Zone, Major Invent Zone, and the Super Graphic Ordinances.

The Office of Emergency Management staff had been planning emergency preparations for the Super Bowl since March 2024.

They trained city staff and worked across city departments to prepare for any emergency that could arise from the events

while coordinating with partners at the City of Santa Clara, County of Santa Clara Office of Emergency Management,

the California Office of Emergency Services, federal agencies, and many others.

In fact, the city's Emergency Operations Center was open for a total of 72 hours this past week.

The EOC was staffed by 77 employees from departments and offices across the city

who worked in two shifts throughout the week with hours varying from 10 a.m. to 11 p.m. each night.

Additionally, many other employees were on call virtually and ready to step in as needed.

The fire department completed extensive training to proactively prepare for these major sporting events by working closely with regional and national partners.

Also, fire provided additional personnel to support NFL events in the city and for the Seattle Seahawks team who was staying in our city.

The police department also focused on coordinated public safety operations for the high-profile events throughout our city.

the Human Trafficking Task Force also led proactive enforcement efforts as part of a broader public safety initiative.

Public right-of-way management in our downtown was a key component in the city's preparation efforts.

To cheer coordination, staff formed an interdepartmental working group.

The team, comprised of staff from public works, transportation, police, code enforcement, economic development, and cultural affairs, housing,

as well as the San Jose Downtown Association, conducted assessments and mapping exercises

and completed infrastructure improvements to ensure safe and convenient access for residents and event goers.

The Public Works Department readied city facilities and resources for the large events and any unforeseen emergencies,

including ensuring the beautiful placement of the super graphics on the outside of our City Hall rotunda and tower building,

while also working on logistics for two major headlining sold-out concerts during Super Bowl weekend at City Hall.

Thank you all for helping San Jose shine nationally during the Super Bowl

and setting the stage for San Jose to captivate the world as we welcome the FIFA World Cup to the Bay Area this summer.

I have been truly amazed to see all the hard work come to life and how we celebrated our beautiful city together.

Thousands upon thousands of people descended on San Jose to enjoy all San Jose had to offer,

from major headlining concerts to spectacular drone shows to elevating San Jose as a premier destination.

This pivotal moment enabled San Jose to share its cultural richness with visitors, creating a lasting legacy for our residents.

We have representatives in the audience from departments and offices I mentioned who are working on our San Jose 2026 efforts.

I would love it if you would all please stand to be recognized by our mayor and city council

and our community for your outstanding work.

Please stand.

There's a lot of them in there.

And mayor and city council, if that's not one team, I don't know what is.

Thank you very much for giving me the time to present our employees and all the great work they've done.

Thank you, Jennifer.

It's one heck of a team.

Just before everybody leaves, just on behalf of the council and the community, very briefly, I just want to pile on.

Jennifer recognized all the different departments, the incredible collaboration, preparation that I know for some of you literally goes back a couple of years.

I had the chance to go by the EOC on Sunday and was just blown away by the diligence, the collaboration, and the hours everybody's putting in.

But I just wanted to say this. I walked around all week, and especially over the weekend, throughout the downtown, and I lost track of how many people came up to me and said, thank you to the city, to all of you. Thank you for making this possible. I'm so proud to live in San Jose. I'm so proud to call San Jose home.

There's a lot of civic pride and something that we don't always get to do at that level on the world stage

because there's that little, you know, cloudy, cold city up to the north that gets all the attention.

But you guys really helped San Jose to shine.

The press coverage was beautiful.

More importantly, the community really enjoyed it and appreciated it.

So, again, just to echo Jennifer's sentiments, thank you for all the hard work.

We've got March Madness and World Cup coming up, so let's keep going.

Have a great day, everybody.

All right.

As the chamber empties, we are starting to transition to the mid-year report.

We'll give everybody a minute to exit.

Thank you.

All right.

Jim, I know it's still a little noisy.

We'll ask folks if they can quiet down just a little. Thank you. Jim, whenever you're ready, we'll let you and the team get started here.

Great. Good afternoon, Mayor and members of the City Council. My name is Jim Shannon. I'm the City's Budget Director.

I'm joined down here with Bonnie Dong, our Assistant Budget Director, Claudia Chang, our Deputy Budget Director, and Selena Yubondo, our Financial Status Coordinator.

The annual adopted budget is a financial plan predicated on the best information available at the time it is prepared

But with any budget changing conditions create the need to modify the original plan

Through its budget policies the City Council has designated mid-year as the appropriate time to perform a comprehensive assessment of the current year's budget and

The mid-year budget review report as the vehicle for consideration of any necessary budget revisions

To prepare this report the City Manager's Budget Office working with all of the city departments analyzed

the status of the city's operating capital budgets contained over 140 different funds.

Based on that analysis and the recent receipt of several new grants and reimbursements,

we are recommending some budget adjustments for city council's consideration.

Through the first half of 25-26, overall, generally our operating and capital funds

are performing as expected, but we got a few exceptions that we'll be talking through

and are detailed in the report.

Our economic conditions, as we talked about last week, they still generally align with

previous expectations, but they're not really in a position to give us significant revenue

growth.

And based on the analysis for the mid-year process, we're recommending a number of adjustments

in various operating capital funds.

My presentation here is just going to touch on a few of the highlights, but I really want

to emphasize the work that's done to create the mid-year budget report.

That process in and of itself is very important as it allows us to sort of see what's going

on and address issues before they even pop up.

So we're just touching a little bit of the tip of the iceberg here today.

A quick peek again at economic conditions.

Again, this looks pretty similar to what we talked about last week,

but our local economy, you know, remains sluggish.

Job growth is stagnant.

It's pretty much flat year over year from December 25 to December 24.

Our office vacancies remain high.

Our commercial sector is a little bit weak.

And we're weighing down on our property,

which is weighing down on our property valuation a little bit.

And we'll talk through that in a second.

residential real estate prices and sales have slightly decreased and our days on market have slightly increased.

So we're starting to see, you know, or we continue to see some softness in the real estate sector.

The good news is our private development activity is up from last year,

but it's not strong in historical standards, but it is performing a little bit above expectations.

And our airport passenger levels are down about 11% from the prior fiscal year.

So still seeing the softness in the business travel market.

I'm going to focus in now on the general fund.

Revenues right now are anticipated to end the year approximately $15 to $20 million

below our budgeted levels, mostly due to lower than anticipated property tax and utility

tax revenues, which we'll show some adjustments for.

Generally expenditures are tracking to end the year with minimal savings, and because

we only see minimal savings, we needed to take action to make sure that we were going

to achieve the necessary cost savings to remain within budget by the end of the year.

So we do have a separate suite of actions that would reduce the general fund expenditure

budget by $16.6 million to partially offset the revenue shortfall and to adjust a few

other necessary expenditure adjustments that we need to recommend here today.

And the cost controls, the enhanced cost controls that were implemented through the city manager's

direction in December are going to be maintained throughout the rest of the fiscal year and

we expect those to yield further savings by the end of June.

Over here is a very quick high level categorization of the different types of expenditure adjustments

or budgetary adjustments we have in the general fund.

They are categorized into required technical rebalancing actions which are adjustments

that we think we need to make based on new information or to make sure that we achieve

direction previously directed by the city council.

We have a number of grants, reimbursements, and fees that we need to recognize that offset

So we're recognizing revenue as part of this report and then spending it on those one-time activities that are funded.

And then we've got this category called cleanup actions that are generally just a realignment of costs between different appropriations without a change in the expected service level.

The little bit of extra dollar amount you see there for cleanup actions is we did a final, as an example of kind of the work that we do,

we did a final year-end reconciliation of the sales tax related to jet fuel sales at the airport.

That always has to go back to the airport and once we finish the reconciliation for

2025, the general fund transferred a little bit too much over so we're going to take back

about $100,000.

So that's an example of the type of work that's in the cleanup actions line item.

But we'll spend a few minutes here talking through the general fund adjustments and the

required technical rebalancing actions.

So the first item is the reduction for the property tax revenue category.

and as we had talked about that is is down because we saw some decelerating

roll growth in 2425 so at the end of the fiscal year the we got some update

information from the county which did some corrections correcting for the the

roll growth in 2425 so 2425 ended up at the end of the year down from where we

thought it would it would end back when we produced the forecast a year ago in February and

then we also are seeing some lower year-over-year growth in the property role as a whole category and

so for that reason we need to reduce that down by 14 million it's there's several different pieces

that are part of part of that but one of the ones I wanted to highlight is there's a section called

our successor agency to the redevelopment agency our Sarah property tax line item so that line item

is we had that budgeted at $27 million.

That's going to end up around $24 million,

which notably is about $2 million less

than we had the prior fiscal year.

And so I highlight that out

because that's sort of an example

of some of the weakness of the commercial sector

as most of those Sarah properties

are commercial and around the downtown area.

So that weakness of that sector is certainly,

I'm sure that's being expressed

in other areas of the property tax as well.

And then the other revenue category

that we're taking down is our utility tax,

which has a number of different subcategories in there.

So that net 1.35 million is a component of reducing our electricity utility tax down by 6.3 million

based on usage levels and expected rate levels.

Partially offsetting this, though, is some increases to our gas utility tax by a million,

our telephone utility tax by about a million to reflect rates and usage.

but I do want to mention that we didn't have enough expenditure adjustments to fully offset

the shortfall for the utility tax. There's probably another two to three million dollar

shortfall that we're going to have to keep an eye on and adjust as part of our year-end

actions. So those are the major revenue adjustments that we needed to make as part of this

budget mid-year review process. A couple of the expenditure items to highlight here. We have a

million dollars to make sure we have enough budget for our workers' compensation related to the

police department to reflect some settlement activity within that category. Do have a little

bit of good news. The bill that we get from the state for our workers' compensation state license

is dropping by about $500,000 from $1.5-ish million to about a million. So we can take some

savings there. We have an increased cost for our lab and forensic analysis that the police

department has to make sure is funded. And so we have a $250,000 increase there. And we are

beginning work of our redistricting that would take effect in the police department for in

November of 2026, and there's some technology improvements that we have to implement, and

so we need $150,000 to have that work completed by the time that shift change happens in November.

So, but we need enough cost savings, again, need cost savings to be able to generate the

expenditure offsets to counteract the revenue, expected revenue shortfall, and so in December,

the city manager directed some specific budget adjustments to make sure that we were going to not

only end 25-26 in a positive position but also set us up for the budget process and make sure that

we would end within the black in 25-26 but also set us up for 26-27 in the best possible position

and so I want to run through a few of these categories that total 16.6 million so the first

is $5.7 million that we are going to, that was previously in the salaries and benefits

reserve that was previously designated as part of our forecast development for raises

related to our management pay for performance program and for potential increased cost related

to the new health rates that became effective in January.

So we do an analysis to figure out what that cost is going to be every year.

Normally, as part of the mid-year budget review, we would do an analysis to see which department

needs that adjustment based on how they are tracking.

What we're saying here today is that we're just going to liquidate $5.7 million from

that reserve and not distribute it to departments.

So departments will have to absorb that cost, and that's part of the cost control efforts

that they're going to have to do.

So that's about $5.7 million there.

And then we also had some direction to review those services that were new in 25, 26, but

not get started, and to evaluate those to see if those should be eliminated or reduced

now to not only generate cost savings in the current fiscal year, but then also could be

reevaluated as a potential reduction for the 26-27 proposed budget process. And so you see those

highlighted out here. We have two capital facilities scheduled to come online in the spring,

which is the Police Training Center and Fire Station 3032. And so we are recommending to

pause the opening of those as we evaluate those for the 26-27 budget process. And so there are

some savings there related to some fixtures, furniture, and equipment savings for the police

center that haven't yet been expended of $2.6 million and about $700,000 of operating savings

in the fire station 32, as well as about $250,000 in the police department's budget for the training

center maintenance and operations that won't need to be expended this fiscal year. We are also

recommending the defunding of the emergency medical services field coordination work,

which was funded on a one-time basis that was starting in December, but did not have funding

to continue past June 30th, and so we are recommending to stop spending on that program.

There was also some new software that was allocated as part of the 2526 adopted budget

for disaster preparedness and emergency response modeling.

That contract has not yet been executed, and so we're going to take that $580,000 savings

and again reevaluate that ongoing cost subscription as part of the proposed budget.

And finally, we had $100,000 that was set aside in the general fund a number of years

ago to help figure out some master planning work for some electrical and infrastructure

upgrades, and we're able to do that master planning work through a different funding

source and so we can take the savings there.

So that's an overview of the main items where we are recommending suspension of services

not yet started that council had previously approved in the budget.

And then we've got another category of $2.4 million for project and program savings that

were just, those projects have run its course, there's savings in the appropriation that

we no longer need. The good example there is for the special election in June we had

an extra million dollar savings in our elections and ballot measures expenditure category and

so we can recognize that savings here to help offset the revenue loss. Further, for our

non-personal equipment, which is the appropriation across departments that pays for contractual

services, supplies and materials, etc., we ask departments to reduce that by 1% and to

absorb the reduction. They would let us know if there was any significant service level

impacts that would happen with that, and then so we would do a little adjustments there,

but those were primarily the driver there. And then in addition to withholding the salaries

and benefits reserved, we were also having departments, except for the police and fire,

to reduce their personal services budget by an additional half a percent. And so again,

the idea here is to generate cost savings totaling $16.7 million to make sure that we're set up for

the end of this fiscal year and next fiscal year, but we also did not want to significantly

and visibly impact existing service delivery or our employees.

So that was the approach we used to take here.

Taking a look at a couple of our capital funds, these are, again, reflections of the economy

and they help fund some key capital programs.

So our construction and conveyance tax funds, that is a transfer tax based on property sales,

is going to be end of the year higher than it did last year,

but it's not going to end, we think, at where we budgeted.

So it's probably going to fall about $4 million short

of our $47 million budgeted estimate.

And of course, as you know, that funds a lot of parks and libraries

and public safety and communications capital improvements programs.

And so we'll have to keep an eye on that

as it develops throughout the rest of the fiscal year

and into the next fiscal year.

But we do have a little bit of good news on our taxes

that fund our traffic capital program.

So the building and structure and construction excise taxes are taxes based on

The valuation of private property that gets developed as I mentioned earlier that overall is higher than it was last year

Our commercial evaluation is a little bit down mostly because we had a big data center get pulled last year

We don't have that getting pulled this year yet, but our industrial and residential categories are higher

That's good news for the tax revenues both those categories are gonna

Probably exceed their budget estimate by about two million dollars each

Then there are a number of budget adjustments that we're not talking about here that are

reflected in the book in our special and capital funds.

Again, these are clean up actions, these are fund balance reconciliations after the books

were officially closed for 24, 25.

And then we have a number of other adjustments to recognize grants or to update cost and

revenue estimates and project timing.

So with that, we're done talking about midyear and then this is just sort of starting up

the looking at the calendar for our 26-27 budget development process

because where we are in the current fiscal year helps us figure out where we're going to be in the following fiscal year.

And so you have that laid out here in front of you. And so we'll be lots more conversations

about the budget going forward. And with that, we will close our presentation and

wait for questions. Great. Thank you for the mid-year budget review.

We appreciate the report. Tony, do we have public comment? I have no cards for 3.3.

Okay. Coming back to the council. Start with vice mayor.

Thank you.

Thank you, Jim, for the presentation and the work of you and the Budget Office.

It's always important to hear where we are midterm as we particularly head into a really

difficult budget session.

Unfortunately, revenues are not where we expected them to be for the fiscal year when we did

the budget last year.

This only amplifies the importance of being conservative with our spending as we begin

planning for the upcoming fiscal year.

We may need to draw down our budget stabilization reserve, which puts us in an even more precarious

fiscal situation as we enter the next fiscal year.

I'd like to thank my colleagues, Council Members Dwan, Campos, Candelis, and Ortiz

for their memorandum.

I think that more information is always helpful in budget deliberations.

However, I'm concerned about the amount of data requested in the memo

and the large body of work that would be necessary to compile and analyze all this information,

particularly from Recommendation 1.

So I have a few questions.

Lee, how much of the information and analysis do we directly control

versus which portion is under the county's control?

I don't know about a percentage. Obviously the items that are outlined for us, we can get that data and work with housing in the budget office to kind of refine that. The look backwards will take some time. I'd say a great majority of what's in the memo is really county related, so that would take a substantial effort to get.

Okay, so the memo gives staff seven business days to respond.

Frankly, I always ask myself, does staff have the capacity to respond to this information,

at least what we control, that is not already published in other reports?

And if we don't have the capacity, what's the tradeoff?

What are we giving up in order to do this work?

so I would say the staff does not have

the bandwidth or expertise to respond in the seven days

so that's one even if it was a longer period of time

I think some of the people that would be needed on this effort are also

in the middle of actually executing on some of the direction that this council

has given as well as the great significance of it we would probably rely on the budget

office and they're starting I shouldn't say starting they are well into the

26 27 budget process so I think we would really need to understand what are the

most important parts or specific parts that are most important or refer this to

the joint city county meeting or when you hear updates specifically on the

community plan and homelessness implementation or you know some some of

the things in here specifically related to the city side could be incorporated

in an annual consolidated report that's typically heard in the fall as well.

So the way I look at the memo, and it's asking for a lot of details, this is information

that will be helpful in forming our upcoming budget and not necessarily in forming our

midyear review.

Do you look at it that way?

Or Jennifer, do you look at it that way?

I would look at it.

It's much more focused, I think, on moving forward is my reading of it.

Okay.

So I'm not going to make a motion right now as I want to hear from my colleagues,

but I have very serious concerns about the memo and the tradeoffs of what staff will have to give up in order to complete this work,

particularly within the seven business days.

Thank you, Mayor.

Thanks, Vice Mayor.

appreciate your questions let me go to councilor condos thank you thank you

vice mayor for for your questions and you know I I want to thank Jim for your

presentation and you know the glum outlook essentially is what I took away

from this from this mid-year I mean it's not great but but you know I'm

optimistic in the budget actions that we're implementing prior to you know the

the next fiscal year which is going to be I think the the little bit more of a

challenge. I did want to, with regards to the group memorandum, I think Councilmember Duan

or Compost could speak to recommendation one and the specifics to why the data and the

specifics around which letter or number and why. But I do want to talk a little bit about the

second part of our memo. You know, knowing that we are in for a difficult fiscal outlook the next

year, I think there's an opportunity on something that I've previously touched on with regards to

our partners in the state and even in the federal level. I think there is a program that I've been

researching and working with the staff with city administration on with regards to

our emergency medical services field coordination and the integrated health care and community

paramedicine program, a pilot, if you will.

And the direction in the memo that we authored was direction to the city administration to

essentially prioritize this with regards to our legislative strategy and give us the bandwidth

to be able to go get it and go get this potential funding as part of a pilot program within

the state budget process.

You know, for my colleagues who don't know, it's essentially a community triage unit on

frequent flyers or frequent callers for medical services that has the potential to reduce

costs for our department.

And I think this is a potential pilot that could allow our service delivery to the next

level and I think it's something that that is worth worth a shot I think we

need to be creative in how we explore funding for programs that could could

essentially solve or help lower the the expenditure burden that we have and so

let's see so that so that's that's that piece specifically on item two in our

memo but I guess the the rest of the the memo is is essentially we wanted

information I think Eric is here from the housing department so I'm gonna cue

you up Eric but I guess in our memo we asked for the total number of service

the total amount the city of San Jose funding expended on housing and shelter

program production efforts is that a difficult amount to quantify and get us

back in in a in a format in the time in in by February 24th is that is that a

difficult number to get it's a 1d for your reference one day so thank you so

Eric's only one director of housing so as assistant city manager Lee Wilcox had

mentioned a lot of the city side data we can pull together then this is broader

than the housing department because it speaks to other city departments as well

So housing department related data is data we can pull together relatively quickly. However as of February 24th

That was so we did a difficult just given the need to have data integrity review

Given the broad set of data that the department collects as part of our work around homelessness

Okay

and so you know I

You know I'll let the

My colleagues speak to the other things, but this is also good for

For context setting as we start talking about difficult decisions and how much money we're going to have to find and address I think part of what the question thank you Eric.

Part of part of what we want is we want the the holistic story of how much what costs and how much it costs us to do it.

So we can have those trade off conversations in a holistic manner and I think that was the intent of our memo and I'll let Councilmember Duan speak to to the other portions but.

But, you know, before making a motion, I will ask whoever makes the motion to include, I would argue, the portion that is easily, more easily able to produce and that's within the scope of our information and that we don't have to ask from the county.

And then the second piece, obviously, item number two in the memorandum, which I talked about before this.

So anyways, that's it for now, and I'll look forward to hearing from the rest of my colleagues.

Thanks.

Thanks, Councilor.

Appreciate that.

Just on the second rec, since Councilor Condulce was just laying it out,

my understanding is that the city's legislative program that we adopted about a month ago

includes guidance to advocate for these and other related programs.

Do we, is that staff's understanding?

I mean, not that I oppose reaffirming it,

although I do want to try to not go back to the days where we bring every bill and program to council to approve.

Is this covered in previous direction? Is there any perspective on it?

I would say the legislative guiding principles as an umbrella around funding,

it gives us broad authority to go seek funding from federal or state partners.

This year there's more specific categories around funding,

especially around housing dollars or operations to support our unhoused.

So if these type of opportunities present themselves within Sacramento or elsewhere,

we would absolutely go over them.

But you can add the specificity and intentionality to the work plan

or the guiding principles.

That's not a concern of the administrations.

Okay. Sounds good on Rec. 2 then.

And then we still have questions on Rec. 1, and we shouldn't forget,

we had a blue memo come in from Councilor Dewan as well so I'll just flag that

we're gonna go to Councilor Kamei and then we'll come over to Councilor Dewan

that's for a commit thank you so much I guess I I want a little bit more

clarification from staff I know that we're sort of with the mid-year budget

but we're also preparing for next year's budget and you know many of the

different departments are also sort of in this mode I'm just wondering all of

this information here seems quite extensive Lee you already talked about

maybe not having the the county's information or it may take more time to

be able to gather that together I'm just wondering about having this information

prior to the mayor's budget message coming out in March?

Because having some of this information might be valuable

prior to his budget message coming out.

I'm wondering, I mean, it seems to me that the February 24th timeline

is very, very short, and you have a lot of the same people

who are working in these other areas and trying to coordinate that

might be difficult if we extended the time frame to perhaps prior to the mayor's budget message,

because that's when we'd probably want to have this information is before that comes out. Is

that a possibility, not a possibility? I just think we should know.

Sure, I'm happy to respond.

You know, I think looking at the memorandum,

I think looking back for the past five fiscal years,

not necessarily related to the city items,

although I have some concern,

but specifically related in the current year,

but specifically looking back for five years on the county side,

is we technically, this information doesn't sit within HMIS

or anything that we have access to on a regular basis.

While the county is a great partner, they do not move as nimbly as us when it comes to these type of requests.

So meeting a deadline to help inform some of your decision making with just the depth of data being asked is a bit troubling from my end.

So I do think items A, B, C, D, E, F, and H, if that were the current year's expenditure,

I think those are things that we could get and try and get them to you in a timely manner.

but I would caution, you know, part of the memorandum, the analysis of what our charter says versus what the county charter says.

I think that's a very difficult analysis for us.

And I would just say nowhere in our charter does it say the word homelessness.

The county is different. They're a subset of the state, and their charters are a little bit different.

our charter does say public peace and safety and health all the things that we endeavor in on a

variety of services it's kind of part of the conversation we had last week is why are we

trying to hold homelessness up and do all this work it's because it's fallen through the cracks

and doesn't necessarily have a place to live like it has fallen through the public sector it's fallen

through the federal state and now it kind of lies in between us in the county and so there's obviously

a lot of tension there, and I think

obviously we would like to spend dollars

on other things, but us trying to get

through where these things

are appropriate, those are ongoing

conversations that at least, you know,

I've been part of for the last 12 years.

It's nothing that we can really formalize

in, you know, a week or

30 or 60 days, so

I grow worry of that direction

and us providing

those because we're, you know,

Eric and I are on a call every single week

or every other week with the county trying to

figure these things out and align those systems and analysis of where they should go isn't

that straightforward unfortunately thank you

thanks council member let's go to councilman doing

thank you mayor first of all thank you staff for putting this together and and I know it's

extremely difficult. And you've been here for 12 years and some have been here less.

But I would imagine that all this information over the years, we should have some type of data

in order to give to the council to make a very clear and concise decision upon the data.

Everything we decide is based on data. And as the mayor and a lot of us now have created

a better relationship with our county.

I believe that we can extract those information quicker than the last 5, 10, or 15, or even

20 years.

And I think it's a travesty that we keep spending millions and millions of dollars that we have

not spent a little bit of time from staff time to gather these data in order to save

millions and millions of taxpayer dollars to be more efficient and effective in what we do.

And this is why it hurts our city. This is why we're in a deficit. This is why we keep, you know,

it's amazed me that when we don't do our job and we keep asking the taxpayer to pay more,

And we need to really crack down on these expenses that, just like the $300 million, we say, oh, yeah, we spent every single dime.

Even Senator Cortese asked for that audit.

And when we got that audit, it should be in more detail.

That $300 million is just some of it is kind of like in general.

For example, we know that most nonprofit organizations get their food from Martha Kitchen.

And 10% of their requirement is spent on underserved family.

And if they get free food, then where does that 10% go to?

And so for me, every single dollar, every single dime out there in the dollar does count.

Because that's what we do, being fiscally responsible to our taxpayer.

and, you know, when we talk about the county,

we continue to have a better relationship,

but yet we have to hold them accountable for their part too as well.

If we don't define who does what, then who pays for what?

And it's, again, we're spending money that sometime,

it's all the way back to COVID.

COVID is over.

We need to move on.

And so a lot of these programs that doesn't need to be there,

then we need to question why we keep doing it.

And so I have a question for our fire chief as well,

if he please make his way on down.

But I think it's important that we, as council,

we, as a representative for our community, be fiscally responsible.

You know, we made a prediction that this year was supposed to be only $25 million in deficit.

Now we're up to $55 million, even $65 million.

How did that came about, right?

And so when we off kilter, we should have addressed it immediately versus wait until now.

So regarding the emergency medical services that we're talking about, Med30 being cut,

Chief, would you please come up?

And I know that our council already approved that $700,000.

It's already set aside the amount of money.

And depending on the fact that the first responder fee to come in.

And so this, it seemed like we keep shrinking our public safety versus increasing.

where we got the pretty much same staffing since the 90s.

How do we serve a large population of our constituent

if we have the same staffing, right?

Same amount of staffing.

And if we did the 2016 grand jury,

they recommended that we have 10 more brand new stations,

add more personnel, and yet we haven't truly grown.

Chief, so my question for you is,

tell me what your big decision that Med 30 was cut,

and tell me, or at least tell our council,

what Med 30 position could have helped us

in preventing thousands of residents

that could have been misled on the medication

or possible the city could be sued by thousands of residents.

So if we save that much and we cost us this much,

tell me why you want to cut down on Med 30.

Council Member DeJuan, I think I'd like to take the first crack at that question.

First of all, it wasn't the chief's decision.

That was my decision, and so I want to take ownership for that

and I'm accountable for that decision.

given the outlook that we monitor our budget,

and we monitor our budget probably closer than most entities across the United States.

And when the fall came around and we started to see some of our revenues

not performing as we expected in those few areas that Jim just went over,

which obviously was very disappointing,

I actually put immediate measures in place to help us stabilize financially.

and so again to help us not only in the current year with the current year shortfall but also

for to help us prepare for next year the I did discuss this with the council as you may recall

in close session and saying that I was going to take under my ability as city manager take a pause

on that program and bring it back for ratification of stopping that program, given what I perceived

as much more severe cuts coming down the pipeline.

And so I thought it was the responsible thing to do with my experience.

And certainly it's the council's decision if they want to not do that.

But I just want to remind the council that we haven't even closed if we indeed have a $20 million gap

in the current year, which the budget office has put the range from 15 to 20,

if in fact that comes true.

And again, we've got hundreds of revenues that we're monitoring on a day-to-day basis.

So it is moving, and we obviously would all like it to be better.

We have not even closed the gap with the measures here,

and what we were trying to do is not say that any of our programs aren't important,

but since we've lived without that program for the last year and a half or so,

and Chief, you can correct me if my timeline's wrong,

and the fact that when the council made the decision when we recommended to cut that program

in lieu of other budget decisions that were holistically being made at the time,

the chief distributed a lot of those duties to other folks in the department to minimize the impact.

but I just want to be clear that it was not the chief's decision it was my decision in which I

informed the city council of because I'm trying to be as fiscally responsible again I want to have

the services as I said last Thursday that we do have to cut and it's going to be a little more

painful to be as invisible as possible to the community and so not starting something really

up that has been already away for a year and a half I thought was a responsible response to this

issue of the current year and not then also trying to minimize layoffs to the extent possible.

So I just wanted to set that context so you understand what my thinking was about.

And I'm trying to give you my best professional judgment with my experience of about 35 years

almost doing this budget work of how to navigate these difficult and challenging budget times,

which, you know, it's going to be challenging over the next several months.

and we're going to do our darndest to navigate this organization through that

and give you our best recommendations.

But that, and I've talked to the fire union about this thing,

and I think he understood where I was coming from,

but we're trying to navigate this in the best way possible,

so I just wanted you to be aware of that.

Well, I appreciate your decision.

What I would imagine, you had to consult with the fire chief

and the local 230 prior to do so.

Well, you know, looking at the budget, you have to look at the budget as a whole.

Don't just pick a particular part of the department.

We should consult with everyone.

As my time running out, I wanted, first of all, to return the requested information,

and I apologize for any confusion.

We initially requested housing information,

but have since asked additional departments to provide information as well.

Therefore, I move our memo with a change to up to 60 days to return the information requested,

along with the second memo from my office approving a change to the $15,000 fund

originally allocated to the TED Festival.

okay thank you council member uh we're gonna go to councilman cohen next and uh and then we'll

come back around to folks who have spoken already councilman cohen well thank you um first of all i

want to thank the team in the budget office and city manager's office for all the work they've

been doing this year in difficult times um i i'm really proud of the work that the city does to be

thoughtful and can and and conservative during the year about our budget to make sure that when

times like this happen we have room to play with in making it through this

fiscal year this is it's not easy when we're heading into the deficits that

we're facing and I like like Vice Mayor Foley have gone through significant ones

as a school board member and know how hard it is and I know that the decisions

we're about to face not now but in the months of March to June how difficult

those decisions will be so I just want to first of all appreciate finding the

the way to keep that $16 million deficit under wraps.

And it makes perfect sense to me that programs that have not already started

at least get delayed in implementation as a way to make it through the rest of this year.

And so that should be obviously number one in any of these processes.

I also want to just ask a question about, well, just mention,

certainly information like what's being asked in the group memo is helpful to us as a council

to understand what we're spending and where and how much.

I certainly think that a lot of things that are in that memo

probably should be put into some kind of portal or resource for us going forward

so that over time in the years ahead, we can always look and say,

how much are we spending, what are the results,

and what are the outcomes that we're getting,

and what are the total amount we're spending.

Now, whether or not we can get that done in the context of this budget process,

I don't know, but it is helpful for us.

Now, I will just point out that we've just invested a significant amount in opening a whole lot of programs

that don't yet have enough time under their belt to measure the impacts necessarily or the successes.

So we need to give it time to see how it works,

but we made some really conscious decisions to invest heavily in addressing this problem in the city,

and I'm hopeful that we will see the impacts of that.

And I think we already have seen the impacts of some of that.

I just want to ask, I think in conversations I've had with city manager and others,

we are working on, is it correct to say that we are working on figuring out efficiencies in these programs in the year ahead?

We're already talking about how to reduce the expenses, not just in the operation of these sites,

but in our beautify SJ programs and other programs in order to make sure that we're not necessarily spending as heavily as we have been.

You're absolutely correct.

We've got several service delivery, I call them service delivery optimization slash realignments

on our docket that we're looking at now and into the next year that I put on my performance

evaluation that are super important.

We're ready to get into that phase, and it's going to be super important for our fiscal

health as we move forward.

Which note, too, just specifically with kind of the information and the memorandum here,

part of the other direction, you know, based off of direction from this council and Supervisor

Dewan's referral to the Board of Supervisors, we're actively engaged with the county on actually

bringing, you know, cost sharing to some of our operations efficiencies and more importantly,

kind of making sure our own system is in alignment with theirs and more effective. So we're getting

that output. So that's a big body of work between the city manager's office and housing is, you know,

expanding medical and behavioral health services to all of our interim sites, having the county

actually purchase or take over the operations of one of our EIHs, you know, in addition to a host

of other things around in, you know, inpatient treatment beds as well. So it's a big body of

work that we're working on with the county, but you're absolutely right. Some of that is going to

shift in the next year considerably, we would imagine. And given the large portion of our

discretionary general fund budget spent in this area, it makes sense that we're going to have to

squeeze out from that squeeze out some of that budget it based given that we're

facing the deficits that we're facing so clearly I know that that's something

that that staff is doing and will continue to do regardless of you know

where what kind of data we're receiving because it is a large portion of our

budget that we should be keeping an eye on so that's all just comments I wanted

to make because I just offer really quick to that one of the big work efforts

that we're working on right now is an update to our interim housing forecast

model so we want to make sure that we've got the best projection we have for our costs going

going forward and what the cost will will be for the homelessness system in 26-27 so that's a huge

body of work that we do we publish a separate appendix for that in the in the forecast and

I'll also note that we also as an appendix to our proposed and adopted budget we have the entire

homelessness spending by by fund and category we revamped and by department we revamped a lot of

of the expenditure program is related to homelessness.

So to make sure that we're all in alignment and it's going to subtract year-over-year

basis.

And so in the 26, 27 proposed and adopted budgets, you will see the actuals by all of

those categories too.

So we have a very comprehensive look at what the city's homelessness funding is.

I appreciate that.

That's great.

And I want to just piggyback briefly, just quickly on Lee's comment about working with

the county.

I do feel like we've gotten to a point where we're working better with the county.

The county and the city are talking well.

And we understand that this is a joint effort and we're going to have to figure out ways to jointly fund the need in our county.

So I just want to express that appreciation.

Thanks, Council Member.

Appreciate all those comments and reflections.

Jim, I think your point about that more comprehensive budget analysis is an important one.

What I was going to suggest is I'm supportive of Council Member Duan's blue memo,

supportive of the second rec Council Member Condell has outlined,

and glad to hear it aligns with the IGR, the general IGR plan we just approved a month ago.

On all the data, I feel like, and I don't know, it's a little messy to do it here. We'd probably

prefer to have had this go to rules for a workload analysis for staff to actually do this, but I'll

just say, since we're doing it on the dais here, I would suggest that we triage these because

some actually are in public-facing dashboards already, though they may not look back a full

five years, but we do report out things like unit production on the city side. The county reports out

affordable housing and PSH production around their expenditures of funds. So some are already

very publicly visible and available. Some are publicly available, but harder to find. They have

to be pulled from an annual budget, and you'd have to go back and collate across five years and say,

this is the report. You know, these are the expenditures out of last year's budget, and they

may not all be in a nice and neat dashboard for somebody like a member of the council or our staff

to go pull. I think to Councilman Cohen's point, some of those over time with capacity allowing

would be nice to have in an easier to access format for the council and for the public.

I'm not going to get there overnight, right? I think I want to lift up Lee's point that

the same team that will have to go do all this analysis and pull this report in the next 60 days

according to the current motion on the floor is the same team we're tasking, many of the same

people we're tasking with starting to figure out how to close a significant budget as we head into

the busiest time of the year for budget. So there is a direct trade-off there and potential real

impact. Some of these are with our partner and I would love as we come up with our third iteration

of the city-county joint community planned out homelessness that we think about how do we do

joint public reporting on some of these things. Again, unlikely to get to where we want it to be

in 60 days, but I think it's a great aspiration.

And then some of these may be very,

may in fact take a long time.

So I don't know, staff, if you've had enough time

to think about a triaging of what could come back

via what Jim described in a budget study session

on our EIH portfolio and our homelessness expenditures.

What might need to be kicked out

to the annual report on homelessness,

which really is where all this data

should come together in one place.

What already is in a dashboard

forward that maybe we should actually give a five-year look back to? And where do we need

some time to engage the county and figure out what they can do and how we might do this better

together? I think the challenge we're facing is not that any of this is unreasonable. It's that

there are very different types of data across different jurisdictions in a timeline that's

aggressive impacting a team that we're tasking with the most critical task in front of us for

the next few months, which is closing a pretty significant projected shortfall. So I just try

layout, that's the challenge, not that the asks are unreasonable. So I don't know, staff, if that's

helpful. I didn't really give you an answer, but I was trying to give you a little time to think

about how we might triage and break these down if there was a friendly amendment or perhaps a

substitute motion. Yeah, I would say, I mean, if we can change the five years to something in the

current year or even two years back and focus it on some of the city data that we know, I definitely

think us coming forward as part of the budget study sessions and giving a look on that to help

inform your own decision we absolutely agree context is important we're just trying to kind

of prioritize execution over some of this so I think that is very doable by staff especially items

BD was it F and H I think those are things that are readily available to us and on some of our

dashboards I also think what the administration can do given the collaboration that we do have

with the county is forward some of these requests to them and see what they're willing to do.

Like we said, Eric and I have that conversation every other week with them.

We do owe the council an update in May on those board referrals and where we are as a status

update on a number of those efforts, like the prevention system and a few of the other things

I could mention so we can try and fit, you know, at a high level some of that initial work into

those two things. Okay. That's helpful context for the council as we can continue our discussion.

I'll also just finally also highlight Councilman Cohen's reference to the fact that, and I saw Eric

nodding, we are, and now that we have a more mature portfolio of shelter and interim housing,

rebidding security, food, property management with a goal of achieving 20% cost reductions,

that is ongoing active work that is probably the single best bet we have over the next year in

bringing down costs on our end. Doesn't mean all these other questions aren't still relevant,

but I did want to just highlight that is active work staff is doing. Okay. Next hand I have is

Vice Mayor Foley. We'll go to Vice Mayor. Oh, I'm sorry. No, Councilor, is that okay? All right,

we'll go to Vice Mayor. Sorry, Councilor, or yeah. Sorry about that. Oh, okay. Thank you. Yeah,

I'm triaging over here.

So, Lee, to be clear, you suggested that you could accomplish B, D, F, and H and include it in a budget study session.

Is that correct?

So much is that we're not looking back a full five years.

I do worry with some of how our programs have changed.

Some of it won't be apples to oranges because we've changed some of our core services and programs significantly.

In fact, some of these programs did not exist five years ago, so we just won't have some of that data.

As we've talked about, this is a new line of business and a new endeavor we're all doing together here.

And then I would just ask for grace and flexibility with any of the other things on this that we may request of the county.

What I'd like to avoid is I do think we are making good progress with the county on the staff side,

so we will make these requests but it we don't have the keys to those systems as well

okay that helped but only slightly yeah so b d e f h b on item one looking back for the past two

years i think those are things we can do and that the motion would be that we can forward these

other requests to the county as a part of our ongoing meetings and see what data that they're

able to provide for us and that we would present those at either a the may budget study sessions

or in may when we come forward with the status update on the referrals to the board of supervisors

related around this body of work okay um i'm going to try thank you i'm going to try for a friendly

amendment first then and if that won't work then I'll try for a substitute motion so would the

maker of the motion include or first of all adding in accept the staff recommendation which I don't

believe was moved in your motion include the staff recommendation plus and and include only

the staff coming to a budget study session in may with items b d e f and h looking back over two

years would you consider that a friendly amendment and eliminating the county all the the county

requests at this point. Though there would be a staff referral to the county.

A staff referral. Sorry, staff referral to the county.

And then including the other... No, I have another question.

I'm starting with there. I then have questions about item two.

Yes, I accept the staff

recommendation and the study session

bring it to the study session in May.

for items B, D, E, F, and H.

Yes, two year look back.

Two years look back.

Two years look back.

I agree with that.

But somewhere with the staff still work with the county

to get the information as we need it, right?

Right.

Okay.

That's part of the motion that the county,

the staff would continue to work with the staff county

to get the information.

Yes, I accept it friendly.

Great.

Thank you.

Let me ask the seconder.

Seconder.

Just to confirm, what month is the budget study session? May?

Yeah, it'll be the second week of May.

Then yes, I'll approve those friendly amendments.

Great, thank you.

My next question is regarding item two.

I'm a little confused about it.

Council Member Candelis, I appreciate your explanation about the mobile integrated health care and community paramedic pilot.

Is that, is your intent that that just be legislative advocacy and that we look for grant fundings?

What's your, because the way I read it, it says prioritize funding, and that's funding from the general fund.

No, thank you.

Thank you for the clarity would be to make sure this is included as part of our IGR's advocacy

with our state delegation and members in the administration

for whether it's an earmark or any other source of funding

outside of the city's general fund.

It's to give staff that green light

so I don't have to go to rules and get the green light

from the body to be able to do this.

Okay.

Then I would request a second friendly amendment,

and that be that the mobile integrated health care, with regards to item two,

mobile integrated health care and community paramedic pilot be referred to LGR for,

I mean IGR, IGR, sorry, for an advocacy program,

and that's a city look for grants and outside funding for that program.

Is that what you're thinking of, council member?

So we would be directing to the staff to make sure they prioritize this to go get funding?

Yes.

As opposed to what?

As opposed to it being part of our program?

I'm understanding like the—

Well, this says prioritize funding.

I'm just trying to eliminate the prioritize funding component of it because this—

and you just clarified that you're looking for grant funding or outside funding.

Yeah, well, it's not—none of this would come from the general fund, just to clarify.

This is for advocacy so we can get money, and it's prioritizing the ask, if you will, and or making this as part.

You know, I think, you know, when I did, well, no, let me clarify, Vice Mayor.

When I did government affairs for another agency, part of the legislative process was to give that flexibility to staff

so they don't have to come ask elected officials, hey, is this program something we should be advocating for?

Is this program something we should be advocating for?

And so I wanted to give the staff enough flexibility and enough reinforcement that this is a priority for all of us

to make sure that we are being innovative with the funding that we're seeking.

And that's why it was a direction to our IGR team or to our program, to our government affairs program or our legislative advocacy program, to have that flexibility to get those funds to bolster our general fund, not to seek new funding from our own staff.

Does that clarify?

Yeah, so to pursue, to add this to our IGR priorities of focusing on mobile integrated health care and community paramedic.

And then, I mean, however it's written, I don't want to wordsmith it.

I mean, I just want to have the intent.

So I don't need to do anything with that.

Then I'll just leave that as it is.

Thank you, I appreciate that.

As confused as I made myself, I apologize about that.

I appreciate the effort.

With regard to the other item, that's related to Med 30, and my question about the Med 30, Jim, in the budget that you just proposed to us, you balance the budget by eliminating Med 30.

If we fund MED-30 for the next six months, which will then go away if we approve it as council directive,

where's the money coming from?

What are we offsetting?

Where are you finding that $700,000 in the budget?

What won't we be doing?

I interpret this language to have both of those items be part of our IGR program.

That was what I was interpreting recommendation to, that it is prioritizing both the emergency medical services field coordination and the mobile integrated health as part of our IGR program.

So you're not reading that as funding the Med30 program?

I'm not.

Okay.

All right.

Then I'm finished.

Thank you.

Thank you for bearing with me on that.

All right.

So we have a modified motion that everyone's clear on.

If we need to, we can restate it before we vote.

We'll go to Council Member Mulcahy.

My job just got a lot easier.

Thank you, Dr. Foley.

Jim and team, just a couple of questions left over for you.

On the salary and benefit reserve,

sort of you're pulling from there,

that's substantially coming down.

What's the remaining balance in that reserve?

We also have some other technical actions in there.

So we are also moving about $16.6 million, I believe, from the salaries benefits reserve to the police department's personal services to adjust for the recently approved contract.

And then we had another $1.1 million in there for both police and fire for some anticipated increased pension costs.

And so at the end of the day, after all of those things are done, the remaining balance is going to be five, $5 million,

which is an amount we like to keep at a minimum every year just in case something comes up that's unexpected,

a payroll error, a miscalculation, something.

And you'll often see that $5 million recommended to, if we have the savings,

recommend that to rebudget at our year-end process to make sure we have at least that balance in there at any given time.

And Jennifer, this might be a question for you to join Jim in, but just thinking about

the long experience you've had with even worse circumstances budget-wise that we're in today,

are there any levers that you've pulled in the past that you haven't, other than cutting

jobs and the severity of that, but are there any other levers you haven't yet pulled that

you're thinking about and considering? And Jim, if you want to start, or Jennifer?

Well, for this mid-year budget review, are you referring to that? Levers for the mid-year?

Well, like in your, you know, you've made some moves to prepare us in this fiscal year. Is there

anything else that you'd consider for this fiscal cutting in the next? I don't, right now, I don't

think that there's any other levers that I think are appropriate to put in place. Now, we did have

some cost controls in the prior year that I put in place, but I strengthened them this year and

made like the hiring freeze a lot tighter and more of a hiring freeze where last year it was more of

a hiring review, again, to make placements for people so we could reduce the layoffs. And so I,

and then I also asked, directed Jim, to let's take money out of the appropriation so we can

ensure we have the savings. Last year we did not pull the money out of the departments when we did

cost control. So I definitely stepped it up quite a lot during this budget season because that's my

experience. And I think that helps us ensure we have that savings and to offset these revenue

shortfalls that you see as recommended in this mid-year budget review. Great. Thank you very much.

That's it, Mayor. Thank you. Great. Thanks, Councilmember. I'll come back to Councilmember Duan.

I just want to say thank you to my colleagues and the mayor and staff that we pretty much amicable today to get the information that we needed.

and you know any type of saving that would help protect our working families

out there protecting our small businesses and keeping our city safe it

would be worth it and and again I just want to say thank you thanks counselor

appreciate that reflection I don't see any other hands so everyone's clear on

the motion. Not seeing anyone

raise their hand. Tony, let's vote.

Motion passes unanimously.

Great.

Thank you.

Thank you to Jim and the team,

budget team, everybody else who

contributed.

We're on to item 3.4,

potential ballot measure increasing

the transient occupancy tax.

All right.

Lee, when you're ready, I think I'm going to turn it over to you.

I'm trying to, sorry.

Lee Wilcox, Assistant City Manager, and joining me in the box today is Deputy City Manager

Rosalind Huey and our Budget Director Jim Shannon.

Good afternoon.

Today we are bringing forward a proposal to place a transit and occupancy tax measure

on the June 2026 ballot.

This is part of a broader strategy to strengthen the city's fiscal foundation and protect essential

services for our community.

San Jose has long operated under a structural mismatch.

We provide big city services, but with a tax base that falls well below our peer cities.

Since 2002, we've closed over $800 million in general fund shortfalls,

mostly by cutting or consolidating services or looking at efficiencies.

That approach, while necessary, has stretched many departments thin and left us vulnerable to growing demands.

Looking ahead, we face a projected $55 million to $65 million shortfall in our general fund and ongoing deficits beyond that.

Council has repeatedly directed staff to explore stable revenue options.

This proposed DOT increase is a modest step that aligns with that direction and supports the long-term health of the general fund.

The language on this slide is what will appear on the June ballot if the Council wishes to move forward.

It clearly ties the proposed increase to visible neighborhood-level impacts, emergency response, homelessness, blight, removal, and park maintenance,

which is what we heard in our polling that voters would support.

The proposed measure would raise the general fund portion of the TOT from 4 to 6 percent,

generating approximately $10 million annually.

The ballot statement in front of you does two things.

It's crafted after careful polling and analysis,

layered with also the legal parameters to meet a simple majority vote.

Looking at our TOT structure that we have in San Jose, this slide shows how it works

and where we are moving.

So of the 10% that we currently have, 6% of it goes to the Convention Center, our CVB,

as well as cultural grants and arts programming.

Of that 6%, half or 3% by municode goes to the Convention Center for Operations, while

25% or 1.5% goes to the CVB to focus on tourism and marketing and branding of our city, and

1.5%, the 1.5% remaining goes to our arts community.

In addition, there's additional 4% that is not voter-imposed but self-imposed by the

hotels for the convention center facilities maintenance district and that is what paid

for the renovation and the modernization of the convention center back in 2009 and 10.

Within this 2% increase to the general fund portion, our effective rate would move from

16.5 to 17.1, bringing us into alignment with other major cities that host conventions and

attract tourism. When you look across our peer cities, San Jose, fortunately, is relatively low

on the spectrum, despite being one of the largest cities in California. Other cities across the

state, such as San Francisco, Santa Clara, Oakland, Sunnyvale, all have higher TOT rates, many with

layered district charges like we have with an HBID or a CVB, or sorry, the CCFD.

In addition, much of our research has suggested as well as working with Team San Jose and many

of us having worked to attract conventions here in the past that hotel taxes have relatively low

price sensitivity. Most out-of-town guests or convention centers choosing to locate to a specific

area choose location based off of quality of the trip, attractions, amenities nearby,

as well as public safety.

This proposal keeps us competitive while allowing visitors to help fund services to keep our

city safe, clean, and welcoming for all.

The Council does wish to move forward.

The next step are as follows.

We will submit this measure on March 6, which is the deadline to the county registrar of voters.

Ballot statements will be due on March 10, and then we'll be working with the city attorney on the rebuttals due on March 17.

And then that will be heard on June 2 of this year, going into effect October 1 of this year.

With that, staff is available for any questions that the council may have.

Thank you for the presentation.

Tony, do we have any members of the public who wish to speak?

Yes, I have 12 cards currently.

I'm going to call your name.

You do not have to come down in the order that you're called.

Just when you hear your name, go ahead and come down and line up behind the first speaker.

Jonathan Barca, Sarah, I can't read the last name, so Sarah, Julian Lake, Aaron Salazar, and Jeremiah.

Come on down.

Thank you, Mayor Mahan and members of the City Council.

My name is Sarah Cornell, and I'm the Executive Director of the Bay Area Glass Institute.

I stand in alignment with the San Jose Arts Advocates in opposing or just wanting something to be reworded in this measure.

The San Jose nonprofit art sector generates nearly $300 million in annual economic activity.

It supports 4,700 local jobs and contributes over $6 million in local tax revenue.

BAGI is one example of this impact in practice.

As the only publicly accessible glassblowing studio in San Jose and Santa Clara County,

BAGI supports more than 200 working artists, 25 employees,

and in 2025 we had over 10,500 people have a hands-on experience at Baggie.

We also generated $1.9 million in revenue.

By excluding the arts from the essential services in the 2% of the TOT,

increase your cutting investment into a sector that actually delivers a return on investment.

I respectfully urge the city to increase its investment in arts and culture,

add arts and culture language back into the measure

as the essential part of San Jose's economic future.

Thank you.

Thank you. Next speaker.

Great.

Before I begin, I just want to thank Councilmember Campos,

Councilmember Ortiz, Councilmember Cohen,

and Councilmember Condellas for drafting the memo

and using ingenuity to explore ways.

This is beyond my pay grade, but thank you.

Good afternoon, Mayor, Mahan, and council members.

My name is Jonathan Francisco Borca.

I have served the nonprofit sector for 15 years,

and today I'm speaking only for myself as a performing artist and event producer

on item 3.4, the ballot measure increasing the TOT.

I perform rap and poetry over live jazz ensembles, from a trio to a big band.

I've held residencies with the San Jose Museum of Art, Haberdasher, Cinema Few,

and I've performed at a lot of annual events.

I've also had the privilege to perform invocations here at City Hall.

It was recognized in 2023 by Ash Calra for arts and culture.

I share that only to say that I'm an active contributing part of San Jose's local scene,

and I'm just one of many artists trying to build something beautiful and meaningful in our hometown.

I want to share a little bit about my background.

I grew up on the east side of San Jose, raised by a single teenage mother.

After witnessing violence as a kid, I was angry and had major behavioral issues.

Basically, I was kicked out of three elementary schools.

Everything shifted when my mom gave me Tupac's greatest hits album

and his poetry book, A Rose That Grew From Concrete.

Music really gave me direction.

I went from Alum Rock, I was a byproduct of Alum Rock,

and then I got a full-ride scholarship to Bellarmine College Preparatory

on a full academic scholarship.

only after I got introduced to the arts.

So it quite literally changed my life.

Art is essential.

It creates healing, belonging, and economic return.

If you move this measure forward,

I ask that you pair with a clear commitment

and investment to the arts and culture as revenue grows.

San Jose Arts Advocates endorse the practical approach,

set a baseline for the general fund portion of the TOT,

and allocate new TOT revenue.

Thank you. That's your time.

Next speaker, also Anil Babar.

come on down, Leah Tennis Ketter and Waskar Castro. Go ahead. Good afternoon, Mayor and City Council

members and City staff. My name is Julian Lake. I'm a resident of San Jose and I serve as a policy

director for the Bay Area Council, a business and policy organization representing nearly 400

companies, research institutions, and entrepreneurs in our region. Changes to San Jose's business

tax, especially those including gross receipts models and headcount taxes, can threaten the

city's economic competitiveness, squelch jobs, opportunities, and bypass the city's obligations

to accountability and spending reform. Gross receipt models levy taxes based on sales, not

profits, and would harm a variety of companies ranging from emerging startups, small businesses

with low profitability in their growth stage to establish high-volume, low-margin operators,

like community grocery stores, discount retailers, neighborhood gas stations, and low-cost convenience stores and bodegas.

Gross receipts taxes lead to higher costs, which will be passed down to city residents as a result.

San Jose also risks losing jobs and businesses, which will migrate to lower-cost cities nearby.

Headcount taxes aimed at employee rosters will punish and ultimately disincentivize hiring of workers.

San Jose residents will therefore have fewer financial opportunities during a period of existing economic challenges.

We urged the City Council to avoid consideration of harmful tax changes that would make the city less attractive to businesses and job creators and employees,

and instead rededicate itself to taking steps through review of city finances

and identifying opportunities for spending reform.

The Berry Council looks forward to continuing to serve as a partner and resource in this endeavor.

Thank you.

Thank you. Next speaker.

Good afternoon, Mayor Mahan, City Council members and staff.

Thank you so much for my time here today.

My name is Jeremiah Matthew Davis. I am the Oshman Director and Chief Executive Officer of the San Jose Museum of Art and proud member of District 3.

That's where I live and where I work, so I get to walk to work, which I recommend, by the way.

I'm here to express the sentiments of the museum, but also my own private sentiments as a citizen of San Jose, newly transplanted this last fall.

Love the city and what you do, and I remain inspired by this city's commitment to art, to culture, to experience.

and to inclusivity, and I endeavor to become an integral part of that process both with the museum

and in my private life. For those reasons, I encourage the council today to pause and to

consider further analysis and stakeholder input for this particular proposal. While we at the

museum fully embrace and understand the need for business tax modernization, as well as the need

need for further investment into the city through a TOT tax. We believe that further study and a

refined language might better serve the people of San Jose by including economic development levers

and investment back into arts, culture, and the experience economy to develop those economic

engines that drive tourism, increase cultural flourishing, and allow additional business

activity to take place in our districts downtown and throughout the city. Thank you for your time

today and I look forward to meeting all of you in the future and please come to the San Jose Museum

of Art anytime. It belongs to the people. It's your museum. Thank you. Thank you. Next speaker.

Mayor Mahan and council members, good afternoon. My name is Karen Kinzel. I am a proud San Jose

resident and have been an active arts worker in Santa Clara County for close to 30 years.

Today I'm speaking to you as a member of San Jose Arts Advocates, reinforcing the messages encouraging greater support of the arts through TOT revenue.

I've dedicated my career to the arts because of its ability to transform lives, to inspire, to educate, to connect us to others and to ourselves.

Our mayor has highlighted the role of the arts as an experienced economy,

understanding that arts and culture not only creates memorable experiences for our citizens,

but also that the sector drives revenue for local business and the civic economy.

Americans for the Arts, Arts and Economic Prosperity Study, quoted extensively in letters submitted to council,

documents the profound economic activity the arts bring to our city.

In addition, Americans for the Arts has highlighted the value of the arts and culture in helping youth succeed in school, life, and work.

Students involved in the arts are four times more likely to be recognized for academic achievement and have a lower school dropout rate than their peers.

The arts teach creativity, a skill that 72% of business leaders say they hire for in a recent study.

We know that we are in a challenging economic environment.

Those who work in the arts understand this acutely.

We are currently seeing federal grant programs for the arts shrinking,

while private foundations and individual donors are redirecting arts support

to address social service needs in our community.

This is the moment for the city to step up to provide public support

to sustain the vulnerable arts programs that animate our city and educate our youth.

And the money is there through TOT generated by the people coming to our city to experience our vibrant visual and performing arts programs and cultural events.

We are simply asking that a greater portion of...

Thank you. That's your time.

Next speaker.

Good afternoon. Anil Babar with the California Apartment Association.

I'm here to speak on the proposed modernization of the business license tax,

which raises a number of concerns you should consider

before expending any staff time or hiring a consultant to study the matter.

One, this is a general business environment that this would impact

at a time when we're encouraging businesses to come to San Jose

or relocate to, or sorry, come to San Jose or preventing their closure.

But more importantly, what we're concerned about is this impact on real estate,

especially residential estate.

At a time when we're trying to reduce the cost of housing,

we shouldn't be enacting measures that will invariably increase the cost to housing.

I think it's important to view these tax measures in the lens of how they're affected by other measures we've passed,

notably recently the sales tax, because all these measures ultimately impact the consumer

and raise costs to the consumer.

So I would encourage you to reject any consideration of a modernization of the sales tax or, in particular, any gross receipts tax.

Thank you.

Thank you.

Next speaker, Shanna Lucy, come on down, and Krista De La Torre.

Go ahead.

Good afternoon, Mayor and Council members.

Leah Tennisgetter, President and CEO of the Chamber of Commerce.

I want to begin by acknowledging the challenge that you have in front of you to close the budget gap that we have.

both I say that as a resident and as the chamber.

We appreciate the work that city staff has done and needs to do in identifying new revenue sources.

The chamber is a business organization, and first and foremost,

we're going to represent the voices and needs of our business community.

So our role here is to support the members impacted by the TOT

and for our kind of specific economic development opportunity

to really advance San Jose's sports entertainment and experience economy.

So we know there are several realities in the moment that are all true.

The city needs to close the budget deficit.

The TOT is one tool to help do that.

Today's TOT supports both the general fund and the investments

that directly strengthen our business and tourism economy.

And four, we're really unlikely to be able to do this again anytime in the near future.

And that matters because without the reinvestment that's come with the TOT previously, the city does lose an important opportunity to support industries generating the revenue.

So to be clear, our members were not in full opposition to the TOT.

The concern was that the proposal pulls away a mechanism to reinvest and promote their business without an alternative.

So what we would ask of the city is to please prioritize working with the chamber and other partners to identify ways to reinvest in economic development, bring those levers that will really bring growth to San Jose's economy.

Thank you.

Thank you.

Next speaker.

Emily Ann Ramos, come on down, and Peter Allen.

Go ahead.

Good afternoon, Mayor and Council.

Huascara Castro, Working Partnerships USA.

here alongside certain partners to voice our support for the memo authored by Council members Candelas, Cohen, Ortiz, and Campos

to both move forward with this work around the transit occupancy tax

and also beginning the modernization of the city's business tax to address San Jose's structural deficit.

Given the forecasted $55-65 million budget shortfall and the main needs facing our city,

we must look towards all opportunities to generate revenue.

Given that our city's business tax is one of the lowest in the region,

we must seriously consider how modernizing our current business tax could directly address our structural deficit and strengthen services.

We would like to thank the authors of this memo for their responsiveness to the lack of resources currently at our city's disposal

and for taking proactive steps to addressing this issue.

We urge council to approve this memo so we can begin the process of exploring solutions towards our ongoing shortage of revenue at the local level

in order to best serve our entire community.

Thank you very much.

Thank you. Next speaker.

Hi, good afternoon.

My name is Krista Dellatore, and I work with IFPTE Local 21.

We represent over 13,000 public sector employees across the Bay Area

and here about 1,000 people.

Today I urge you to support the Candelas, Cohen, Compos, and Ortiz memo,

which advances the transient occupancy tax and importantly calls for exploring modernization of San Jose's business tax

as part of a real strategy to address the structural deficit.

The TOT is a good start, but it cannot stand alone.

Over the past decade, eight of ten five-year forecasts included a deficit in the first two years,

and this year we know we have forecasted a $55 to $65 million budget shortfall with growing needs across our neighborhoods.

This is a time the city needs to take a proactive approach to revenue generation, not a reactive one.

We're also operating in a moment when instability at the federal level directly impacts our local economy.

And when Washington is chaotic, it is even more important for local leaders to act with clarity and foresight.

This is that moment.

San Jose's business tax is one of the lowest in the region and one of the oldest.

many peer cities have already modernized their structures in ways that keep pace with inflation

and service demands, create predictable, stable revenue, ensure businesses contribute fairly,

and importantly, protect small businesses through thoughtful exemptions and tiered structures.

Moreover, exploring modernization doesn't commit the city to just one path. What it does is allow

San Jose to understand its full range of options, evaluate fairness and competitiveness, and consider

how a modern tax structure could support staffing, public safety, infrastructure, libraries,

parks, the list goes on.

The services residents really count on day in and day out.

As a union of public sector workers, we see the impacts of chronic underfunding every

day, vacancies, turnover, burnout, and service delays that residents deserve better than.

Revenue solutions are essential to a long-term recovery.

So today, again, we urge the council to conduct this analysis so San Jose can meet the most

Thank you. Next speaker. And also Erin Salazar. That is the last card. Thank you.

Good afternoon, Mayor and Council and City staff. My name is Shawna Lucy, and I'm proud to be the

General Director and CEO of Opera San Jose. We bring more than $7 million of economic impact

downtown every year. And we are so proud to work closely with our partners at the Office of Cultural

Affairs and the city in general. But I am also proud to be a member of the board of Team San Jose.

And that is why I'm here today to say that no matter what, Team San Jose is so proud to be a

strategic partner with the city to drive revenue downtown. And however this measure fares, they are

dedicated to working with the city as with the board and the staff in order to implement it.

So thank you very much for your consideration and I hope you will all join us at our upcoming

production of Cavalier Rusticana and Pagliacci opening on Sunday and running through March 1st.

It's my production. I directed it and it is fabulous. So thank you very much. Thank you. Next speaker.

how do you top that all right um hi everyone uh mr mayor madam vice mayor and council

my name is emily ann ramos i'm here representing sb at home and we are here alongside some of our

partners in support of the memo authored by council members candelas cohen compost and

or T's to move forward with increasing our transit occupancy tax or a TOT and also to

begin exploring modernizing the city's business tax to address the city's structural deficit.

I'm pretty sure you all know you have a daunting budget shortfall to consider and this is one

of the solutions that we're hoping to propose. You could explore many different options for

modernizing the business tax. It may not have to be the same one other cities are doing. There are

a lot of options out there, and you can bring your business stakeholders in to get some buy-in

on what the proper business tax modernization can be for your city. So we would like to thank

the authors of the memo that are getting this ball rolling as we move forward on trying to fix

this budget deficit and moving forward with making San Jose a really great city.

Thank you.

Thank you.

Next speaker.

Good afternoon, Mayor and City Council.

I'm Peter Allen.

I'm standing here with San Jose Arts Advocates to reiterate many of the comments of my colleagues

to call on you to create greater reciprocity between the transient occupancy tax and the

experience economy, as you call it, which generates the transient occupancy tax.

The mayor recently stated the obvious following a recent shooting at Valley

Fair that gangs focus their recruitment on our youth, and that's because youth often

lack belonging, especially in communities of color, communities of low income.

The arts, culture, the entertainment economy creates belonging.

It brings us together in peace, joy, and harmony, and I'm thinking very particularly,

frankly, of the Bad Bunny concert, which we all watched on Sunday. I heard there was a football

game attached to it, but that did more in just a few minutes to uplift community and to get people

thinking more broadly about what it means to be American, what it means to be an immigrant, what

it means to be a human being, frankly. And I'm thinking also of my daughter, a three-and-a-half-year-old

who is the grandchild of immigrants from the Philippines, and what she could see in that

performance at her young age, and how it inspires her to understand her identity better. So I

I implore you, I know this ballot measure is,

you feel is required to help bridge a budget deficit,

but it's not about dollars and cents.

It's about people.

You're balancing the budget on the backs of our youth,

on our arts and our cultural community,

and I implore you to find a better way

to find that greater reciprocity,

to find that reinvestment that my colleagues

have been talking about, and to reinvest in the creatives

and the creative workforce that help create the vibrant city

that you all love to go out and take photo ops of.

Thank you very much.

Thank you. Next speaker. Okay, back to Council. Thank you, Tony. Thank you to our public speakers. We'll start with Councilmember Campos.

Thank you, Mayor.

Thank you for everyone who submitted public comment and came in to speak on this item.

I appreciate staff's efforts to prepare this ballot measure and want to express that the

revenue generated from TOT increasing, if approved by the voters, will reduce the need

to impose harsh cuts if the budget deficit gets worse.

However, we should take the opportunity to benefit from staff's analysis

on additional revenue generation opportunities.

As mentioned in the staff report through the adoption of the Mayor's June budget message

for fiscal year 2024-25, the City Council directed the City Manager

to pursue potential paths to generate new revenue, including new cost recovery fees,

revenues to sustain and enhance parks, and modernization of the city's business tax.

This is prudent and forward-thinking direction, and I support continuing this work.

Keeping that in mind, if we pursue something like a gross receipts tax,

we can set a high threshold that would exclude many or all of our small businesses.

A business currently paying the existing tax may be penalized if increasing headcount.

The existing business tax imposes a $30 tax per employee on businesses with at least three employees,

up to a maximum of 35 employees.

The tax increases to $40 per employee if that business adds one additional employee.

So we should consider whether we actually want a tax that discourages businesses from adding new employees.

The headcount thresholds in the existing tax are arbitrary,

and a modernized business tax could reduce the tax burden on small businesses,

encouraging businesses to hire instead of discouraging them as the current tax does,

which will then in turn increase revenue generation for the city.

And in the mid-year budget review, we heard that it's been a stagnant growth for jobs in our city.

So with that, I move to approve the staff recommendations

and the memo from Councilmembers Cohen, Ortiz, Candelas, and myself.

Thank you.

Thanks, Councilmember.

Go to Councilmember Ortiz.

Thank you, Mayor.

There's a lot wrapped up into this item.

I just want to thank staff for their hard work preparing this proposal,

as well as all the members of the community who came out to speak,

both members of our community, of course, members of our municipal unions,

as well as our business leaders here at the city.

I think at the core, this conversation is about how we protect city services

and close a deficit that threatens them.

We owe it to our residents to do everything we can to avoid layoffs

and prevent cuts to the departments people rely on every single day.

Our residents have a high expectation for the city of San Jose,

and we simply cannot provide the level of service they deserve with the revenue we have currently coming in.

Which is why I believe all potential avenues and solutions should be on the table.

It doesn't mean that we will go with every single avenue and solution.

And that's why I signed on to this memo.

If we're serious about closing the deficit, we have to be willing to look at all the tools that are available to us

and to do so thoughtfully.

And one thing that I want to highlight about our memo, which Councilmember Kambos had mentioned,

is that it explicitly centers advocacy and protections for small businesses.

It asks that we examine whether our business tax securely and truly reflects what small businesses are experiencing right now.

These small businesses are the backbone of our local economy.

And it's important that we not only consider how our actions can impede their growth,

but also actively look at ways to remove existing barriers or potentially lower taxes for them.

I want to acknowledge also the concerns we've heard from our art community.

Last year I worked closely with the art advocates to explore ways to secure baseline funding

for the Office of Cultural Affairs because I strongly believe arts and culture really are a core part

of San Jose's identity and economic vitality.

And I believe Y San Jose plays a major role in that conversation.

Arts and cultural programming support small businesses.

They draw people into our city, and they contribute to long-term growth in our TOT revenues.

That's why even in tight budget years, investing in the experience economy matters.

And if we want to grow the overall TOT pot that supports our general fund,

arts and culture should and need to be part of that strategy.

So as we move into the budget process,

I hope to pursue an allocation that reflects this priority.

And I'm committed to continuing to work alongside arts and cultural advocates,

as we did last year, to do this in a thoughtful and responsive way.

So I look forward to this overall discussion,

and will support the current motion.

Thank you.

Thanks, Councilmember. Let's go to Councilmember Casey.

Thank you, Mayor.

I want to thank Councilmembers Ortiz, Campos, and Cohen for their memo.

I think it comes in the spirit of leaving no stone unturned, given the structural deficit we're dealing with,

and I appreciate that sentiment.

I am concerned, though.

Our deficit, structural deficit, has to do with our jobs and housing imbalance,

and I'm sensitive to any, and the wording used is additional revenue,

And we can't get additional revenue unless we raise taxes on folks.

And so our ability to retain and attract folks here to San Jose has a lot to do with the tax regime that we implement.

And having been involved in the location decision of companies, I mean, that's a top consideration when companies decide where to locate or where to leave from.

Given that, it would be difficult for me to not be sensitive to it.

And if we did pass your memo to down the line to any way, support raising taxes ultimately on anyone that does business here in San Jose.

So I appreciate the effort and the reason why you guys brought the memo forward, leaving no stone unturned.

But ultimately, you know, in terms of our economic development department, Jen Baker and her task of bringing companies in here,

if we're raising taxes, that's just going to make it more difficult.

And that's actually why we have the structural deficit.

So I would encourage us to be real sensitive to what we do in terms of business taxes.

Thank you.

Thanks, Councilmember. Appreciate your comments. We'll go to Councilmember Mulcahy next.

Thank you, Mayor, and thanks for the presentation.

So just as I understand the memo from my colleagues, it suggests to bring back findings on the business tax,

but doesn't explicitly say it's to be ready for a ballot measure in 2026.

but that is inferred, as it states, to help close the projected budget deficits and return to council by May 26.

So could I ask Leah a question?

With respect to my colleague's proposal on the city's business tax, knowing this would have to go to the voters,

could we even be in a position with all that a ballot measure would entail,

all the work that you've done with respect to the TOT,

like the impacts on our business community in this difficult climate

when we're hoping for businesses to reinvest versus making decisions

based on tax policy to take their jobs elsewhere.

And that is just the tip of the iceberg.

Could we even be prepared by May to then make a decision to get on the ballot for November?

I think the second part of what you're asking for,

that analysis or that economic impact of how a tax would impact different sectors or different

sizes of business. I don't think we would be ready by May, and in most cases that probably

would take several months or if not a year looking at, you know, a variety of work and

engagement that would need to take place on that end. The way staff read the memorandum was like,

you know, a status update, so we have started to do this work and look at, you know, other peer

cities. We've actually had a lot of conversations with all of our counterparts and, you know, where

we measure up against them, as well as, you know, the cities that have transitioned to gross

receipts tax or even ones that have transitioned back after that, given their experience. So I think

we'd be ready to do a status update, but if the council, you know, before placing something on

the ballot, wanted that broader economic impact and to overlay that analysis with our economic

development strategy, that would take much longer. Well, I guess that's where I'm having trouble

because if the intention is not to do the work by May to get it on the ballot for November,

the next opportunity is 2028. So, you know, why don't we take our time to really do

that work in an effort that takes into account all the impacts, you know, potentially to the

small businesses, as even the memo points out, and look at the variety of ways we could do it.

There may be the base of our fees are such that could afford an adjustment, and two years out,

we may be in a different position to make a decision. So I can't support the memo or the

motion on the floor. It points to the potential harm of our small businesses, as you talked about

in your own memo. And I just don't like the idea that we would be going through in this very busy

time, tough budget, you know, sending off, you know, to get this information and not even be

in a position to get on the ballot. And so I would sort of think about a substitute motion.

I think we've got to focus on what we know and where we think this new revenue can come from

the TOT so I'd offer a substitute motion for staff's recommendation with regard to the TOT

increase. I'm going to sort of talk about it and then I'll come back to so the key reason I'm

supportive of the TOT is that without it our tourism and arts funding could suffer further

degradation due to citywide and broad budget cuts ahead. There's going to be tremendous pressure we

we know, especially in this budget year, to protect jobs and wages over arts, culture, and tourism.

That is just an unfortunate fact, and I've seen this happen before. I've served our city as an

executive director of one of our premier arts organizations for youth, have sat on arts and

tourism boards every year since 1988. I'm a founding member of Team San Jose, which was born

out of four unlikely partners, hotel, arts, business, and labor, uniquely coming together

to rescue a failing convention center in the early 2000s. And I'm a former partner in two

downtown hotels. I feel like I have the credentials to share a little bit of the history on the

TOT. And I think it's what is contributing to the anxiety that we're hearing from our

arts and tourism partners. And so the first TOT was 6% approved by the voters in 1982.

Not one cent went to the general fund. It was a one and a half, as we heard, to the arts,

one and a half to Convention and Visitors Bureau, which is our marketing arm of the city,

and 3% to support the convention center. In 85, we boosted it by 2%. And so it went to 8%. And

And there were discussions at that time about trying to pull some of that off to support

the arts.

Didn't happen.

Just four years later in 89, voters approved another 2%.

We went to 10%.

And what followed was a negotiated gentleman's agreement, as it had been called for many,

many years.

While it didn't go into the statute, it shifted an additional 1% to augment arts funding,

which went to 2.5%.

That lasted for many years until the budget pressures started pulling back that 1% and

eventually took it all back.

This also impacted our ConVis Bureau, which is grossly underfunded today and limits our

ability to be competitive and market our city due to its lack of resources.

Compounding that, other cultural investments like staff in the Office of Cultural Affairs

began to be financed from that same pool, further eroding support for grants and programming.

In 2010, that resulted in only 61% of the intended funds.

They actually went to the arts organizations themselves.

These shifts further weakened the arts ecosystem that helps drive visitation and economic activity.

The reality is that the arts, culture, and events sectors are essential parts of San Jose's experience economy.

The ecosystem of performances, conventions, festivals, dining, nightlife, and the creative experiences that give people reasons to visit and stay here.

A healthy experience economy directly advances one of our city's five focus areas, economic growth.

Supporting cultural vitality isn't just a quality of life issue.

It's an economic development strategy.

Now, if we want the TOT revenues to remain strong, we must ensure the underlying engine,

our cultural and hospitality ecosystem, stays healthy.

And as you all know, I'm the lone wolf on the budget process this year.

Some of the things that will be driving me in our priority discussions are baked into the following.

I'd like to see us reintroduce transparency and accountability regarding how TOT revenue is deployed

and how it supports the experience economy that generates that very tax.

This past week, we all just witnessed how a well-marketed, funded, and coordinated series of events in our city

can drive pride, prosperity, and broad community engagement.

And therein lies the power of the experience economy.

I'd like to see us introduce direction to staff to return with policy options or guiding principles for reinvestment,

something like the earlier discussed Gentleman's Agreement or more aptly named Experience Economy Agreement

that explicitly ties a portion of TOT revenue to economic generators like arts, culture, and tourism promotion.

I'd like to see us push toward 100% of the funds by statute actually get to the arts organizations.

This would restore trust and predictability for our arts community

and align our TOT policy with the city's broader economic strategy to build an inclusive, thriving, experience economy in San Jose.

And lastly, I just want to point us back to February 2024.

Many of us were in this room, me before I was a council member,

for a city council study session on arts destination marketing and destination events funding.

The purpose was to provide the City Council an opportunity to discuss funding of arts destination marketing and events.

And the outcome was that the City Council will establish a common understanding of the importance of and funding models for arts destination marketing and destination events.

I'd like to see us get back to that work because I think it will inform decisions that we will make not just in this budget year that we're coming into,

but in future budget years and prioritize the experience economy through our arts, culture, and tourism operators and organizations.

So with that, I will sort of go back to a substitute motion and accept the staff recommendation.

All right, we have a substitute in a second.

Thank you for all the historical context.

We'll turn now to Councilmember Cohen.

Yeah, thank you, and I want to thank staff for the work to get us to this point on this improvement of our, or upgrade of our TOT.

We are behind other cities, and I only wish that we could have had the increased TOT in place before all the visitors that are coming in 2026 were coming,

because there was a clear revenue opportunity lost by implementing this starting in 2027.

But there we are.

I'm just going to just comment for a minute on the memo that I co-signed.

You know, I am not at a position where I am supporting any kind of increase in business taxes,

but I do think it's important, just like it was in the last item,

for us to understand the data that's out there, the comparisons that are out there,

what the impacts are on our businesses of our current structure,

and what potential modernization there could be.

And I think that's important for us to understand,

even if we're not moving down the path of a ballot measure anytime soon

so we can be thinking about the future and what a future could look like.

So I certainly, in any tax that were brought forward,

if there were a proposal, I would be very, very disinclined

to support a tax that affects our local businesses.

I understand staff's already working on this and bringing it forward,

so I appreciate that.

I just wanted to reinforce the idea that this kind of information

is good for us without necessarily proposing any kind of ballot measure for 2026, knowing

that I believe there's probably going to be five or six tax measures on the November

2026 ballot anyway that we're going to be dealing with regardless of what we do on this

council, and I wouldn't want to add to that at this point.

So I just wanted to give some context about why I think this is an important question

for us to understand, an important piece of information for us to understand, and I suspect

that this work will continue regardless of what action happens at this council meeting today, but

if you just want to make sure that this was an opportunity for the council to say, hey, this is

important work to make sure that it occurs. Thank you. I appreciate that comment. Basically, just as a

point of information on Councilman Cohen's comment, maybe it kind of threads the needle here. We have

a substitute motion, which is the staff rec related to the TOT. As Councilman Compos pointed out, we

had previous direction on exploring various revenue measures. Lee, you've already said there's

ongoing work. I think we've all acknowledged it's extremely unlikely to be feasible, even that there

would be support on this council to do something in 2026. Can you just help us understand what

council would learn or what incremental research would come back to us if we support the substitute

motion? Because it's not like no analysis happens or we learn nothing this year. So maybe there is a

middle ground here. Yeah, I think there's a lot of lessons learned, you know, first and foremost,

how we compare to other cities with our rates, but also the structure, the employee head count

versus gross receipts, and how those differ. I think we've learned an awful lot in talking to

some of our counterparts, and also just kind of economic analysis ourself. I think we could also

look at, you know, the last time we really modernized our existing business tax was 10 years

ago. And so I think more information for the council on what the levers of those are, how the

flat rate works, how the employee count works, and how we put in kind of a progressive structure to

actually kind of help small businesses versus some of the other cities. So I, you know, Mayor, to your

point, some of this work is already directed. We need to continue it. I think we'd be kind of

ground-truthing and giving information to the council in case you ever wanted to take action.

And if I understood correctly, we will learn, we will get an update with some of that information in May, we believe, even with the, assuming the substitute goes forward today.

Correct.

Okay. So it's not a binary, totally either or situation. Okay. That's helpful. Let me turn to Councilor Kame.

Thank you so much.

You know, I know that you've done a lot of analysis and polling and all of that of what works

and why 2% and not 2.5%.

But, you know, I looked at the peer benchmarking, and, you know,

it seems to me that we're pretty far down the line,

and why not add another half a percent for the arts?

I think that Councilmember Mulcahy is correct.

You know, I think it was last year,

we had the presentation of how the arts economy

really brings in a lot of vibrancy.

It gets people excited.

And having that sort of like additive

as opposed to saying,

well, we're only going to use it for this and not that, why not add another .5?

Sure. If I can answer that in three ways, just the numbers help. Sorry.

Looking at the polling, I think the 55% that's represented in the memo is a soft 55%.

Typically with numbers like that, after positive arguments and negative arguments,

I personally would be on the fence on what to recommend to my boss,

who ultimately recommends how to move forward with you.

I think I mentioned last week during the priority setting

is our right track in the city,

we've changed 16% over the two prior years.

So that number really indicates,

okay, voters are really trusting in what we do.

I'm comfortable moving forward with this.

And ultimately why I recommend it to Jennifer.

We didn't poll two and a half.

It was very specific around two.

So I think an increase.

there's additional risk there. So that's one. The second is

you know, we've, at least in the

November poll, we didn't poll the specific term arts or cultural

funding, but we have in past polls over the last five years. And it

is an exceedingly low number. So including that verbiage, unfortunately,

doesn't just change it into a super majority or two

thirds measure if we're going to be specific about part of it.

it also just puts the simple majority at risk because unfortunately with our community right

now through the polling the numbers aren't necessarily there and I would say the third

thing is this is really in my mind an exercise increasing the pie for everyone the 11 of you

get to make those choices during the budget season on where you want to put those funds it doesn't

you know what's outlined here as I said in my presentation it's enough verbiage to make it

politically viable for the voters, but also meet the muster of a general tax.

But it's your discretion on how you spend that money

through the process. Thank you. Thank you for that.

You know, with these times when we're faced with deficits,

we do have to sort of see what's available.

The other thing that I know that is happening is that

other agencies are also

getting out there and having things on the ballot. I know Open Space is having

benefit assessment increase.

And so as we continue to need more

funding, it's very challenging. It really, really is

because everybody is saying we need money, we need money, and

there's only so much I think that residents are able

to give. And then you have the fatigue, the tax fatigue.

So I think that's a danger. I want to certainly agree with Councilmember

Cohen in that information is always good. I know that as it has been pointed out

by the mayor that that information is going to be coming to us. I don't know

if it's specifically as laid out by the the memo from my colleagues but but I do

do think that we do have to have no stone unturned as we continue to face, but there

are consequences. So we have to find ways of balancing, well, how do we create that revenue,

but also, you know, not scare away our businesses, right? So I think that having the information

to me is going to be really important. The other thing that I'm looking forward to is

the wonderful optimization that everyone was going to be looking at as we move forward with

how do we do our work in a way that is perhaps not as costly, right? Because we have made a lot

of changes over the years, and of course we've learned a lot every year as we've moved forward.

So I look forward to getting some of those savings as well. So thank you.

Thanks, Council Member. I'm going to turn now to Council Member Tordios.

Thank you, Mayor, and thank you also to the members of the public who wrote in and provide

comment letters and public comment today. I'm definitely sympathetic to all of the requests

for additional funding for our arts and culture sector, as well as the calls for reinvestment,

both in our downtown and in economic development, to actually support the hospitality sector that

ultimately is what generates TOT revenue to begin with. That said, you know, we obviously have a

significant deficit that we have to close in the months ahead, and I think updating our TOT to more

closely aligned with some of our peer cities is one of the few levers that the city has to raise

revenue and hopefully minimize any service impacts that will be felt by our residents or layoffs that

will be felt by city employees. And given the short timeline to actually get a measure qualified

for the ballot, I don't think we can really afford to delay this consideration any further.

I am sensitive to concerns that have been raised about the lack of guardrails, about where just

additional general fund revenue will ultimately be allocated, but I think it ultimately falls to

all of us to be the stewards of our precious general fund revenues and ensure that they

are being allocated both responsibly and fairly.

So as we evaluate our budget both this year and in future budget cycles, I hope that we

can all be intentional in ensuring that this revenue doesn't just become low-hanging fruit

to kind of address some of our short-term budget concerns, but that we can be really

intentional in ensuring that as much of this revenue as possible can be reinvested back

into the arts and into advancing economic development to generate jobs, generate revenue,

and again, support that broader experience economy.

As to the question of modernizing our business tax, I do believe this is worth exploring

to, as Councilmember Casey said, not leave any stones unturned.

I do agree with comments from my colleagues and from members of the public that any change

to our business tax has to be made very carefully with consideration to the impacts to existing

small businesses as well as the city's efforts to recruit new companies that hopefully will

set up shop in San Jose in the future. But it's also true that we're facing a very different job

market today than we were before the pandemic. As Lee said, there hasn't been a major update to our

business tax in about a decade. So I do think that it is worth exploring, particularly as some of the

new industries that the city is looking to court. Things like data centers and advanced manufacturing

just have very different jobs characteristics to the office heavy industries that we were

recording in the past. So definitely supportive of staff continuing to explore all of these

avenues for additional revenue generation and looking forward to getting more information

on all of this in May.

Thanks, Councilmember. Let me turn that to Councilmember Condellas.

Thank you. I, too, appreciate the comments from my colleagues. And, you know, especially

Councilmember Cohen, with his cautiously optimistic exploration of any adjustments or modernization to our business tax, I think that's important.

And Councilmember Todeus, you said it well.

I think it has been 10 years, and I think it's worth us getting information.

Not to say we're leaning one way or the other.

It's just the metaphor that comes to mind is an ostrich with their head in the ground.

I think we don't want to be that.

We want all the information to be able to essentially call the strikes and see what we can do as policymakers.

And, you know, like Council Member Casey said, you know,

understanding the cautious nature of not wanting to scare away companies with whatever action we take.

But I think it's important for us to analyze.

And with the current direction, Lee, I mean, the motion on the floor now excludes the direction to come back to council

explicitly with, you know, comparison of annual business tax receipts in large cities in the Bay Area,

as well as business tax burdens, small businesses compared to other.

There's a few things we outlined.

Curious as to what direction staff has now that could encompass some of the information that I think would be helpful for us to make a decision.

I guess, do we have that?

I'm trying to understand, like, do we have that information?

If not, I mean, wouldn't it be helpful for staff to have some of this comparison information?

Yes, I think we have the comparison information about how our city compares with other cities

and how our model compares with other models.

So we can definitely do that.

We can kind of anecdotally walk through, you know, cities that have changed from employee headcount to gross receipts tax,

what that process has looked like in the way of time and cost.

What we can't do, which I think is what Council Member Mulcahy said quite yet,

is say how any of those changes,

whether it's a gross receipts tax

or smaller changes to our existing structure,

how that may impact business by sector and size,

especially with kind of shifting economies.

But the status report on kind of that initial thing,

we can absolutely do and give you that context,

and that could inform future direction

down the road that you may want to give.

But definitely we won't be in the position in May

to give that larger kind of multivariant

kind of statistical analysis of this is what it'll do to this sector and this is what it'll do to

this sector. It's more kind of high level, I would say, best practices analysis. Okay. And so without

the May deadline, I think, would it be helpful for staff to have the leeway to, say, bring it back

as part of the study session process and, you know, the robust conversations that we have? Would

that be helpful for staff to be able to provide that insight then? When you said May, was that

part of budget study session or independent?

Was that just a council item? I think the council

direction that we were providing was independent.

So it was by

May 2026, but I don't know what...

Yeah, I just saw May 2026,

which is when budget study

sessions begin.

So we can definitely...

It would make sense to do it there.

You suggesting working it into a study session?

I mean, I think it would make sense, no?

Yeah.

There's just some thoughts.

But I do have a question.

I want to ask this question before I forget it.

One of the comments was about the thought about delaying and or going to November.

Is there a reason why we're going in June for a potential ballot measure as opposed to November where there's typically a higher turnout?

I think we measured a June electric when we went out to look at parks bond, parks, parcel tax, public safety bond.

So that was the voter demographic we tested, so we felt comfortable with that.

We also felt, especially working with our polling firm, it sounds like every public entity in the state of California is putting something on the November ballot.

and what we've seen in the past several ballot cycles is voter fatigue has become an increasingly

important variable for us. So we really wanted to stick this away from the November ballot given

kind of was at 55 percent. Got it. Okay. All right. Just curious. Thank you. Thank you. That's

all I have for now. Thanks. Thanks, Council Member. Let me turn to Council Member Kompos. Has everyone

spoken once at this point? Okay, Councilman Kompos.

Thanks, Mayor. I wanted to offer a friendly amendment to the motion on the floor to include

recommendation two from the four signature memo so that we can have this in writing that

we'll have that status update by May 2026.

So, REC 2 in its entirety is what you're asking for?

I guess what I'm really struggling with is if, you know, this has to go to the ballot eventually to be approved.

And we just heard that we wouldn't be in any position in May to be prepared to go to the ballot by November.

So I'm concerned about sending us on this discovery when it's not going to be helpful to us because we couldn't implement it or take it to the ballot in November, even if we loved it.

So I guess I'm concerned with adding it to the roster of work by the staff if we have no hope of getting it to a ballot to approve it.

Can I ask a clarifying question?

Is it possible that we could get the modernization of the existing structure?

Is that information that we could then use within the 2026 year?

Because I understand that the process for the gross receipts model is more time consuming.

So if we include recommendation two that ends at the period May 2026 without the rest of the language,

is that a friendly amendment you would accept?

if you could so what are you trying to get at i guess i'm really struggling with what the end

goal is by doing the work by november so the desired outcome is that we would get the

status update to use in the context of our budget decision making

i'm not sure that's relevant to the budget decision making because any change would have to go

to the voters. Well, in the conversation that we've been having and talking about how we're

going to close our deficit, I think it is relevant information that is going to help us

understand all the options that we have. I mean, I wouldn't, I would not accept a May date,

you know, I might push it out into a future study date so that it's closer to a time when we may have

enough time to do the work to tee it up for 28, which I think would be the next time.

So I'm hearing no to the friendly amendment.

We're having a conversation. I'm trying to understand what the motivation is. I don't

want to say an outright no, but if it's in the context of trying to get to us with May without

any real intention of it going on the ballot in November, I don't see the need to rush it to get

it to May, I would be open to pushing this work out to a future date, which would give us plenty

of time to prepare if we decided that that was the right thing to do to get it on a ballot measure

in year 2028, which would be the next available time for us.

Okay, I hear what you're saying. Given that this is something that staff has already been

working on and my understanding is that the work is in progress it seems to me like I'm just asking

for in writing what is going to be coming to council so that's what I'm asking for. So Lee

could you clarify again what you thought you could commit to by May of this year which doesn't

include sort of the competitive sets but it might include or pardon me I think you mentioned that

It wouldn't include the impact on our business community in a variety of sectors,

but it could be how we compare to other communities.

Correct.

Your very first question to me was about impact to our economy,

and would we be able to do that in May?

And that part is a no.

So that's a decision the council wants.

Before they were to move forward, we would not be ready by May.

a status update on the work we were directed to do two years ago we can absolutely do that

which is a status update on our research of how we compare to other cities how the two models

compare and what are the levers or things that we've learned in the way of the existing structure

if we were going to modernize it again what those levers are to kind of help increase revenue so

So it's basically like a status report on programmatic work.

Jennifer?

I was going to say, and if we were to do that, I would recommend it.

Come through an MBA, not actually at the study session,

because I think the study sessions are going to be very, very full of current year deliberation

of the budget decisions you're going to be before you.

Council member, I think you still have the floor.

Sorry to interrupt.

So that status update is what I'm just trying to get the time certain that we're going to get that information back.

So that's the friendly amendment that I'm trying to make.

It sounds like our understanding is May.

It's what Lee just described.

And I don't know if we've resolved.

I think our city manager, I don't know if your mic was on, is suggesting.

Were you suggesting that would be an MBA?

That was my mic was on.

Oh, your mic was on.

Okay, sorry.

I wasn't sure if everybody followed that.

So let me go back to the maker of the motion on whether or not you want to modify anything.

Well, I want to make sure that everybody hears what Jennifer said, which I think was sort of counter to what Lee was saying.

We had said budget study session, I think.

I think Lee initially was talking about a budget study session, which could have been appropriate,

but I'm just suggesting given the magnitude of deliberations I think this council is going to have over this budget,

I'm recommending an MBA, a written report to get to the council members' information,

and we could get that out in May sometime.

Okay.

Ed's nodding that that's something we can achieve.

Is that okay with you as the maker of the motion?

Yes, it's okay with me as a maker of the motion.

Okay.

Thank you.

Who was the seconder?

Okay.

Vice mayor is okay with that.

Okay.

Okay.

Thank you.

We'll go to Council Member Ortiz.

All right.

So I'm not sure exactly what happened, but that's fine.

I was ready to rail against this recommendation, but I just want to say a few comments.

But, you know, as council members, I believe we owe it to our constituents to be as informed as possible when we make decisions that affect services, residents, and our local economy.

We cannot emphasize the importance of being data-driven and a fact-based council, yet we refuse to explore all avenues to close our budget deficit.

If that's the case, then we are simply prioritizing data that fits our positions and our arguments

and avoiding information that goes against our personal politics.

And so that, you know, initially that's what I was going to say.

I was going to oppose the motion as it stands,

and so I guess I'm going to listen to a few more people talk and finally understand.

But I personally do not see, I'm a small business of support.

about 80% of the policies I introduce on this council is supporting small business.

I'm trying to revitalize my local economy in District 5.

I'm not trying to harm small businesses.

I'm trying to look at avenues in which we can make our city healthier

and actually meet the expectations of our residents, because we aren't.

We are not meeting the expectations of our residents every day,

whether it comes to parks, whether it comes to the quality of our streets,

whether it comes to the quality of our services for youth.

down the line. You know, I speak to residents every day who are frustrated.

And I believe that if we close our mind or actively participate in what I would call

cognitive dissonance, then we are essentially tying our hands as we think of solutions for

our problems. Thank you. Thanks, Councilmember. Let's go to Councilman Condellas.

Thank you.

No, I appreciate the dialogue,

especially the willingness to have that information.

Councilmember McCahee,

I appreciate your supporting the friendly amendment.

I guess my question to staff is about, you know,

we had polling information that helped us make this decision today,

knowing that we had the public support out there

to make sure that whatever we're proposing

and whatever we go to the ballot with is going to be supported.

So, you know, I understand the fear of not wanting to have information that would force us to have to go in November for an election.

But I guess my question for staff is, even if we had that information by the study session, I mean, we still obviously have to go out and poll to see with whatever information that we have or what we want to put forth, whether it's a business tax receipts change or a head tax-based model, we still need the voters to be in favor of it.

So, Lee, I mean, from your perspective, I mean, at the earliest, we would have to go out to poll would be, what, August, September if we wanted to.

But then we need to go to the county to let them know we're putting something on the ballot by, what, August 15th, 90 days out?

August 7th.

August 7th. Thank you, Tony.

So walk me through that timeline in your head.

Yeah, so contemplating something for the November ballot, we would typically be polling now or in the spring.

So yeah, polling in the fall is typically done by a campaign when something's already on the ballot

to kind of really refine messaging and approach and mail and 500 other things that you guys know way better than I do.

So we would be doing that now.

I would say where we're at now, I don't think we would know what to poll, right?

There's two big questions, I think, that we'll try and present to you guys in the way of May of here's what we know what the levers are and what, you know, research tells us at this point is, you know, an employee headcount versus a gross receipts.

And I think we've learned enough as a city to kind of talk about those things with you.

We think ultimately, whether we try to fit something in in 2026, or quite frankly, I think a next step may require additional resource, it's still informative for you guys to resource what the next step is, like an economic impact analysis or anything else.

Great. That's all I wanted to reiterate for those of us up here who are nervous about, you know, not wanting to get information by a certain date.

The reality is I don't think we should be scared of information or to place something on the ballot because I don't think we're even there yet.

I don't think we're at that point.

And I think what we're trying to do in the intent of our memorandum was to get information

to enlighten us to see, you know, are we thinking about the right things and are we getting

the right information to be able to pivot one way or the other?

That's that's all.

I'm throwing that out there.

Thank you.

Thank you.

Thanks, Councilor.

We'll go to Councilor Kameh.

Okay, I'm with my colleague, Councilmember Ortiz.

You know, we went around the block a couple of times.

And so I've gotten a little bit confused, so I'm just going to ask for clarity.

So staff's recommendation is to adopt this resolution to move forward in June, correct?

For the TOT.

Correct.

For the 2 percent.

Okay.

Okay.

So I got that straight.

And then in terms of the additional sort of like information that has been asked by Councilmember

Compost, it would be item number two in the joint memo in terms of trying to get information,

but it's not information that would be as part of our June study session, I mean our

our May study sessions, it's going to come via an MBA.

So we, yes, so it would be a manager's budget addendum,

which means it could be part of, you guys can ask questions about it,

we can deliberate it depending on the timing of that,

whether it's budget study sessions or the June budget message.

So you guys can actually ask questions about it.

It's not like an info memo.

So that information is coming anyway, right?

I mean, we could utilize that, the MBA information in our questions.

Okay, so, okay, I got it.

Thank you.

All right, thanks for the clarification.

We're going to go back to Councilmember Mulcahy.

Well, since two of my colleagues called me out for being afraid of information,

I figured I might as well say, I mean, it's ridiculous.

What I was really talking about was the concern about sending our staff

during our budget crisis to explore something that we'll have no hope

to get on a ballot for approval anytime soon.

So I've accepted the friendly amendment

to receive that information,

but it had nothing to do with being afraid

of receiving the information of what it would say.

It's really about staff capacity.

And, you know, so I'll just leave it there.

Yeah, appreciate that point.

Let's go to Councillor Dewan

for maybe the last word on this item.

We'll see.

I'll keep it brief, Mayor.

Thank you.

Council Member Cohen and Council Casey made a very clear point, right,

that a resident cannot afford or even our visitor cannot afford taxes.

I see that as the economic downturn that we have now.

If we keep asking without being fiscally responsible,

without doing what we can with the budget that we have.

We keep asking for more, and eventually the citizen is going to say no, no, no, and no.

Thank you.

Thank you.

All right.

I don't see any other hands.

Tony, let's vote.

Motion passes unanimously.

All right.

Consensus.

Thank you.

That's wonderful.

All right.

We are, thank you to staff for the mid-year review.

We're on to, or I'm sorry, that was the, that was 3.4, TOT.

It felt like the mid-year review.

We're on item 3.5, which is support and collaboration on Assembly Bill 1633.

3. There's no staff presentation.

Tony, do we have public comment? I have no cards

for this item. Okay. Coming back to the council.

Second.

Okay. Any questions?

Comments? Not seeing any.

Tony, let's vote.

Motion passes unanimously.

Alright. We're on item 6.1.

2026 power content and rates.

We'll turn it over to Lori and Zach when they're ready.

Good afternoon, Mayor and Council.

Lori Mitchell, Director of the Energy Department.

I'm very pleased today to be joined by Zach Strike, our Assistant Director.

So this item today will set rates for 2026, as well as our renewable energy content that

we supply our power customers.

In summary, we are recommending to lower our rates by 18% compared to last year.

As a reminder, we also lowered our rates in 2025, and since 2024, we have lowered our

rates by 27%.

San Jose Clean Energy has worked diligently to lower our costs, build financial reserves,

and improve efficiencies to provide more affordable and cleaner power to our customers.

If the recommendation is approved today, our customers will pay $92 million less than in 2025,

and our rates will be 3% lower than PG&E, including the PCIA.

The PCIA is a fee that PG&E charges all CCA customers statewide,

and our renewable content will remain the same at 62%.

It's important to note that in 2025, we met the state's goal of supplying our customers with 60% renewable energy,

and we did this five years earlier than the state's goal, which had that being met in 2030.

In order to achieve these lower rates, we are recommending using $108 million from our operating reserves to meet our expenses.

By taking this action, we will shield our customers from increases in the PCIA.

As a reminder, we design our rates in a competitive market.

Each year we complete a cost of service study to ensure all costs are recovered and that

our financial goals are met.

We review our current rates by each customer type and determine if they recover costs and

then we consider our competitive position relative to PG&E to develop recommendations.

One of the biggest factors in designing our rates is the PCIA, or what's known as the

Power Charge and Difference Adjustment.

The PCIA is a fee that all CCA customers are charged by PG&E for their legacy resources.

These resources include older renewable energy power purchase agreements, utility-owned hydro,

utility-owned nuclear, as well as gas power plants.

Each year, PG&E and the CPUC determine the cost of these resources as well as their current

market value.

And then the stranded above market costs are collected by customers in the PCIA.

Historically, as you can see in this chart, the PCIA has been volatile with very large

increases.

In 2026, San Jose Clean Energy customers will pay PG&E $132 million in the PCIA.

This increase is 470% higher than in 2025.

Due to the volatility and large increases in the PCIA, San Jose Clean Energy has built strong financial reserves over the last few years to protect our customers from these increases and keep our rates stable and competitive.

CCA statewide are advocating for long-term solutions to the PCA that increase transparency

and reduce costs for all customers. In the coming years, it will be important to continue

this advocacy and to find long-term solutions to PCA increases. And with that, I'm going

to turn it over to Zach to talk about our rates this year and financial condition.

Good afternoon.

Zach Stryke, Assistant Director in the Energy Department.

This slide shows the rates that customers will pay relative to customers who take full

service from PG&E.

As Laurie said earlier, San Jose Clean Energy charges are down 18% from 2025, and that's

a total of $92 million in savings, and that includes the PCIA and other PG&E fees.

You can see that if we're just comparing the rates that San Jose Clean Energy receives,

that reduction is actually 42% year-over-year.

For both 2025 and 2026, these are full-year comparisons in the bar graph.

So that means that looking at 2026, for example, adding up San Jose Clean Energy being a little

more expensive in January and February since PG&E changed their rates January 1st, also

including the $25 million bill credit that went on customer bills in January from San Jose Clean Energy,

and the rate change being approximately 3% cheaper beginning March 1st,

San Jose Clean Energy customers will pay $5 million less than PG&E in 2026.

Here we show summary financials across a range of three scenarios, worse, expected, and a better case.

In the middle case, we expect to need to utilize $108 million of reserves to make up for the revenue shortfall caused by the 470% increase in PCIA fees collected by PG&E.

As noted in the memo, though the table shows us using the full $106 million currently in the rate stabilization reserve,

Energy Department staff will work with the Finance Department and the city's municipal advisor

to determine the exact amounts of the rate stabilization reserve and other reserves that are used to make up the revenue shortfall.

Despite the financial challenges in 2026, the recommendation still calls for 62% renewable

energy in San Jose Clean Energy's base green source product.

That's one of the highest renewable energy service options in the state and compares

favorably with the 23% renewable energy in PG&E's most recent filing.

The financial plan also assumes a sustained funding for customer energy programs, which

be recommended to increase slightly to $13.5 million in the 26-27 budget. Staff are also

working on the five-year refresh of our energy program's roadmap this spring.

And finally, as shown on the previous slide, even after what is expected to be a difficult 2026,

San Jose Clean Energy forecasts having $50 to $60 million in reserves above the 100 days of

operating expense target per council policy. And with that, we're open for questions.

Thank you. Come back to the council. Tony, do we have public comment? I have no cards for this item.

Okay. Thank you. Then we'll begin with Council Member Duan.

Thank you, Mayor.

Lori and Zach, I just want to say thank you for doing a fantastic job

protecting our residents from the rising cost of energy

and for saving our environment by using the renewable energy.

Great job. Thank you.

Thanks, Council Member. We'll go to Council Member Cohen.

Thank you. Thank you for the report and for the long conversations

that we've had on this, I just wanted to, I continue to be flabbergasted by the PCIA.

The fact that there's a 470% increase year over year, and I know the CPUC has to approve

it, so I'm just still wondering why they get away with it, but I fear that PG&E is aiming

for PCIA rates that will make it nearly impossible for local CCAs to offer energy at a cheaper

total cost than they offer customers.

So I'm just wondering, do you feel that that's their intention and approach,

or is there something that accounts for this big increase year over year in the PCIA?

Yeah, that's a great question, Councilmember.

You know, the PCIA calculations are very complicated,

and I think one of the most complicated parts of it

is that it's calculated each year based on short-term market prices,

which are inherently very volatile, which leads to this volatility.

To your question around could sustained increases make us more expensive,

I think that could happen, and I think that's really one of the reasons

we think it's so important to continue to advocate for reform in the PCIA.

through our trade association, CalCCA, we will be ruining a bill this legislative session

to increase the transparency around PCIA.

And as we do every year, we will continue to engage in that regulatory process.

And although this outcome this year is not good, in the past we have had some regulatory wins regarding the PCIA.

and so we'll continue that advocacy to ensure that we can provide competitive and stable rates for the long haul.

Thank you. I just kind of wanted to get that out there a little bit.

I appreciate the work that you've done to take that into account

and still provide some small but real savings to customers that are using our energy

and for continuing to provide clean energy, so I will move approval of the resolution.

Second.

Well, all entitled to a little venting about the PCIA.

We'll go to Kelser Kamei next.

Thank you.

And I want to thank you and your team for all of the briefings and the update.

I have a lot of frustration with PCIA, and it's really just outrageous.

470 percent increase is like out of control.

I think that we need to do more.

I would offer whatever I can do.

I'm sure that my colleagues, in terms of needing the reform,

and I do know that you're working on legislation.

I think that the message to our IGR team is use us as local officials

who can advocate towards the need for reform.

and I do know that there is legislation on the way

and we just have to be on it because this is not okay.

I mean, I understand the short-term market prices

and that it's done every year,

but, you know, it's still out of control

and I think that the rate stabilization fund

I think is good that we have it

because if not, our ratepayers would be all over the place.

And so I think that reform is needed.

It's needed now.

And if there's anything we could do,

I think please work with us

because I don't think we should continue this.

So thank you.

Thank you for your work.

Thanks, Councilmember.

Looks like that's exhausted our comments and questions.

We have a motion on the floor

Tony, let's vote.

Motion passes unanimously with fully absent.

Okay.

Thank you all.

We are on to item 8.1.

Would the Vice Mayor like to vote on the last item?

Motion passes unanimously with all present.

Thank you.

just in time.

We're on to item 8.1,

public hearing on the 2026 weed abatement

commencement report on the removal of weeds

or refuse.

I don't have

staff presentation on my notes. Is that right, Rachel?

Are you just here to answer questions?

That is correct. Okay, I'm going to

turn to Tony then.

Sure, I have two cards. James Aguilar

and Alan.

Come on down.

Okay, if you heard your name, oh, I'm sorry, you're here.

Thank you.

Good afternoon.

Good afternoon.

Foley and city council members, thanks for having me here today.

My name is James Aguilar, and I'm here to represent my parents, who unfortunately just

stepped away for a little bit.

they were hanging in there for the session, but they took a little bit of a break.

I'm here today to respectfully request that their property be removed from the wheat abatement list,

which is located in the Alviso District of San Jose at APN 015-06087 on Grand Boulevard.

and I'll get into the specifics of why I'm requesting that but first I wanted to first

congratulate you all for the amazing work you all did showcasing San Jose over the last few weeks

and I know there was a lot of preparation we heard from city manager McGuire on all the work that went

into highlighting San Jose as a real showcase on a global audience with the global audience

It was amazing.

I had some friends that flew in for the game.

They were here to watch their Patriots lose.

They came in for the weekend, and I hosted them, taking them around the city.

And I got to say that I had a tremendous amount of pride that I felt just seeing the community come together

and all the great work that you all did to bring that spectacular together.

So thank you for all of that.

it made me think of my parents actually in that

that pride of city and community

and property I see that with my parents

and specifically they've been

property owners in San Jose for over 60 years they have a lot

in that district of Alviso

that received a notice of

weed abatement last year.

And they had a deadline of March 1st, 2020.

That's your two minutes?

Okay.

Anyway.

Thank you.

The property is, in fact, in compliance, as you see, with the packet that's in front

of you.

Thank you.

Hello, good afternoon, Mayor, City Council members and staff.

My name is Alan.

I'm representing the address that is on the weed abatement list.

It is 1090 South De Anza Boulevard.

It is under the company name De Anza Hospitality.

I was managing this property starting June of last year,

and as of July, taking care of the weed abatement notice.

but the city of Santa Clara County, they come out and do the inspection starting March 1st.

So when I took over the management, it was already over the deadline.

So on the left side of the column, those are pictures taken by the Santa Clara County inspectors, hence why it failed.

And then on the right side of the column, which is as of recently, it has all been rough graded

and all of the overgrown weeds and abatement has been taken care of and the fencing has been re-secured.

we've also secured the block with additional rounds of security private

security and then we're also in talks with the local PD across the street so

that you know if they want to do more patrols over there that is also open so

after speaking with the Santa Clara County inspectors they informed me the

minimum requirements to take care of this land as well as coming to the public

hearing so that we are no longer on the weed abatement list for the next two

additional years since we did fail for 2025 so yeah that's pretty much my

remarks thank you again for your time thank you back to council okay thank you

Tony thank you to our two public speakers I don't see any hands Rachel do

you want to just remind us of the process and help us understand I mean

obviously we're always concerned when residents come and feel that they're

in compliance and there's a discrepancy there?

Is there anything the council should be aware of before we vote here?

And is there any recourse for members of the public

other than coming to this meeting?

Yeah, so I actually would like to turn that inquiry over

to our representative from the county weed abatement program,

Garrick Ioselewski, who can help answer that question for you.

Okay.

Hi, good evening.

Garrick Ioselewski, I'm the program manager

for the weed abatement program for Santa Clara County.

If I understand the question correctly, what is the recourse for these individuals, aside

from coming to the hearing, to get removed from the list?

And maybe, yeah, and sorry, just maybe since we only see these once a year, maybe just

a quick refresher for the council.

I mean, it's just always concerning, obviously, when constituents come and feel that they've

come into compliance and are maybe facing penalties, and so I just want to be respectful

of the fact that they sat through a long meeting and just make sure we understand how we might

have gotten to this point, and then, yes, if there's any recourse.

because you're asking us to vote on a big body of these altogether, I believe.

Sure.

So our inspection program, we discover properties throughout Santa Clara County

either through receiving a complaint from a member of the public or a public agency

or just through an inspection while we're out in the field.

We see a property that is overgrown with weeds and other vegetation.

That's how they get added on to our list to begin with.

Our process is that once a property gets added to the list, they will be inspected annually for a minimum of three years.

What we do is we go to the property and ensure that they are maintaining their property in compliance for three consecutive years.

Once a property owner has been in compliance, as seen through our inspection program for three consecutive years, they will be removed from the list.

There is also another way that they can be removed from the list is to build or landscape on the property in a manner which will prevent the weeds from regrowing.

So that's just a quick overview of our process.

When we do the inspections, we do charge inspection fees.

If the property is out of compliance, we will work with a property owner to bring it into compliance.

And if we do not get voluntary compliance, we have a contractor who will go to the property and do the abatement work on their behalf.

and they get charged those fees and costs for abatement on the property tax bill.

And the compliance date is March 1st, and then if it's not in compliance by then, there's a fee at that point.

So March 1st is the earliest that our team will go out to the property to do an inspection.

So that does not necessarily mean that if they're not in compliance on March 1st, they'll get charged additional fees.

They get charged the fee once we go out to do the inspection for the year.

And then if they're out of compliance at that point, there are additional fees that may be added.

Got it. But in that case, there's an opportunity to cure, basically.

Correct. We will send them a notice telling them they have two weeks to correct the violation,

and then we will return to the property and verify.

And if at that point it is still out of compliance, we'll follow our process to bring it into compliance.

Okay. And when you first contact the property owner, you make sure they understand that you lay out that process for them and clear dates?

when we first contact the resident we send them the notice which is the in the big packet that

you guys have in your agenda it does lay out the process of the deadlines where they can come and

contest it does not necessarily explain in complete detail the whole three-year process so

that part is a little bit confusing and we do receive a lot of phone calls and emails asking

questions about that well let's try to fix the part that's confusing but i'm glad to hear that

you do lay that out. Yeah, I just started this job a little over a year ago, so I'm just working

to fix a lot of the things that are broken already. Well, appreciate that you're doing that.

That's great. Okay, well, I'll see if colleagues have additional questions. It's always tough in

this case without us being as close to it. We're not out there doing the inspections. Obviously,

we want to hold everybody accountable to the same rules and treat everyone fairly,

But while recognizing sometimes people have hardship, and I believe you do have some allowances there.

Is that right?

Allowances for hardships, for financial hardships.

At this time, we do not have any programs geared towards that,

but we are working on a state budget request right now to actually provide financial assistance for those in need.

Got it.

So that's pending right now.

Okay, I see.

Got it.

Okay, well, let me turn to colleagues, see if others have any other questions, thoughts, or emotion.

Let me turn to Councilmember Kameh.

Thank you.

You mentioned the three years in compliance.

Here we are in February, March is coming up, so if your inspectors go to a property and

it's in compliance, you check off, okay, that year it's in compliance?

Okay.

And so you have to come back two more years for them to be off the list?

Correct.

Okay. Is that something that you let the property owners know?

That, oh, you're in compliance and...

They do not receive a notice when they're in compliance,

but when they're out of compliance, they do receive a notice.

And if they receive one of those notices,

that three-year process starts over again the next year.

I see. So the property owners who mentioned that,

who came today, who said, oh, they're in compliance,

you know, you've got two who have been doing the work,

then as of March, okay, they're in compliance,

and then there'll be two more other opportunities

where they'll have to be maintained in compliance,

and then they're off the list.

Correct.

Okay.

With that, I move staff's recommendation.

All right.

We have a motion on the floor.

I don't see any other hands.

Tony, let's vote.

The motion passes unanimously.

Okay.

Thank you all.

We are on to item 10.2,

which is the administrative hearing on the appeal

of the Planning Commission's denial of a conditional use permit

located at 1692 Story Road.

And I believe we are starting with a staff presentation.

Good afternoon, honorable mayor and council.

I'm Vanilla Sandhu, Deputy Director of Planning, and to my right is Chris Burton, Director of

Planning, Building, and Code Enforcement.

The item before you today is a permit appeal on the Planning Commission's decision on the

Tropicana Late Night Use Project.

Just to provide a little bit of context, the project is located on 1692 Story Road in a tenant site, Suite 100.

The site area is 3.34 gross acre.

The existing use is a public eating establishment known as the After Bar and Grill.

And the general plan and zoning designation for the site is neighborhood commercial.

I'm so sorry to interrupt.

I didn't notice a hand up, and I think we have a disclosure we need to make before we begin.

So we may need to do that and then kind of restart the presentation.

My apologies.

Councilman Erdogan.

Thank you, Mayor.

I want to disclose that I had contact with the project consultant.

Okay.

And for our city attorney, is there anything else beyond disclosure that needs to be done?

He doesn't need to recuse himself?

Okay, great.

Sorry about that.

Let's go back and do the staff presentation.

Apologies.

No worries.

I will continue with the project description.

So the proposed project is a conditional use permit to allow late night use,

specifically until 2 a.m. Fridays through Sundays,

for an existing public eating establishment within an approximately 7,000 square foot tenant space at the stated address.

The project does not include any external modifications to the existing commercial building or the site.

The public eating establishment currently operates with a Type 47 ABC license, which typically includes serving of food with the sale of beer, wine, and distil spirits for on-site consumption.

The project was reviewed in conformance and for consistency with the Envision San Jose

2040 General Plan, San Jose Municipal Code, the California Environmental Quality Act,

as well as two specific policies around late-night uses, or rather one specific policy, which

is 6-27, for the evaluation of 24-hour use, and then, of course, the Council policy 6-30

public outreach policy, which applies to all development projects.

For this project, the San Jose Police Department is opposed to the project because this operator

has been cited multiple times and has stated that they would not allow for entertainment

users at this site.

Staff during their review found that the project is inconsistent with the Council Policy 6-27,

which states that 24-hour users should not be approved unless the facility can operate

without detriment to nearby residential users or the general welfare of the surrounding area.

And then there is also a conditional use permit finding 20.100.720.84,

which says that the proposed use at the location will not adversely affect peace, health, safety, morals, or welfare

or be detriment to the general public health, safety, welfare goals of the city.

This project has documented history of noncompliance with state and local laws.

As I mentioned, it's been cited multiple times by the police department,

and despite warnings and opportunity to achieve compliance,

the business has continued to operate,

and therefore the police department is opposed to this conditional use permit.

This item was heard by the Planning Commission on November 19th.

last year, and the Planning Commission, during the hearing and after hearing all the testimony,

offered the applicant an opportunity to defer the item for six months to allow for coordination

with the police department and the resolution of issues. However, the applicant declined,

and thus the Planning Commission voted unanimously at this hearing to deny the proposed CUP for late

night use. The applicant subsequently appealed the Planning Commission's decision, and that is why we

here today for the council to consider this item. With that summary, staff is recommending

denial of the conditional use permit. If denied, staff wants to note that the public eating

establishment can still continue to operate within the hours that are allowed by right,

which is until midnight, but the late night use could not move forward if the council

chooses to deny it, and the project would be exempt if denied under the California Environmental

Equality Act, Section 5270.

That concludes staff's presentation,

and we are available for questions.

Thank you, and I believe we hear from the applicant

for up to five minutes, and then see if we have

any other public comment. Is that the proper order?

Great. Let's hear from the applicant,

or the applicant's representative.

Thank you, Mr. Mayor, members of the Council,

Jerry Stranches representing the applicant after bar and grill.

So this is pretty simple.

It's two hours they're asking for to really stay alive and be able to stay open.

It's a difficult business, the restaurant bar business.

And so what we're suggesting is that we come back in a year with a compliance hearing

to make sure there are no issues, any problems.

We want to partner with the police department.

We need the police department's help.

We would prefer to have what is secondary employment by the police department there

to provide the best kind of security if we can do that.

If not, we're prepared to bring in whatever amount of private security

would be required or necessary to satisfy the police department.

We want to work with the police department.

So asking that you approve this appeal.

We come back in a year to make sure everything is fine

and continue to serve food and operate a successful business.

Happy to answer any questions, but I think that's saying it all.

Thank you very much.

Okay, thank you.

Thank you.

Tony, do we have other public comment on this item?

Yes, I have three speaker cards. I'm going to call all three.

First person in the microphone, go ahead and speak.

The others can line up behind him or her.

Dennis, Jenny, and Ted, come on down.

Good afternoon, Mayor Mahan and members of the council.

I'm honored to be in front of you.

Hopefully that you can listen to my presentation.

First, I'd like to, as you know, I'm the owner of La Placida Tropicana,

the Tropicana Shopping Center.

And as many of you know, having been there, the history of Tropicana,

I work at a shopping center.

This is a picture of my office, the building, 1692-story road, second floor.

That's my office with a staff of five.

I sometimes work here seven days a week.

When my wife gets mad, I work eight days a week.

So I'm there all the time.

After, it just happens to be the restaurant right underneath my office.

So I should have a pretty good grasp of what goes on in there.

That's why when I saw the memo, it says there's 428 incidents.

after.

I said,

that means there's more than,

that's 1.2 incidents a day.

And I'm sitting right upstairs.

I don't see those 1.2 incidents a day.

And so we asked for clarifications

and

to find out

what instances are they talking about.

Bear in mind,

as a manager of the Tropicana Shopping Center

for the entire shopping center, I'm responsible for calling in incidents.

So whenever there's a broken car, illegal vendors selling oranges on the parking lot and so forth, we call in.

And I think the San Jose Police Department advises to call in.

We should call in as often as possible.

It's because that's to build up history to remove people that are using this stop program.

And so we all...

I'm sorry, that's your time?

I'm so sorry.

It's a two-minute time limit for each.

The applicant...

I'm sorry.

The primary speaker had five minutes,

and then it's two minutes for all subsequent public comments.

Maybe we should have had you go first.

Sorry about that.

You're welcome to leave them with the clerk.

Yeah, right here.

Next speaker.

Good evening, Council members.

Thank you for having me here.

I am Jenny Kosky.

I represent the Common Area Manager Office.

I help to maintain the Common Area at Tropicana.

To kind of reiterate on what Dennis was saying,

is when we make calls in, especially myself or Dennis,

when we call in an incident, whether it's something small or large,

San Jose PD often asks us for the address and we provide the 1692 address at our office.

So part of the question is, is that address being incorrectly assigned?

Are those incidences being incorrectly assigned to after Bar and Grill

because we are providing the 1692 address?

In terms of what we've done since 2022 is we've been working as common area managers

with San Jose PD, the SEU unit, to improve the safety of the shopping center.

So it is not something where we haven't been doing it at all.

We've been working with them since 2022 to make sure that the shopping center is safe.

And I, for instance, when I've worked late at night, left to go to my car at 9, 10 p.m.,

I feel safe walking across to the parking lot and going to my car.

and in terms of how we have been as owners working to improve the safety of the shopping center.

Since the December 5th, 2024 owners meeting, the landlords had made a decision that requires any business,

especially the restaurants being open past 10 p.m. to hire either SEU or private security to monitor their areas,

patrol their areas within the business and the common areas if they are opening past

10 p.m., if they receive that CUP.

So we are working on providing safety and making sure that the shopping center is safer

and working with San Jose PD's SEU to ensure that safety.

So thank you.

Thank you.

Next speaker.

Mayor, City Council, I ask you to consider letting this man have his business.

Consider what we talked a lot about here today was taxes.

You're going to get tax revenue.

You have employees.

The area could use another restaurant,

and the fact that somebody is willing to do that in this business environment