All right.

Good morning, everyone.

Welcome.

Good to see you all this morning.

We have quorums, so I think we'll get started and hope that our other colleagues arrive shortly.

Tony, would you please call the roll?

Kameh Campos.

Tardillos.

Here.

Cohen.

Ortiz, Mulkehi.

Here.

Duan.

Kendallis.

Here.

Casey.

Foley.

Mayhan.

Here.

You have a quorum.

Okay, great.

Thank you.

Uh well, once again, good morning, everyone.

Thank you for joining us for our first budget study session of the year.

I uh have some opening remarks, and then I'll turn it over to our city manager Jennifer McGuire to share her opening remarks, and then we'll jump into the staff presentation and get our study sessions underway here.

So I want to start by thanking City Manager Jennifer McGuire, assistant city manager Lee Wilcox for their leadership in delivering this balanced proposed budget.

This fiscal year we face the most challenging conditions in my time on the city council, and I'm very thankful to have a former budget director as our city manager to help lead us through the process.

I also want to thank budget director Jim Shannon, Deputy Budget Director Bonnie Yung and Assistant Budget Director Claudia Chang, as well as the uh entire city manager's budget office for their dedication and long hours worked.

I know you guys are pulling long days and have for many months now to shape this budget and help guide us.

This process is the foundation for our everyday operations.

Your attention to detail and expertise are critical to our success as a city as we serve the residents of San Jose.

So, colleagues, the purpose of these sessions is to allow staff to present the current state of each city service area, allow the city council to weigh in, and the general public to also learn more about the state of our city's budget and fiscal commitments for the coming year.

As a reminder for everyone about where we are in this process, the city manager released the proposed budget on May 1st, and it's publicly available online.

On June 1st, I will release the June budget message after we've gone through these budget study sessions.

We're also doing community town halls and hearing directly from residents.

And uh the June message will then go before the council for a vote on June 9th, and then of course, city staff will do final cleanup and bring us the final budget for a vote before the end of the fiscal year.

The study sessions are organized by city service area, service areas with focus area overviews woven into each relevant presentation.

We will also cover specific topics like fees and charges to understand the cost recovery for essential services and programmatic costs for our residents.

I want to thank my council colleagues and commend them for maintaining focus in the five focus areas.

Increasing public safety, reducing unsheltered homelessness, building more housing, growing our economy, and cleaning up our neighborhoods.

These focus areas still very much reflect our residents' top priorities as shown by our annual resident survey.

One interesting note is that beautification has risen to a top three concern for our residents.

I would encourage everyone to review our focus area dashboards.

They are regularly updated to reflect our progress.

Difficult decisions.

The good news is that we are turning a corner on our homelessness response.

We are nearing the end of the era of large encampments in San Jose with the final large encampment clearing underway as we speak at Coyote Meadows.

And our expected interim housing system has now expanded to over 2,000 beds, and we've continued to sustain critical investments in prevention to reduce the inflow to homelessness.

As the circumstances on the ground have shifted, we can redesign and optimize services like Beautify SJ to better respond to smaller encampments and a more mobile unhoused population.

We are also seeking new ways of partnering with the county and the housing authority to reduce pressure on our general fund.

We're lucky that this pivot and these partnerships will result in more agile response as well as cost savings.

This optimization will save approximately 5.4 million dollars in fiscal year 26-27 and even more ongoing.

A few other notable aspects of the proposed budget, I just want to highlight, and I'm sure the city manager will reinforce.

A majority of these positions are currently vacant, and of those that are filled, most will be moved to a different role within their department.

And so again, I just want to thank the city manager for really putting an emphasis on supporting and protecting our workforce even during difficult budget times.

The proposed budget recognizes new revenues of 19.1 million dollars in 2627, of which 18.4 million is ongoing.

While the proposed budget offers the city council a solid foundation to work off of, there is a level of uncertainty that we are currently facing, and there are three challenges that I just want to highlight that will be with us in the coming months and potentially years.

First, this budget assumes the passage of measure A, which is the transient occupancy tax or TOT modification passage by voters.

Should this not occur, we will have a deficit of approximately nine million dollars, which will require us to reevaluate departmental level reductions.

Second, educational revenue augmentation funding, quite a mouthful, also known as ERAF, 20% of the city's ERAF funding, roughly $9 to 10 million dollars annually, is at risk, as well as a potential one-time clawback on the order of $35 to $39 million is possible.

There's an anticipated audit from the state controllers audit that will assess Santa Clara County's calculations, and therefore some of our funding is at risk.

So we should be mindful of that.

And then third and finally, card room revenue.

The California Bureau of Gaming Control recently approved regulations that limit card room operations.

Certain industry leaders are estimating this could result in an 85% reduction in operations and a correlated $25 million loss of revenue to the city.

The timing and magnitude of these impacts are still uncertain.

We're hopeful it won't be that bad, but it's something again for the council to be mindful of the cumulative risk of these three items equals over 75 million dollars.

This eclipses the current structural shortfall, which means we must exercise great fiscal restraint.

As we continue to develop the budget, we need to monitor these structural risks and avoid making commitments that imperil our solid financial footing.

I want to thank all of our community members who have participated in the process, both here at Council and through the budget town halls we've hosted.

Thank you again to my council colleagues for their engagement throughout the process and hosting uh their own town halls through their offices.

Ultimately, just I believe that with more voices, we will create a stronger and more responsive budget to support our 1 million residents.

So thank you again to everybody for getting us this far in the process.

I look forward to the last couple of months here, and I want to turn things over to City Manager Jennifer McGuire.

Thank you very much, Mayor, and good morning to you all.

That was an excellent overview, Mayor, of the budget.

So I think making Jim's job pretty is easy when he goes over it, so it'll just be reinforcing a lot of the things that you just went over.

Today we are proud to deliver the 2627 proposed operating budget, a fiscally responsible and balanced budget that meets the important objectives of the city council while also structurally aligning the general fund with minimal community or employee impacts, as you just said.

This budget follows the direction provided by the mayor and city council with their approval of the March budget message and considers other city council and administration priorities, recent community outreach and surveys, and the impacts of service reductions to the community.

While the 2627 shortfall represents a relatively modest portion of the general fund base budget at 3%, this shortfall comes on top of the funding realignment and reduction actions taken last year to balance the 2526 adopted operating budget and make progress on closing the early forecasted shortfall for 2627, making further cost-cutting actions all the more impactful.

Nevertheless, with continued economic certainty, uncertainty, and the potential for conditions to worsen, thoughtful decision making is essential to address the structural shortfall this next year and position the city to meet the challenges expected for 27-28.

Keeping these considerations in mind, the proposed budget follows City Council direction to focus on targeted strategic spending while fully resolving the ongoing shortfall and preserving critical core community services to the maximum extent feasible.

It's important to note that even with a number of cost reductions, service delivery efficiencies, and position eliminations necessary to address the shortfall.

Again, only a handful of employees will be impacted from the actions in this proposed budget.

However, as the mayor mentioned, should Measure A's transient occupancy tax increase not pass on June 2nd, the contingency plan included in the transmittal memorandum would necessarily result in a more significant and noticeable reduction of city services with the resulting impacts on our community and our employees.

Throughout the study sessions today, tomorrow, and next week, which will cover not only the proposed operating budget but the proposed mid-biannual capital budget and capital improvement program and proposed fees and charges.

I encourage you all to ask questions of department staff to better understand the various components of the budget documents, including the existing service levels, new or expanded initiatives, cost and service reductions, as well as performance measures.

I'm very grateful for all the hard work of all of our departments and the budget office to produce such a comprehensive budget document that's before you today and that you will go over early next week.

With that, I will turn it over to our budget director, Jim Shannon, to get us started with an overview of the proposed operating budget.

Thank you again.

Thank you very much, Jennifer.

Um good morning, mayor, members of the city council, uh Jim Shannon City's budget director.

Thank you for that excellent framing that allows us really to just kind of dive right in in here.

Um I'm gonna provide a brief overview of the overall proposed budget.

Most of that presentation is going to focus on the general fund, um, but um it will also provide highlights regarding key actions of other city funds that are also recommended for 2627.

Details about all these items will be provided in the budget study sessions and are detailed in the budget document itself.

And so I just to uh set us for the next uh little bit here.

We're gonna go through the proposed budget, talk through some of the high-level budget balancing strategies, look at the next steps, and then I'm gonna turn it over to Jen Baker, our director of the Office of Economic Development and Cultural Affairs, to talk through the economic outlook that we're seeing.

So, first though, I do want to start with the um the forecast.

As the mayor had mentioned, we've got a 50.3 million dollar shortfall for 2627, and how this works, if that if that was uh resolved through all ongoing solutions, which our proposed budget does, the following year's shortfall would be an additional 27 million.

Uh and so any shortfall that's reduced in 2627 on a one-time basis would then get added to the next year's shortfall, making that worse.

That's why it's really important that we stay as structurally balanced uh as we as we we possibly can as we go through this process.

Uh we are the proposed budget balances all of the city's funds, our general funds, special and capital funds.

We are fully resolving that 50 million dollar shortfall on an ongoing basis, minimizing those impacts, and still making some targeted investments, both in the investment priorities identified in the March budget message, as well as some other uh select areas for important ongoing core service work within other community services, strategic support services, and some important infrastructure and technology investments.

Overall, our budgeted positions across all of our funds decreases from 7,009 to 6924.

This is a high-level look at the city's overall budget for proposed is 5.5 billion across all of our funds.

That number is going to go up as we get through the adopted process.

When we re-budget funds at the end of the year for projects and programs already in process, and so when you see the final number in the middle of June, it'll probably be that that close to a six billion dollar number that we have in the current adopted budget.

But across all of our 150 funds, um you can see that only about 25 or 20, 27% is really the general fund.

We spend a lot of our time talking about the general fund because most of the resources in there can be used for any governmental purpose, which is where the trade-off discussion becomes really important.

But most of our funding is spent on restricted uses where those revenue sources can only be spent on certain things.

So think about your water bill or your garbage bill.

You can't use that to buy library hours or to uh to pay for police services.

So those are restricted funds both on the operating side, which we have for our special funds and our uh rehabilitation of public infrastructure, which we have for our capital funds there.

Just a quick snapshot of the different funds that we have.

And while the general fund is not the biggest piece of the budget, it is the single largest fund that that we have.

And so this shows all of the expenditures within so several fund categories.

Um, if you exclude the transfers, reserves, and fund balance, so this is a little bit more of a net picture of what the planned expenditures is going to be.

So the general fund is the largest, followed by our underground utility funds, and then our energy fund for the procurement of electricity, airport, and so on.

At a very high level, this slide shows the budget by uh the total budget across all funds by city service area, with uh environmental utility services being the largest, followed uh closely by public safety.

Um then we get into neighborhood services, our uh transportation and aviation strategic support, which also includes a lot of our benefit funds and our debt our debt service funds, and then some for our housing and community and economic development uh roles.

Moving over to the general fund, this slide shows the various categories of general fund revenues.

We've got over 450 individual accounts for different revenues coming into the general fund.

So we do have a nice diverse stream of general fund revenue, even though we wish we really would like to have more uh the do have a nice diversity.

I'll note though that property tax and sales tax, we're super reliant on how those perform.

There are not only are they the largest um uh portions of our general fund, you know, it's it's what's important to be kind of I like to or we often like to point out is that you know, property tax and sales tax almost face pays for the cost for police and fire services, which is not unusual because as cities, you know, cities are the are those providers of those emergency services, but that means that sort of the rest of the revenue category sort of pay for everything else, which is why it's so important to maximize the revenue approach that we have, and that's one of our strategies in the proposed budget.

Looking at the expenditure side, this shows the different types of expenditure uses as a city.

We provide services, and most of our services are provided by people, so most of our budget in the general fund is to pay for people, so that's uh over 75 70 percent of our of our costs in the general fund, followed by our non-personal equipment, which is a category describing supplies, materials, contractual services, um uh you utility costs, things like that.

Our citywide expenses are multi-departmental charges and our major grant programs, just a little bit of funding for capital contributions and uh some a little bit of support to support other other funds with our transfer category.

We have our specific earmark reserves and our contingency reserves, which is set by council policy, and then we have an encumbrance reserve, which is funds that have been encumbered but not yet spent.

Then by department, want to just kind of show the uh how it looks if you just look at the various departments and the non-departmental expenditures, how they sort of stack up.

And there you can see police and fire right at the top, followed closely or followed next, which is actually a fairly significant gap with PRNS, a public works transportation library.

So this just gives sort of a sense of scale about where the general fund uh budget is by department.

Now getting into the proposed budget strategy itself, you know, there are a number of competing community and organizational needs that we need to figure the think through while ensuring that resources contained within all of our city funds remain in balance and thoughtfully deployed.

Uh while the budget development process was informed by a variety of factors, the inputs shown on this slide are the key drivers that provided the strategic approach to address these needs.

That includes council's approval of the mayor's March budget message, which also included our budget balancing strategy guidelines and service delivery framework, various uh city council and administrative priorities that are surfaced throughout the uh throughout the year, and we have our city council uh policies and our budget principles, but equity considerations really need to remain central to the development of our general fund budget to mitigate the impacts that you know service reductions ultimately will uh will uh sorry uh to mitigate the service impacts that will ultimately arise.

We want to make sure that we're optimizing as much as we can for service delivery changes to get ongoing cost savings without an impact or minimize impact as much as possible, and then maximize our revenue strategies, which are outlined here.

So uh the two categories resolves over 75% of our general fund shortfall.

And we can so using these strategies, we're able to minimize the service impact.

So we're resolving 75% of our shortfall before we even get into the cost reduction portion.

So, as the mayor had mentioned, you know, with the transition of the uh end of large encampment abatements, we can shift a little bit of our homelessness spending without compromising outcomes within or reducing unsheltered homelessness focus area.

That is includes a reduction of uh BSJ for contractual services primarily, and so we can reduce 4.2 million dollars in 26, 27 and 6.4 million dollars ongoing.

We have some reductions in our interim housing portfolio of 1.2 million in 2627, which is related to the uh the closing of the Taylor Hub hub site effective in January.

That increases to 14.2 million dollars ongoing as we're looking to leverage some other housing funds to purchase two of our uh motels that were leasing to reduce future lease costs in 2728 and working with the county to take over operations of two of our interim housing sites, also effective in 2728.

So that's over 20 million dollars in that category.

Then looking at the new or increased revenues again per per direction, we are assuming that passage of measure A, although we do have a contingency plan, which we'll talk about in a few minutes.

Um so that generates some significant revenue.

Then we uh has some opportunities and some a few other funds that are uh unrestricted funding sources that can be transferred back into the general fund.

That includes some funding from the construction excise tax fund because development uh taxes are higher than previously anticipated.

We've got some transfers coming in from the Muni golf course fund because of the improved operations and the net um uh profit in that fund that can be taken back into the general fund, and then we have recommendations to include a parking meter rate increase in downtown and extension of hours, allowing us to transfer some funds from the general purpose parking fund into the general fund.

So, really important strategies along with you know being really diligent about all of our fees and making sure they are as cost recovery as possible while still being mindful of the impacts to our community.

So we think we did a good job there raising about 3.8 million dollars for our fees and charges.

But then we do get into cost and service reductions, although they are minimized, they're still real.

Uh, and so we we definitely spent a lot of time thinking through that.

Of that 19.4 million dollars ongoing, you know, two million is from organizational realignments optimizations with minimal service level impacts, but one of those larger impacts is for our public safety area.

Again, because that uh is such a huge part of our general fund, we do need to look to public safety uh services as part of our reduction strategy.

Um we do have a two-year deferral, then of fire station 32 as well as the police training center.

Although we do want to say that's subject to reevaluation, so if budget conditions improve sooner, we want to bring those back online sooner, but but those are part of our of our strategies.

We want to make sure that we're we're being transparent about, and then we're being very strategic about the use of our budget stabilization reserve, which I'll talk about again in a moment, allocating 35 million dollars for capital maintenance and technology investments, key city priorities, and some bridge funding in 2627 to make sure that we can phase in and get the full ongoing benefit of the BSJ and interim housing portfolio reductions by year two.

The very high level strategy then is you see a uh our $50 million shortfall.

We're bringing in uh $66 million of additional sources in 2062.

Um, 18.4 million dollars of that is ongoing.

The rest of those that 66 million dollars is really the budget stabilization reserve again of 35 million.

We're cashing in uh 6.6 million dollars from our IT sinking fund reserve to then turn that in and replace a bunch of IT equipment that needs to be re-replaced.

We got some savings from our business tax replacement system project, uh and so we're gonna cash that in as well at about 2.5 million, and then some other adjustments make up the bulk of that.

Uh on the the change of use side is really reflected in this chart, which is what we're gonna spend the next hours and days uh talking about in-depth.

So I won't go uh too much in depth here, but the how these categories are made up is if you wanted to get super super deep, you can check out attachment B uh to the budget, which kind of goes through which individual proposals are slotted into these categories.

But we've got a number of investments as we in any given year, we need to make investments in technology and capital re rehabilitation.

We have some limited service level enhancements, we have uh the few reserves for our police sworn backfill, our central services, and our children and youth master plan.

A few services previously funded on a one-time basis that will recommend it to be continued in some form.

We have services that are offset by revenues for our fees, grants, and other reimbursements.

We've got a little bit of funding for new capital projects that come online that need to be operated, so we set aside that money in the base, and then we uh we spend it in the proposed and offset that by uh taking down the use of reserves.

Then we've got that $18.9 million dollar, $19.4 million ongoing reduction for uh service reductions, service delivery service delivery efficiencies and fund shifts besides BSJ and interim housing, which are also listed below, and then we had a several reserves that we set aside as part of the base budget that we can liquidate in the proposed to pay for various uh items up above.

Thinking about the budget stabilization reserve.

So, as part of the mayor's uh March budget message approval, we had a budget stabilization reserve framework to work with, and the first uh direction there was do not rely on the budget stabilization reserve to address an ongoing shortfall.

Because the budget stabilization reserve is a one-time funding source, it should be used for only one-time uses, and so we abided by that.

Um, we do have funding to address some one-time urgent unfunded capital rehab and technology projects at $8.3 million, and we've got some limited targeted investments for one-time services projects, order-year long-term savings or efficiencies at $11.5, and then uh $15.2 million dollars again for that phase in, allowing us to phase in the reductions for BSJ and interim housing.

Without this phase in of $15.2 million dollars, that's $15.2 million of other cuts we would have had to make, uh, to make sure that the budget balance.

So the individual components that make up these numbers in the table are shown in the city manager's transmittal memorandum.

If you want to see uh how they add up, but as the mayor said, you know, there are other needs out there that we might need to we need to make sure that we are prioritizing the reserve for.

Um, we think by the end of the current fiscal year by July, we'll have roughly $32.5 million dollars remaining in the budget stabilization reserve, and we have continued litigation between the county and the state regarding the state's uh interpretation of how ERAF should be calculated.

They differ from the county, and so that we're they're currently in court on that.

Um, that could be a pretty significant impact to us both on ongoing basis and as a potential one-time clawback.

We've got the regulations for the carbon business tax, which potential loss of up to 25-5 million dollars beginning sometime next fiscal year potentially.

Um, and then we, of course, as we talked about a couple weeks ago, we have a number of one-time critical capital needs and revenue losses or expenditure needs can fluctuate based on need, and so we could have some unexpected situations arise where we need to make sure that we have some capacity to address.

And a reminder there in bold, we do have a city council policy to make sure that our general purpose reserves, which is our budget stabilization reserve, our contingency reserve, and our workers' compensation and catastrophic loss reserve should be, should be 10% of general fund uh operating expenditures.

Right now in the current budget, they're about 4.99%.

So anything we can do to sort of bolster our reserves is going to be important, you know, to meet council policy and to just deal with these uh these unexpected uh potentials that that could arise.

And then finally, we do have our contingency plan.

Uh and this is again this little bit more detail is provided in attachment E to the transmittal memorandum.

These are not included in our proposed budget balancing strategy, but most of them almost were.

So we worked really hard to keep these types of reductions out of the proposed budget, uh, and feel really proud of the budget that we have for you because of that.

But um if measure A doesn't pass or if we get some unexpected you know revenue shortfalls or unexpected expenditure needs, we may need to look at this contingency plan to make sure that we remain in uh structurally in balance.

And so these service impacts are significantly more impactful than what is currently in the proposed budget.

It includes reductions to library hours, uh reductions to various uh rec recreational and and parks access, some reductions for the police department, as well as strategic support, appointee and mayor and council reductions.

So, you know, even though it's a you know not the largest dollar amount in the world, it's it is a pretty significant service impact that will be felt for sure.

And then the rest of these slides, I'm not gonna go through them, just really for documentation purposes.

These are also mentioned in the city manager's transmitted memorandum.

Just to note that you know, if you want to go and understand what the individual proposals are, um you can you can see the title of the proposal here and the section in the budget document where you can find more information about them.

And then if you're online, you just go on the city manager's budget office website, you click onto that department or the citywide section, you search for that title, and boom, it's right there for you, and you have all the detail you need to understand what that proposal is gonna do.

And we have these organized by city service area, um, and there's a lot.

Um, so again, I'm not trying to shortchange any of these by scrolling through, just we have are gonna spend the rest of our time talking about these.

So I just want to make sure that they're documented here for the record, um, but we'll talk more about them in depth later.

And just uh highlight we do have a few uh we have a web, we have a whole document for our fees and charges.

We'll go over that on Monday.

Um, documenting here the utility increases that we have and some adjustments for our development fee fee programs uh that are shown here again that are also discussed in our fees and charges report.

Our study sessions will be continuing.

So after we're done here with this overview, we'll get into community and economic developments.

Then tomorrow we'll do um transportation aviation and environmental utility services, then we'll get a break on Friday, and Monday we're gonna be back at it for the entire day going through the rest of the of the of the CSAs plus fees and charges and hopefully get through capital.

But if we don't get through all that, that's okay because we also have time spent on Wednesday and Thursday.

The next steps for review input and approval, we've got our budget study sessions.

The mayor's organizing a virtual town hall on May 18th.

We've got our public hearings on May 12th and June 8th, the mayor's message release on the first.

We have again, I really drove it home.

We have our final public hearing on the 8th, and then we've got our review and approval of the June budget message and the proposed budget on the 9th and formal appropriation adoption on the 16th.

And with that, I just really want to thank um my senior management team here and the budget office staff who are sitting right front and center, who are uh I'm very, very proud to be the director of uh for a number of years, and I'm always really grateful for the work that they do and very proud of the work that we create together.

So thank you very much for that.

Um, and with that, I want to pass this to um Jen to get us through the economic context, and we can come back for questions for everything, unless Mayor, you want to jump in.

Yeah, let me just since we're ahead of schedule, I really appreciate the overview.

I I'd be happy to entertain like 10 or 15 minutes.

If there are any, just before we go deep on our first CSA, if there are any questions on the high level points, Jim outlined around the budget context, it might be useful.

Let me go to uh councilmember Casey first.

Hey Jim, thank you.

Appreciate it.

Uh, the report acknowledges a significant deferred infrastructure liabilities.

Yeah, only a relatively modest amount of one-time fund funding is proposed for the backlog reduction.

What's our long-term plan to prevent infrastructure backlog from continuing faster than our funding is available?

Yeah, that's you know a really important question.

Um, you know, we we do have, you know, one of the largest projects that we have we're getting started on is a city hall water intrusion project.

That's probably a 45 to 50 million dollar project.

We have two million in the budget this year um to get uh award for a design-built contract.

We'll be coming back to council later in the fiscal year with a a strategy to fully fund it with probably a mix of one time and financing proceeds.

You know, I think the long-term strategy is gonna have to be at some point we're gonna need to have a more uh uh significant and ongoing general fund commitment to some general fund capital that will just be, you know, at some point the buildings just stopped working, and so then the money gets need to get spent there in any way.

So I think that'll need to be a priority couple years, and we won't be able to get at the backlog for the entire system without some more general obligation bonds, and as assets are supposed to be there for 50 years, uh financing that across you know a couple of generations is is a smart way to do it.

Um so I think as soon as it looks like we got some viability out there, I think council we would be recommending council to go forward with the general obligation bond.

We're probably not not there yet, but that's got to be part of the strategy.

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

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

Okay, thank you.

Yeah, great.

Thanks, Councilmember.

Let's go to Councilmember Condelas.

Uh thank you.

Um Jim, I appreciate the work of your office and and the entire uh and the entire team.

Um one of the I guess at a rural high level, one of the concerns I have is uh on the contingency plan that we that we have, and I it's on one of the slides, but you know, I guess my question for the administration is is there anything outside of these this contingency plan or or is uh is this everything in this table or in this uh slide uh reflective of uh what's what's gonna happen should uh measure A or or our T OT measure fail?

Is there anything outside of this, or is this all we're talking about here?

You know, like a menu of options, you know.

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

Yeah, I think so.

The the process that we would we would go through, so if if you know if it's clear that measure A fails on June June 2nd, you know, we've got you know, we're gonna hustle to be able to bring forward uh MBA to say, hey, here's uh the implementation of the continuous plan.

So there's an administrative, you know, process that we'll go through to recommend those.

If I would say that I would this is you know, we we scrubbed this list and we work really really hard to keep everything sort of off, and so we went through a bunch of budget proposals.

So um, you know, we'll take one final look before we make our final recommendation to council as we always do.

Like, what's our best information available?

Do we have any other alternative strategies that have materialized in the last 40 45 days?

There probably will be something, but but I would imagine most of this would still be our primary recommendation.

Great.

Yeah, and I I guess this is essentially um, you know, alternative scenarios would I was looking to help me sleep better at night.

Um, but uh essentially what I'm hearing is probably not, and and which which paints um, you know, a a scenario that we I think all are rowing in the same direction in.

Um and hopefully we we can um we don't have to make that decision and and outside of that I look forward to diving deep in the different CSA areas and and the questions I have uh pertaining to specific budget uh budget actions.

Thanks.

Thanks, council member.

Uh Vice Mayor.

Thank you, Jim.

This is uh the final time that I'm gonna hear you make this presentation.

Uh, but thank you for bringing forward uh a balanced budget, taking into consideration uh really all the risks and the need to preserve and and to use City Manager 2 to save as many programs and staff positions as possible.

But I am very concerned about the list of question marks that our big ticket income generators that if they don't come through, we have to go to contingency plan, which is very concerning and will keep us awake at night.

So I'm my questions for you are about the ERAF.

Is there we've been talking about the these funds for a long time as to the instability of them?

Does it look like that will be resolved this fiscal year or what what's it look what's it look like that this will happen?

We think it's unlikely to be resolved in 2627 or probably at the very end.

I think so they did go to to court, so they went to court in April.

Um so I think there's no decision yet.

It's likely that any decision that comes forward would likely be appealed.

Uh so we don't have a firm timeline.

I mean, the county's been worrying about this for a while, but you know, we've um, you know, if we had surplus funds, we would just been setting this money aside and just say, well, we'll just you know we'll put aside and great, but but we're not in a position to put that money on the sideline, and so we've just been been spending it.

Um, but knowing that it's out there um is is gonna be important for us to make sure that we can manage that appropriately if if ultimately decision, but I don't think we'll get a decision, you know, uh until probably toward the end of the fiscal of next fiscal year.

Okay.

So the the concern about EREF is not necessarily income for 2627, it although that is a component, it's the clawback provision that is of concern to me.

What what's your feeling, your crystal ball about the clawback provision or possibilities?

I don't know.

Um, I don't I mean I'd be speculating.

I think I'm maybe the reverse of you.

I think I think the ongoing hit is gonna be harder for us to figure out.

One times, you know, you know, sometimes we get strategies or something else that comes up, and I think you know, we we put the outside clawback figure out there, but there's not a guarantee that no one is saying you're gonna owe us all of this money back.

That'll probably be a process to go through, like, hey, what should really be paid be paid back?

Um, but yeah, I'm speculating a little bit, but I think the ongoing hit will be challenging for us.

Okay, thank you.

And then um, of course, the TOT that's a question, uh, but then the card rooms, we don't know where that's ending up and to uh the the revenue side of 25 million.

That's that's a big number.

The last question is about UAL.

Uh does it look like our unfunded liability number will increase in the fiscal year?

Or we're comfortable with the current number we're budgeting?

Well, for the 2627, it's gonna be where it's it's gonna be at.

So no matter so we've already got the uh the contribution set from the the retirement boards for 2627.

Really how the market ends up this year is gonna impact our contributions for 2728.

So right now I think I think this the systems are doing pretty well, but it doesn't count until you get to June 30th.

And so whatever we're at at at June 30th, that's what the actuaries use to calculate what the contribution would be for 2728.

Right now, our forecast does have UAL going down in the out years, which is one of the reasons why you see a surplus there.

Um, but that's all depending on you know the markets returning what the assumptions are.

Okay, great.

Thank you very much.

I appreciate it.

Thanks, Vice Mayor, Councilmember Campos.

Thank you, Mayor.

Um, and thank you for you know all the work that's been done, um, city manager, department directors, um, Jim Shannon.

I know that preparing this balanced budget is a uh full team effort, and so I just want to express my gratitude to um all of the staff who have been meeting with my team to walk us through some of the key components of the budget and the recommendations, and so um last year we had uh pretty uh long and detailed MBA regarding the workload for virtually all departments.

Um my question is, will there be a similar MBA prepared for this budget cycle?

And will it be just as comprehensive as um last year's, or will it be different from the MBA we saw last year?

Yeah, we have an MBA coming forward for um talking about our focus areas.

So we've got an implementation plan and the different goals for our various focus areas as part of that work, the teams are looking at you know which which previous which prior city council referrals may need to be dropped or deferred to accommodate that work.

So you will be seeing that um in the coming days or week.

But it won't be as exhaustive as the memo that you saw last year.

It is it is still, you know, it's a lengthy memo, um, but but there's not nearly the number of rows that you had to wrestle with last year.

Thank you.

And um, you know, with there being proposed policy in the March budget message, will the MBA provide a workload analysis for every policy item in the March budget message?

Uh no, no, it'll it'll really focusing around the the focus area components.

Okay.

Um I just want to uplift that because as we have, you know, as a council conversations about trade-offs, um, the workload analysis is important in helping us understand the staff capacity impacts that um are included in those trade-offs that we'll have to potentially be making.

Um, and so um just as a follow-up, um, from the overview and thinking about how the city administration is implementing budget principle number three, which reads any requests to develop or implement new policies using existing resources, shall provide sufficient information for the city council and staff to understand the required level of effort for implementation and any trade-offs that may be necessary prior to city council approval.

So, how are we implementing that?

Well, I I think that's what the proposed budget rep represents.

So the proposed budget is showing us so for the direction that that we received from council, here's the proposed budget that would make that happen.

That is a combination of additional resources that we're recommending to in increase, some new revenue, some cost reductions to take to take down, as well as any specific deferral of items that um uh doesn't require a budget decrease, but is recommending staff sort of shift their attention from certain areas to these other areas that were more recently directed.

So I think that's what the proposed budget tries to encapsulate.

So we do a lot of work, and so this is the proposed budget sort of represents that uh and um and I I think it's baked into all of the different components that we are bringing forward and gonna talk to you about over the next few days.

Thanks, Jim.

I have one more question.

Um, you know, given that we have really aligned our budget um timeline with our priorities, um, how is the city administration thinking about our approach to the city council area focus areas and are there some key changes that we should anticipate given that um and I know that we'll have the um CSAs coming up to share more information, but as we make progress and um are achieving uh some some measurable goals in these CSAs.

How are we thinking about um when it might be the right time to look at a new emerging focus area?

For example, we've heard affordability uh become one of the top concerns for our city residents uh in addition to addressing homelessness and affordable housing, which have remained top concerns for our community over the past five years, and so with um the cost of living and unaffordable and affordability or unaffordability of you know San Jose that is not just an emerging but pressing and urgent issue for us to address.

I'm curious um how how we as a city council um in partnership with the city administration can be thinking about that.

I can answer that, council member.

Thanks for the question.

I think you're right to highlight it because it is top of mind uh for our residents, and what what I would suggest in the current framework, given the direction the council gave, is that we make sure we are baking an affordability agenda into our focus areas, especially related to building more housing and growing the economy, which really ought to be about expanding economic opportunity, income, upward mobility.

The time for the council to potentially modify or expand focus areas would be a conversation we can have throughout the year, but would really be direction the council would need to give through a majority vote, ideally through the March message each year.

Not to say the council couldn't collectively choose to make decisions elsewhere, but because that's early in the budget process, it helps give the city manager and the administration time to shape a budget to align with our focus areas and goals and have that baked into the budget we pass in June, which of course starts the fiscal year in July.

By then the department's staffing models, programmatic goals, and performance measures are pretty uh locked in, and we don't we don't want a mid-year kind of you know jerk them around and create a lot of waste unless there's something really urgent to respond to.

But typically it would be the through the budget process starting with the March message.

Uh thank you, Mayor, for opining on that, and thank you, Jim, for your answers to my questions.

I'll just end with us looking at the very sobering reality of where we're at with our current budget and um in our city manager's opening letter.

I I was really struck by the sentence due to the nature of the city's work, service reductions have the potential to disproportionately impact already disadvantaged communities.

So at a time where we're having to make really difficult decisions, I think we should be very um honest about what expenses are not paying a return to our city and how we can consider those luxuries because when we are uh using our public dollars, we really need to be stewarding those uh investments into building uh our social infrastructure wealth throughout the city and what's going to help strengthen San Jose's local economy because no one's coming in to save us, not the county, not the state, not the federal government.

So it's important that we're um really being thoughtful about what needs to change so that people can have better lives in San Jose.

Thank you.

Thanks, Councilmember.

Appreciate your comments.

I want to move us on, Councilman Condelas.

I know you have your hand up again if you can be brief, and then um I think I misunderstood that part of the overview was actually some economic analysis from Jen.

So we are not in fact ahead of schedule.

So I do.

No worries, Mayor.

I'm I'm known for being brief.

Great.

Um, but I I guess um the I I just wanted to uplift something that you both said uh just now on the opportunity for um, you know, the March budget message being that that vehicle, the the proper vehicle to be basically assess um the evaluation of what we should be focusing on as a council and and our city and subsequently our city.

Um I did want to also piggyback on an opportunity that maybe uh during the June uh budget and and subsequent direction to the administration to start laying the framework for as we start uh you know, uh basically getting getting our arms around these really really difficult issues around uh beautification around cleaning up our neighborhoods or uh reducing the unsheltered homeless population or or whatever one of our priority areas is to what the next iteration of what we should be focusing on as a city, for example, affordability has been has has jumped in every every public opinion poll on our residents.

And so we should be capitalizing on that opportunity to be to hear our community and and it's a it's a it's a it's a uh to borrow uh city manager McGuire's term, it's a wicked problem that we have to work in conjunction, not just within the city, but with our partners in at every level of government.

And if we if we're truly serious about helping that upward mobility for everybody in our city, especially those most historically disadvantaged in East San Jose and in all parts of our city, I think we need to have a tangible conversation is how do we how do we include that as a priority for our city uh council and and how do we start integrating uh that conversation now in June so we can have and be primed and be ready to to adopt something the following March budget message opportunity, if that makes sense.

So I appreciate it.

I appreciate that, and I appreciate both of your comments on this.

And I I think it's not an either-or, it's it's a yes and and how how can we do that given given the the cost of living and the cost of everything, frankly, which we'll hear right now, Jen.

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

Yeah.

Well, and I think it's uh, yeah, I think you're right.

I think it's an ongoing conversation.

I I would guess that we're most likely to tackle affordability through focus areas like housing and economic opportunity, but it's not to say it couldn't become its own focus area.

I think to your point, part of the reason I I feel so strongly that it's important that we have this quarterly cycle every 90 days of checking in on the focus areas, understanding what we set out to do in that 90-day period and what we're learning.

Is it allows us to have that more iterative conversation and not just have to wait for March once every 12 months to have a big conversation about priorities?

Every 90 days, twice a year at council, twice a year through the committees.

We're checking in on focus area progress, able to ask questions, learn together in public and reflect on hey, could we bake uh an affordability uh goal into one of these focus areas, or is there something here we're doing that isn't isn't actually delivering the impact, and can we learn that without having to wait 12 months to uh to get there?

Um okay.

So we're gonna we're gonna continue on a couple of notes.

So Jen, I know you're gonna speak to kind of the macroeconomic picture and then go into the community and economic development CSA, and you can just flow straight through, and then we'll do questions on the economy and economic development at the end there.

I also it came to my attention that I unintentionally demoted Bonnie.

So, Bonnie, I'm so sorry.

You are the assistant budget director, not the deputy budget director.

And Claudia, I'm sorry, you are not in fact promoted.

My apologies.

Um I always think of deputy as like the number two, but in this city, the assistant is uh is the right hand to our budget director.

So Bonnie, my apologies, and um, I will turn it over to you.

All right, good morning, Mayor and Council members.

Jen Baker, Director of the City Manager's Office of Economic Development and Cultural Affairs, and it is my pleasure today to do a swift scene setting of the economic context and backdrop against which we can be digesting these budget considerations and the proposed operating budget that I will know we will discuss vis-a-vis the focus areas moving forward.

So, this presentation provides an overview of the current conditions in San Jose and the key trends shaping our local economy.

Um the goal is to be swift, clear, data driven, and provide a snapshot of where we are today and what we're seeing across major sectors and how those trends may impact the city moving forward.

Uh the presentation is divided into four sections.

We'll take a look at the economic landscape, corporate trends, employment dynamics, and lastly, city revenues.

So moving right into San Jose's economic landscape and levels of analysis, wanted to acknowledge that there are macros that the city itself does not control, right?

So at the national level, we see a considerable amount over the last 18 months of variability in trade and tariff rates that are impacting uh exchange of goods and services internationally, and definitely impactful to our local environment.

Um what we see on the ground is that more companies are pursuing foreign trade zone implementation in our footprint, and and that is a noticeable bump up.

Also, that program is undergoing increased scrutiny.

Um we know at the national level because of ongoing geopolitical conflict and war that the energy market right now is also considerably variable, and um and immigration patterns likewise.

So companies and industry love predictability, transparency, and uh an opportunity to operate and invest in known environments, and um at the national level, we see quite a bit of fluctuation across key considerations for company investment.

Um at the state level, um, since I was a little kid, energy generation and demand in California has been top of mind, and something that the state continues to grapple with.

We are fortunately positioned in San Jose with forthcoming power and some diversification of that power that will serve us as a competitive advantage.

The regulatory environment is not the same as the regulatory environment across a lot of states in America, and so important for us to take that with some reflection and know that we have to be that much more competitive in other arenas.

So some of the ways that that is impactful to us include the unfunded mandates, which I know we have looked at in previous study sessions, and likewise the pressures for growing housing stock, which is a challenge statewide.

Where we are seeing the state lean in in a really positive way is through their GoBiz efforts.

So the state of California, more than in recent years, is really looking at its competitiveness vis-a-vis other states that are seeking to be a magnet for investment.

And in this past year and the year looking forward, GOBIS will be bringing a team to Japan, a team to Taiwan to really be courting the international marketplace for to try to attract domestic investment.

So this is more bullish than we've seen in recent years out of the state, and I think a really positive trajectory to try to underline the Golden State's competitiveness vis-a-vis the rest of the country.

At the local level, AI investment continues to be pervasive.

AI and tech firms at large, the Mag 7 are composing 41% of the SP 500.

So that is a really large amount of market share from those firms, of a handful of which have a pretty significant footprint here in San Jose, and then more broadly in the Bay Area.

A dynamic tech sector will continue to impact us locally.

We'll talk a little bit more about jobs in that arena.

Population and labor market, I have some statistics there for you, the development pipeline, and of course, we know as council members have raised already today, the proportionately higher cost of living in California at large and in the city of San Jose.

This is a quick snapshot look at benchmarking performance statistics.

So you'll see population in Santa Clara County has grown a little bit, whereas the population in California has decreased, and at large, the population in the U.S.

has increased.

Gross domestic product is showing favorably also in Santa Clara County.

Gross domestic project is a remind product as a reminder is the sum of some total of goods and services that are being produced in a region.

So we are seeing positive activity there more than what the country is seeing at the national level.

Employment is also just a teeny smidge up, and certainly we would like to see that number grow.

And housing stock also up a little bit, and unemployment is tracking pretty common to what we would see at the national level.

California unemployment is a little bit higher, Santa Clara County unemployment registers at 4.2%, and San Jose is at 4.1.

Where there continues to be a tremendous amount of opportunity is across our landscape.

So San Jose is uniquely positioned as a major West Coast city that has quite a bit of developable acreage and opportunity that is outlined at our general plan to facilitate growth.

So what you're seeing on this slide across the different regions and regions in San Jose is not necessarily vacancy, it is opportunity with statistics of where we would like to anticipate job growth and further development.

Moving on to some of the corporate trends, I'm pleased in the last year to 18 months to share that the post-COVID messaging of sort of mass layoffs and industry shift, industry negative downturns and shifts have somewhat neutralized in a considerable way.

So unemployment by way of data is tracking steady for the last three years.

That's not to discount that there aren't current layoffs in our present marketplace.

But those, we have tapered down from what was a peak in 2021 2022 and 2023-2024 of 4,000 jobs and are moderating down more closely to roughly 2,5020 jobs.

One of the positive stories in San Jose is that we have a pretty strong reabsorption of unemployed workers, and so the skill of the workforce and the capacity to reabsorb workers who have been laid off is a positive attribute for us.

And layoffs have cooled from recent highs.

Corporate trends and back to office, it's a little bit difficult to discern, but San Jose is the gray line, roughly in the middle of West Coast cities in the metro area.

So we would like to continue to see back to office and more office occupancy.

And we're we're middle of the pack, which is an okay place to be.

Certainly, Dallas Metro and Houston Metro, New York are tracking ahead, and San Francisco and Philadelphia Metro are lagging where San Jose is.

So this is looking at how our real estate is being subscribed.

We know that office of the real estate types, office vacancy remains higher, although it has recovered a little bit from the post-COVID highs.

And industrial and retail are tracking in a really strong trajectory.

So we may see churn in the industrial space, but we're seeing that space get resubscribed swiftly with an average of like hovering right around 5% in recent quarters for industrial.

That's definitely the hottest real estate product on the market, which is RD space, lab space that can take advantage of the power commodities that we have coming online, the ability to be able to scale around that power.

And retail space is also hanging in there right around 5% citywide.

Some of the positive trends that you will be seeing are in our headlines.

So a number of our local companies right now are masterfully capturing capital like series capital funding rounds to the tune of hundreds of millions of dollars.

So that's speaking to the innovative environment, our ecosystem of patent making, and the notion that if you can dream it in San Jose, you can build it here.

So both from a venture standpoint and a private equity standpoint, we're seeing a lot of money come into the city to try to spur innovation, and then likewise we're seeing some of the anchor companies who have had investments here aggregate their workforce and really double down on populating existing infrastructure to the tune again of hundreds of millions of dollars investment coming into the city.

So that is definitely positive, and we want to continue to capitalize on that.

From a business development standpoint, as you know, we don't have eyes and ears on every single transaction that's going on in the city, but we want to be able to help soft land those investments and be facilitative and make sure that companies who are choosing to be here and scale here are having the most positive experience.

Next slide, you can see the some of the largest companies who have a footprint and a legacy footprint here in San Jose, and again emphasizing that the capital funding around those companies continues to be strong.

And lest we forget, or definitely not forget small businesses.

So in our environment, being able to zoom in and out from the macro and micro scale businesses is important.

The small businesses contribute to placemaking, they give our community members a sense of pride in neighborhoods, and they create outlets for entrepreneurship and expression and community in ways that differs from what the large businesses present.

So you can see on this slide a number of new small or family-owned businesses that are landing across our districts.

One of the headlines here is the hottest toy of the year.

Those are local innovators who were able to scale and around the holiday season gained market traction for a gaming console console that company is next playground.

So a lot of great small business activity.

We see more business starts than closures by a considerable margin here, and want to continue to support businesses both large and small.

Now, shifting to employment dynamics, the chart that we're looking at here on the left side would show coming out of the pandemic, kind of the high of 6.6% of employment variation, unemployment, and then a kind of a shift in right sizing.

Part of that is the way employment data and statistics are captured.

We see the dip down to 2.7% in 2022, where some people who were unemployed rolled off of the official counts because they timed out of their unemployment cycle.

And then now in December 2025, we've regulated to right around 4%, which is very competitive.

We can certainly point out that not everyone is hovering, not all demographics are impacted the same way.

So we see a higher margin of unemployment around Hispanic and Latino populations, around black and African American.

And then also what is somewhat more uniquely to this perspective is the 25 to 29 year olds, where we tend not to see higher levels of unemployment because those young people are entering into the Census Bureau's prime working age of 25 to 54 and really launching into the workforce.

So that is a higher 8.5% than we would like or we would typically see, but that is tracking with the national average.

A quick look at sectors where we see growth, losses, and dynamic activity, sector gains around health care and social assistance in the largest margin, construction and manufacturing, sector losses around finance, transportation and warehousing, and accommodation and food service.

So I want to share that accommodation and food service is not because we're seeing a decline in accommodation and food service companies, but as those companies are reinventing and coming back online, they're hiring fewer people.

So we see a lot more electronic point of sale, order on a tablet at the counter sort of services that don't find those small businesses in particular bringing on as many employees.

And then the tech sector, we do not have a magic button with tech sector to be able to look at, you know, exactly how many employees across a lot of different job classification types are coming online.

We see a lot of churn in this sector.

So across some classifications, we will see a decrease, and across some classifications, we will see an increase.

If we had two-thirds of the slide or three quarters of the slide occupied by a given sector, then that would create a vulnerability for us.

And here we have a really amazing diversity of inputs into our economy and employment.

So that creates some opportunity for upward mobility.

Definitely some resiliency as we take different shocks, are absorbed by budgets or investments at the national and state level.

So this is a great slide.

The average wage for job in San Jose is 128,000 plus per year, but 20 of the 20% of the population, notably lives on less than $60,000, less than $55,000 per year.

Of our residents, 49% hold a bachelor's degree, and 22% hold a graduate degree or higher.

This is a really high education ranking for our city employees and also helps us be a magnet as we attract industry investment.

The last bullet on this slide refers to the amount of time that workers commute.

So 31% of workers commute 25 miles or more.

And imagine a scenario where those workers were not spending time in the car but otherwise spending time in their workplace or celebrating non-work, quality of life opportunity.

Definitely that is an opportunity for us given the amount of land and capital space we have to be able to build out.

The next slide for us here is looking at how the employment demographic is spliced across across employers.

So the gold box is the first one percent of employers, which represent 39% of total employment in San Jose.

The gold and the CFOM box taken together represent the largest 35% of employers and 90% of total employment.

So 35% of employers, 95% of employment, and the remaining percentage of employers, 65%, so the larger majority of employers account for 10% of total employment.

We see some of the larger employers per employee headcount and tax certificate here on this current slide.

And then moving forward, also an important data point for us is the variation of resident income and state tax paid in the decade between 2013 and 2023.

So you can see we grew 20,000 by 20,000 taxpayers.

That's just short of the 500,000 tax returns that was a high in 2020.

As that, as the population of resident income taxpayers grew, the aggregate income grew almost two-fold.

So $35 billion to $71 billion.

You can see what the average taxable income is across our employees, and then how much the state yields from that residential income tax.

So state tax is grown from 1.7 billion to 4.3 billion, quite a sizable benefit from that 20,000 employee swing and a decade.

Population demographics also are shifting for us.

So you'll see in the limey green, 14 and underpopulation.

In the sky blue, 65 and over-population, with the darker bars representing transition of younger people into the prime age workforce, which is that the middle green color.

In that same time period, we are up 6% from 10 to 16% of what the icon would denote to be active seniors who are entering into the retirement prospects and possibility years of 65 and older.

So we are aging a bit as a population.

We are still younger than some of the larger city populations up the way.

And what you can see from this slide is really a considerable inflation rate factor.

So revenues at large have grown since 2020 but are down in real terms almost a percent, 0.8% after inflation.

Sales tax trends show uneven growth across sectors, and the county pool share of sales taxes increased significantly from 12 to 25%, largely driven by online sales.

So everything in the solid line is what we have data for, and then the dotted line is what is is projected.

Another look at the sales tax revenue trends.

So the black line on the bottom is construction, and you can see that dotted line of inflation, and then the sales tax revenue by sector.

So sales tax revenue decreasing, and that is a reflection of the inflation being considerable for construction costs between 2022 and present.

You'll see a little bit of the inverse for transportation and fuel costs and food, where food consumption patterns and tax revenue are increasing, but inflation is not quite as extreme.

Okay.

Employment lands and how employment lands support jobs.

So you can see in our pie charts the percentage of land area, employment land through the general plan occupies about 14% of the total land mass, 49% is public and open space, and then about 37% is residential, and then you can see conversely how much property tax revenue and roles are created based on those segments.

What is important to know is that the property tax role doesn't necessarily reflect the fee to serve those different property types.

So conventional economic developer wisdom would show that single family housing at the most extreme comes at the highest cost to the city as fee as services that we must extend.

And then industrial creates a net value gain per acre in a considerable way.

So as we think about economic development, how we try to create some changes and shifts in the structural deficit, the employment lands are creating a lot of opportunity for us, and how do we seize that opportunity is something that the team will be working on.

Just to sum it up, our takeaways are that the economy is stable, but definitely under pressure, and not all of those pressures are ones that the city controls, right?

A lot of macros out in the universe that are impacting our dynamics, and we just have to work that much harder to transcend.

Large employers are the anchor to the economy.

We're seeing strong growth and investment from our large employer base and small businesses create a pocket of resilience and also give our communities the personality and the envelopes for entrepreneurship that are important across workforce types.

Revenues are being supported by structural shifts, and as our last couple of slides pointed out, preservation of employment lands is essential.

So look forward to continuing on to the city service area discussion and a deeper dive into focus areas with you all.

And with that, I think we can invite colleagues down to the box who are also peer directors in the city service areas for community and economic development.

Great.

Thanks, Jen.

Thank you, Jim budget team.

We'll give folks a moment to transition.

As folks make their way down to the box, I can share who will be joining today for our community and economic development service area.

Again, Jen Baker, director of the city manager's Office of Economic Development.

Joining today is Deputy City Manager Rosalind Huey.

Chris Burton, director of planning building, code enforcement, Matt Lesh, Director of Public Works, Robert Sapien, our fire chief, and Eric Sullivan housing director.

Okay.

So digging in here, the community and economic development city service area includes economic development and cultural affairs, the planning and building divisions of planning, building, and code enforcement, fire, public works, and housing.

Our core services center on expanding businesses and arts and cultural development, public real estate services and services, including permitting and inspection and land use planning, as well as housing production, preservation, and tenant productions protections.

Here we can look at a couple of different samples of the types of programs that the community and economic development CSA digs into.

I know as we look at logic modeling and the opportunity for interdepartmental collaboration, these program samples will change over time, and very excited about what that means for economic development.

But here under economic development and cultural affairs, you can see business district and small district support, business retention, expansion, and attraction activities, some of the cultural investments and special events, sports and entertainment, et cetera, under planning building code enforcement, the development services, environmental review and historic preservation, fire, fire development services, public works development services, utility franchise agreements, and downtown construction management, and then housing, affordable housing, development loans, apartment rent ordinance and administration, CDBG infrastructure investments, and then property maintenance and inspection.

We measure across a lot more metrics than what you'll see on this dashboard, but here we have a sampling of some of the performance that can be visited.

So the first two boxes of the top are looking at retaining, expanding, and attracting jobs, jobs growth numbers in 2025 and 2026, as well as downtown foot traffic and mobility.

The next box to the right and the bottom corner box and metrics show planning, building and planning, building timelines, and for permitting and on-time reviews, and then for the planning process and for the building and construction processes.

And then finally, the two metrics that we're showing here on the dashboard for housing are for housing production and rent stabilization rates.

But these are again just a sampling of a much broader cadre of metrics that we are monitoring.

Want to take a look at how the department budgets are shaping up.

So you can see here the 2025-2026 adopted budgets, the forecast for the upcoming year, and what is proposed, and then the deltas across our different programs, which I know we will have the opportunity to dig into more together.

As part of the community and economic development city service area, building more housing is a key focus area, and you can see here the long-term goal to meet residents' housing needs across income levels by making San Jose a great place to build housing.

And underneath the problem areas, which we will be able to discuss with you more.

Likewise, another key focus area for us is the growing the economy focus area, and the long-term goal for that focus area is to meet resident, I'm sorry, cultivate an environment for thriving businesses and resident prosperity, and then within that we have identified four problem areas.

So good to note that the focus area activity is doing what it's intended to do.

It is an iterative process, and we are really honing in on the areas where interdepartmentally we believe we can make an impact also with your direction to really drive community and economic development.

Here is a summary slide of some of the priorities and service delivery that we are anticipating in 2026-2027.

So among those priorities, the economic strategy work plan, the experienced economy financing tools, which are called out in the March budget message, 2027 celebration strategy, and dialing that in.

We have affordable housing, alternative financing strategies, a look at ministerial planning and how that interfaces with the permit process, local building codes and administrative policies evaluation, development fee framework policy, and electric grid updates and capacity enhancements.

So these are some pretty amazing priorities to wrap around and which can make a difference.

We have you can see the title of the proposed project, the amount, and whether or not this is one-time funding.

To sum it up, as a community and economic development CSA, we are eager to work together to cultivate a thriving business development ecosystem, advance the experience economy, facilitate housing production, and increase certainty in development services processes.

And with that, we're happy to engage in some discussion about the operating budget.

Wonderful.

Thank you for the overview.

Looking forward to the discussion.

Let me turn to colleagues and we'll start with Council Member Broties.

Thank you, Mayor.

I want to thank you, Jen Baker, for your very informative presentation, as well as the entire staff who helped put this data and information together.

I truly believe, as a council, if we want to turn our budget shortfall around, instead of simply just shuffling chairs on the Titanic, I believe we must double down on improving our city's economic standing.

And the one area I think that sometimes gets lost in this subject is workforce development.

I was surprised to see that here even in Silicon Valley, despite being a lot better than national trends, but here in Silicon Valley, we have ongoing disparities with employment for uh communities of color, both our black and brown community, and our our youth, opportunity youth, individuals who have been disconnected from the workforce.

I'm sure many of those individuals are in my district, but I'm sure they exist across the city.

We have so much wealth being generated here in Silicon Valley, but our youth don't know where to get started and how to access that wealth or even the jobs that lead to that type of wealth.

And then I I saw, you know, and I'm I'm all for providing incentives, you know, breaks for employers to come to the city of San Jose.

I support that.

I'll keep supporting that, but I also want to have a conversation in regards to, you know, what sort of uh skin in the game are the the employers bringing to the table, and and you know, just to talk about workforce development, right?

Looking at that slide, you know, it was kind of like looking at a slide of who's who in Silicon Valley in regards to corporate trends.

We see Apple, Google, you know, Supermicro, uh PWC, you know, many, many companies that are you know amassing a lot of this wealth, how are they contributing to our workforce development pipelines?

What conversations um at OED or our corporate um outreach team having with them to make sure that they're investing in, you know, pipelines at our local community colleges or at San Jose State.

Um, because I know a lot of individuals who I used to work in tech, I was at eBay, I was at PayPal, who you know get good paying jobs with an A plus certification that you could get at San Jose City or Evergreen Valley College, and I I believe the city as uh a partner should be playing a role in convening these conversations.

And so I guess I'd like to ask the um Office of Economic Development how those conversations are being held.

Well, certainly it has been a um a great achievement of our work to future team and the local workforce board, which was just commended for being a highly functioning workforce board.

So that was an announcement that came out this week, in placing individuals who are some of the highest need individuals into positions where they can adopt and matriculate into a higher wage, higher skilled job trajectory.

So our proving point around the resources that the city has through um we owe funding from the department labor primarily um does show a track a strong track record of engagement with the most um sort of under-supported community members or those with the most disparate need in placing them into um sustainable career growth trajectories.

That's something that we will continue to lean into.

I appreciate that.

Having come from a workforce development background and have worked with workforce development boards, most of them are dysfunctional, and most of them don't have good performance.

So I appreciate that we're a high functioning one.

Um, but at the end of the day, a lot of employers don't really look to workforce development boards to um pool their recruitment.

And I guess I guess I'll be more intentional.

So I'm glad that in spite of that, we're we're still moving the needle.

But how are the, you've mentioned like Google, Apple, Nokia?

How are they working with the city?

Are we having active conversations to say like, hey, are you actively employing our residents or are you overly relying on you know visas to fill your your ranks?

What what what are we doing or what can we do as a council to legislate to make sure that happens?

Well, one of the interesting um approaches that private industry in particular has helped us advance is in what skills unemployed people will need to be re-entering the workforce.

So if somebody leaves the workforce now, we know that the likelihood of them needing to have a baseline level of AI literacy to re-enter the workforce will be that much more important.

So in initiatives like sort of AI for all, where there are opportunities for training for self-directed training.

If you have a library card, um anyone can be able to come to the library, upskill, and I think there's been a strong amount of private sector support in that arena.

But I think there is always an opportunity to invite more public-private partnership.

Um, there was recently a partnership announced between Teradine, which is a company that is scaling in our footprint and San Jose State University.

And so, um, you know, creating those direct ties for um graduates or young people who are pursuing a career and and how they can land in a company that is scaling here.

Okay.

Great.

I appreciate that.

I know, you know, don't mean to you know ask tough questions, but I appreciate organizations leaning into programs, but I want to start seeing some data.

You know, a company could come and say, Oh, we're giving a hundred thousand dollars to this pipeline, okay.

Well, how many youth are you actually uh hiring?

Where are you sourcing these jobs from?

Are you looking at community colleges as a viable employment uh strategy?

Because individuals could you know participate in press conferences, can say you know, good things about workforce development programs like work to future.

But if we are not seeing them hire our kids, if we're not seeing them hire our youth or our black and brown youth, we're gonna continue continue to see wealth disparities in this valley.

And then those individuals, because there's a double cost of this, right?

There's a double cost of this.

Those individuals who aren't uh being able to seek these opportunities who don't have uncles that work for tech or own companies who don't have a father who you know made all the right decisions and you know connect these individuals to you know quality private schools or whatever, these individuals are gonna be reliant on our public services safety net, right?

They're gonna continue to rely on the city and county uh um for and the state for services.

And so in in theory, we are subsidizing these employers' lack of commitment to hiring our our youth because we're the ones providing food stamps and housing, affordable housing and other types of things to these residents.

And so I believe we need to have a high support and high expectations uh uh outlook as we as we look for bringing in corporate employers.

Yes, let's provide incentives.

Let's look at breaks for for companies to make sure that they're doing business here in the city of San Jose.

But let's uh let's also have that tough conversation of okay, what are you doing uh to make sure you're hiring our youth?

And I I want to be clear, I know I think some people can easily say, well, you know, this is a failure of the K-12 system, or this is a failure of the community college system.

And and all those are fair um uh, you know, fair fair statements.

However, if the city just sits on our sidelines and says, okay, that's for the you know, uh East Side Union High School District, or San Jose Unified, or that's for you know the community college system to continue to fix, we're not gonna be able to move the the needle on this.

And then we with in turn see issues in our neighborhoods, individuals who aren't employed, they're gonna be participating in crime or or other types of activities.

And so I continue to say the number one, the number one way, number one way to stop a bullet is with a job.

And if we are not being intentional with employment opportunities in our communities, we're not gonna see improved outcomes in that in that arena.

And so I'm gonna be looking forward to leaning with your department um to see real uh uh return on investment and real employment outcomes, not not just you know employers coming for like PR uh events or anything like that.

Thank you.

Awesome.

Thanks for the questions and comments, great points, um, an important issue.

Let's go to Vice Mayor Foy.

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

And the more businesses we bring in the better our revenue is and the better our income is is for the city I've looked over the budget and I have have some questions for you later about that probably not going to ask them now but the but um I want to get really specific on an issue related to um something that was in the mayor's budget message as it relates to funding for the Momotoro statue statue.

And if you were Carl in his message city manager was directed to locate funding within the budget for the Momotaro statue and for those who are listening or who have no background on Mama Taro that is the gift from our sister city Okayama that was installed by the Center of Performing Arts many years ago and was uh stolen and probably meltdown for the the medals and we are working on a partnership now with Okayama to create a new statue and place it again in the city of San Jose and uh I thank the mayor for including that in his budget message but I don't see it in the budget.

So can you tell me where that is accounted?

How will it be addressed?

Well thankfully with the budget director's support um the Office of Cultural Affairs has identified um some TOT funding to support the reinstallation of Momotaro with a contingency um to also account for variability in the tariff environment.

Okay so do I um since it's not in the in this budget statement how do you recommend that we memorialize that an MBA Jim what's yeah I think that's a good question vice mayor I think um you know it um in the transmittal memorandum for the capital we had previously identified potentially using public art funding for that I think after additional analysis we identified a more appropriate spot and availability would be the cultural arts funding in the the TOT fund so I think we will do we will just um memorialize that change as part of our rebudget cleanup and be a since it's very technical we will just document it there and then the transmittal message will then be updated to reflect where that funding source is is coming is coming from great thank you I I appreciate that and I think this is a culturally significant statute it's very important to our relationship that is a long-term sister city relationship 70 years next year where we will be traveling to Japan and then they will be coming here in 2028 so be great to have that installed I'll I'm sure I will unveil more details as we move along but the funding was the uh critical piece right now thank you look forward to more discussion.

Thanks, Vice Mayor.

Let's go to councilmember Condelas.

Thank you, Mayor um good excellent point, Vice Mayor, on all the all the uh more reason why the TOT needs to needs to be successful in June um but uh I I thank you, Jen, for your for your presentation and and your um in in your study session introduction and um I I'm I'm really excited to see the uh business outreach and development staffing continued again for another year to the tune of half a million dollars.

And I guess my my you know we we've all everyone on this diocese has uh supported uh expanding our business improvement districts citywide and um in both um uplifting our our respective uh council districts and and with our votes supporting the passage of these business districts in our in our respective districts uh as part of this um authorization or the workload essentially um what would um this also allow us to expand let's say a business improvement district as part of their work plan in my district or or or can you walk me through the capacity of of what their work plan uh looks like and and whether uh this is to allow us to continue our what I would consider our our uh our prudent and an aggressive expansion of our bid program in the city.

Yes thank you for the question Councilmember Condelas there are three limit dated positions that are proposed for extension as part of the corporate outreach and small business and neighborhood teams so um we have currently have two corporate outreach officers um who are working on outbound business attraction retention expansion um and then we also have a position um that supports bids in neighborhood development so indeed this would um be a resource that can help continue to build capacity among the evergreen business association um and and build momentum en route to forming a bid oh excellent no that that's that's exactly what uh what I wanted uh to hear and um I essentially you know getting getting that bid ready for it to come to us as a council I mean we've we've laid the the groundwork and uh I mean uh last year I I believe I did a budget document for that um as well as um uh county supervisor arenas uh from the counties so so I think we're we're primed and ready and and I hope um supporting this could lead to the fruition of a of a bid um and more bids citywide not just speaking selfishly for for my district um uh but that's that's that's that's wonderful um the next area I wanted to to ask about um is uh workforce development as well as you know council moretized brought up something and um a recommended action um I you know I briefly mentioned to to Jim thank you for your time yesterday Jim on this but the San Jose works action with the youth job initiative uh specifically we are you know I I see the um the ongoing savings to the tune of 203 thousand dollars uh with the um uh vacant staff specialist position uh elimination um but uh there's also non-personnel equipment funding that goes towards um 25 students having approximately or about eighteen hundred dollars in a summer stipend to work somewhere and and do exactly what we're doing um or we're trying to do um in our city so it is is there a reason why in addition to the staff elimination uh we are we are uh essentially uh reducing our capacity by about 25 to 30 students if i it's my if my math is right um yes so there would be a reduction from 325 placements to 295 um and non-personal services were previously assigned um to that staff level position um to help facilitate the placements and recruitment and contracting for um for those services um part of the evaluation has been a restructuring um on a uh on some levels of that program um and I am for informed by staff that conceivably we could um reaccommodate non-personal um funds to support 30, those 30 students.

So that would be within the realm of possibility.

Thank you, Jen.

And that's exactly my my next question.

Is for for some reason if if so if that staff specialist position is eliminated to the tune of about 154 thousand dollars in savings or 150,000 in savings um uh would uh we be able to if we identify that source of fundings, you know, add that to give 30, 30 young people an opportunity to have a summer job.

And I think we I I've seen a lot of our colleagues at the at the giveaways to launch the program in the summers in the summer for the students.

Would we be able to do that essentially without that staff specialist position?

Is my question?

Um we would be um it would require extra staff effort from the existing staff to try to be able to um to wrangle those additional placements.

Okay, okay.

Yeah, fair fair enough.

Okay, all right, thank you.

Thank you for that question.

Um, and then uh the last uh well my next point is on the 2027 celebration strategy, um, and and uh you know with with uh San Jose's birthday coming up next year, it's a big one.

250 is important.

Um I guess uh uh could can you maybe shed a little bit of light into um what the administration's plan is with regards to this this funding and and maybe uh outside of what's in the the description the descriptor.

Certainly.

So there are $350,000 outlined as part of the budget proposal to support 2027 celebration activities.

Um right now that is split out between a temporary um staff or contract position supported by about 250,000 and 100,000 in program output to be able to help realize um event and events and build mom or an event and build momentum around the activities we know are forthcoming.

Now it is the intent that there will be a an advisory group formed, and part of the role of that advisory group would be to help amplify and springboard um raise funds and and help define the appropriate scope of 2027 celebrations forthcoming.

Got it okay, all right.

Uh, that's that that's that's exciting.

I guess part of what I want to see, and you know, I uh I was in downtown for the NCAA tournament, that was that was great.

Um Super Bowl.

Um I saw it on TV, I didn't come to downtown.

Um, but you know, one of the things that you know I I'm mindful of is you know, how are we how are we as an as a city um uh facilitating opportunities outside of of essentially San Pedro Square?

Um and I know uh you know it's a it's a popular destination, but uh, you know, FIFA, we have FIFA coming up in a month, and I know I've talked to several folks in the administration about um what we're doing and how we're uh utilizing um you know the the investments we've made and uh the investments we're going to make to make sure that folks outside of downtown are also seeing these investments.

And you know, uh I I did not lead a super bowl watch party in my district, you know, nothing happened, fair enough, but um I am leading a FIFA Super Bowl watch or no super FIFA World Cup watch party thing, uh, whatever that looks like, and and so but if I if I am not leading that, would we see you know these things the these kind of activations happening outside of downtown and and I mean I I just uh I can throw a good party and I know that but um you know I just want to make sure that the administration knows that there's other venues and other places outside of downtown to throw a good party.

Um and I I that's something that just really sticks with me, if that makes sense.

Um and uh I'll just stop talking about parties.

Um and the the next the the last thing is um on the EIFD assessment, um the $100,000 would go primarily towards what?

So there are two technical prongs of exploration in looking at an EIFD or other um enhanced infrastructure financing district or community facilities district tools that can help be can help seed public infrastructure to bring online broader development projects.

Um one of those lines of funding would be for financial analysis and bonding support, so really um uh understanding the tools um the our ability to leverage tools and our capital capabilities to execute on those tools.

Um, and then another aspect is really looking at what sort of overlay or perimeters um make sense vis-a-vis each of those tool types.

So there is a technical element of property and parcel ownership that would need to be conveyed to define an eventual district.

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

Yeah, and no, and this is nothing, this is not new.

I mean, I worked on the bill that that helped essentially enable EIFDs when I was with Jim Bell, especially the voting threshold.

However, you know, um LA is doing EIFDs, I mean several several entities across our state are doing them.

I would just implore as we go through with this, if we don't have that buy-in from, you know, one of the other biggest entities that has to agree to an EIFD, the county.

Without changes in state law, it would make um you know this this fairly uh fairly difficult to put it kindly.

But uh I see the blinking light.

First time I've seen it in a while.

And uh that being said, I'll uh I'll let go of the mic for a bit, uh let my colleagues speak, and then I'll come back if I have any questions.

Thank you, Jen.

Thanks, Councilmember.

It has been noted in the record that you know how to throw a party.

That was clear.

Uh Councilmember Kameh.

Thank you so much.

Um, and thank you for the presentation.

I really think that a lot of the information and data that was given is uh so key uh to our decision-making process.

So uh I appreciate all the work that that went into it.

I know it's one of those things that it's it looks great and easy when you just have it in the presentation, but it takes time to be able to capture that information.

Uh so thank you so much for that.

I was actually um curious, you know.

I mean, if it if one third of the workforce has to travel more than 25 miles, that's quite a bit, you know.

And you know, I don't know what the trend has been in the past, but I but I think that it it says a lot about our area and um and and what needs to change here.

Um the one area that I um wanted to uh ask about is something that has been persistent for a very very long time.

And on uh slide 55, you talk about preservation of employment lands as essential because we've had such pressure on the housing side and on the development side, and looking at well, what are the areas of opportunity?

That that whatever 13% or whatever percentage it was seems to keep shrinking and shrinking, and um I don't know what kind of strategy uh is coming forth that we would do uh maybe even both.

I know a lot of uh of developments have um been uh looking at mixed use and and that kind of stuff, which you know can work, but uh you know, there's a danger that there will be no more and and uh and certainly I just was wondering like what is the strategy.

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

Thanks, Jen.

Uh Chris Burton, director of planning building code enforcement.

Uh and you're right, certainly, council member, we're not creating any more employment lands.

Um and so really our focus is on preservation when we wrote the general plan in 2011.

We understood the pressure that was you know placed upon our employment lands we'd seen a considerable amount of conversion over the previous decade that resulted in this sort of diminishment and this this constant reduction.

Um I think part of the challenge we've seen over this last five years, as noted is the introduction of many state laws that not only continue to put pressure on on areas where housing can go.

So, as Jen noted, with SB 79, we excluded a considerable amount of our key employment lands to ensure that we're preserving them, but other state laws have come through and continue to really push the bounds on that and limit our ability to do so.

Um so we're trying to sort of approach that in a number of different ways and be clear.

I think the point on mixed use is an important one.

Ultimately, what we've seen, certainly in our commercial areas, so more of our sort of neighborhood retail areas where you know we've looked at the interaction between residential and commercial uses and seen the opportunity for a mix of uses, is the you know, the residential markets just don't seem to be interested in effective mixed use.

Um, it's challenging from a financing standpoint, and they have vehicles through state law to eliminate any requirements that we may have to actually produce that.

So, you know, so unfortunately the move has been away from the sort of tight integration of uses where we're having to really take uh an exclusatory approach to land use to just say housing can go where housing can go, and we're doing everything we can to preserve what little employment we have left.

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

And you know, they look at us and say, what are you doing?

Why aren't you doing something about it?

And so I just think that we need a better strategy to either push back or do something because um 13% is very little.

So I I really think I really think that more needs to be done, just you know, my thought, because uh others are are saying, you know, like the community just doesn't understand, and um, and I I think that there are a lot of other things that that the state does to us that um, you know, I mean we're we just continue to suffer, and it's like, well, you know, keep taking it, keep taking it.

And I know we do what we can, but I think that there needs to be uh thought of different strategies to combat some of these things that get done to us, including the sales tax, because I think that it's great that you know we have these companies and everything, but if uh C D C D T FA comes in and says, hey, this is really the state's money, what are we gonna do?

I mean, I just I just think very differently in terms of defending ourselves against some of these things that impact a general fund.

And so um I'd like to think about that too.

I also want to uh mention that you know Peter's idea of you know how is it that we provide better ways, better opportunities for our youth is really really key.

Uh when you look at the unemployment figures that you showed and that whole sort of uh young people who are unemployed, uh we need we need to we need to also have a better strategy for that, and um San Jose City College just opened up a brand new building, it's absolutely fabulous, and you know, the schools and cities collaborative with the library does very very well in terms of connecting with the local school districts.

I'm wondering if there's a way, and I don't want to create more work, but being able to better connect, uh, work to future with our uh local uh community colleges or even San Jose State, but you know, West Valley, San Jose, uh Evergreen, and Foothill Deanza, there are great opportunities there, and I wonder if there's a better way to um do something with them and letting the youth know that yes, in fact, there are opportunities.

Thank you.

Thanks, council member.

Let's go now to Council Recampos.

Thank you, Mayor, and thank you.

Um to the staff who presented on this, Jen, you know, welcome to San Jose in your first city uh council budget with us.

I think that the information you've provided really uh helps us understand the full landscape of what we have to consider, despite significant financial constraints.

I appreciate staff's effort to adequately resource development services and achieve the council's ambitious goals as it relates to housing, land use, and economic development.

Um, I want to boomerang back to Councilmember Ortiz's comments on workforce, which I love the discussion with council on.

We name preparing residents to successfully participate in the local economy, but then we're looking at cuts in areas that are doing that work as Councilmember Candelas mentioned $200,000 cut to the San Jose Works Youth Jobs Initiative, and we're seeing trends that are telling us that entry level jobs like in the food service industry, server cashier jobs are being lost to uh advances in technology.

We're seeing mid-career professionals with alarming um rates of unemployment, especially when we have equity concerns around the racial demographics of who is most impacted by these trends.

And so I just want to caution how we're looking at workforce development and make sure that we're not putting all our eggs in one basket with one sector, because let's be real.

We were we were here last month when the data centers item came and we saw how packed the chambers uh was.

There is I think a split between young people who want AI and those who don't want AI and data centers.

So again, I want to caution us to not put all our eggs in one basket because we need to make sure that we are providing a diverse set of opportunities to our youth.

And so here comes my question.

I see a lot of support for businesses that provide jobs, but we know that the minimum wage has not gone up and workers are struggling.

We need real solutions for building wealth and prosperity at the individual level, and I trust that our staff is up to meeting that challenge.

So, what are we doing or what can we do?

Well, across the country, a growing trend of wealth disparity is um you know is notable in the US.

And so I think as we look as a city, you know, we have a shared goal of helping people approach a pathway of self-sustainability.

Um, and with finite workforce dollars, and many of those workforce dollars coming with very specific rules from the Department of Labor, um, a lot of our investment is on training and being able to help people keep pace or get a foot on the ladder to be able to grow with industry.

So I think that is um is one of our best tools, and it definitely comes with a significant rule book that is outlined by um by the federal government.

Thank you, Jen, for that answer.

I also um want to just bring in the the issue that I've raised the most on this dais, and that's child care.

Um, just some food for thought for my colleagues and city staff.

Studies show us that at the Santa Clara County level, we are experiencing a 1.3 billion dollar loss in uh earnings, productivity, and revenue by not investing in child care.

And so, as we're thinking about all the cuts and where we might want to improve our investments so that we can strengthen our local economy.

We can't overlook the role that the city can play in making child care access more affordable and available to our families so that we can generate a stronger local economy.

Um, and and for the last um theme that I want to uh ask some questions about and just learn more about how we as a council are thinking about our approach.

Under building more housing, problem area three, we acknowledge that we don't have all the right tools to build affordable housing.

But on slide 46, we are only acknowledging 20 percent of uh the population lives on less than 55%, roughly $55,000 a year.

So that is families who are extremely low income.

That is folks who are in the zero to 30% AMI.

But we know that over 50% of San Jose renters are housing cost burdened, spending more than 30% of their income on rent.

So I'm curious why we didn't see data on low income at the 50 to 80% AMI and very low income at the 30 to 50% AMI, because these are workers who are experiencing poverty and represent a much larger portion of our population.

Thank you, Councilman.

The question is why are we only looking at the 20% that are an extremely low income, but not including the number of everyone who is living in poverty and working in our city?

Because I'm trying to understand what is the goal of telling us that 20% of the population is earning less than 55,000.

We have more families struggling, so I'm just trying to better understand the relevance of that data point.

Okay, I can just provide guide uh broader context based on the information memo we released on cost burden households in March in response to Councilmember Ortiz's memo from earlier in the month as part of the budget message that talked extensively about cost burden households across the income scale, but more most specifically at 50% or below on the AMI scale, and also recognizing some key facts within our affordable housing portfolio.

So if you look at it in terms of the three tranches of work that the department does, one on sort of our work on prior investments into affordable housing, primary local housing tax credits, our work with rent stabilized programs, including mobile home uh ordinance, and then our work around inclusionary housing units, and that provided a lot more detail about the needs of our cost-burn households, and also acknowledging that the majority of our cost-burden households, over 80%, live in current income restricted or rent stabilized units.

So there's a broader sort of context and recognition of the needs that across the lower AMI scale down to 30% that was captured in the memorandum, and I think the single data point from today's presentation was just iterating on a particular uh subset.

Thank you, Eric.

I appreciate that context.

I asked the question because as we're looking at the progress that we're making as a city, I think it's also important that we are being uh very truthful about um what work is is still uh needing to be done.

And so I have a few uh more minutes.

I'm gonna boomerang back to Councilmember Kamei's comments because they really resonated with me in terms of the um PBCE work that needs to be done, especially you know, during in this moment of a general plan for four-year review.

Does this budget anticipate scope changes for the four-year review, or will this planning work be constrained by what's proposed in the operating budget?

Uh so the thank you, council member.

The scope for the four-year review um was brought before council prior to starting the task force.

So at this point, we don't anticipate changes in scope.

Um, our intention is to wrap up our task force process by the end of June of this year, and then we'll be before the city council in August of this year to discuss that scope, which will then sort of kick off all of the work and the supplemental EIR that sort of comes once we've sort of set the direction.

So that's that's what's currently anticipated in the work plan.

Thank you.

And I just want to call attention to two big funding commitments, um, the tri-elemental General Plan Update Consultant and the Historic building uh buildings inventory.

Do these two budget commitments help lighten the workload, or was this work that was already baked into staff's uh capacity assumptions?

Um so the tri element is actually something that we put on pause through that prior year MBA that you'd previously mentioned.

There is state law that requires us to update three elements of the general plan.

It's our safety element, our open space element, and our environmental justice element in the general plan.

So we have been deferring that work is work that we need to start because there is a sort of a clock ticking.

So that was already in the work plan.

I think there's always been a reference to additional work that we need to do around historic resources.

Working on the inventory is work that we know we've needed to do for multiple years.

Again, because of limits on resources, it has been pushed back.

We do have capacity within historic preservation sort of uh resources to actually accommodate that work.

So this doesn't create an additional burden on the work plan as it stands.

Got it.

Thanks, Chris.

And I'll wrap up with this last question, because it was included in the presentation, and it reflects what Councilmember Kamei was mentioning as our city priorities threaten to get pushed out by mandatory work.

What is being done to boost staffing levels?

Because my concern is that proposals for this CSA aren't really moving the needle, especially as you're constantly reshifting and reprioritizing work.

Yeah, so we'll be bringing forward an MBA on the citywide planning sort of work plan and uh fee.

So most of the work that's sort of accommodated by our citywide policy team is supported by our citywide planning fee.

It's a general plan update fee that's uh across sort of most permits that we issue, and that represents about 75% of our funding source.

So uh we've started to take a look at that.

There's more work that needs to be done, so we're bringing back an MBA hopefully very shortly that will outline more of that and more of the work that's to come.

Thank you.

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

Thank you.

And I just wanted to add in, council member, because that's a very important question that you've asked.

Um we wish we could do more with the but obviously, as you know, with the constraints of this budget, because there is a lot more work to that we could do in this area.

Um so hopefully we will be looking forward to better times, but we will definitely try to maximize with with what we can with this budget, to your point.

Thanks, Jennifer.

Thanks, Councilmember.

Let's go to Councilmember Dawn.

Thank you, Mayor.

Thank you for the presentation.

Regarding the community and economic development growing or economy focus areas.

I feel like we've done a not a great job in the past in order to really aggressively bringing in business or advertise what the C San Jose should be.

In order to build more housing, we have to have investment.

We have to have, even if the housing was a hundred thousand dollars from some miracle to happen, if you don't have a job, then you can't pay for the house.

So can you give me a little bit of your thought process?

How are we going to be aggressively recruiting the investors' businesses?

Through leveraging, you know, like in in Arizona, they they leveraged the university and done a great job at it.

I think we could do much better.

Yeah, thank you for that prompt, Councilmember Duan.

Um, I would say that there has been sort of a natural gravitation from post-COVID, very um neighborhood-based and small business-based lifeline work, which was um necessary in that moment, and a gravitation back to um uh to center where we're focused both on large industry growth and investment prospects as well as supporting neighborhood districts.

So it definitely is a telescoping activity.

Um this year I'm very proud that our business development team has been at um industry events on the ground, planting the seeds and sharing about San Jose as an investment opportunity.

Um so they have been to uh NAOP uh photonics conferences for the first time in many years.

They were attending uh Semicon West in Phoenix.

This next year it will be in San Francisco.

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

Thank you.

For that answer, I have a question for PBC.

In the report here that stated very clearly, the some of the problem is about the permitting process is not predictable and not optimized for speed in order to attract investors and job here in the Silicon Valley, especially to San Jose.

How do we move that forward?

Yeah, thanks, Councilmember.

Obviously, you know, this is something that we try to uh illustrate a little bit more through the recent study session that the sort of uh diversity and complexity of permitting that we do across the departments that that touch direct permits is um significant, and so we're catering to a lot of different needs within our community with the resources we have.

That being said, a considerable amount of our work around process improvement is around transparency and in particular sort of clear communication and education of our customers so they can come into the process prepared, because inevitably that's what makes it quicker, is if you know they understand the requirements, they know sort of how to submit, what to submit, it allows us to move through quickly.

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

Well, I look forward to that acceleration and diversion.

I have a good question for the Fire Chief.

I know that we we almost finish with uh building station 32.

Even though with the economic downturn and the and the cuts, do you have any plan to staff station 32 with, for example, maybe a truck company from station nine or station 30?

Because in in a district where the critical needs is there for our underserved community, uh we have station 33 has already been shut down for about 15 years, and now we just built a brand new station, and then we're thinking about keeping it shut down as well.

Um hi, council member.

Um, I'm just gonna I'll start, and then the chief can certainly add in.

So that will all that will that actual proposal will come up in the public safety city service area meeting on Monday, but in early answer to your question, because it's an important one.

We are continuing evaluating that proposal.

So I don't think uh the chief has an answer yet, but he has been working very hard during this entire budget process to figure out if there is another way to even do a slightly modified opening just to have it opened at a very, very low cost, and so um that's under evaluation right as we speak.

So we may have more to share on Monday when we actually have the public safety CSA.

I'm not sure if we'll be ready yet, but um uh that's that would be the goal if we could.

Um, and so it's right now in under analysis, those those different options are under analysis with the budget office.

And so if you can hang on um a little bit longer as we're doing that analysis, we'd appreciate it.

But uh, we might be able to give you.

I think Jim on Monday we might have a little bit more information on from your analysis, but yeah, the chief's been working hard all along to fight try to figure out if there's another way to do that.

Of course, that is a very important fire station to open.

I mean I personally was part of the organizational review back in the mid-like 2015 was a chief um with the chief, and um, I understand very very much and very deeply how that will positively affect service levels across this organ is across the city actually because that's such a busy area but our so we didn't take that proposal very lightly in any way shape or form so it would as Jim said it even if we can't find a way because we don't want to trade one problem for another in other areas of the of the of the community but if we can't find a way to do some sort of soft opening of it or something's modified we um it certainly is on top of list for me to recommend to the city council to get it open thank you jennifer well I look forward to further information on that and same as um council member condelis you know I think it's important that we fair and equitable especially I'm leading the entertainment center right there in the Little Saigon which every time we've done a a an event over there our oh our OI is incredible uh we we invested fifteen thousand dollars in the night market where it draw over eighty thousand people and it's continue by private funding every two weeks that we have a night market that bring enormous amount of people to visit in in district seven that's not that's including the um San Jose Giants the Shark Eyes the Barracuda and the South San Jose uh state university and I would hope that with all the funding you know not only racially equity but equity as a whole and it was kind of I would hope that we shared those funding and I know the the the shark have invested over about a hundred thousand dollars in in funding to to help out and I want to make sure and I'm fighting for district seven to have that same equity as downtown or any other district and it's only fair and equitable because the taxpayer in district seven pay the same taxes as anybody else and I expect just like Councilman Candelas that we get the same amount of funding so that way we can make the business around here thrive that's including the Tropicana the Monterey Corridor Business Association Story Road Business Association with that I yield my time thank you.

Thanks Councilmember and I I do appreciate the uh the night market was a huge success and I I hope uh you know as we look at the essential services reserve and council members apply for grants to take on special events and projects in their district that that'll be one of the types of uses that folks bring forward because it was a huge huge success.

I would caution colleagues though and I'm not sure this is necessarily what's being stated but I also would note that we we don't have 10 downtowns and there is something unique about downtown that doesn't mean it should get all the focus and attention and funding to be clear we also need to activate in the neighborhoods invest in our parks and our public spaces we obviously have our libraries and community centers situated throughout the city for a reason but I I wouldn't say that it's simply a matter of taking large events and dividing by 10.

I do think there is a something unique about a big city's downtown and there is value in tax base and folks from all over the city and the region come to our downtown for a variety of reasons and are and benefit from the density and dynamism of it.

So it's not either or to be clear certainly not either or I think it's an important tension and discussion for us to keep having um okay councilman Mulkehy.

Thank you, Mayor um in the interest of time, I'm gonna kind of pop around a little bit.

I'm gonna start with you, Jen.

And wanted to talk about the business improvement districts, right?

We've approved some this year.

We've got some more kind of moving forward.

I'm I'm wondering from a staffing perspective um are you both uh staffed up for capacity for the ones we've approved, the ones we sort of intend to approve, but also those that we have in place today.

As I've stated before, both with like the Alameda Business District and so forth, that you know, our work isn't done when we you know berth these bids, right?

I mean, I think the work is ongoing, even if they've been around like the Willow Glenn Business Association's been around a long time, you know, they have enough capacity for some staffing, but that evolves over the years uh as people transition in and out.

But we have several bids that are not able to afford or not affording, you know, committed staffing.

So I think our job to continue to help facilitate the success of those is important.

So I'm just do you have any comment on whether there's anything in this budget that's allowing you to do more in this area, or do you still have some gaps that we should know about?

Well, the proposed budget before you does help backstop two positions that are limit dated positions that have small business and neighborhood focus.

So the short answer is yes, if those positions are approved as part of the operating budget moving forward, then we will sustain our capacity to support technical assistance to the bids, help them grow their capacity to be self-sustaining and to have a lasting impact.

I think this is a really great example of where the city has invested seed funding over the last couple of years, and now we are bearing the fruits across districts, including including Alam Rock, Santa Clara, Story Road, East Village, and the Alameda, to invite the private sector also to lean in and have that co-investment in uh in a vital neighborhood life and and retail scene.

So, so the the longer short answer is yes, with the proposed budget, we have the staff.

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

Well, I think it's you know, uh what we've heard is some comments about um inclusion in all the activities around you know sports, entertainment, and you know, activations and so forth.

And one of the conduits for that is our business improvement districts and our you know business associations, and I think that is one of the ways, just an example of what I see the role moving forward as your shop is to not just keeping them in the loop on these things that are economic drivers that the city is sponsoring, but also whether it's the you know the the you know out of Chris's shop, the expeditors for opening a business, right?

One of the first places that a business owner or prospective business owner is gonna go is that local business association, and the more they are connected in knowing the services that we are providing, I think the better.

So for those, even those more mature uh associations, I mean downtown associations, very unique, they're highly staffed, you know, probably would say they're not staffed enough, but uh as we know that they have a broader staff.

I just think having our team available to continue to connect them to what we've got to offer is helpful.

Just an idea that I was thinking about, especially for this group as well.

When we did the ABA C bid or the yeah, the C bid.

One of the things we took out was all the home-based businesses, right?

There was no reason, I thought, for us to be um adding more tax onto them, but it's fertile ground.

There's 500 plus businesses, you know, at home in that sector in the broader Alameda Business Association area.

Um, that is fertile ground for the possibility to be continuing to communicate with those businesses.

I'll give you an example.

I have a tenant that we did a lease with 10 years ago.

They came out of their home.

They took 4,000 square feet and they were there for 10 years.

They just bought a building and they're moving out.

And, you know, that came from a home-based business who bought a building in San Jose, made a conscious decision to stay in San Jose.

So just like we were talking about our jobs lands, right?

We always think about, oh, this is all about real estate.

We have other fertile ground, in my view, and that's where I think your operation can be super helpful by staying connected to these business associations and those other affiliated, you know, at home businesses in that same area and for that matter throughout the city.

I know Vic's probably doing the math right now about how many of those are out there, but I want us to make sure that we're being mindful about communicating with those uh as well.

That makes sense.

Um I don't know if you want to react to that while I find my next question.

Sure.

I would say, well, notably among the home-based businesses in the Alameda business district, um, a number of those businesses are situated in with owners of the homes, right?

And so there is a base level foundation of security that comes with increased property value and um and revenue stream from being able to have uh a business based at home in a neighborhood that has a lot of vitality and an opportunity to patronize um the and what we call linger time, right, to be able to access the community and spend time there.

I think the partnership with the bid boards is particularly um, you know, particularly important and how we're helping bid boards mobilize to gain that legitimacy and traction with all business owners that are in proximity.

Um so I would agree with you there that there is is definitely more support work to do and I would say with the momentum that we've already gained with the bid boards.

So switching gears a little bit to the public art program.

I know the vice mayor just raised the question about Momentaro Peach Boy, um, so is the um is the plan with our public art that you know there's gonna be a uh, you know, that's gonna need to be installed, right?

So I assume public works would be involved in something like that.

And then obviously, you know, we have a um, you know, a staff in our public art department.

Um, well, you know, is a situation like this gonna require, you know, public art, sorry, a public works, you know, installation fee.

And at the same time, would our um public art program through our OCA actually take a fee for accommodating that work as well?

Is that a typical way of doing things?

Um that is typical based on how our budget is modeled.

So our staff charges time to be able to steward assets into the public art inventory, um, and then likewise um solicits the input of other departments um to help make sure that the installation of any given art asset um, you know, is seismically retrofitted, is engineered in a way that it won't tip over or create a liability for us, and and that is um, I think since the great recession, how the city has been operating.

So we don't have a general fund amount that otherwise supports um overhead for public affairs staff.

So, but uh I mean I I get public works as a cost recovery program.

I I don't see how if we have staff, you know, from general fund or TOT or however you're staffing public art folks who are doing that work.

I don't understand why there's a fee taken for that kind of thing.

Doesn't compute.

Is that something, Jim, you want to talk about?

Yeah, to elaborate.

I mean, there are some there are some staff that are funded in the the the TOT fund on an ongoing basis.

There are also some staff that are charged to public art funds on a uh ongoing basis, but it's a project to project funding source.

So if they are pulled off a project to work on something else that's not part of the public art program, for example, they don't have a place to charge their staff time to.

So they can't charge their non-public art staff time to a public art project.

That's the reason for the some of these projects require um funding sources to make sure there's resources for staff to do the work that's required.

And that came into place when decades?

Yeah.

At least 35 years ago.

Okay.

So that means that if the Japanese consulate, I I can't remember, Vice Mayor, you talked about it the other day, that they're actually building that for us now and bringing it back.

Who's burdened with that cost to do that?

It's just sort of an example of, you know, we've got people doing really nice things for San Jose, especially when the thing unfortunately got stolen.

Um that then there's sort of a bill to pay to actually put it in.

It seems a little counterintuitive to encouraging more of this goodwill to happen in our community.

That's a good point to to make.

I think there are no easy solutions here.

I mean, that's why we can't say that uh how thinly staffed the city is.

We've gone through iterations and iterations of reductions, and we have departments that are essentially work like a contractor where you bill, you be you bill for service because there is no general fund support for that for that work.

Certainly it could be prioritized, um, but that would be part of the budget in the trade offs with everything else that we have going on in the budget process.

All right.

That was a quick 10 minutes.

So I'm gonna sign off, but I have five more questions that I'll come to some of you each individually, but I'm not gonna give up on this topic.

I think we have to do better to encourage more investment in our city, especially when it's philanthropic, and we need to be good receivers of goodwill from our community and set an example for allowing more.

Thank you.

Yeah, that's right.

Well said.

Uh colleagues, I I don't see additional hands so I'm gonna move to public comment.

We'll see what in a burning final question.

Okay, so Tony, do we have public comment?

I have no cards.

Okay.

Well, then I want to thank everyone for the presentations and substantive discussion, and we'll see you all tomorrow for the next study session.

Have a great day.

And just a reminder, we start at 9 30 tomorrow.

We'll see you at 9 30 tomorrow.

We are adjourned.