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Redevelopment agency runs short of funds

May 31, 1995

By Yolanda Reynolds

La Oferta Newspaper.

On June 1, the San Jose Redevelopment Agency Board (San Jose City Council) will decide which building projects will be funded for the next five years.

The controversial Redevelopment Agency is facing grim realities as the golden goose is not laying enough eggs to continue all the projects dear to various groups in the city.

Mayor Hammer submitted a revised “five-year capital budget” that does not delete any projects, but pushes back the starting dates for some long promised projects.

Among the projects currently on schedule are the Repertory Theater $19 million. the Mexican Heritage Gardens $75 million, the Nihonmachi $6 million, Villa Torino $10 million, The Tech Museum of Innovation $39 million.

Among the projects that have been delayed are the Teatro Jose, parking improvements at Century Center between So. Second and South Third Streets, and the Mid-Size Theater. Teatro Jose will come on line sometime after five years. The parking improvements will begin in 1998-99. The Convention Center carpet replacement will be delayed to sometime after five years. The San Pedro Street sidewalk improvements will continue sometime after five years.

Many opera supporters were disappointed because the Mayor’s budget proposal, if approved, will delay construction of their personal performing stage in the proposed “Mid-Sized Theater “beyond a five year period.

In spite of the suggested delays of numerous long promised projects, the Agency staff is proposing that the City act “creatively” to fund those projects that Mayor Hammer feels are a priority and should go forward.

According to Hammer, she directed the staff to select the programs for completion based on the following criteria: (1) respect of Agency commitments to private and nonprofit groups thereby keeping those partnerships intact. (2) to propose projects that they believe will “maintain the momentum that has been created by downtown redevelopment” (3) to also impose those projects that they believe provide a balance between the neighborhoods and downtown and (4) include those projects ready for construction.

To construct the reduced list of projects the Agency Board must find an additional $150 million. To accomplish this the Agency staff is recommending that: the Agency Board (San Jose City Council) increase the Transient Occupancy Tax (TOT) by 2% to 12%, borrow millions in a HUD Section 108 Loan, reduce agency operating costs by 35% ($5 million) and, using the backing of the City’s General Fund. borrow another $20 million in a long-term bond. The staff also expects property assessments to increase bringing in the remaining revenues.

The Agency staff claims that real estate values in the city will hold and even increase (though modestly), in the near future. Critics are skeptical of the Agency projections and urge extreme caution. The increase in hotel taxes will likely drive hotel guests away and to nearby Santa Clara, which charges only 9.5% in T0 taxes. The result will be that rates will not only impact hotel occupancy and revenues, but also impact restaurants and all others whose revenues and businesses rely on hotel/restaurant customers.

William J. Conlon, a San Jose resident who is well informed on governmental activities, says, “One of the most dangerous methods of municipal financing is the use of COPS (Certificate of Participation Bonds) because the electorate is not the definitive voice in its use. In other words,” he adds, “politicians can use it as often as they wish. “Conlon explains “too often the expected revenues do not materialize.”

That is, in fact what happened with the San Jose Performing Arts Center, and again with the new convention center.

Redevelopment came to San Jose with the urban renewal programs of the 60’s. One of the first projects was the Center for Performing Arts in downtown San Jose. That project was extremely controversial because then Mayor Janet Gray Hayes and the Council proceeded with the Symphony Hall’s construction, even though the votes twice rejected bond approval for its construction.

Mayor Hayes and the Council reamed to use of a Certificate of Participation (revenue bond/loan) that does not require the voters’ approval to proceed and is guaranteed by the City’s General Fund. “A COF is also tied to a specific project – in this instance the Performing Arts Center,” explains Conlon.

The expected rental revenues were never realized and the debt service became a drain on the City’s General Fund for twenty years after its construction. To add public embarrassment to the controversy, the movable ceiling collapsed shortly after the Performing Arts hall was opened, barely missing some workmen.

The more recent, millions over budget, San Jose McEnery Convention Center was also constructed with a COP Bond (a loan) that, like the one for the Center for Performing Arts, was expected to bring in enough revenues to meet its operating expenses and debt service. It also has been a major drain on the General Fund – at one time requiring an $11 million annual gift from the City’s General Fund.

The borrowing of money that is backed by the City’s General Fund should concern many San Joseans.

The Police Officers Association recently announced that they were thinking of proposing an initiative that would require the maintenance of a certain ratio of officers per number of residents in the City.

City trees are now trimmed once every 24 years rather than the in the seven-year cycle that was in force just a few short years ago. Such services are funded by the City’s General Fund.

Just last election, San Joseans approved a parcel tax in order to support the City’s libraries. The General Fund has not had enough funds to properly maintain the City’s libraries.

The proposed Mexican Heritage project is a combination of senior housing, shopping center, and a center complex that, its sponsors hope, will be a money making. To this concern the Agency staff estimates that any potential drain on the General Fund should be made up by an increase in sales taxes because of the increased customer traffic that will result because of the activities of the new theater. Time will tell.

At the recent Council meeting, most people spoke on one side or the other of the proposed projects disregarding the overall potential danger to the pool of money (General Fund) that provides the daily services needed to maintain the City.

Among those who did present themselves at the meeting was the former City Councilman member and now County Supervisor, Blanca Alvarado, who was armed with a letter from Supervisor Ron Gonzales appealing for the approval of the Mayor’s proposed budget and specifically requesting full funding for the Mexican Heritage Gardens project.

Susan Price, speaking for herself and PACT (People Acting in Community Together), requested that the Mayor’s promise of $2 million for home work centers in this and next year’s funding cycles, be honored. Mayor Hammer said that this promised funding remained in the budget.

Eastside resident t Felix Alvarez, representing ARAC (Alcohol Abuse Watchdog Organization), asked that the Council ban the sale of alcohol at the soon to be constructed Mexican Heritage Gardens Development.

The Mexican Heritage Gardens adjoins the San Antonio elementary school.

San Jose resident Steve Arevalo informed the Council that he and his group had been informed, just prior to l the Agency Board meeting, that the Filipino Center’s promised for much needed repairs at the community center was no longer included in this year’s budget.

Al Drost, an Eastside Resident and Agency critic, asked where were the long term “jobs that the Agency always claims is its purpose.” Drost also asked for a public accounting of the property taxes paid by the Fairmont Hotel and the new Arena – all now sitting on City land. He added, “when I asked former Councilman Joe Head if you were going broke, he told me ‘No.’” Drost added “You are robbing Peter to pay Paul.”

Others claim that the “Agency financing is a giant Ponzi scheme.” The section 108 HUD loan will be backed by the full 550 million federal allocation to CDBG (Community Development Block Grant).

According to a former CDBG allocations committee member, Dale Warner, Community Development Block Grant monies available to San Jose funded many small community based non profit organizations. He added that, “one of the major recipients was MACSA (Mexican American Community Services Agency).

“Another major CDBG recipient has been the San Jose Development Corporation, which is a partner in the planned senior housing project. Paloma Blanca, at the Mexican Heritage Gardens.

For more information on the 1995-96 Redevelopment Agency Capitol Improvement Budget, contact the Mayor or your Council representative at 277-4241.

Concerned San Joseans should plan to attend the June 1 Redevelopment Agency Board meeting at City Hall where a final decision will be made. © La Oferta Newspaper.

 

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