Reality Check

Reality Check

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San Jose City Hall: A Good Deal for Taxpayers?

San Jose followed the will of voters by opening a brand new city hall in 2005. But a recent grand jury report questions whether city leaders had to deceive taxpayers to make it happen.

By Sam Brock
|  Friday, Dec 7, 2012  |  Updated 12:37 PM PDT
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San Jose followed the will of voters by opening a brand new city hall in 2005. But a recent grand jury report questions whether city leaders had to deceive taxpayers to make it happen

San Jose followed the will of voters by opening a brand new city hall in 2005. But a recent grand jury report questions whether city leaders had to deceive taxpayers to make it happen

In a city without a long list of veritable landmarks, San Jose’s City Hall certainly fits the bill.

A gleaming structure that stands some 18 stories high and borrows French inspiration to offer a look that’s very close to government chic, San Jose is proud of its new civic center for many reasons.

“One of the things that we wanted to achieve with city hall is to create a space for our community, to
gather, to protest, to celebrate,” communications director David Vossbrink said, “and we’ve achieved that.”

When the vision sprang up nearly 20 years ago, Vossbrink said there was also the added goal of creating a more efficient workspace, where more city employees could work and communicate.

By concentrating staff at one location, Vossbrink said the city would be able to save considerable money in the long term.

Today, roughly seven years after the completion of city hall, has that cost-saving vision started to take effect?

The question sits at the epicenter of an ongoing debate about whether or not San Jose failed to live up to the voter ballot measure that backed the construction of the new building, Measure I.

“The city has a pledge to its residents to do things cost-effectively, and efficiently,” Vossbrink said.

But reports conducted by two separate Santa Clara County grand juries, most recently one filed in May of 2012, conclude that the city of San Jose “cannot demonstrate that (city hall) was constructed in compliance with its promise to voters who authorized the project only under very limited financial criteria.”

The criteria, according to Measure I, included a mandate not to impose additional taxes or take away funding from other city services.

Additionally, the ballot measure outlined several measures for funding the new building, specifically, “by using the proceeds from the sale or lease of the old civic complex and other land, savings from the elimination of leased office space, and consolidation of city facilities and services.”

The old civic center was transferred to Santa Clara County in 2011 for $10 million to settle redevelopment debt.

A nearby parking lot, referenced in the grand jury report as ‘Lot E’ and slated for sale to fund city hall, currently provides parking space for police officers and country workers.

Collectively, those two properties have generated zero revenue to pay down city hall.

“Measure I didn’t say you *had to use these specific mechanisms to pay for the building,” Vossbrink said. “The measure said can you build a building without raising taxes? Can you build a building without affecting services? And the answer is- we can build a building without raising taxes, and we can build a building without affecting services. We passed the test.”

Andrew Crutchfield, who works for California Common Sense, a group dedicated to transparency in government, agreed with Vossbrink about the language of Measure I.

“I don’t really think the city of San Jose did break its promise to voters,” Crutchfield said.

The measure, in his interpretation, provided a blueprint for funding city hall, not a mandate. If voters wanted more accountability, Crutchfield added, they should have demanded it in the first place.

“San Jose has borrowed money and has to pay for borrowing costs each year out of its General Fund,” Crutchfield said. “However, San Jose has projected savings from the new building that would accrue over a 50-year period. In the long run, the city should realize those savings.”

But does the grand jury have a point, that San Jose should have honored the concept of borrowing some money now, and using land sales and leasing to defray the rest of the costs?

As a taxpayer, here’s what you need to know:  Of the $507 million it cost to build city hall, about $445 million of the funds are currently listed as ‘outstanding debt.’

Under current loan terms, that debt translates to $20 million in annual payments, taken from the city’s general fund. 

The general fund is used to pay for services such as law enforcement, fire, parks and recreation, and libraries.

To provide perspective, the general fund budget for 2011-2012 was $906 million. The $20 million debt payment, by comparison, constitutes only a 2.2-percent sliver.

But when compared to the police department budget of $298 million, the same payments eats up a larger percentage, about 6.7 percent.

Lastly, when viewed in light of the libraries budget, which is $22.6 million, the debt service is equivalent to 88.3 percent of that department’s entire budget.

To provide context, Vossbrink noted there was no way the city could have anticipated several periods of economic tumult, which drew down city coffers and resulted in a decade of budget shortfalls.

“You can’t blame city hall for the dot-com bust,” Vossbrink said. “You can’t blame city hall construction for the widespread Silicon Valley recession in the early 2000’s, and you can’t blame new city hall for the incredible recession we’ve had since 2007.”

The grand jury report filed in May of 2012 also contained several ‘factual errors,’ according to the city, including how many employees were intended to be relocated to city hall.

Calls placed to the grand jury’s foreperson, Kathryn Janoff, were never returned.

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