$30 Million City Surplus Beats Forecast – Operating Reserves Near $50 Million
The Oct. 27 Santa Clara City Council meeting had some very good news for residents. The City closed the 2014-2015 books with a $20 million surplus for the year; adding $15 million to the City’s working capital – general fund – reserve and $5 million to its capital project reserves.
With these surpluses, the City’s general fund now has almost $48 million in operating reserves – up from less than $3 million five years ago – and the capital project reserve is now $13 million. This meets the City’s target of having reserves equal to at least 25 percent of the City’s $167 million general fund budget – about $42 million.
However, the reserves remain below the target set by City Manager Julio Fuentes. “We should be at $60 million, even $100 million,” he said at a May Council meeting. “That helps the city become bullet-proof.” Santa Clara top income source is sales tax, which is highly sensitive to the ups and downs of the Silicon Valley’s volatile economy.
By comparison, Sunnyvale has $54 million in its budget stabilization reserve and $19 million in its contingency reserve. This year Sunnyvale forecasts adding $5 million to its operating reserves.
Convention Center To Continue Booking Business, But Uncertainty Causes Business Fall-Off
By a 4-2 vote, with Council Members Debi Davis and Lisa Gillmor opposing, the Council allowed the Santa Clara Convention Center to book business beyond June 30, 2016, as negotiations with the State Dept. of Finance continue about former Santa Clara Redevelopment Agency assets. But while negotiations are proceeding, the Center is losing business because of that uncertain future, according to City Manager Fuentes and Convention Center Manager Lisa Moreno.
Trade show and event planners need to book many months and even years in advance. At least one of the Center’s long-term clients has booked its event in San Jose because of this uncertainty. “Fortunately we have some very faithful customers that have continued to book with us,” Moreno said after the meeting.
“Many of the large events are being picked off by neighboring cities,” said City Manager Fuentes. “The irony is that we may end up keeping a convention enter that doesn’t have business. There are discounts being offered to book by Nov. 1. These are being offered by neighboring cities. The City has already lost one big convention and is on the verge of losing another. It is very hard to build back a reputation.”
Regardless of what the City does there’s risk.
If the City waits to book business until its ownership is clear, there may be no business book. If the Center books future business and the City loses ownership of the facility, Santa Clara could be sued if the new owner failed to honor those contracts. “The RDA dissolution Successor Agency Oversight Board would arguably take on those liabilities,” said City Attorney Ren Nosky at the Oct. 27 Council meeting. But that wouldn’t necessarily eliminate the City’s liability exposure.
“There’s a draft agreement for the city to have fee simple ownership of the Convention Center,” said City Manager Fuentes. “That has gotten a favorable reading from the taxing authorities. The agreement is now being reviewed by State Dept. of Finance. We’re working on a long-range property management plan. As part of that, the Convention Center would be returned to City, but there is a cost for us. The goal of the State is liquidating RDA assets and retiring debt.” For that reason, Fuentes said, “I have a good feeling that it’s going to work out.”
If the City loses the Convention Center, the Oversight Board could operate the Convention Center, sell it, or demolish it and sell the land to a developer. In July 2016, city Oversight Boards will be consolidated in a single County RDA dissolution Oversight Board. The members would be appointed by the Board of Supervisors; the majority of whom – Cindy Chaves, Dave Cortese, and Ken Yeager – are San Jose city politicians.
An agreement about the Convention Center was “close,” said Council Member Lisa Gillmor. Given that the question would likely resolved in a few weeks,” I think voting for this motion is voting for huge risk. We’re going for the immediate result of making money now, but putting ourselves at risk [for long term liability].”
On the other hand, less business means higher City subsidies to operate the Convention Center.
“We’re getting poached by San Jose,” said Council Member Dominic Caserta. “We’re losing millions on our convention center. We’re not making it compete. We have to stop playing Russian roulette.”
For some, then question required no deliberation. “This [the Convention Center] was supposed to be turned over a long time ago,” said Deborah Bress of the anti-stadium political committee Santa Clara Plays Fair, which was strongly in favor of RDA dissolution and the County’s “clawbacks” of Santa Clara RDA assets.
“We do not even own this piece of property. It’s fiscally irresponsible to commit our money. And you still work for us,” she said, addressing her remarks to the City Manager. “For this to go forward because of someone’s gut feeling or whatever is going on behind closed doors. It isn’t a city run by an individual meeting behind closed doors. Yeah, it’s a problem. Who’s to say we’re not losing business because there’s no parking?”
1st Year of Stadium Operations Posts $5 Million Surplus, $2.9 Million Direct Contribution to Santa Clara Bottom Line
The audited Stadium Authority financials were reviewed for a second time on Oct. 27, and for a second time the Council took no action to accept the report.
Auditors KMPG reported that the Stadium Authority had a $5.5 million surplus for its first year of operation, and the City received $2.9 million in rents and fees from the stadium in FY 2014-15. Although KMPG auditors gave a painstaking explanation of Generally Accepted Accounting Procedures (GAAP) for conducting audits, stadium opponents continue to dispute the numbers. “If they [KMPG] audited the garbage that was put in,” said Bress, “where is the assurance that we’ve had an audit that means a damn thing?”
The Council, however, isn’t disputing the numbers. At this meeting and in September when the report was first presented, whether the audit should have been a strictly financial audit, or an audit of compliance with Measure J – the 2010 ballot measure approving the stadium project – which was what some Council Members expected. The Council endorsed the need for a compliance audit, but gave no actual direction to conduct one.
Since August, there has been discussion about whether or not the City’s general fund is being reimbursed completely for stadium expenses – specifically, public safety costs.
The issue is a continuing source of friction because Measure J doesn’t allow Santa Clara general fund money to be used for stadium construction or ongoing operations.
The system for tracking stadium-related activities has been evolving since 2010 to capture costs in stadium-specific cost centers, according to City manager Fuentes – who started work in 2013 in the middle of stadium construction, well after the contract was negotiated.
Another issue, which also surfaced in the Council’s charter review discussion that night, is whether Santa Clara can properly manage an NFL stadium with a volunteer, part-time City Council paid $600/month, no staff and with no experience managing a professional sports venue doubling as the Stadium Authority. City staff – which already had a full workload before Levi’s Stadium was built – similarly doubles as Stadium Authority staff. By contrast, noted Gillmor, the City’s $500 million electric utility, Silicon Valley Power, has over 100 employees.
In addition to overseeing the City’s day-to-day business, planning for future needs, and establishing City policy, City Council Members make decisions about significant development projects – including the largest development project ever proposed in the City’s history, Related Companies’ City Place Santa Clara. Added to that is representing the City on dozens of state and regional agency boards, and acting as the governing boards of the City’s Housing, Sports and Open Space and Stadium Authorities.
Raises for City Attorney, City Clerk and Police Chief
The Council approved salary increases for the City Manager, City Attorney, City Clerk and Police Chief, as recommended by Salary Review Committee – Mayor Jamie Matthews, Council Members Pat Kolstad and Lisa Gillmor. The City Manager declined a 5 percent “stipend” – $14,701 – that would have been paid in June.
City Attorney: 10 merit percent increase – from $227,928 to $250,721 – this year and an additional 7.5 percent increase to $265,525 in October 2016.
Police Chief: 5 merit percent increase, from $248,484 to $260,908 plus any cost-of-living adjustments specified in the Police Management contracts.
City Clerk: 5 percent merit increase, from $177,108 to $185,963.