2023-2024 PROPOSED
OPERATING BUDGET
OVERVIEW
May 10, 2023
2023-2024 Budget Study Sessions
Slide 2
PRESENTATION AGENDA
• Opening Remarks
• Proposed Budget Overview
• Budget Balancing Strategy and Recommended Budget Actions • Next Steps in the Budget Process
• Economic Outlook
2023-2024 PROPOSED OPERATING BUDGET
GENERAL FUND OPERATING MARGIN
Slide 3
2023-2024 2024-2025 2025-2026 2026-2027 2027-2028
Five-Year
Surplus/
(Shortfall)
Incremental
Surplus/
(Shortfall)
$35.32 ($18.8) ($0.1) $9.4 $0.1 $25.9
2024-2028 Revised General Fund Five-Year Forecast
($ in millions)1
2 This figure was revised from the $29.9 million surplus as presented in the February 2023 Forecast as a result of continued analysis of projected revenues and expenditures.
1 Does not include 1) costs associated with services that were funded on a one-time basis in 2022-2023; 2) costs associated with unmet/deferred infrastructure and maintenance needs; and 3) one-time revenue sources or expenditure needs. 2023-2024 PROPOSED BUDGET OVERVIEW
Slide 4
• Balanced all funds (General Fund, Special and Capital Funds) • General Fund projected surplus of $35.3 million fully allocated, included reserving ongoing funding of $18.8 million to resolve the shortfall anticipated in 2024-2025 • Investment Priorities:
➢ Increasing Community Safety
➢ Reducing Unsheltered Homelessness
➢ Cleaning Up Our Neighborhoods
➢ Attracting Investment in Jobs and Housing
Other select areas of urgent, important, and continuing work within other community services, strategic support services, and deferred infrastructure • Budgeted Positions (all funds) are up 2.1%, from 6,884 to 7,033 2023-2024 PROPOSED BUDGET OVERVIEW
BUDGET BALANCING CONSIDERATIONS
Slide 5
Mayor's March Budget
Message
City Council and
Organization
Priorities
Budget Balancing
Strategy Guidelines
City Council Policy
1-18 and City of San
José Budget Principles
Budgeting for
Equity
CITY OF SAN JOSE PROPOSED OPERATING
BUDGET OVERVIEW
Slide 6
2023-2024 PROPOSED CITY BUDGET 1: $5.2 billion
TOTAL NUMBER OF FUNDS: 137
TOTAL NUMBER OF POSITIONS (FTE): 7,033
1 An adjustment of $880 million is necessary to arrive at the $5.2 billion net 2023-2024 Proposed City Budget to avoid the double-counting of transfers, loans and contributions between City funds.
General Fund
1,583.8
26%
Special Funds
3,299.2
54%
Capital Funds
1,238.0
20%
2023-2024 PROPOSED OPERATING BUDGET
USES BY CITY SERVICE AREA (ALL FUNDS; $ IN MILLIONS)
Slide 7
Community and Economic
Development
$243.4
7.8%
Environmental and Utility Services
$959.4
30.7%
Neighborhood Services
$312.6
10.0%
Public Safety
$813.4
26.0%
Transportation and Aviation
Services
$286.0
9.1%
Strategic Support
$513.6
16.4%
* Excludes Fund Balance, Transfers, Reserves, and Capital Fund (project) expenditures.
CITY OF SAN JOSE PROPOSED OPERATING
BUDGET OVERVIEW – FUND CATEGORIES
Slide 8
$12.4, 0%
$38.6, 1%
$58.7, 2%
$74.0, 2%
$95.8, 3%
$107.2, 3%
$107.6, 3%
$141.9, 5%
$177.8, 6%
$473.5, 15%
$487.7, 16%
$1,353.1, 43%
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
Parking
Convention & Cultural Affairs
Internal Service
Development Fee
Other
Capital*
Benefits
Housing
Airport
Clean Energy
Sewer, Storm, Waste, Water
General Fund
Millions
2023-2024 Proposed Operating Budget by Fund Category (exc. Transfers, Reserves, and Fund Balance) * Capital Fund expenditures include only personal services and overhead reimbursements.
CITY OF SAN JOSE PROPOSED OPERATING
BUDGET OVERVIEW – CORE SERVICES
Slide 9
$3,019.7
$33.0
$36.2
$36.8
$34.9
$37.0
$39.5
$40.0
$42.5
$43.3
$48.8
$53.2
$60.1
$79.4
$99.6
$103.3
$200.1
$263.2
$301.9
$331.9
$427.4
$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Other Core Services
Recreation Services
Fleet and Equipment Services
Airport Operations
Facilities Management
Arts and Cultural Development
Airport Facilities
Development Plan Review and Building Construction Inspection (PBCE) Access To Information, Library Materials, and Digital Resources Affordable Housing Production and Preservation
Plan, Design, and Construct Public Facilities and Infrastructure (PW) Potable Water Delivery
Parks Maintenance and Operations
Homelessness Interventions and Solutions
Investigative Services
Wastewater Management
Recycling & Garbage Services
Emergency Response (Fire)
Strategic Support (Multiple CSAs)
Respond To Calls For Service and Patrol Support
Providing Clean Energy to the Community
Millions
2023-2024 Proposed Budget by Core Service - All Funds (excl. Transfers, Reserves and Fund Balance) 2023-2024 PROPOSED OPERATING BUDGET
GENERAL FUND SOURCES
Slide 10
Encumbrance Reserve
3.4%
Fund Balance - Carryover
8.5%
Property Tax
29.1%
Sales Tax
21.2%
Transient Occupancy Tax
1.0%
Franchise Fees
3.3%
Utility Tax
8.0%
Business Taxes
5.5%
Real Property Transfer Tax
3.2%
Telephone Line Tax
1.4%
Licenses & Permits
1.4%
Fines, Forfeitures, & Penalties
1.0%
Fees, Rates and Charges
1.4%
Revenue from Money & Property
0.9%
Revenue from Local Agencies
1.1%
Revenue from State & Federal Government
1.2%
Other Revenue
0.6%
Overhead Reimbursements
4.9%
Transfers
1.9%
Reimbursements for Services
1.1%
Total General Fund Sources: $1,583,796,728
2023-2024 PROPOSED OPERATING BUDGET
GENERAL FUND USES BY CATEGORY
Slide 11
Personal Services
65%
Non-Personal/Equipment
11%
City-Wide Expenses
8%
Capital Contributions
2%
Transfers
2%
Earmarked Reserves and
Contingency Reserve
9%
Encumbrance Reserve
3%
Total General Fund Uses: $1,583,796,728
2023-2024 PROPOSED OPERATING BUDGET
GENERAL FUND USES BY DEPARTMENT
Slide 12
2023-2024 BUDGET BALANCING STRATEGY
GENERAL FUND
Slide 13
2023-2024 Ongoing
T otal General Fund Surplus $ 35.3 $ 35.3
Recommended Balancing Strategy
– Changes in Sources $ 68.2 $ 4.5
– Changes in Uses 103.5 39.8
T otal Balancing Strategy $ (35.3) $ (35.3)
Amount Remaining $ 0 $ 0 2023-2024 PROPOSED BUDGET INVESTMENTS
GENERAL FUND*
Slide 14
Investment Priority 2023-2024
Adjustments
Ongoing
Adjustments
Increasing Community Safety $22.9 million $6.1 million
Reducing Unsheltered Homelessness $38.0 million $0.5 million Cleaning Up Our Neighborhoods $15.6 million $8.9 million Attracting Investments in Jobs and Housing $3.5 million $0.2 million Other Community Services $19.0 million $4.3 million
Strategic Support Services $4.9 million $3.2 million
Deferred Infrastructure $27.5 million $0.9 million
Investment Priority T otal $131.4 million $24.1 million Measure E Revenue Stabilization Reserve $15.1 million
2024-2025 Future Deficit Reserve - $18.8 million
Use of Reserves ($43.0 million) ($3.1 million)
T otal $103.5 million $39.8 million
* While only the General Fund is shown in this table, other Special and Capital Funds may also contribute funding to these Investment Priorities.
RECOMMENDED BUDGET ACTIONS (PARTIAL LIST)
INCREASING COMMUNITY SAFETY
Slide 15
• Police Department Sworn Backfill Reserve ($5.0 million) • Fire Station 32 – Fixtures, Furniture, and Equipment
($1.8 million)
• Firefighter/Paramedic Lateral Recruiting Academy
($1.6 million)
• Fire Battalion Staffing ($1.2 million)
• Police Field Patrol Staffing ($1.1 million)
• Community Services Officer Downtown Ambassador ($907,000) • Community-Based Violence Solutions ($400,000)
• Vision Zero and Grants Evaluation Staffing ($280,000)
RECOMMENDED BUDGET ACTIONS
REALLOCATION OF UNCOMMITTED MEASURE E RESOURCES
Slide 16
Direction in the City Council-approved Mayor’s March Budget Message: for the Administration “to explore the use of uncommitted Measure E resources for reallocation to homeless prevention, support, and management investments as part of the overall strategy to fund the priorities described in this message.” Considerations to determine the amount of uncommitted Measure E resources recommended for reallocation to meet this direction:
• Funding levels for homelessness prevention and support should be significant – for City staffing capacity, for outreach capacity, and to drive the development of EIH and safe parking sites – to provide resources in 2023-2024 that can be expended over a multiyear period;
• Program sufficient levels of Measure E resources to support previously approved affordable housing projects and those projects that successfully competed for an allocation of funding from recent Notice of Funding Availability; • T o provide maximum flexibility to meet the above objectives, take into consideration both Measure E resources received in prior years through 2022-2023 and anticipated revenues for 2023-2024; and • Ensure that a portion of uncommitted Measure E resources remain unspent to absorb the likelihood that Measure E revenues in 2022-2023 will fall short of the $65 million revenue estimate so funding commitments stay intact.
RECOMMENDED BUDGET ACTIONS
REALLOCATION OF UNCOMMITTED MEASURE E RESOURCES
Slide 17
Determination of the Level Of Uncommitted Measure E Resources Uncommitted Affordable Housing Allocation
Current and Prior Year Uncommitted Affordable Housing Allocation $70.3 million 2023-2024 Uncommitted Affordable Housing Allocation $35.6 million T otal Uncommitted Measure E $105.9 million
Amount Retained for Affordable Housing Purposes
Inflation Reserve for Previously Approved Projects $11.0 million Commercial Space for Previously Approved Projects $1.3 million Fully Fund Affordable Housing Projects from Recent NOFA (partially supports 519 affordable housing units) $35.5 million Affordable Housing Acquisition Reserve $5.0 million
T otal Amount Retained for Affordable Housing (50% of Uncommitted) $52.8 million Measure E Revenue Stabilization Reserve (14% of Uncommitted) $15.1 million Amount Recommended for Reallocation to Homelessness Prevention, Support, and Management Services (36% of Uncommitted) $38.0 million
RECOMMENDED BUDGET ACTIONS
REDUCING UNSHELTERED HOMELESSNESS
Slide 18
Recommended One-Time Reallocation of Uncommitted Measure E Resources Recommended Investments
Reallocated
Amount
Anticipated
Expenditure
Timeframe
Interim Housing - Site Acquisition, Development, and Operations (including Safe Parking) $20.9 million Multi-year Homelessness Response and Outreach $10.5 million 3-year Homelessness Prevention $4.8 million 1-year
Homelessness Coordination T eam $1.8 million 3-year
Investments to Reduce Unsheltered Homelessness $38.0 million
RECOMMENDED BUDGET ACTIONS (PARTIAL LIST)
CLEANING UP OUR NEIGHBORHOODS
Slide 19
• Beautify San José ($12.3 million)
• 280 Almaden Avenue Beautification Improvement Project ($1.9 million) • Automated Public Toilets ($438,000)
• San José 311 Program ($500,000)
• “Beautify Your Block” BSJ Grants ($150,000)
RECOMMENDED BUDGET ACTIONS (PARTIAL LIST)
ATTRACTING INVESTMENTS IN JOBS AND HOUSING
Slide 20
• Supplemental Arts + Cultural Funding ($1.0 million)
• Storefront Activation Grant Program ($750,000)
• Downtown Management and Citywide Business Development Staffing ($318,000)
• Permit Center General Customer Support Staffing ($280,000) • Market Ready Urban Villages (CEQA – Pre-Clearance, $300,000) • Mobile Home Park Protections ($240,000)
• Anti-Displacement Strategy Staffing ($210,000)
RECOMMENDED BUDGET ACTIONS (PARTIAL LIST)
OTHER COMMUNITY SERVICES
Slide 21
• Digital Equity Program ($1.8 million)
• Animal Care and Services Staffing ($1.4 million)
• Youth Scholarship Funding ($1.0 million)
• Recycling Contamination Reduction ($840,000)
• Storm and Sanitary Sewer Infrastructure and Regulatory Investment Needs ($812,000)
• Child and Youth Services Programming Staffing ($529,000) • Disability Community Engagement and Service Evaluation ($180,000)
RECOMMENDED BUDGET ACTIONS
STRATEGIC SUPPORT AND DEFERRED INFRASTRUCTURE
Slide 22
Cultural Facilities Capital Rehabilitation Projects (General Fund) Center for the Performing Arts – Chiller, Cooling Tower, and Boiler Replacement $7.6 million San José Museum of Art – Cooling Tower Replacement $2.9 million The Tech Interactive – Chiller and Cooling Tower Replacement $1.2 million Children’s Discovery Museum – Curb and Walkway Rehabilitation $0.4 million Total $12.1 million
• IT Sinking Fund Reserve ($4.5 million)
• Transfer to the Vehicle Maintenance and Operations Fund (Fleet Replacement, $4.0 million)
• Windows 11 Upgrade, Equipment, and Resources ($3.2 million) • Disaster Recovery and Grants Management Staffing ($1.3 million) • Recruitment Centralization Pilot Program
($1.0 million)
• Pipeline Development Staffing ($479,000)
RECOMMENDED BUDGET ACTIONS
FEES AND CHARGES ADJUSTMENTS
Slide 23
• Utilities:
– Storm Sewer Service Fee: No increase
– Sewer Service and Use Charge Fee: No increase
– Recycle Plus Rates: 4% increase for single-family and 2% for multi-family dwellings
– Municipal Water System Rates: revenue increase of 14.6% increase (rates will vary by user)
• Development Fee Programs: fee increases of approximately 5% to 10% recommended
• Other Fee Programs: fee changes to generally maintain cost recovery, with exceptions
NEXT STEPS
Slide 24
May 10th through 17th City Council Budget Study Sessions May 8th, 10th, 20th, 22nd Community Budget Meetings
31st, and June 6th, 7th
May 16th/June 12th Public Budget Hearings
June 2nd Mayor’s June Budget Message Released
June 13th Council Review/Approval of Mayor’s June Budget Message and Budget
June 20th Adoption of the 2023-2024 Budget and Fees and Charges 2023-2024 PROPOSED OPERATING
BUDGET OVERVIEW
Jim Shannon
Budget Director
Bonny Duong
Assistant Budget Director
Claudia Chang
Deputy Budget Director
Selena Ubando
Financial Status Coordinator
Bryce Ball
Operating Budget Coordinator
Stewart Patri
Capital Budget Coordinator
FY23/24
Economic
Outlook
May 10, 2023 Office of Economic Development and Cultural Affairs Nanci Klein, Director of OEDCA
Key Topics
1 General Fund Revenue Sources
2 National and Local Economic Outlook
3 Factors Impacting Revenue Sources
4 Fiscal Impact of Land Use Decisions
What are the major General Fund
revenue sources and how are they
collected and distributed?
Economically Sensitive General Fund Revenue Sources
460.4 million is 29.1% of the
General Fund
Property Tax
City of San Jose receives ~14%
of the Countywide 1%
Property Tax
44%
K-12 Schools
18%
County
14%
Cities
11%
Redevelopment
Property Tax Trust
Fund
7%
Community
Colleges
6%
Special Districts
Example:
Property
Tax paid by
a major
employer
Assessed Value: $133.7M
1% Tax Charge: $1.37M
Government Entity
San Jose Unified
Santa Clara County
Education Revenue Augmentation Funds
San Jose City
San Jose Evergreen Community College
County School Service
Santa Clara Valley Water District Central
Zone
SCC importation Water-Misc District
Bay Area Air Quality Management District
Santa Clara Valley Water District
Santa Clara Valley Water District West
Zone 4
Amount
$623,681
$199,161
$180,448
$167,750
$92,228
$44,109
$15,639
$6,951
$2,673
$2,272
$1,738
Tax Rate
46.66%
14.90%
13.50%
12.55%
6.90%
3.30%
1.17%
0.52%
0.20%
0.17%
0.13%
Total $1.3M 100%
$336.4 million is 21.2% of the
General Fund
Sales and Use Tax
City of San Jose receives 1.25% of
the overall 9.375% statewide sales
and use tax
8.125
Other %
1.250
San Jose %
Sales and Use Tax
9.375%
Every person engaged in
business in the City shall
pay a business tax
Business Taxes
$87.5 million is 5.5% of the
General Fund
$16 million is 1% of the
General Fund
Transient
Occupancy
Tax (10%)
4.0 General
Fund %
3.0 CVB
Cultural
Fine Arts %
3.0 Convention
Center %
How is our economy performing?
National Economic Outlook
Macroeconomic Uncertainty: Slow Growth, Possible Recession • Significant progress has been made towards recovery from the pandemic-induced economic slowdown: V-shaped recovery
• Strong job growth has been attained, but challenges to achieving a full and equitable recovery lie ahead, especially with the emergence of inflation in 2021 and tightening
monetary policy in 2022
Indicators to Watch
Gross Domestic
Product (up 2.1%)
Lower than expected
growth but back to a
normal pattern
Unemployment
Rate (3.4%)
Added more than
250K jobs-above
expectations
Consumer Price
Index (up 5%)
Declining but still far
from the 2% norm
Federal Funds
Rate (5-5.25%)
10th hike in 14 months
Local Economic Outlook
Struggling but not in Crisis
• The interplay between interest rates and inflation has various impacts on the local economy
• Despite major challenges such as tech layoffs, bank runs, declining venture capital investments, remote work and recent falls in commercial real estate valuations, economy is not in crisis (yet) Strong Economic Base Driven by Tech
Largest GDP per Capita
San Jose MSA $210,235
San Francisco MSA $144,633
Seattle MSA $119,646
Boston MSA $108,506
Bridgeport MSA $102,809
New York MSA $100,806
Tech-dominant industries generate
62% of the GDP in San Jose MSA
Venture Capital is Down but not Collapsing
All Lost Jobs are Recovered Over the Last 3 Years
San Jose MSA
+2%
-1%
1,059,000
1,078,100
19K more jobs
unemployment
rate decreased to
3.3%
-7,700
Retail Trade
-4,300
Personal Services
-2,100
Leisure and Hospitality
Low Paying Jobs Dominated by People of Color
58%
65%
69%
31%
35%
42%
Consumer Spending
Which factors impact
city budget drivers?
Economically Sensitive Budget Drivers
Property Tax
• Commercial Real Estate Market
• Residential Real Estate Market
Sales Tax
• Employment Trends
• Consumer Trends
• Industry Trends
Business Tax
• New Business Development
• Major and small employers
Transient Occupancy Tax
• Hotel Occupancy
Commercial Real Estate Vacancy Varies
San Jose has Lower Property and Sales Tax per Capita
Land Use and Revenue
City of Eugene Oregon
FY23/24
Economic
Outlook
May 10, 2023 Office of Economic Development and Cultural Affairs