Sorry this is so late.  There have been more pressing things to get to.  This was, indeed, a relatively short meeting that we breezed through pretty quickly.  Councilmember Swegles was not present.  He’d been hospitalized in Michigan a couple of days earlier and was unable to attend.

We started the evening with a redevelopment agency closed session (top secret, sorry), followed by a study session regarding the budget stabilization fund (BSF) and the contingency fund.  It was a good discussion and a good prelude to our eventual vote on the issue.  I’ll recall what I can from the staff presentation.

In short, the BSF is intended to be used to smooth out the highs and lows of our budget in response to short-term changes to our revenue stream.  But in the past ten or twelve years, it has instead been more heavily depended upon as an actual revenue stream itself, which wasn’t its intent.  Things haven’t been that great since about 2001, basically.  At that time, we had about $60 million in that fund, and we had a long-term projection that was predictable and relatively smooth, with a policy of planning our budgets so that we have $0 in the BSF at the 20-year point.

Fast forward four years to 2005, and suddenly the BSF isn’t so rosy.  City actions from 2001 to 2005 cut the BSF by a little more than a third and resulted in a pretty dismal projection of its future.  So in the years after that point, Council got a lot more conservative with its spending, in response.

Fast forward to now, and the BSF has been fairly stable in total – it stayed at about $40 million, and then the New Great Depression hit, and we drew down on it pretty heavily pretty quickly, mostly to pay CalPERS obligations, but also in response to increases in medical insurance, the recurring raids by the state, a huge jump in fuel costs, and other factors.   So we’re around $32 million now.  The long-term projection is a lot better than just six years ago, but it’s still headed to negative because of the ongoing structural deficit.   But we did manage to push the crisis point back by several years with our budget actions this year.

Staff showed the three graphs from 2001, 2005, and 2011, showing predictions of BSF spending, and it was really amazing to see.  2001 looked great and predictable, a nice smooth curve.  Things went nutty by 2005, more of an oscillating graph.  And 2011 was somewhere in the middle, a smooth but declining curve (and it’s the “declining” part that we’re working on now).

But the other big change was with the whole “zero BSF in 20 years” policy, which staff is recommending that we finally get rid of.  This is a bit of inside baseball, but it involves millions of dollars in invalid planning for many, many years, and nobody really talked about it until we hired Gary as our city manager.  With the “zero at 20” budget plan, we plan to spend all of our BSF reserves by year 20, so as to fully use tax dollars and not run the city for a profit.  But there’s a problem with that philosophy.  Let’s say we plan this year for $0 reserves in 2031 (20 years from now), and we therefore plan our spending on services accordingly – manpower, operational costs, etc.  Now jump forward two years to the next such budget.  Suddenly, we have to plan for our reserves to last an additional two years that we didn’t plan for just in the last budget.  So our next budget has to somehow come up with those millions, which means we have to save more than we planned on saving.  And in the next budget, the same thing happens.  So each and every budget, the “zero in 20” model forces us to save more and spend less than our 20-year forecasting predicted, just to make ends meet.  So the “zero in 20” model means that each budget is instantly wrong to some degree.  And we’ve just been doing business this way for decades – for as long as anyone can remember.

Incidentally, one of this year’s council candidates has been complaining that we’ve got more money in reserves than we’ve predicted, and he says that this means that we’re putting money in reserves and cutting services needlessly.  But that’s not the case – it’s this “zero at 20” artifact, which causes us to under-predict future expenses and forces us to save more than we planned for every single budget cycle, just to pay bills that we know are coming but didn’t budget for properly in the previous budget cycle.  It’s a little frustrating that it took us hiring Gary to realize this was happening, but it’s good that we know about it now and can deal with it.

Then there’s the contingency fund.  The contingency fund is our “only if a major earthquake wrecks the city” fund, and we haven’t touched it, quite literally ever.  We put 20% of our general fund into the contingency fund, and that’s a huge chunk of revenue that could be spent on operations, but instead goes to a fund that we’ve never touched, for expenses that we can’t define.  Staff points out that in events like the San Bruno explosion, San Bruno essentially had no additional expenses, because other agencies or PG&E covered costs.  And in the event of a major disaster, like Loma Prieta, that’s what FEMA is for.  So the fact that the fund grows quickly as currently designed, and that we can’t define what we’d use it for and can’t actually envision an event that would cause us to spend it, staff is recommending that we cut back on that fund – not dramatically, mind you.  Maybe we establish a baseline and then increase it by CPI, which would cause it to grow more slowly than it grows now based on general fund growth, which is driven by CalPERS costs, medical insurance, and other things that wouldn’t factor into a major disaster.

I’m oversimplifying all of this, because the discussion was very detailed.  But in the broad strokes, that’s what was covered.

Anyway.  We then got into the general meeting.  One of my colleagues pulled 1K from the consent calendar, and we approved the rest of the consent calendar 6-0.

1K was the separately-elected mayor ballot measure, and this issue is really indicative of this whole SEM process.  One of the Charter Review Committee members had read the City’s proposed ballot language, and he pointed out a vagueness in the language that could have been interpreted to mean that the SEM proposal was for eight-year mayoral terms, instead of the four-year mayoral terms that were intended.  And when the City Attorney reviewed the observation, he found merit in it and proposed modifying the ballot language.  Sigh.  Not exactly the kind of thing to inspire confidence on an issue this serious, so close to the filing deadline.  This is also just characteristic of the lack of full deliberation that we’ve given to this issue.  Anyway, we approved a modification to the language on a 5-1 vote, and I supported the motion, because the alternative was to cause the vote to fail, and to let the 8-year term wording stand.

After one public speaker, we moved on to general business.  Item 2 involved an appeal regarding a request to study rezoning some property near Fair Oaks and Old San Francisco.  The property owner runs a gas station there, and he believes he’s going to be priced out of the market in the next six years.  So he wants to convert that lot to condos, and he wants us to study the necessary rezoning (at his expense).  After a fair bit of discussion, we denied the appeal and supported staff’s decision on a 5-1 vote, and I supported the motion.

This was a tough one, because it’s a balancing of property owner rights against the city’s interests, which is never easy.  But I think our general sense was that the applicant had jumped to the “let’s build condos!” point too quickly, that he should have looked at mixed-use development or other land uses before getting to that point.  And a switch of commercial zoning to residential is something that isn’t necessarily in the city’s best interests, because it represents a loss of revenue and an increase in service demands.  I think most of us felt that with six years to go, the owner could spend a little more time examining options before ruling everything else out and going straight to “let’s build condos!”.

Item 3 involved putting overdue utility bills on property tax rolls for collection, and it’s an annual and largely non-controversial issue, so we approved it on a 6-0 vote without any questions or discussion.

Item 4 was probably the toughest one – deciding what to do about community event and neighborhood grants for this year.  We’ve cut back on the money due to budget constraints, and we had the added pressure this year of planning for the 100-year celebration, which will not be cheap, despite our best efforts.  So we had a council subcommittee review the applications for both grants and make recommendations (instead of staff, who has always handled it in the past), and I gotta say, that worked out really well.  In the past, staff has had to second-guess what we’d want to do, and not knowing what wild flights of fancy might strike us, they haven’t always guessed right.  Had we not all mutually agreed to have a council subcommittee review and recommend actions, this year would have been a mess up on the dais.  But we did, and the subcommittee really did a great job of setting priorities.  They recommended a whole bunch of neighborhood grants, although most grants are significantly less than was requested.  And they recommended that the balance of the fund be given to the 100-year anniversary event.

The real issue was with the community events grants.  In the past few years, the lion’s share of this has gone to Sunnyvale Downtown Association (SDA) events – the two music series, the Christmas tree lighting, and others.  And I think that may have created an expectation that it would happen again this year.  But instead, the subcommittee recommended to cover a request from Senator Elaine Alquist for her annual women’s health forum, with the balance going to the 100-year event.  This was obviously disappointing for the SDA, but they took it well and received the recommendation graciously.  And we voted 6-0 to accept the subcommittee’s recommendation.

There was one other change that I pushed for.  Both this year and last, we gave out neighborhood grants to members-only organizations – two different ones, one each year.  This year, it was a mobile home park, last year, another location with a members association.  I made the point that if we give money to organizations with the ability to charge dues, we are in effect supplementing those dues with city funds.  This year, it was only for $100, so I didn’t want to spend time arguing the point.  But I asked the subcommittee to consider excluding dues-paying organizations from neighborhood grants in the future, since they already have a means of raising revenue.

And that was pretty much it.