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City Desk: August 25, 2015

Levi’s Stadium Celebrates Birthday, Santa Clara’s Bottom Line Grows $2.9 Million

Levi’s Stadium just had its first birthday and the Santa Clara’s general fund got a $2.9 million gift. That was the bottom line of Santa Clara Finance Director Gary Ameling’s presentation of Levi’s Stadium’s 2014-2015 financials at the August 18 City Council meeting.

Stadium construction costs are under the estimated $930 million. Additionally, $48 million in costs will likely be reallocated from the Stadium Authority (SA) to the stadium management (49ers), when auditor KMPG completes its cost analysis – bringing the final number down to about $870 million.

Operating revenues – less transfers for debt service and reserve funds – were $57 million, significantly higher than the $19 million estimated,due to early Stadium Builder License (SBL) payments. SBL proceeds are earmarked to pay down outstanding debt, so Santa Clara’s general fund doesn’t benefit directly. However, reducing debt, notedAmeling, reduces SA obligations down the road and increases financial health.

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Operating expenses of $10 million were $1.3 million lower than budget. The SAretired $128 million in debt, and paid $22 million in interest on what remains – $562 million, $67 million under forecasts.

Tuesday night’s Council discussion focused on two questions. First, the method fortracking stadium-related administrative costs and ensuring full City reimbursement for the stadium-related work – the SA, which is the City Council, has no separate staff. And second, whether the City is being properly reimbursed for stadium public safety costs.

Under the terms of Measure J, the referendum approving the stadium, Santa Clara general fund money can’t be used for stadium construction or ongoing operations. The system for tracking stadium-related activities has been evolving since 2010, and those activities are captured in a stadium-specific cost center.

Public safety expenses, $2.4 million, are more than double the original $1.7 million budget. Part of it, $1.97 million, was reimbursed from stadium revenue, and the rest from parking revenue. This led to a discussion of whether or not this equated to using money that would otherwise go to the general fund.

“Measure J says that they [49ers] will cover the public safety costs,” said Gillmor. “So I want to want to make sure that public safety costs are not being taken from this pot or that pot that may be generating revenue to the general fund. If public safety costs are supposed to be covered, they need to be covered.”

“We can’t go back and address these costs until we’ve had three successive years of over-expenditures,” said City Manager Julio Fuentes. “It depends on how you want to define over-expenditures. The budget is $1.7 million. But when you look at the revenue sources that are available under the agreement, that discretionary fund was available to be used as a backstop in the event we did go over on that. So we did cover our public safety costs. That didn’t affect the percentage rent to the general fund.”

In the meantime, more cost-effective methods for routine activities like traffic control are under consideration for the upcoming season, reported Ameling.

Gillmor and O’Neill voted against accepting the report. “I’m not comfortable with the numbers,” explained Gillmor. The final audited report will come to the Council in September.Visit santaclaraca.gov/index.aspx?page=1447 for a link to the meeting and reports.

Council Approves $2 Minimum Wage Increase

The Council voted to raise Santa Clara’s minimum wage to $11 an hour as of January 1, 2016; matching minimum wage levels in neighboring cities. The ordinance applies to employers with a place of business in Santa Clara and those providing goods and services within City limits. It alsoincludes annual automatic increases corresponding to Consumer PriceIndex (CPI) growth.

California’s minimum wage is currently $9 an hour and slated to rise to $10 in January. Sacramento is considering raisingthat to $11 in 2016, $13 in 2017, and after thatindexingit tothe CPI.Ten states currently increaseminimum wages automatically based onthe CPI, and five more plan to do so. The sentiment on the Council, though, was that the City shouldn’t wait for Sacramento to act.

After noting that action was imperative due to bad publicity the City has garnered from not matching the area’s minimum wage – “NPR’s report “The Mall With Two Minimum Wages,” about Valley Fair, which crosses the San Jose border – Council Member Dominic Caserta put some “conservative” arguments to work for “liberal” policy.

“The conservative approach is doing things at the local level,” he said. “The conservative approach is giving people more money so they can get off the public dime. The center of our economy should be the community.”

The minimum wage isn’t really going up. Its purchasing power has been declining fairly steadily for nearly 50 years. California’s minimum wage lost 29 percent of its buying powerfrom 1968 to 2014 – and almost 10 percent since 2008 – according to acurrent report by the Legislative Analyst’s Office (LAO). A $10 minimum wage would restore buying powerto 1988’s level, and $13 to 1968’s.

“This ordinance is only a very small step above the poverty in which low wage workers live,” Retired VP Plumbers & Fitters Local 393 Fred Hersh told the Council. “It’s a small step toward $15 an hour, which is being asked for around the country. It’s not just an economic issue. It’s a moral issue.”

Workers aren’t the only ones hurting, countered UPS store owner Ravinder Lal.

“What you’re saying is a $4,000 increase a year for all my employees,” he said. “I have six employees. That’s $24,000 a year. I don’t know how many people in this room can afford a $24,000 pay cut, but I can barely afford to live here and I’m a business owner. That extra dollar is not a lot. But for a small business like myself, it kills us.”

Several Council Members questionedthe effectiveness ofincreasing the minimum wage in Silicon Valley without actively increasing affordable housing.

“We should have a two-pronged approach with housing,” said Council Member Debi Davis. “I do not support the motion [because] I want to see affordable housing [included].”Sunnyvale recently approved ahousing impact fee for rental housing and commercial development to fund affordable housing programs.

With so few opportunities open to municipalities to address poverty at the local level, said Mayor Jamie Matthews, it behooved the Council to take action on this one.

But the larger questions of economic inequality and out-of-reach housing prices must be addressed, warned Council Member Teresa O’Neill. “If we can’t solve these problems in our community with the best economy in the nation, then we will be a failure as a community.”

Minimum Wage: Feelings vs. Facts

The LAO’s report (tinyurl.com/ca-minwage-2015) cites several studies showing that minimum wage increases have little effect on employment levels, and can reduce turnover and increase efficiency. Studies showed small price increases for restaurants – one of the largest employers of minimum wage workers.

In a 1998 study, “Making Work Pay: The Impact of the 1996-97 Minimum Wage Increase,” Jared Bernstein and John Schmitt of the Economic Policy Institute examined effects on low-wage workers of the 1996-97 federal minimum wage increases from $4.25 to $4.75.

That study found 71 percent of the 10 million benefitting from the increase were adults and 58 percent, women. Further, they found that minimum wage workers earn more than half their households’ income.

The study also found the poorest 20 percent of U.S. working households – which receive 5 percent of all household income – received 35 percent of the wage gains. Finally, analyzing the data four ways,the authors found no significant statistical evidence linking minimum wage increases to job losses. In fact, job growth – including that in minimum wage-sensitive industries – in 21 months following the wage hike equaled or beat the prior 21 months.

In other Council action:

The draft Historic Preservation Ordinance – now two years in the works – has been simplified and reduced to 9 pages from 26. Council Member Caserta remarked on the “glacial” pace of this effort and asked for action by the end of October. A review was set for September 22.

Advocates for an agri-hood on six open acres on Winchester Blvd. reminded the Council they want to participate actively in development plans. The City has received eight development proposals. All were “very interesting and very creative,” said City Manager Fuentes, “and addressed a lot of the issues people spoke about tonight.” The Council discussed how much about the proposals could be made public without jeopardizing negotiations, and set a public review for September 22.

Requiescat in Pace

The August 18 meeting was adjourned in memory of Hayward PD Sergeant Scott Lunger who was killed in the line of duty on July 22, 2015.

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