A surprisingly short evening, but interesting nonetheless.  In fact, this blog entry may be longer than the actual meeting was.

We started the evening with a closed session for the City Manager’s annual performance review.  While I can’t comment on what took place, the fact that the City Manager was present at the subsequent council meeting should say something…

After that, we went to open session to discuss the January election of our Mayor and Vice Mayor.  This is only the second year we’ve done this, and it’s a way for councilmembers who are interested in the positions to make their case in public and hopefully eliminate the potential for Brown Act violations that would inevitably result from lots of one-on-one lobbying amongst ourselves in private.  For Mayor, Councilmembers Moylan, Spitaleri, and I expressed an interest in the position, and we made our cases.  Councilmember Whittum additionally made himself available for any position at Council’s pleasure, specifically mentioning that he has not yet served as Vice Mayor.  It was an interesting session.

Then we went to open session.  We breezed through the initial stuff, passing the consent calendar on a 6-0 vote with no pulls, and we got to the general session.  One member of the public expressed concerns about water fluoridation.

Item 2 involved an appeal of a Planning Commission decision regarding the old Chevrolet dealership property on the south side of El Camino Real near Mathilda.  The property owner is proposing dividing the property into two pieces, one to be developed into 113 townhomes, the other piece along ECR to be developed into a 17k square foot commercial (retail or office) property.  Staff recommended against the project, and the Planning Commission voted 4-0 to deny the application.  But their denial was somewhat interesting.  Staff specifically called out the fact that the proposed quantity of commercial space fell below the expectations of Sunnyvale’s Precise Plan for El Camino Real.  This is a very difficult property, because about 80% of it is tucked back from any street, making retail development problematic (nobody wants to run a business in a location where potential customers can’t see it).

The Planning Commission’s difficulty was that the project violated established city policy on its face, specifically the Precise Plan.  And the PC didn’t feel empowered to recommend approval in violation of city policy.  So they didn’t even look at the specifics of the plan.  Instead, they recommended denial of the application for policy reasons, and they additionally suggested that should Council decide to exempt the project from existing policy and overturn the denial, the project should be sent back to the PC to examine the project’s actual specifics.

There was a lot of discussion and a handful of speakers, all of whom favored the project, and then we got to the motions and votes.  The initial motion was pretty much straight-up alternative 2, grant the appeal and give the appellant what was being asked for.  That motion failed on a 3-3 vote, and I was one of the dissenters.  So then a second motion was made to refer the project back to the PC on the condition that the commercial space be increased from under 5% of the property to 10% or more of the property.  That motion also failed on a 3-3 vote, and again I dissented.  At that point, no further motions were forthcoming, which meant that the decision of the Planning Commission stood, and the project as proposed was rejected.

This was a difficult call, because we were being asked to balance the needs of the community against the right of a property owner to make fullest use of her property.  And the two were pretty seriously in conflict on this one.  ECR near Mathilda is one of four spots on ECR that we have designated for serious future commercial development, and if we had approved the application, that plan wouldn’t be possible for at least the next 50 years, if not longer.  But the shape of the property and the nature of the neighboring properties calls into question whether or not the city’s plan could reasonably ever be realized.  On balance, this was probably the most difficult development proposal I’ve had to deal with.  But I guess that’s why they pay me the very small bucks…

In the end, I felt the applicant made very little attempt to develop a project that conformed to the El Camino Precise Plan.  And that’s a plan that we created with a lot of thought and long-term planning.  Plans only have value and meaning if you hold to them when push comes to shove.  And the bar has to be considerably higher for that location, because it’s very much the heart of Sunnyvale.  I could have approved a project that followed the spirit of the plan while deviating somewhat from the specific requirements.  But that wasn’t the case, in my opinion, so I couldn’t support the project.  In general, we were evenly split on what to do, which was probably inevitable given the challenges of this particular property.  Hopefully, the applicant will bring back something better, although with Council changing shortly, what Council considers “acceptable” is now very unclear.

Item 3 was the summary of our fiscal year 2010/11 budget – a report on how expenditures and revenues ended up, compare to the budget.  And it was mostly good news.  Revenue came in $6.2 million above what was predicted, for a number of reasons.  Sales tax revenue was higher than expected, which is a strong indication that the recovery is in full bloom.  Sunnyvale’s sales tax comes very heavily from “business to business” sales – companies selling stuff to other companies (as compared to companies selling to individuals).  And B2B sales is always a leading indicator of an economic recovery.  When companies plan to expand and hire and produce more, the first thing they do is spend lots of money on the hardware they’ll need to do so – and they buy a lot of that stuff from NetApp and Juniper, two big Sunnyvale companies (Rambus too, for that matter, as well as Fry’s).  Permit revenue was also higher than expected, indicating that construction is picking up – a lot.  That means more jobs, which also means more people working in Sunnyvale (and spending their money at Sunnyvale stores).

There were other really good economic signs.  Vehicle license fee revenue is up, indicating that people are buying more cars.  And property transfer taxes were up, indicating that people are buying property.

Expenditures were also $1.7 million below budget, adding up to Sunnyvale ending the fiscal year $7.8 million under budget, or around 5% of our operating budget.  That’s obviously really good news.

Now for the bad news.  First, we have to set aside $3.7 million of that money to pay the state’s ransom demand and keep our downtown development going.  There’s a chance that the state’s attempted extortion will be overturned by the courts, but we’re planning our finances on the assumption that that won’t happen.  Second, this has little or no bearing on our structural deficit.  The additional revenue doesn’t represent a trend for significantly higher income – it just represents an earlier economic recovery than we were expecting.  And the reduced expenditures don’t represent reduced ongoing costs – they’re just one-time savings.  So this just means that we needed to take a lot less out of reserves this year, and we’ve only bought ourselves an extra year or two before we reach the crisis point where our expenditures exceed our revenues.

In general, we’ve done a pretty good job of delaying the budgetary crisis point through a combination of Council making hard policy decisions and Staff executing very well on operational requirements.  I don’t have specific numbers, but I think we’ve put off the crisis point for about 15 years until the mid 20’s.  That gives us some time to get our house in order and better balance expenditures vs. revenue.  But it’s going to be very difficult to put it off further than that.  Around that time is when we stop receiving “revenue” from repayment of our redevelopment agency funds.  The loss of those annual funds is a big number that we probably cannot overcome through cuts and improved efficiency.  Structural changes to expenses, to revenue, or probably to both, are going to be required to get us past that point and to a sustainable budget picture.

Anyway, we voted 6-0 to receive the year-end report.

Item 4 involved a modification to our contract with CalPERS regarding public safety retirement benefits.  There seems to be a lot of confusion out there about what this means, and I’ve heard some criticism out there about these recent votes that suggests that people really don’t understand how things work, so I’ll try to explain.  In short, this was not a policy or budget decision point.  Here’s the way a contract negotiation works:

1. A bargaining unit negotiates with city staff – the City Manager, HR, sometimes a hired negotiator, until either an agreement is reached or negotiations reach the limits of the authority that Council has given staff.
2. Council votes to approve an agreement (or not).
3. (If so), we sign a new or modified contract with the bargaining unit based on that agreement (called a “memorandum of understanding”, or MOU).
4. We sometimes modify our agreement with CalPERS to reflect the new contract.

All of the agenda items over the past month have been strictly involving #4.  #1 took place from 2010 through the beginning of this year.  #2 and #3 happened in May, and those are the points at which Council sets policy and determines the fiscal near future of our expenditures – whether our benefits are too generous or not, whether or not we can afford an agreement, and so on.  Once #3 is done, Council is legally committed to uphold the decision – to do otherwise means breaching a signed contract and creating significant and indefensible legal liability for the city.  So #4 is basically pro-forma, because there is no real alternative.

And staff said as much in the RTC, where alternative 2 read

Alternative 2: There are no other alternatives as the City is contractually obligated to provide this change in retirement formula.

We have this as a general business item because it’s always possible that Council will spot an error in the changes, or that Council will disagree with staff’s interpretation of either the bargaining unit’s agreement or the contract amendment.  And we recognize that members of the public may want to speak.  But beyond that, there are no practical alternatives to approving the amendment.  And we did so on a 6-0 vote.  I’ve heard a few people state that we should have voted against this stuff because PSOA didn’t provide enough concessions, and because we need to strike a better deal with them.  But that decision took place in May, and we’re now contractually bound to what we decided in May, until 2015.  Voting against this CalPERS amendment could only hurt us, legally and fiscally.

Item 5 was the second reading of our single-use carryout bag ordinance (banning plastic bags).  It was not placed on consent because there was a vote in opposition during the first reading.  And sure enough, we approved this on a 5-1 vote.

Item 6 was the second reading of our housing sub-element amendment ordinance.  One of my colleagues made an effort to narrow the provisions for emergency housing, keeping it either 250′ or 500′ from existing housing.  But there were no takers, and the second reading was passed on a 5-1 vote.

That was it for the regular meeting.  We then adjourned to the redevelopment agency, where we approved the consent calendar on a 6-0 vote.  Our one item involved the 5-year review of our project area plan, and we accepted it on a 6-0 vote.  That did it for the RDA.

We then adjourned to the Onizuka Local Redevelopment Authority (LRA), and again we approved the consent calendar on a 6-0 vote.  The LRA’s one item was more significant though – amending our Onizuka redevelopment plan and authorizing the City Manager to negotiate to allow Foothill-De Anza to develop the property, along with homeless housing providers.  This represents a significant development in the Onizuka process.  We’ve been going back and forth with different proposals for Onizuka – an auto dealership, sports fields, more commercial space, and so on.  This represents a turning point, and a commitment to pursue a new path – an extension campus for Foothill-De Anza.  And we approved taking this path on a 6-0 vote.

That’s it, and that’s it for the rest of the year.  We meet again on January 10th, at which time we’ll seat the three new councilmembers and elect a new Mayor and Vice Mayor.  Happy holidays to all!