The following transcript is provided for your convenience, but does not represent the official record of this meeting. The transcript is provided by the firm that provides closed captioning services to the City. Because this service is created in real-time as the meeting progresses, it may contain errors and gaps, but is nevertheless very helpful in determining the gist of what occurred during this meeting.

1 The 2013 State of the City Address

>> Brian: Before we begin our program, we would like to acknowledge the many elected officials attending this evening's event. From the County of Santa Clara, please welcome: Supervisors Dave Cortese, George

Shirakawa, Joe Simitian, Mike Wasserman, and . Superior Court Judge Vanessa Zecher. District

Attorney Jeff Rosen And of course, County Assessor Larry Stone. I'll pause for a boo here.

>> Keri: No booing. We also have with us today: Mexican Consul General Carlos Ponce Martinez. State

Senator Jim Beall Santa Clara valley Water District Board Members Barbara Keegan and Linda LeZotte. And former San José mayor Tom McEnery.

>> Brian: We are also joined by Elected Officials from a number of our neighboring cities, including: Mayor

Elizabeth Lewis from Atherton. Mayor Steve Tate and Councilmember Larry Carr from Morgan Hill. And councilmember Chuck Page from Saratoga. Councilmember Jeff Cristina from Campbell.

>> Keri: And finally, we would like to extend a greeting to the many Board Members from the Santa Clara County

Office of Education and San José's 19 School Districts. Please welcome these special guests with a warm round of applause. [applause] ∂ ∂ ∂ [ ∂music∂ ]

>> Keri: We begin tonight by introducing San José's elected leaders, your San José City Council. Would you please enter and have a seat on stage as we call your names. Councilmembers Pete Constant of District 1, councilmember much District 3. Xavier Campos of district 5. Vice Mayor Madison Nguyen of district

7. And councilmember Don Rocha of district 9. [applause]

>> Brian: And please welcome the other members of the City Council. Councilmembers Ash Kalra of District 2,

Kansen Chu of District 4, Pierluigi Oliverio of District 6, Rose Herrera of District 8, and Johnny Khamis of District

10. [cheering and applause]

2 >> Brian: And finally, please welcome the distinguished mayor of San José. , whom you will hear from later in the program. [applause]

>> Keri: Welcome to you all, distinguished guests, members of the City Council, and you, ladies and gentlemen, the citizens of San José. We now will begin the program for the 2013 State of the City address. I am now pleased, very pleased actually, to introduce my co-host for this evening's event, Brian Adams. Brian is Vice President for

Advancement at Bellarmine College Preparatory, a position that he has held for the past six years. Prior to joining

Bellarmine, Brian enjoyed a long career in media and public relations - and remember all those dialing for dollars? Still heard though each week he is on radio stations KLIV and KRTY. as a third-generation resident of

San José, Brian is very involved in the community, through such organizations as the American Cancer Society,

Hospice of the Valley, and the Rotary Club of San José. I'm happy to say that Brian was also among the first men appointed to the Board of the YWCA of .

>> Brian: Thank you. [applause]

>> Brian: Thank you very much and I'm also very pleased to introduce my co-host for this evening, Keri

Procunier McLain who has been the CEO of YWCA Silicon Valley for the past fifteen years. Prior to her current position at the YW, Keri was the Director of Agnews State Hospital and developmental center for more than 15 years. In fact, she was the first woman ever appointed by a Governor to direct a State Hospital and

Developmental Center. Keri is also someone who knows A bit about elected office herself, having served as a councilmember for the City of Santa Clara and a Trustee for the Mission Community College District.

Keri continues to be very active in the community through her involvement with civic organizations like the Rotary

Club of San José, Soroptimist International and the Mission City Community Fund. Please acknowledge Keri

Mclain. [applause]

>> Brian: Many people are aware of the good work performed by Kiwanis Clubs throughout the region. But you may not know that Kiwanis also sponsor Key Clubs at local high schools, where the next generation of leaders is

3 learning how to contribute to their community. Please welcome members of the Key

Club, who will lead us in the Pledge of Allegiance. [ pledge of allegiance ]

>> Keri: Please be seated. We would now like to welcome to the stage Ms. Erika Robertson. Erika is a native

Californian who has lived in the Bay Area for over 18 years. She is a true renaissance girl. Erika holds a BFA in

Fashion Design from the Art Institute of California - San Francisco, is versed in visual and performing arts, and is a self-described Science Geek. She is representing Silicon Valley in the 2013 Miss California USA pageant and over the next year will be donating much of her time and energy to raising funds for three essential human needs: clean water, food, and housing. Erika will now perform one of our, nation's most favorite songs. America the beautiful. ∂ O beautiful for spacious skies for amber waves of grain ∂ ∂ for purple mountain majesties ∂ ∂ above the fruited plain ∂ ∂ America, America ∂ ∂ God shed his grace on thee ∂ ∂ and crown thy good ∂ ∂ with brotherhood ∂ ∂ from sea to shining sea ∂∂ [applause]

>> Brian: Delivering this evening's invocation is Pastor Oscar Dace from the Bible Way Christian Center in San

José. Please join me in welcoming Dr. Dace. [applause]

>> Pastor Dace: To the mayor, city council, officials, brothers and sisters. Friends and elders. Peace be unto you and may God's mercy and his blessings always be yours. Let us stand now for the invocation. Almighty God, creator of the heavens and the earth, we give you glory and honor and respect. Thank you for the families in which we were born. Thank you for the roof over our heads and all of the blessings, and we do not want to take anything that you have given us for granted. We are grateful to live in this wonderful city where the possibilities of happiness and success are so favorable. Though not perfect we are fortunate to call San José our home. Give our mayor and city council the wisdom to lead, the courage to cooperate, the passion to find new and creative solutions to today's serious and complex challenges. We pray for all elected and appointed officials and leaders. We want them to govern with wisdom and love. Give us victory over negativity and divisiveness. Create unity and peace among us. Protect our hopes, and dreams, that are yet unborn. Thank you for our diversity. And our gifts and talents, thank you for the zeal that we have for success in this city, and let us continue to live in harmony. Forgive us of our wrongs that we have done to others and to ourselves. Help us to learn and grow and

4 share together. And with whatever levels of prosperity and success we have, let us never forget the disenfranchised. The homeless, the poor, those who seem to fade into invisibility. We pray for the city as a whole and we pray for our families, our youth, our children, our marriages. We pray for our community to have safety, so that our children may travel to and from school in peace and safety. We pray for our seniors who are so often lonely and left out. We pray for our communities of faith. I pray that we all can work together for the common good. We pray for our transformation for all those who are hopeless who are forgotten, who may be addicted to drugs and mental illness and who are sick or afflicted in some way. We pray for our veterans, who have risked so much for us. We pray for our first responders. Our police and firemen and paramedics. We pray for our institutions and colleges and schools and hospitals, city workers and all who work and serve in those areas. We pray for our churches, temples, and mosques, and synagogues, and all other places of worship. Protect our neighborhoods from violence in all of its ugly forms. We pray for jobs and businesses and freedom and security, we pray for peace throughout each neighborhood. Lord, enable us to end racism in us, poverty in all forms of injustice, unable us to have compassion for all people. O God enable us to stand for righteousness for grass roots democracy, for equal access to health care. Empower us to stand up for nonviolence, for community-based economics, for equality for everyone, enable us to celebrate diversity and to focus on the future growth and development of our fair city. Heavenly father, please motivate each of us to make time regularly to volunteer, and serve, in our local communities. Lord, please allow our city to serve as a beacon of hope and a place of healing. Enrich us for ideas for healthy families and neighborhoods. Let our city continue to be a welcoming place to live, work play and worship. Great I am, help us to feel refreshed and energized and to approach each new day with renewed strength and vigor. Your word declares that if we acknowledge you in all our ways you will direct our path. And lastly, God, we ask you to guide us to behave in a way that will reflect the universal peace that comes from the prince of peace. And I close with a traditional gospel styling of a passage that says, accept the lord, keep the city. The protectors of the city are protecting in vain. But if my people, who are called by my name, would humble themselves and pray and seek my face and turn from their wicked ways, then, God said, I will hear from heaven and forgive their sins and heal their land. In the name of Christ Jesus I pray, amen. Amen, thank you. [applause]

>> Keri: We continue tonight with our tradition of honoring many of the dedicated city employees who help make

San José a great place to live, work and raise a family. The Pride of San JosÈ Honorees represent the highest

5 level of public service and commitment to the city and its residents. The following employee teams were selected by the City Manager for their outstanding efforts in 2012 which exemplify the City of San José's six Employee

Values.

>> Brian: Our first honoree is the Citywide Web Conversion Project Team. The City's website is a vital source of public information about San José services and issues. But over the past fifteen years, it had become harder to use and maintain because of out-of-date technology. With the selection of a new Web Content Management

System one year ago, an interdepartmental team of 100-plus employees helped overhaul the website. Over a ten- month period, they dived in to review and update thousands of web pages, all on top of their regular duties. Under the leadership of project managers Lenka Wright and Astra Freedman from the City Manager's Office, the Web

Conversion Team stayed on schedule and successfully launched the new site last November. The result of this collaboration Has been better customer efficiency, greater customer service, and greater staff efficiency. Let's congratulate them. [applause]

>> Keri: Our next honoree is the Air Service Dream Team. Bringing back regular non-stop air service between

San José and Tokyo took a big step forward on January 11 when All Nippon Airways launched its first flight from

Mineta San JosÈ International Airport. However, wooing a new international flight took plenty of time and patience, as representatives from Silicon Valley's Airport and the San José Office of Economic Development began discussions with ANA more than five years ago. This grew into a strong partnership between the City, the

Silicon Valley Leadership Group, and numerous local CEOs and travel executives who together helped land ANA for San José. Although the flight has been temporarily suspended for technical reasons, our team has built a strong foundation based on business partnership and community engagement that will support ANA's long-term success in San José. [applause]

>> Brian: Our next honoree is the Successor Agency to the Redevelopment Agency Transition Team. When the

State of California eliminated all redevelopment agencies in 2011, it triggered an immensely complex effort to dissolve their governance, assets, and commitments on an extremely short schedule. The City of San José created a staff transition team to unwind the San José Redevelopment Agency, a $3 billion enterprise with a half-

6 century history of providing benefits for our community. Throughout 2012, this Transition Team successfully worked with state agencies, the County of Santa Clara, the investment community, a new oversight board, and other stakeholders in the face of uncertain requirements, tangled legal interpretations, and incredibly high stakes. With diligence, integrity and transparency, this team made sure that San José complied with the new law while protecting the interests of our residents. [applause]

>> Keri: Our next honoree is the Police Automated Field Reporting and Records Management Systems

Team. For many years, the San José Police Department has relied on "old-school" paper-based systems to prepare crime reports and manage records. Information was manually entered into databases, and boxes of documents were collected and delivered to other bureaus to be re-filed and re-sorted, again and again. However, the Police Department's new Automated Field Reporting and Records Management Systems will much more efficiently meet the needs of our 1500-member department. Patrol officers in the field will be able to enter all reports into computers, and the information will be readily available throughout the department. Due to the implementation team's efforts to prepare the department, officers and support staff for this huge technological upgrade, the new system will be up and running by March. [applause]

>> Brian: Our next honoree is the Fleet Management Alternate Service Delivery Team. To improve quality and reduce costs, three City departments have worked together to change the way we deliver services. For example, the Planning Department worked with Fleet Management to efficiently choreograph the way vehicles needing repair and service are inspected. By taking advantage of staff and service schedules, this collaboration has eliminated vehicle downtime, which translates to greater time available for inspections and increased revenue. In another example, Fleet Management trained and certified Happy Hollow staff to do daily inspections of the amusement rides and meet exacting state safety standards. This has reduced Happy Hollow's operating costs by about $175,000 per year and freed up Fleet Management and staff for other priorities, all while continuing to ensure the safety of visiting children and families. [applause]

>> Keri: Our next honoree is the Citywide Special Events Team Special events throughout San José attract local residents and visitors, support local businesses, and enrich the quality life in our community. The Citywide

7 Special Events team coordinates with community and business partners on hundreds of affordable, fun, family- friendly experiences, which collectively draw about 1.3 million participants each year. The team handles big and complex events attended by tens of thousands of people - such as the annual Amgen Tour of California, San

José Jazz Festival, and Christmas in the Park - as well as simple neighborhood and cultural festivals. They work with organizers with limited budgets to find creative, flexible and Cost-effective ways and solutions that ensure successful events and protect public safety. [applause]

>> Brian: Our final honoree is the Homeless Encampment Response Team. Now, while homeless encampments in San José and along our creeks are a growing concern, ongoing efforts to clean up encampments were not working effectively and posed risks for the City. In early 2012, the City halted its cleanups to review and revise cleanup strategies in a manner that addresses both environmental issues and the civil rights of encampment residents. An interdepartmental team developed a new approach that included outreach and assistance to encampment residents; a system to sort and store their personal belongings; housing options for encampment residents when available; and extensive communications with stakeholders. The Homeless Encampment

Response Team completed nine more cleanups in 2012 that removed more than 140 tons of trash and offered meaningful assistance to scores of encampment residents. [applause]

>> Keri: We now invite all of the pride of San José honorees who are in the audience to please stand up and take a well-deserved bow. Let's give them another round of applause. [applause]

>> Brian: Now we honor those exemplary citizens in our community whose deeds and contributions stand above the rest in serving our city. Each council district selects an honoree annually. Now, I think you'll agree that all of the honorees are quite remarkable. Honorees please come to the stage to receive a special thanks from your councilmember and the Mayor.

>> Keri: In district 1, Councilmember Pete Constant is honoring Steve Landau. [applause]

8 >> Keri: Steve landau currently serves as president of both the Winchester Neighborhoods Action Coalition and the District 1 Leadership Group. Steve's long-term involvement with these groups has been instrumental to sustaining grassroots efforts to build community throughout West San José. true Steve's passion, Steve has inspired his neighbors to become Active in civic issues and help address problems facing our community. [applause]

>> Brian: In District 2, Councilmember Ash Kalra is honoring the Boys and Girls Club of Silicon

Valley. [applause]

>> Brian: For more than six decades, the Boys and Girls Club of Silicon Valley has been helping enrich the likes of of children throughout San José. The organization provides more than 3,000 youth and teenagers with access to innovative programs, inspiring leaders and an enlightened perspective on life. Most recently, the Boys and Girls

Club has partnered with the City of San José to operate the Edenvale Community Center and bring its quality programs to even more South San José residents. [applause]

>> Keri: In District 3, Councilmember Sam Liccardo is honoring Garden to Table. [applause]

>> Keri: Garden to table -- here they come. Garden to Table was formed in 2011 with the goal of making fresh produce more accessible and affordable to Downtown San José residents. It's just over a year -- In just over a year, Garden to Table has harvested more than 14,000 pounds of fruits and distributed them to 150 families in need. The group has also conducted gardening and cooking classes for more than 40 families, and helped install a-half-dozen gardens at homes, apartments and schools in Downtown San José. [applause]

>> Brian: ihad to move to the Montgomery theater to get out of the shot. In district 4, councilmember Kansen

Chu is honoring the Berryessa business association. [applause]

>> Brian: Founded in 2011, the Berryessa business association helps promote economic vitality throughout

Berryessa. The Association serves as an important means for local businesses to share information, develop

9 new ideas, and collaborate on issues of mutual interest. This past fall, the group helped organize the inaugural

Taste of Berryessa event, at which more than 500 people sampled the diverse food and culture offered by

Berryessa restaurants.

>> Keri: In District 5, Councilmember Xavier Campos is honoring the Battaglia Ranch Farms. For more than 40 years, San José families have turned to Battaglia Ranch Farms to get in the Christmas spirit. But this family- owned business also exemplifies the spirit of giving back to their community. Every holiday season, Battaglia

Ranch partners with the Police Activities League, and volunteer groups like the San José Jobs Corps, to distribute free Christmas trees to families throughout San José. This past year alone, they donated trees to more than 600 families who otherwise might go without. [applause]

>> Brian: In District 6, Councilmember Pierluigi Oliverio is honoring the The Rotary Club of San José. [applause]

>> Brian: For nearly a century, the rotary club of San José has been at the forefront of efforts to build the infrastructure and social fabric of our community. Since installing San José's first street signs in 1915, San José

Rotary members have volunteered more than 3 million hours for a wide range of community service projects. In addition, the group has given out more than $5 million in grants to 150 different community organizations throughout the city. And as you heard earlier, Keri and I are very proud to be members of the rotary club of San

José. [applause]

>> Keri: We certainly are, Brian, thank you. In district 7, oh my goodness, came on here a little soon but that's okay. Taking the stage over. Vice Mayor Madison Nguyen is honoring the happy hollow foundation. And joining us on stage to make this presentation is Happy Hollow's very own, I know you know him, Danny the dragon. The

Happy Hollow Foundation was established in 1958 to support San José's treasured family destination. With generous support from the community, the foundation contributes more than a Quarter of a million dollars in resources to Happy Hollow each year. Most recently, the foundation's dedicated staff and volunteers spearheaded the renovation of the Capybara habitat, the restoration of the beloved Crooked House, and the establishment of its signature Hoot & Howl benefit event. [applause]

10

>> Keri: Thank you.

>> Brian: We'll try to move this along before we're all a little dragon this evening.

>>> In district 8, Councilmember Rose Herrera is honoring the Bay Area chapter of Food Allergy Research and

Education. Food Allergy Research and Education is dedicated to improving the well-being of all those living with food allergies. With the help of numerous generous donors - including San José's very own sports teams - the group raised more than $150,000 last year at events like the BJ Hom Memorial 5K Walk. The group also joined other advocates in Washington, D.C. to push for legislation that ensures public schools have epinephrine available in case of an anaphylactic emergency. [applause]

>> Keri: In District 9, Councilmember Don Rocha honors Carlo Pedron and the San José Elks Lodge 522

Highway Clean Up Team. Since 1992, the San José Elks Lodge has helped beautify San José through its monthly clean-ups along Highways 85 and 87. As a result of Carlo Pedron's stellar leadership over the past 12 years, the clean-ups have grown to include more than 20 regular volunteers. This past year alone, Carlo and his team of Elks Lodge volunteers helped remove an estimated 2.5 tons of garbage and litter from our roadways. [applause]

>> Brian: In District 10, Councilmember Johnny Khamis is honoring The Martin-Fontana Parks Association. The

Martin-Fontana Parks Association is a nonprofit organization that was established in 2010 to save 140 trees that live under power lines in TJ Martin and Jeffrey Fontana parks. Due to their efforts, PG&E agreed to preserve the vast majority of the trees that it originally planned to remove. Since then, the association has continued to work with a number of stakeholders to further enhance the vegetation and beauty of these two Almaden Valley parks.

>> Keri: Please thank these distinguished honorees, real heroes to us all, one more time. And let's hear from you! [applause]

11 >> Brian: Now, it is my honor to introduce Carl Guardino, a community leader who is continually working to help improve the quality of life in San José and Silicon Valley. Carl was born and raised in San José, graduated from

San José State University and now serves as the president and CEO of the Silicon Valley Leadership Group, a public policy trade association that represents more than 375 Silicon Valley companies. He currently sits on the

State of California Transportation Commission and has been called One of the 5 most powerful People in Silicon

Valley by the San José Mercury News. Please welcome Carl Guardino. [applause]

>> Carl Guardino: Brian and Keri, thank you for that kind introduction. Valued partner, visionary public servant. It's an honor to introduce a leader as effective, intelligent and engaged as Mayor Reed. In preparation for tonight I contacted five Silicon Valley CEOs to share their thoughts about the mayor. Three themes emerged. First, he understands and appreciates the speed of doing business. SunPower CEO Tom Werner says:

We had a permit issue in San José. I called him on his cell phone at 3 p.m. on a Friday afternoon. He answered personally. By 4 p.m. our issue was resolved, and we were able to move in by Monday. He knows how to operate on business time. Former Brocade CEO Mike Clayco says, when we were looking for a location to house our

2500 local employees, I was reluctant to relocate in San José due to the perceived challenges and difficulties of finishing our project on time. After meeting with the mayor, we chose to stay in San José because of his commitment to move at the speed of business. That appreciation for the speed of business in Silicon Valley is why we were honored to partner with Mayor Reed and Congress member Zoe Lofgren to bring a satellite office of the U.S. patent and trademark office to Silicon Valley so that for the first time -- [applause]

>> Carl Guardino: -- in our nation's 235-year history, entrepreneurs and innovators don't have to travel all the way to Alexandria, Virginia, to meet with a patent examiner or judge. Know, at the speed of business, we'll be able to do it, right here in San José and Silicon Valley, thanks to mayor Chuck Reed's leadership. [applause]

>> Carl Guardino: The second theme: He learns from the past and builds for the future. Power Integrated

Solutions' CEO Balu Balakrishna says that Mayor Reed has demonstrated exceptional leadership and courage in taking on the difficult long-term fiscal challenges facing the city. Elected officials in Washington and Sacramento could learn much from the example he has set. And president and publisher Matt Tully of the San José Mercury

12 News says, I like the way Mayor Reed leads the city with conviction, heart and dogged determination. He has led this city through the great recession and has helped get us back into a position for growth and investment. That's why it was such a pleasure to work with Mayor Reed when he asked us to fly with him to Japan two years ago, to meet with the CEO of ANA, to bring direct air service between San José and Tokyo. And why, on January 11th, we took that inaugural flight on the Dreamliner 787 to Tokyo. And yes, while we took a row boat back to get home

-- [ audience laughter ]

>> Carl Guardino: -- that flight once again will be up and running again soon. That's why on -- [applause]

>> Carl Guardino: That's why on this past Monday, thanks to the leadership of Mayor Reed, Matt Tully and our

CEO airport task force, with incredible partnership by Matt Mahood and our San José Silicon Valley chamber of commerce, we were thrilled with the news that Virgin America CEO, truly a game changer in the airline industry, announced direct air service between San José and Los Angeles international, four times a day, starting on May

1st. [applause]

>> Carl Guardino: And if you haven't flown on Virgin America, shame on you. Prepare to be spoiled. That's why it was with risk for a great reward, that in the economic downturn that hit Silicon Valley, our nation and our world,

Mayor Reed partnered with the leadership group and the central labor council, and others, to go forward with the initiative to bring BART to Silicon Valley. And even during a downturn, voters in San José and Santa Clara County trusted Mayor Reed with their vote to tax themselves to bring that long overdue service to Silicon

Valley. [applause]

>> Carl Guardino: Third, the final theme to emerge, he has a head for policy and a heart for our community. It's why CEO John Chambers says, on behalf of Cisco's thousands of San José based employees I want to thank Mayor Reed for his dedicated service to our community. He continues to implement his strong vision for the city keeping San José always on the cutting edge at the heart of Silicon Valley. His leadership has played an integral role in ensuring Cisco's growth and investment in San José and I value his partnership. That's why two and a half years ago, when Mayor Reed called me, and downtown San José city council member Sam

13 Liccardo, said with RDA being threatened we cannot afford to lose the jewel during the holidays that we call

Christmas in the park and holiday on ice. And we made phone calls under his leadership, raised nearly $300,000 to keep that going. It's why last year we decided we couldn't -- my mother's here! [applause]

>> Carl Guardino: It's why last year the mayor said we can't tin-can the solution every year. We need something more sustainable. And in Silicon Valley we come up with great, crazy ideas and we introduce Santa run Silicon

Valley, with 2700 people dressed like Santa Claus, running down the street, raising nearly $90,000 so that we could, again, save and grow Christmas in the park enjoyed by 500,000 people every holiday season! And to Scott

Knies and the downtown association, thank you for being an integral part of the mayor's partnership. The citizens of San José appreciate Mayor Reed for his frugality. Two-buck Chuck is a compliment rather than a condemnation. He is generous with his own dollars but jealously guards taxpayer dollars. The CEOs of Silicon

Valley admire him for his integrity, his word is his bond, and his ability to deliver helps Silicon Valley to compete. My wife Leslie and myself admire him for his basic decency. He never tears others down to build himself up. I'm happy to present the mayor of Silicon Valley, mayor Chuck Reed.

>> Mayor Reed: Thank you, Carl. Thank you. Thank you, okay, come on, come on, let's get on with this. Welcome everybody. Carl, thank you for the generous Introduction, probably as long as my speech. But there are a lot of things to talk about. In collaboration with the city of San José, on so many issues like increasing air service, Christmas in The Park, Tour of California, US Patent and Trademark Office, pension reform, transportation funding, Talent Partnership, and getting us a seat on the MTC. Carl, thanks for all of that collaboration. Where did you go, there you are. Keri and Brian I'm not sure where you went, you're somewhere backstage. Thanks for helpings us out and thanks for the great work you do every year in our city. We really appreciate it. We thank the community volunteers, the organization he that were just recognized, thank you for your service. [applause] Pastor Dace, thanks for the invocation and your inspirational leadership with the Mayor's

Gang Prevention Task Force and the Reentry program. to my council colleagues behind me here, thank you for your service to our city in extremely difficult times and your good humor and professionalism, even when the decisions were hard. I appreciate that. To all of the other elected officials out in the audience, I think we read out the names. I'd like you to stand up. Thank you for your service. [applause]

14

>> Mayor Reed: And to our business organizations like the San José Silicon Valley Chamber of Commerce.

Matt Mahood. the Hispanic Chamber of commerce, James Duran, Santa Clara County association of Realtors

(Carl San Miguel), TriCounty Apartment Association (Josh Howard) and the Silicon Valley Leadership Group

(Carl), thank you for your support of our fiscal reforms, and your advocacy for economic development. we really appreciate it. I also want to recognize my wife, Paula, and my sister, Sandy, who are with us tonight, Paula, thank you for your love and support and thank you for being my Wing mate for 44 years. [applause]

>> Mayor Reed: And to the people of San José. Thank you for your faith and support during six very difficult years. There's not another big city in America where the residents have done more to help solve a fiscal crisis. You approved ballot measures to raise revenues for critical city services. You approved measures V and W to allow sustainable pensions to new city workers and to reform binding arbitration. And you voted overwhelmingly, nearly 70% voting yes on Measure B last June. You told us not to mortgage your children's future and then turn around and take out a second and third mortgage against your grandchildren's future. You told us to take action to solve our fiscal problems and protect services, and we did. Despite threats of political retribution, personal vilification and well-funded opposition, a majority of the City Council courageously voted to make the changes necessary to save our city from insolvency. Political courage is rare among elected officials, but you were exceptional. You stood up for our residents and taxpayers. You saved our city. Your political courage will long be remembered. As President Teddy Roosevelt said: It is only through labor and painful effort, by grim energy and resolute courage, that we move on to better things. And we would not be moving on to Better things if it wasn't for great professional staff work. Our City Auditor, Sharon Erickson, her staff did a great job of identifying the problems and solutions in their reports. Our City Manager Debra Figone, our City Attorney Rick

Doyle, Our senior staff and our managers and our labor negotiators, led by Alex Gurza, implemented the

Council's directions. These dedicated public servants worked tirelessly and bravely, leading by example, and always Being professional. [applause]

>> Mayor Reed: Tonight is my seventh state of the city address, for those of you who are counting. In the first six

I spent a lot of time talking about the budget, And San José's fiscal problems. Some of you were at my first

15 speech when I called the structural budget deficit Public Enemy Number One. I'd love to tell you that I'm not going to talk about the budget tonight - wouldn't that be a pleasant change! - but the budget is still our biggest challenge. We have come a long way, but we still have a very great deal of work to do. To understand how far we have come and the hard work ahead of us, we need to take a look back. Following the dot-com bust, San

José experienced ten straight Years of budget shortfalls. We closed yearly deficits by cutting services and eliminating jobs. Over a ten year period we eliminated 2,000 positions from the city payroll. We cut library hours, closed community centers, delayed road repairs, deferred maintenance, and laid off firefighters and police officers. But it wasn't enough. Even when the economy rebounded and our revenues went up, it wasn't enough, because our cost Of living, our cost of doing business was going up, Even faster, primarily driven by skyrocketing costs for pensions and retiree healthcare. In just ten years, retirement costs increased from $73 million Toes 245 million a year. Faced with these fundamental, structural problems and realizing that continuing to cut services would push us into insolvency, with bankruptcy likely to follow, the City Council rose to the challenge and adopted the Fiscal Reform Plan to achieve two equally important objectives: First, make sure our city employees and retirees get paid the retirement benefits they have earned and accrued. And two, provide essential services to our residents and taxpayers. The elements of the Plan we have already implemented are saving Us over $100 million a year. As a result, this year we were able to balance the budget With no layoffs and begin to restore services, like opening Four branch libraries that have been vacant and locked. Seven Trees opened in January. Bascom will open in a couple of weeks. Education Park and Calabazas Will soon follow. We are grateful that things are getting better, but we still have a lot to worry about. Our retirement plans still have about $3 billion in unfunded liabilities, and the independent Retirement Boards' actuaries have projected our annual required payments will continue to increase for more than a decade. This is a billion-dollar problem and it requires a billion-dollar Solution. That's why we have to stay the course and implement the rest of the Fiscal

Reform Plan. We are going to make sure that our retirees get paid what they have earned and accrued, and we are going to restore police and fire services, re-open libraries and community centers, and Repair our roads. That's what we're going to do. We can do it. And we will. [applause]

>> Mayor Reed: And while our fiscal reform plan has averted disaster and put us on the Path to recovery, I want to acknowledge that it has had real and painful consequences, especially for our hardworking city

16 employees. many of our painful decisions were made in agreements with our employee unions, with the knowledge that if everyone sacrificed, jobs and services would be saved. there are a lot of city employees here tonight. You've taken significant pay cuts. You've incurred increases in your share of retirement costs. And yet you have served the public with care and professionalism. Thank you for your sacrifices. [applause]

>> Mayor Reed: And while pay cuts and pension reforms were necessary to save hundreds of jobs and preserve services, they have resulted in resignations and a loss of good people in some areas. Other cities and the State of

California are making similar changes. Government employees are taking pay cuts and paying more for their retirement benefits all over the state. The marketplace is catching up with San José, but we still need to mitigate some of the impacts that fiscal actions have had on our employees. We can take some steps this year to help us retain experienced And talented staff. We can begin to reward innovation, superior performance and experience, starting with critical and hard-to-fill positions. we will implement the provisions of Measure B that give all of our employees an opportunity to choose a lower cost set of pension benefits for future years of service. Our request for a ruling from the IRS is pending, and we are pushing aggressively to be able to give our employees a choice. and with continued cooperation From our unions, we will slow down the increase in the amounts our employees pay for retiree health care. Innovation, creativity, collaboration, hard work, and overtime have helped close some of the gaps created by service cuts, but the reality is, San José is understaffed in many areas. Nowhere is this more apparent than in our police department. We have a great department with some of the best officers in the country, but 10 years of spiraling costs have left the department understaffed and reduced its ability to respond to, investigate, and prevent crimes. Now, it's important to note that in the decade before the fiscal reform plan, we didn't cut the police department budget. We actually increased it by nearly $100 million. But during that time, the cost per officer increased dramatically, driven by rising retirement costs. So even with a budget increase of nearly $100 million, we have fewer officers than we had ten Years ago. Thankfully, our police officers agreed to take a 10% cut in total compensation, so we didn't have to cut 150 more positions in the department. Now, this understaffing is even more troublesome because the state of California has reduced its prison population by more than 40,000 inmates in the last five years. There is little doubt that some of those former prisoners are committing crimes again, impacting our neighborhoods and further stretching police resources. I want to thank Santa Clara County for collaborating with the city on an innovative Re-entry program to

17 work on this problem. Of course, this isn't just a San José problem. Across the region and across the state, property crimes are up. Like us, San Francisco and Oakland saw spikes in homicides last year. That's interesting information for statisticians and the media, But the only crime that matters to me is what's happening here in San

José. We must not and we will not accept higher crime rates as the New normal. [applause]

>> Mayor Reed: And as I have said and this council has said many times before, we are not going to write off any neighborhood in this city. What we're going to do is restore capacity in our police department, so we can better respond to crime and better protect our neighborhoods. My priority for the coming year Will be public safety and as we begin to realize more savings from Measure B and see new revenues from the Fiscal Reform

Plan, we will hire more police officers. [applause]

>> Mayor Reed: Unfortunately, we are not going to have the resources to immediately increase the size of the police department very much, And we can't afford to restore the 10% pay cuts immediately without cutting services. But there are some things we can Do, and do them this year, to retain officers and improve capacity in the police department. We can improve retention of experienced officers with retention bonuses and targeted pay increases, within our financial ability to do so. we can return officers to the street. The City Auditor has identified positions that could be civilianized, like doing background checks, which would free up officers for patrol and investigations. Non-sworn Community Service Officers could follow up on burglaries. Reserve Officers could be allowed to do a lot more. And we are going to continue to recruit and hire more aggressively. More than a dozen direct hires are in the field training program, another 40 recruits are in the academy, and hundreds of applicants are in the process for the next academies. and finally, we just have to be more efficient and adopt the best practices of other big city police departments by using data to more effectively deploy our officers. Some have suggested that we Restore the full 10% cut in compensation to encourage experienced officers to stay. I wish we could do that today. But it would cost about $20 million a year, meaning we would have to shrink the force by more than 100 officers or cut other services dramatically. No one thinks it's a good idea to shrink our already-too-small Police force. We need to hire more officers to patrol our neighborhoods and solve and prevent crimes - and that's where we will put savings generated by the Measure B Pension reforms. To be more precise: With the savings from pension reform, we can expand the force by 200 more police officers. We can do it

18 and we will. You are probably wondering "When will we get those savings?" Despite the numerous attempts to

Block Measure B with lawsuits, Administrative actions and arbitration, we will get significant savings over the next two years that will allow Us to grow our police force. Now, of course, we also need to restore many other services that were cut over the last decade. Response times in our fire department have slowed. We have far fewer community centers than we once had. Our branch libraries are only Open four days a week. Streets in our neighborhoods have too many potholes, and we have a street maintenance backlog of over $300 million. All of our departments need increased funding both to improve service levels and to retain top quality workers. pension reform alone will not generate enough savings to cover all of our needs. One option is going to the voters to ask for new revenues, and the Fiscal Reform Plan includes the possibility of a tax increase in addition to the Savings from pension reform. The voters have approved four, four tax measures since I've been mayor, and we really appreciate that support. It now appears from our most recent survey that a majority of the voters might support another tax increase. After we fully implement Measure B and can assure the voters that new tax revenues will go to improving services, then we will be much more likely to get approval for new revenues. we could possibly go to the voters for a tax increase in 2014 but success cannot be assumed. So I challenge all of you, who want a tax raise, put a tax increase on the ballot. To put together a broad coalition of support with the capacity and commitment to raise a million dollars. That's what it will take to win. Despite all the challenges, disruptions and difficulties, our workforce continues to do a great job for the people of San San José. Drawing on the innovation is a hallmark of Silicon Valley, many city employees turned crisis into opportunity and found ways to be more efficient and do more with less. For example: the fire department now use he two-person squad cars instead of four-person trucks to respond to some medical emergency calls. or Parks, Recreation, and Neighborhood

Services department has partnered with nonprofits to keep community centers open. our libraries have been a national leader in using technology to increase circulation at costs far lower than other cities. and our new model for graffiti cleanup is saving money and delivering better service through technology, like the SanJoséClean app that allows residents to report graffiti with a photo sent however you want to send it and get a confirmation after the clean up. Partnerships and relationships that we built with other government agencies and non-profit organizations have been a great help to us during these times of short staffing. And as we now begin to restore services we'll continue to find creative ways to be more efficient and more effective in delivering services to our residents and taxpayers. Wide-ranging collaborations will ensure that San José continues to make significant

19 progress in areas like closing the educational achievement gap through the SJ2020 initiative reducing gang violence and keeping our Schools safe through our Mayor's Gang Prevention Task Force Ending chronic homelessness through destination home. Reducing the overrepresentation of Latinos in the criminal justice system through the La Raza Rountable/Harvard consensus building process and harnessing the power of innovation by creating the Silicon Valley Talent partnership. We've also worked hard to capture economic growth - and we're seeing great results. Silicon Valley companies are once again leading the state and the nation out of recession. Last month, the Milken Institute released its annual "Best Performing Cities Index" which identifies the cities that are the best at creating and Sustaining economic growth. The San José metro area was ranked number one. That's number one. One in the country. [applause]

>> Mayor Reed: It's always great to be number one. And here are a few of the companies that Have invested and created jobs in San José though our expedited Permit process. To our business community, from our large corporations to our sole proprietors, thank you for the jobs and investments you've Brought to our community. We appreciate the confidence you have in San José. Thank you. [applause]

>> Mayor Reed: And I want you to know that as your mayor, I'm Committed to helping your companies stay here and grow here by working at the speed of Business. We have private sector projects underway, already under construction will generate nearly $10 million in new tax revenues once they are completed. And we have more than a billion dollars of investments, moving through our permitting process which will create thousands of jobs, and generate another $10 million in annual tax revenues. I want to thank and acknowledge the many members of city departments, especially the Development Services Team, who have been working at the speed of business to make each of these projects successful. and a special thanks goes to governor Brown and his GoBiz office for working with us on projects Like the world R&D headquarters for Samsung Semiconductor. Thank you Charlie

Bae and your Team for growing here in San José. [applause]

>> Mayor Reed: Even more companies will stay here and grow here if the legislature follows the Governor's lead and streamlines the California Environmental quality act. Another area where we're seeing a big impact is in clean Technology. In 2007, we launched our Green Vision, which is our road map to becoming the world's center

20 of clean tech innovation to create jobs and improve the environment. and today, San José is ranked Number 1 for clean tech Innovation, that's number 1 in the country, and we have over 7,000 clean tech jobs. [applause]

>> Mayor Reed: And San José now has more solar power on homes and commercial and government buildings than any other city in the state. California leads the country in megawatts installed and San José leads

California. [applause]

>> Mayor Reed: And we're making progress on Replacing our ugly yellow street lights with new LEDs that will save energy, reduce maintenance and enhance safety in our Neighborhoods!

>> Mayor Reed: In the coming year, dozens of driving industry companies are going to be look to expand into larger buildings. If your company is one of those looking to expand call me: 408-535-4800. Is I want to help. San

José is ready to work at the speed of business to help you stay here and grow here. That's critical to ensuring that

Silicon Valley remains a driving force in our national and global economies. Our region is home to the most successful tech companies in the world. that's why BART to San José is under construction. That's why the U.S. patent and trademark Office will open a Silicon Valley branch. That's why Lew Wolff wants to build us a baseball stadium and a soccer stadium. Thank you, Lew. [applause]

>> Mayor Reed: And that's why virgin America will Soon be flying out San José. Thank you David Cush, CEO of

Virgin America. [applause]

>> Mayor Reed: I love your service and I fly coach. It's good, folks. Talented people from across the globe come here for the opportunity to compete and collaborate with other world-class innovators, and that's why San José is the top patent filing city in the country. We need to make sure these talented people have the opportunity to stay here, invest here, and grow their companies Here. So I'll continue to support the efforts of the Silicon Valley leadership group, Carl, and our Members of Congress to make that possible through Immigration

Reform. [applause]

21 >> Mayor Reed: San José is a place where people from all over the world focus on what we have in common, rather than our differences. Where people from different ethnicities, religions and cultures live, work, play and prosper together. San José is a beacon of peace and prosperity for the world. Our economic outlook is strong and opportunities abound. Now it's up to us to stay the course to solve our fiscal problems, to remain mindful of what got us into the mess in the first place, and to keep our eyes on the long-term goal - a future in which we are fiscally strong and can afford to open all of our libraries and community centers full time, repair our streets, end the fire company brownouts, and restore the capacity in our police department. We have made the hard decisions And we have taken the difficult steps to solve problems so they don't burden future generations. But we could not have done so without the strong and continuous support of the people of San José. Our residents, taxpayers and Our voters have all been tremendous allies in solving our problems. And for that I can't thank you enough. And I want each of you to know that I am deeply honored to be your mayor, and enormously proud of you and our city. With your help we put San José back on the path to be a great city. And together we will keep moving toward a brighter future. Thank you. Thank you. Thank you all. [applause]

>> Mayor Reed: Thank you, Sal. Thank you very much. All right, I'm going to vendor the microphone to our esteemed MCs.

>> Keri: Thank you mayor for your leadership. And Brian, thank you for the pleasure of sharing the hosting duties with you. and especially we need to give thanks to all the behind-the-scenes team of City staff who put this event together. Several departments work together to make this event happen but unfortunately there are way too many names to mention but we say thanks and congratulate everyone for another great effort on the State of the City Address. And -- [applause]

>> Keri: And to all of you. Thank you for being such a great audience.

>> Brian: Thank you, Keri. And I certainly enjoyed working with you as well. And ladies and gentlemen, one more word before you go. Little suggestion. Tonight, you should seriously consider dining downtown San José at one of

22 our many fine restaurants, yes? It is a perfect night to enjoy Downtown San José. Thank you, ladies and gentlemen, for sharing your time here today. This concludes our program. Good night. ∂∂

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