2009-2010 Santa Clara County Civil Grand Jury Report Money-losing Hayes Mansion:

Conclusions 5

• CL1 Page 5
  To ease the structural budget deficit, after extensive opportunity for public input on city budget priorities from citizens, employee and business groups, and city staff, the City decided to assess the management and possible alternative uses of City properties. The list of properties to be reviewed in the Asset Management Program (AMP) includes the Mansion.
• CL2 Page 6
  The AMP study of the Mansion is behind schedule. Deadlines have been set and subsequently extended.
• CL3 Page 6
  Since the City initiated the AMP and its study of the Mansion, the financial condition of the City has gone from bad to worse. In November 2008 the projected deficit for 2010 - 11 was $109.7 million. Now that projected deficit has increased to $116.2 million.
• CL4 Page 6
  The City Council will have extensive information and an opportunity to act on the Mansion when the study of the Mansion is complete.
• CL5 Page 5
  City staff is providing a thorough analysis of the asset management study to aid in the City Council’s ultimate decision regarding the fate of the Mansion. That decision must be made promptly, given the rapidly deteriorating state of the city budget and the ongoing cost of sustaining the Mansion. If the council decides to keep the Mansion and its continuing drain on the City budget, the council needs to provide citizens with a convincing rationale as to why City ownership should be retained, and why the property should be run as a hotel-resort. Efforts to improve the Mansion’s management and to restructure the Mansion’s debt are commendable. But these efforts do not address the foundational and underlying reality that the City Council needs to decide whether the City, staggering financially, should choose to carry the heavy financial burden of this historic Mansion. Findings and Recommendations Finding 1 To ease the structural budget deficit, after extensive opportunity for public input on city budget priorities from citizens, employee and business groups, and city staff, the City decided to assess the management and possible alternative uses of City properties. The list of properties to be reviewed in the Asset Management Program (AMP) includes the Mansion. Recommendation 1 The City should continue the AMP, focusing on those properties that present the biggest drain on City finances, such as the Mansion. 5 Finding 2 The AMP study of the Mansion is behind schedule. Deadlines have been set and subsequently extended. Recommendation 2 The City Council should require adherence to City staff’s currently estimated 2010 study completion date. Finding 3 Since the City initiated the AMP and its study of the Mansion, the financial condition of the City has gone from bad to worse. In November 2008 the projected deficit for 2010 - 11 was $109.7 million. Now that projected deficit has increased to $116.2 million. Recommendation 3 None. Finding 4 The City Council will have extensive information and an opportunity to act on the Mansion when the study of the Mansion is complete. Recommendation 4 The City Council should either sell the Mansion or articulate for the public what the more important values are that offset the significant long standing and continuing financial drain of the Mansion on the City’s budget. 6 This report was PASSED and ADOPTED with a concurrence of at least 12 grand jurors on this 15th day of April, 2010. Angie M. Cardoza Foreperson Judy B. Shaw Foreperson pro tem Mary Nassau Secretary 7

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