The 2024-25 fiscal year budget faced challenges from the start as labor costs continued to outpace revenues. The cost of salaries and benefits were expected to rise by $488 million from last year to the 2024-25 budget. But county officials were able to close the $250 million gap through a series of new revenue sources and reductions.

Still, challenges lie ahead as the county expects the state to cut funding due to its own multi-billion deficit. The county’s healthcare system is also bracing for the impact of Regional Medical Center closing its trauma center and downgrading other life-saving programs.

“We are facing trickle-down impacts from the state and federal levels, along with a private sector actor that is pushing its social responsibilities to the local government,” County Executive James Williams said in a news release. “But, unlike a for-profit business, we must find a way to operate that maintains our commitment and support for the residents who need us most.”

Among the many priorities outlined in the budget are a sizable chunk for seismic improvements in the county’s healthcare system — $40 million at Santa Clara Valley Medical Center and $60 million at Valley Health Center San Jose.

The budget also expands access to mental health services, adds new funding for agricultural worker housing and increases investments in sustainability projects and programs, among other priorities.

Despite it being on the chopping block last month, Special Olympics Northern California was also able to obtain the necessary funding for its operations in Santa Clara County.

Board Presidents Susan Ellenberg said in a statement while she’s “relieved” that the county was able to balance its budget and maintain “service levels for the most vulnerable residents, secure our core budget priorities and protect the jobs of county employees, I don’t believe we are out of the woods.”

“The real test will be in the coming years, so our continued prudence and collaboration in how we steward our residents’ tax dollars will be critical,” Ellenberg said.

The county has projected a $158 million deficit for the 2026-27 fiscal year.

California’s biggest utility sees power demand doubling by 2040, driven by artificial intelligence, electric cars and other efforts to electrify more of the economy, according to PG&E Corp.’s top executive.

PG&E is equipped to meet that surge in demand without significantly adding to its fleet of power plants, Chief Executive Officer Patti Poppe said Friday in an interview on Bloomberg Television. That’s because the utility’s system isn’t running at its full potential.

“Our grid today is underutilized,” she said. “We built the grid big years ago, and now we get to utilize it.”

Utilization rates on PG&E’s grid are currently at around 45% and Poppe said she sees that growing to as much as 80%. While there will be “some new generation,” the CEO said better use of existing assets will be key to delivering more power without driving up costs.

Shares of PG&E fell 0.9% at 10:46 a.m. in New York. The stock has risen 1% this year.

Other parts of the US are also projecting massive increases in power demand, with the head of the grid operator in Texas estimating this week that power demand there would nearly double by 2030. A number of US power companies have also dramatically increased their projections of demand, though unlike PG&E, other companies are planning to build new plants.

Wildfires

Poppe has pledged to prevent catastrophic wildfires, which drove the utility into bankruptcy in 2019 after its equipment sparked some of the worst blazes in California history. More than 100 people died and thousands of homes were destroyed.

The utility says it has reduced ignitions tied to its equipment by 68% since 2017 by installing more weather monitoring stations, hardening poles, covering and burying power lines and preemptively cutting power during dry and windy weather.

–With assistance from Josh Saul.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

Anyone with half an eye on the housing market over the last two decades will know that in many countries, not least the United States, it’s become much more difficult to buy a home.

But a new report sums up the feeling of many potential home buyers by creating a category that labels some major cities as “impossibly unaffordable.”

The report compared average incomes with average home prices. It found that pandemic-driven demand for homes with outside space, land use policies aimed at limiting urban sprawl, and investors piling into markets had sent prices soaring.

US cities on the West Coast and Hawaii occupied five of the top 10 most unaffordable places, according to the annual Demographic International Housing Affordability report, which has been tracking house prices for 20 years.

Perhaps unsurprisingly, the most expensive US cities to buy home are in California, where San Jose, Los Angeles, San Francisco and San Diego have all made the top 10.

The Hawaiian capital of Honolulu also rates a mention in sixth place of 94 major markets surveyed in eight countries.

Australia is the only other country besides the US to dominate the “impossibly unaffordable” list, led by Sydney and the southern cities of Melbourne in Victoria and Adelaide in South Australia.

But topping the global leaderboard is Hong Kong, the compact Asian financial hub known for its tiny apartments and sky-high rents. Notably, it’s the only Chinese market covered in the report.

A regular entrant on the “most expensive” tables, Hong Kong has the lowest home ownership rate of all the cities surveyed, at just 51%, compared to its Asian rival Singapore where home ownership tops 89% due to the government’s decades-long commitment to public housing.

Hong Kong may be the least affordable city worldwide, but potential home buyers may be encouraged to know that it’s not as unaffordable as it once was.

House prices slipped during the pandemic in 2020, when the government closed the city’s borders and imposed a zero-Covid policy — that’s on top of new national security laws that have had a chilling effect on the city.

Why so high?

The report measures affordability using a price-to-income ratio of the median house price divided by the gross median household income.

It links the rise in working from home during the pandemic to a “demand shock” for houses outside city centers, which have more outside space. But it also blames soaring house prices on land use policies, including “urban containment,” a kind of planning designed to stop urban sprawl.

“The middle-class is under siege principally due to the escalation of land costs. As land has been rationed in an effort to curb urban sprawl, the excess of demand over supply has driven prices up,” the report said.

Prices were driven up even further as investors jumped into the market to make a profit.

One solution, the report’s author wrote, is to look to New Zealand.

In an opinion piece for Canada’s Financial Post, Wendell Cox, a senior fellow at the Frontier Centre for Public Policy, advocated for Canada, in particular, to follow New Zealand’s lead and free up more land for immediate development.

Both Vancouver and Toronto made the list of the cities that are “impossibly unaffordable.”

Cox points to a policy, “Going for Housing Growth,” introduced by New Zealand’s coalition government that requires local authorities to immediately zone for 30 years of housing growth.

“Toronto and Vancouver show that the cost of taming expansion is unacceptably high: inflated house prices, higher rents and, for increasing numbers of people, poverty,” Cox wrote.

For those who can’t wait for a change in policy or for demand to fall, the report also identifies the most affordable cities of the 94 surveyed worldwide.

They are Pittsburgh, Rochester and St Louis in the US; Edmonton and Calgary in Canada; Blackpool, Lancashire and Glasgow in the United Kingdom; and Perth and Brisbane in Australia.

The report was compiled by researchers from the Center for Demographics and Policy at Chapman University in California and the Frontier Centre for Public Policy, an independent public policy think tank in Canada.

Top 10 “impossibly unaffordable” cities

• Hong Kong
• Sydney
• Vancouver
• San Jose
• Los Angeles
• Honolulu
• Melbourne
• San Francisco/Adelaide
• San Diego
• Toronto

The-CNN-Wire & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

Moreland Apartments, a multifamily property at 4375 Payne Avenue in San Jose, was bought for $71 million, according to documents filed on June 13 with the Santa Clara County Recorder’s Office.

The San Jose apartment property totals 160 units, which indicates a value of $433,750 a unit. Moreland Apartments was built in 1982.

San Francisco-based Reliant Group, acting through an affiliate, bought Moreland Apartments, according to the county public documents.

The value was on the low end of apartment purchases in the Bay Area within the last nine months, a review of transactions with multifamily properties shows.

Here are a few examples of what investors have been paying on a per-unit basis in recent deals:

— Southwood apartments in Palo Alto, 100 units. The price was $59.9 million, or $599,000 a unit.

— The Rise in downtown Walnut Creek, 97 units. The price was $57 million, or $587,600 a unit.

— Villa del Sol apartments in Sunnyvale, 124 units. The price was $62.3 million, or $502,400 a unit.

— Artists Walk Apartments in Fremont, 185 units. The price was $89.8 million, or $485,000 a unit.

— Diridon West, 249 units in downtown San Jose. The price was $117.5 million, or $471,900 a unit.

— Modera The Alameda in downtown San Jose, 168 units. The price was $78.2 million, or $465,500 a unit.

— The Kensington in Pleasanton, 100 units. The price was $35.5 million, or $355,000 a unit.

Except for the Sunnyvale apartments deal that occurred in November 2023 and the Fremont apartments deal in September 2023, the examples all involve transactions that occurred in 2024.

Despite the recent softening of per-unit-values for apartment transactions during the last nine months, prices for multifamily complexes are very much in line with price trends before the spikes in inflation and interest rates over the last year or two.

Before the upward surge for interest rates and inflation, here are examples of some per-unit prices:

— The Village Residences in Mountain View, bought in 2019 for a jaw-dropping $963,700 per unit. This $292 million deal for the 333-unit complex was completed in 2019.

— The Platform Urban Apartments in San Jose, 551 units, bought in 2022 for $320 million, or $580,760 a unit.

— The Eleanor apartments in Milpitas, 193 units, bought in 2022 for $333 million, or $579,580 a unit.

— Sofi Waterford Park apartments in San Jose, 432 units, bought in 2020 for $194 million, or $449,070 a unit.

— The Lex apartments in San Jose, 387 units, bought in 2019 for $180.5 million, or $466,408 a unit.

— Park Hacienda in Pleasanton, 540 units, bought in 2020 for $248 million, or $459,260 a unit.

— An 18-story Oakland apartment tower at 1130 Third Avenue, 178 units, bought in 2022 for $55.5 million, or $311,800 a unit.

With interest rates rising, apartment buyers find it tougher to justify purchases unless the prices are sufficiently low for the residential complexes.

The new owner of Moreland Apartments in San Jose, Reliant Group, specializes in market-rate and affordable apartments, according to the real estate firm’s website.

Reliant Group’s affiliate obtained $73.9 million in financing at the time of its purchase of Moreland Apartments, the county records show. This included $60.4 million from Citibank and $13.5 million from Reliant Cap X.

The new law, as interpreted by the Attorney General’s Office, means a restaurant cannot charge an additional surcharge on top of the price listed. And it seemingly brings to an end the practice of restaurants adding 3, 4, 5 and 6 percent service fees on to bills, often to the chagrin of diners.

However, a newly proposed bill, Senate Bill 1524, seeks to clarify that restaurant surcharges are legal so long as fees are, “clearly and conspicuously displayed on the advertisement, menu, or other display.”

State Sen. Bill Dodd, D-Napa, who authored both bills, is advancing the legislation as an urgency measure, because the law, as interpreted, will, “pose a serious threat to restaurants.”

The hotly debated surcharges have grown in popularity among San Diego-area restaurateurs, who say they rely on the fees to afford increases in labor costs or to boost pay for back-of-house workers who aren’t tipped.

But patrons hate the fees and often lament the practice on social media sites.

Q: Should restaurant surcharges be legal?

Economists

Kelly Cunningham, San Diego Institute for Economic Research

YES: Transactional fees are almost universal. Transit taxes are added on top of advertised hotel room rates, as well as sales taxes applied to retail prices by governments because they can. As long as restaurants disclose the total charges upfront, they are simply providing a partial breakdown of their costs. Restaurants attempt to absorb increasing costs without deterring customers. Consumers are concerned with the expected value of products within limited price ranges they are willing to pay.

Norm Miller, University of San Diego

YES: We all want to know full charges in advance, but the key is open and transparent disclosure. My preference would be for such charges to be included in the prices, but I’d prefer less government involvement in the oversight of restaurant menus. What is far worse, at present, are entertainment venues and ticket scalpers, akin to going to a restaurant, ordering a meal, and having the bill show up at twice the posted price.

Ray Major, SANDAG

YES: All businesses, not just restaurants, should be honest and transparent about the cost of a good or service. If the menu says a dish is $20, then the customer should expect to pay $20, plus sales tax and an optional tip but not any additional fees. This practice is disingenuous as these surcharge fees are not meant to be reversed or come off. Customers should be able to know upfront the cost of a service so they can best compare prices.

David Ely, San Diego State University

YES: Pricing should be transparent to restaurant patrons. Governments should establish rules that make surcharges clear to customers and stop restaurants from surprising customers with unexpected fees at the end of a meal. But they should be cautious about controlling how businesses charge for their services. If patrons are sensitive to higher menu prices, restaurants should be able to choose to keep prices lower and add a surcharge if it means retaining more customers.

Caroline Freund, UC San Diego School of Global Policy and Strategy

NO: You should have confidence that the price you see will be the price you pay. With price transparency, you won’t get an unpleasant surprise when the bill arrives, and you can more easily comparison shop. Even if prices go up to compensate for lost fee revenue, the total cost to you will be the same. In addition, surcharges may hide from official statistics, making it harder to track inflation and design appropriate policies.

Lynn Reaser, economist

NO: Ideally, enterprises should not be told how to run their businesses. Restaurants have been hit by the higher costs of food and supplies, while driven to surcharges by increases in the minimum wage. However, consumers should know up front what their total meal will cost. Surcharges, even if disclosed, are irritating and make price comparisons between restaurants and of consumer impact that much more difficult. The practice should be ended.

Alan Gin, University of San Diego

NO: This is a “bait-and-switch” situation, where customers see one price on the menu but end up paying a higher price. If restaurants need more revenue, they can raise prices by the amount of the surcharge. People in the restaurant industry acknowledge that there is no difference in the two approaches other than a psychological one with the higher prices. Hotels have been able to deal with this by listing their total nightly rates, which include extra fees that are charged.

James Hamilton, UC San Diego

NO: Restaurants have a right to charge whatever price they want. But they don’t have a right to hide the price from customers or try to trick people into paying more than they expect. I’m OK with a surcharge or service fee as long as it’s indicated very prominently on the menu in a way that nobody can miss. But I worry that in many cases the purpose of these surcharges is to mislead the customer.

Executives

Bob Rauch, R.A. Rauch & Associates

YES: While I oppose surcharges and do not use them in our restaurants, SB 1524 will clarify how surcharges are posted. Restaurants can impose service charges, mandatory gratuities, and other menu charges, but only if those charges are clearly and conspicuously disclosed in advance to restaurant guests. That means on the website, within social media promos, and on menus, not in small print.

Jamie Moraga, Franklin Revere

YES: The caveat is that any fees and surcharges must be clearly listed before customers dine in or order to go. This transparency will allow customers to decide if they want to dine at an establishment that has the fees and surcharges or if they want to select a different restaurant that doesn’t. Customers should always know these costs up front and not be surprised when paying the bill.

Chris Van Gorder, Scripps Health

NO: But I have mixed feelings about this. Like all businesses, restaurants must pass costs on to customers in one way or the other, but adding a surcharge is a slippery slope; it misleads the customer. I’d rather see the complete charge built into the item I purchase and base my decision to buy or not based on that charge.

Phil Blair, Manpower

YES: There is a push to have companies (airlines for example) list any added charges for a total sales price. Restaurants should be able to show the public when mandated charges are forced on them. It clearly needs to be visible to the guest. The added charges also allow restaurants to share fees with the back-of-house kitchen staff since tips go to servers. This often results in higher earnings than may be deserved.

Gary London, London Moeder Advisors

YES: But these surcharges are wrong. In fact, they represent incredibly tone-deaf marketing. When presented with surcharges, I deduct them from my tab prior to calculating the server tip. I then base the tip amount on a percent of the net, before taxes. Bottom line: Restaurants should charge what they want and compensate employees without interference from lawmakers. They should not be corrected for their stupidity. Patrons should take care of that.

Austin Neudecker, Weave Growth

NO: Consumers deserve price transparency. Unavoidable fees added to all bills, even if noted at the bottom of the menu, feel deceptive. Costs are increasing due to inflation, so either raise prices or decide the market won’t bear the associated increase and find ways to save elsewhere. Further, I support ending any recommended tipping and including a flat and fair in-dining fee.

Not participating this week:

Haney Hong, San Diego County Taxpayers Association

That’s according to a lawsuit filed Thursday claiming Apple systematically paid thousands of women less than men. It alleges that on the printer in the Apple office in Sunnyvale where Jong worked was a W-2 tax form belonging to a male colleague who did the same job she did, Jong said.

“He was being paid almost $10,000 more than me,” said Jong, a training instructor in Apple’s marketing department.

Apple, valued at $3.3 trillion in the stock market, did not respond Thursday to requests for comment.

Jong, employed at the company for more than a decade, and another long-time Apple worker, Amina Salgado, an AppleCare manager, filed the lawsuit in San Francisco County Superior Court against the Cupertino iPhone and app store giant. It claims Apple underpaid more than 12,000 women in its engineering, marketing, and “AppleCare” warranty departments.

Jong and Salgado are seeking class-action status and a court order awarding back pay, with 10% interest, to the thousands of current and former female employees allegedly victimized by Apple’s pay practices over the past four years.

“Apple systematically paid women lower compensation than men with similar education and experience,” the lawsuit claimed.

The legal action puts a renewed spotlight on Silicon Valley’s male-dominated technology industry. Google in 2022 agreed to pay $118 million to up to 15,500 women to settle a years-long class-action lawsuit alleging the Mountain View company discriminated against female employees. Four plaintiffs accused Google, whose most-recent diversity report shows about a third of its workforce are women, of slotting female workers into lower salary levels than men, giving women lower-paying jobs, promoting women more slowly and less frequently, and generally paying female employees less than men for similar work. Apple’s most-recent report shows a similar gender breakdown.

This week’s lawsuit against Apple alleged that until late 2017, Apple asked potential hires about their previous pay, leading the company to put women on lower starting salaries than men for the same work. Jong, hired in 2013, was offered “essentially the same base salary that she had received at her prior job,” the lawsuit said. Salgado, brought on in 2012, later complained to Apple several times that she was being paid less because of her gender, and an investigation by a third-party company Apple hired confirmed the underpayment, according to the lawsuit. Apple raised Salgado’s salary, but refused to give her back pay “for the years during which she was paid less than men,” the lawsuit claimed.

After the new law took affect, Apple pivoted to asking applicants about their salary expectations, according to the lawsuit. Research indicates people’s stated salary expectations are typically only slightly higher than their previous pay, so Apple’s use of that information to set salaries “has had the effect of perpetuating past pay disparities and paying women less than men,” the lawsuit alleged.

Because Apple is required by law to keep records of wage rates and job classifications for all its California employees, it knew, or should have known, it was underpaying women, “yet took no action to remedy the inequality,” the lawsuit claimed.

Over time the pay disparity widens for female Apple workers because raises are based on a percentage of base salary, the lawsuit charged.

Apple also pays a premium to workers it deems to have “talent,” and according to the lawsuit, “more men are identified as having talent.”

The lawsuit also seeks an order barring Apple from paying women less than men for the same work.

That was one of the assessments and recommendations from economist Christopher Thornberg during a recent presentation at the San Jose State University Economic Summit at the college’s downtown campus.

Wide-ranging efforts must be conducted to rezone existing office sites so they can be replaced by residential units, Thornberg, economist and founding partner with Beacon Economics, said.

“How do you make housing more affordable? You build more housing,” Thornberg said, urging San Jose and its neighboring suburbs to intensify efforts to rezone wide swaths of commercial properties so housing can sprout on those sites.

“You need to start taking down these office buildings and putting up apartments,” Thornberg said.

However, Thornberg said he prefers “adaptive reuse” of existing office buildings rather than projects that bulldoze office structures. Too much demolition could create “dead zones” in urban areas, he stated in a PowerPoint display that was part of his demonstration.

Thornberg also disagreed with assessments that California is locked in a doom loop characterized by an exodus of corporations and a flight of its residents to rivals such as Texas, Arizona and Florida.

“California is not dead yet,” Thornberg said. “California is doing just fine.”

The Beacon Economics co-founder asserts that the South Bay economy is also in good shape, but like California, must navigate past some hazards to remain robust.

“San Jose is still big in tech but housing and labor shortages are obstacles,” Thornberg said.

In his PowerPoint display, Thornberg listed a few observations about the South Bay economy:

— Labor and housing costs could erode the South Bay’s competitiveness.

— The South Bay needs to find ways to grow its labor pool as a way to attract entrepreneurs.

— Artificial intelligence is not by itself a game changer. AI must become integrated into the larger South Bay economy to start having an impact.

“AI is incredibly important, but AI is not going to rejuvenate the Bay Area by itself,” Thornberg said.

Tech jobs have slumped in the Bay Area since February 2020, which was the final month before state and local government agencies imposed wide-ranging business and office shutdowns to combat the spread of the coronavirus, according to estimates from Beacon Economics that Thornberg presented.

Over the approximately four years from February 2020 through April 2024, here’s how tech industry job totals changed in selected regions, according to the Beacon Economics estimates:

— South Bay tech job fell 1.3%

— East Bay slipped lower by 0.5%

— San Francisco-San Mateo metro, down 2.5%

— California, up 1.6%

— United States, up 4.5%

Some major Silicon Valley rivals posted gains in tech jobs that were double-digit increases over the same period. The Texas cities of Austin and Dallas, and the Alabama city of Huntsville all posted gains of more than 10%. Utah’s Salt Lake City and North Carolina’s Durham managed percent increases in job totals that were nearly double digits.

The boom periods of Silicon Valley’s boom-and-bust cycle have always been fueled in large measure by tech workers who are relatively new to the industry. Thornberg believes that’s why plenty of housing must be available for tech’s new workforces.

“Tech hubs are rejuvenated by young people coming into them,” Thornberg said. “Where are they going to live?”

While the South Bay economy is in good shape, Thornberg warned that the region’s housing crunch could impede future growth.

“The limited housing supply is preventing the hip new tech companies from locating here,” Thornberg said.

Despite the obstacles and difficulties, Thornberg believes the respective economies of the South Bay and California are both in good shape.

Thornberg added that a recession is not on the horizon for the South Bay, California, or nationwide. He predicted that the national economy should grow over the next year at an annual pace of 2% to 3%.

The San Jose region, Thornberg maintains, remains the globe’s primary creator of tech jobs, in Thornberg’s view.

“There is no doubt that San Jose remains a Cadillac economy,” Thornberg said. “This is still the center of the tech world.”

WASHINGTON — A handful of lawmakers say they plan to press the issue of the threat to humans posed by generative artificial intelligence after a recent bipartisan Senate report largely sidestepped the matter.

“There’s been no action taken yet, no regulatory action taken yet, at least here in the United States, that would restrict the types of actions that could lead to existential, or health, or other serious consequences,” Sen. Mitt Romney, R-Utah, said in an interview. “And that’s something we’d like to see happen.”

Romney joined Sens. Jack Reed, D-R.I., Jerry Moran, R-Kan., and Angus King, I-Maine, in April to propose a framework that would establish federal oversight of so-called frontier AI models to guard against biological, chemical, cyber and nuclear threats.

Frontier AI models include ChatGPT by OpenAI, Claude 3 by Anthropic PBC and Gemini Ultra by Google LLC, which are capable of generating human-like responses when prompted, based on training with vast quantities of data.

The lawmakers said in a document explaining their proposal that it calls for a federal agency or coordinating body that would enforce new safeguards, “which would apply to only the very largest and most advanced models.”

“Such safeguards would be reevaluated on a recurring basis to anticipate evolving threat landscapes and technology,” they said.

AI systems’ potential threats were highlighted by a group of scientists, tech industry executives and academics in a May 2023 open letter advising that “mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.” The signatories included top executives from OpenAI, Microsoft Corp., Google, Anthropic and others.

Rep. Ted Lieu, D-Calif., who holds a computer science degree and was one of the signatories of that letter, said he remains concerned about the existential risks.

He said that he and Rep. Sara Jacobs, D-Calif., sought to address one aspect in the fiscal 2025 defense policy bill advanced by the House Armed Services Committee last month. The provision would require a human to be in the loop on any decision involving the launch of a nuclear weapon, to prevent autonomous AI systems from causing World War III.

Lieu, co-chair of the bipartisan House Task Force on Artificial Intelligence, said in an interview that he and others have tried to address further risks. But he and his colleagues are still trying to grasp the depths of these perils, such as AI spitting out instructions to build a better chemical or a biological weapon.

“That is an issue we’re looking at now,” Lieu said. “How you want to prevent that is a whole different sort of issue that can get very complicated, so we’re still gathering data and trying to explore.”

There are several proposals to control and supervise advanced AI systems, though none have been fast-tracked in Congress.

In August 2023, Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., proposed a licensing regime for advanced AI models that would be managed by a federal agency. Companies developing such AI models would be required to register with the agency, which would have authority to audit the models and issue licenses.

Policymaking pace

Experts studying technology and policy say that Congress and federal agencies should act before tech companies turn out AI systems with even more advanced capabilities.

“Policymakers should begin to put in place today a regulatory framework to prepare for this future,” when highly capable systems are widely available around the world, Paul Scharre, executive vice president at the Center for a New American Security, wrote in a recent report. “Building an anticipatory regulatory framework is essential because of the disconnect in speeds between AI progress and the policymaking process, the difficulty in predicting the capabilities of new AI systems for specific tasks, and the speed with which AI models proliferate today, absent regulation.

“Waiting to regulate frontier AI systems until concrete harms materialize will almost certainly result in regulation being too late,” said Scharre, a former Pentagon official who helped prepare the Defense Department’s policies on the use of autonomous weapons systems.

Senate Majority Leader Charles E. Schumer, D-N.Y., who led a monthslong effort of briefings with dozens of tech industry executives, civil society groups and experts, last month issued a bipartisan policy road map on AI legislation.

The road map and associated material mentioned existential risks just once — it noted some participants in one briefing were “quite concerned about the possibilities for AI systems to cause severe harm,” while others were more optimistic.

The report directed various congressional committees to address legislation on AI through their normal legislative processes.

One reason the risks may be downplayed is that some in the tech industry say fears of existential risks from AI are overblown.

IBM, for example, has urged lawmakers to stay away from licensing and federal oversight for advanced AI systems.

Chris Padilla, IBM’s vice president for government and regulatory affairs, last week recounted for reporters the stance of Chief Privacy and Trust Officer Christina Montgomery, who told participants at a Schumer briefing that she didn’t think AI is an existential risk to humanity and that the U.S. doesn’t need a government licensing regime.

IBM has advocated an open-source approach, which would allow experts and developers around the world to see how AI models are designed and built and what data is ingested by them, Padilla said.

A large community of AI developers peering into algorithms that power the AI systems can potentially identify dangers and threats better than a single company scrutinizing its own product, Padilla said. That approach differs widely, however, from OpenAI and Microsoft, which uses OpenAI’s models, that are advocating proprietary AI systems that are not subject to public scrutiny.

Padilla and Daniela Combe, vice president for emerging technologies at IBM, compared the company’s open-source approach to the widespread use of Linux operating system that runs on IBM’s mainframe computers. Microsoft declined to comment on the idea.

Instead of licensing and regulatory oversight of AI models, the government should hold developers and users of AI systems legally liable for harms they cause, Padilla said. “The main way that our CEO suggested this happen is through legal liability, basically, through the courts,” he said.

Padilla spoke to reporters before as many as 100 IBM executives traveled last week to Washington to meet with lawmakers on AI legislation. IBM and its subsidiaries spent $5.6 million lobbying Congress last year on a variety of issues that included AI, according to data from OpenSecrets.org.

The issue isn’t likely to be resolved soon, as Padilla and others say legislation this year is doubtful.

At least one key lawmaker agreed. Asked whether his AI proposal is likely to turn into legislation and pass this year, Romney said it may not.

“It’s unlikely this year because we move as slow as molasses,” he said. “Particularly in an election year.”

___

©2024 CQ-Roll Call, Inc., All Rights Reserved. Visit cqrollcall.com. Distributed by Tribune Content Agency, LLC.

“Flawed information, flawed decisions” is the title of a new civil grand jury report on the county Housing Authority’s botched efforts to handle the purchase and sale of an office building on a prominent north San Jose corner that the housing agency had once eyed as its headquarters.

The Housing Authority’s purchase of the office building and the agency’s subsequent sale of the empty property triggered a stunning $16.2 million loss in less than two years for the county organization, the grand jury determined in its June 10 report.

The office building in question is located at 3553 North First Street, a two-story structure that totals 86,100 square feet — but just as importantly, occupies a choice six-acre parcel next to a busy light rail line.

The county housing agency’s blunders arose from its efforts to find a future headquarters for its staff and client meetings.

At the time, Katherine Harasz, Housing Authority executive director, described the office building purchase as a deal that would provide “much-needed expansion space for staff” and plentiful parking for visitors and clients.

Harasz retired in 2021 and was replaced by a new Housing Authority executive director, Preston Prince.

In September 2022, the Housing Authority sold the office building — which the county agency never occupied — for only $24 million. That was a core loss of $13.5 million.

Insurance, maintenance, deferred maintenance and other costs tacked on another $2.7 million, which produced the overall loss of $16.2 million for the office building, the Grand Jury report found.

The Housing Authority’s quest for a new headquarters began because its downtown San Jose offices at 505 West Julian Street were too old and cramped.

An early option was constructing a new headquarters on East Santa Clara Street near the downtown. The Housing Authority deemed that project’s $100 million cost prohibitively expensive.

That eventually led the Housing Authority to the 3553 North First site, a property purchase that became a financial fiasco for the county agency, the grand jury report found.

The Housing Authority created an ad hoc committee composed of three members of its board to review the options for the future of the office building it had bought in late 2020.

“The board (of the Housing Authority) and the (ad hoc) committee had a fiduciary obligation to examine all viable options for using or repurposing the (3553 North First Street) property to maximize long-term value to the organization and to further the Santa Clara County Housing Authority’s mission,” the grand jury stated in its report.

Instead, the Housing Authority’s top brass, led by Prince, failed to fully present the options that the county agency could pursue regarding the office building, the grand jury report found.

“Santa Clara County Housing Authority executive management presented,” the grand jury stated in its report “financially flawed analyses, and evaluated only options to sell the property without seriously or rigorously considering alternatives.”

County Housing Authority officials defended the decision to sell the building.

“We reviewed the location through a resident and community-centered lens, analyzed the options, and made an informed decision to sell the building,” County Housing Authority executive director Prince said. “The loss was not taken cavalierly.”

Prince noted that the Housing Authority board and community members supported the recommendation to sell the office building.

“There were turbulent market conditions post-COVID, and we wanted to respond to the needs of our residents and the affordable housing crisis in Santa Clara County,” said Jennifer Loving, chairperson of the Housing Authority’s board. “The board of commissioners stands united behind our leadership and staff.”

Among the possible alternatives to a sale, according to the grand jury:

— occupy the property until office market prices rebounded and sublease surplus space.

— lease the property until prices rebounded. This was viable because the Housing Authority paid cash for the office building and wasn’t under pressure to repay a real estate loan.

— rezone the property to enable affordable housing development on the entire site.

— rezone the property for a hybrid development. This option would have retained the existing office building and constructed affordable housing on part of the six acres.

Instead, the Housing Authority’s executive management steered the agency’s board into a narrow set of options.

“Executive management selectively filtered information to present only what they thought should be reviewed by the board,” the jury’s report stated. “The civil grand jury learned that executive management informed members of the committee and the board that the only viable option was to sell the property quickly.”

The muting of certain options appears to be a severe failure, in the view of Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.

“This report shows a lack of governance by the Housing Authority board over (executive director) Preston Prince and his executive staff,” Staedler said. “They have both failed the Santa Clara County Board of Supervisors in their role.”

In 2022, Staedler suggested that the civil grand jury launch a probe into the real estate debacle.

“The lack of transparency and misrepresentation of the material facts cannot be excused,” Staedler said.

The report also determined the five-member county Board of Supervisors took a lax approach in reviewing the Housing Authority’s floundering commercial real estate adventures on North First Street.

“The civil grand jury was surprised to learn that some county supervisors were unaware the Housing Authority had lost millions on the property,” the scathing report determined. “(Other county supervisors) were indifferent to the Housing Authority’s financial loss because the loss did not come from county funds.”

The errors were compounded by what seemed to be lax oversight by the county Board of Supervisors while the housing agency floundered with the North First Street site, the grand jury stated.

“This laissez-faire attitude is concerning to the civil grand jury,” the report stated. “The county Board of Supervisors must be acutely aware that any significant loss of public funds for housing is a lost opportunity for the county to address the overwhelming need for affordable housing opportunities.”

Nearly 24% of all new cars sold here during the first three months of the year were zero-emission electric vehicles, known as ZEVs, according to new data from the California Energy Commission.

By comparison, just 7.5% of cars sold nationwide were ZEVs, according to the California New Car Dealers Association, which represents auto dealers.

“The EV transition is in full swing, with nearly one in four California car shoppers choosing to go electric over the last year, resulting in record sales,” David Hochschild, chair of the California Energy Commission, said in a statement. “This is good news for all Californians, as our success delivers cleaner air statewide and drives significant investment in our emerging zero-emission vehicle industry.”

EVs or ZEV’s are battery electric vehicles that emit zero emissions from their power source.

In the first quarter of 2024, Californians purchased 102,507 ZEVs. That’s the highest number for a first quarter of any year, according to the California Energy Commission. Total sales also increased from the previous quarter.

For John W. Crittenden, a retired attorney from Los Altos, comfort was a driving force in his decision to purchase an EV, but reducing his carbon footprint also played a part when he went looking to buy a new vehicle.

“We wanted something that had comfortable seats with good thigh and lumbar support, and that is hard to come by unless you go with a more expensive car,’’ said Crittenden, 67. After test driving EVs made by Mercedes Benz, VW, Jaguar and Audi, Crittenden purchased a blue Mercedes EQB 300 in May of last year. He liked it so much that four months later, he and his wife leased a second one.

“We love our EVs — they’re quiet, fun to drive and cost little or nothing with electricity from our solar panels to fuel,” he said. “We will never go back to gasoline-powered cars.”

While comfort and style were important, the couple also considered the environmental impact of purchasing another gas-powered car. “It’s so important,’’ he said. “You are thinking, ‘I’ve contributed so much damage to the environment, and I want to make amends at this point.’ ”

In the last week, California surpassed both its zero-emission truck sales and vehicle sales goals — two years ahead of schedule — and surpassed its goal of installing 10,000 fast EV chargers, more than a year ahead of schedule.

With 60 ZEV manufacturers based in California, according to Gov. Gavin Newsom’s office, including Lucid Motors in Newark, the success of the state’s programs has led to ZEVs becoming a top export and has spurred major advances in manufacturing and job creation.

Although a record 1.2 million U.S. vehicle buyers went electric last year, according to estimates from Kelley Blue Book, new national survey data from AAA shows that interest in buying a ZEV is waning.

Just 18% of people polled across the nation said they would be “likely” or “very likely” to buy a used or new EV, a drop from the 23% the same survey found a year earlier.

“Early adopters who wanted an EV already have one,” Greg Brannon, AAA’s director of automotive research, said in a statement.

The survey, conducted in April, included more than 1,100 interviews with American adults. AAA said the survey provides sample coverage of approximately 95% of the U.S. household population.

The survey said Americans are passing up EVs for several reasons, including higher purchase prices. Sixty percent of those surveyed said price was the largest single reason for preferring gas-powered vehicles. Infrastructure was another reason, with 54% of respondents saying that a lack of convenient places to charge kept them from buying an EV. Maintenance costs were also a factor with more than 57% of those polled saying the cost of battery repair or replacement was a sticking point.

But in the Golden State, it’s a different story, and it starts with the weather.

“EVs do really well in moderate temperatures,’’ said Kelley Blue Book auto-industry analyst Brian Moody. “When it’s very cold, well below freezing, the cars take longer to charge, and they don’t hold a charge as much.”

California is also making it easier to charge electric vehicles.

The California Energy Commission in April approved $1.9 billion to build 40,000 new public EV chargers statewide and other ZEV infrastructure across California.

The investments are part of Newsom’s $10 billion budget for ZEVs, which is bolstered by billions of dollars for clean transportation from the Biden-Harris Administration.

In recent decades, California has continued to face significant pollution and climate challenges. In fact, the state includes seven of the 10 worst areas for ozone pollution in the country and six of the 10 worst areas for small particulate matter, according to Newsom’s office.

The state also faces increasing risks from record-setting fires, heat waves, storm surges, sea-level rise, water supply shortages and extreme heat. And these conditions are made worse by climate change.

However, California has emission rules set to slow climate change and reduce pollution. Starting in 2035, the state’s rules will require that all new cars sold in California be EVs. What’s more, the Clean Air Act allows the state to set motor vehicle emissions standards that are at least as or more stringent than national standards pursuant to a waiver from the Environmental Protection Agency, according to the nonprofit Environmental Defense Fund.

Last year, California was challenged on those rules by oil and gas companies and 17 Republican-led states that wanted to deny the state’s authority to set clear car standards as guaranteed by federal law.

In April, the U.S. Court of Appeals for the District of Columbia Circuit rejected the challenge to the constitutionality of the Clean Air Act provision allowing California to continue to set its own clean cars standards, which, given the size of the Golden State’s economy, can pave the way for other states to follow suit.

“The clean vehicle transition is already here — it’s where the industry is going, the major automakers support our standards, and California is hitting our goals years ahead of schedule,’’ Newsom said in a statement. “We won’t stop fighting to protect our communities from pollution and the climate crisis.”