SPUR report to San Jose: You need more money — here’s the blueprint

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SPUR report to San Jose: You need more money — here’s the blueprint

May 12, 2016, 2:43pm PDT Updated May 12, 2016, 3:30pm PDT


Bryce Druzin

Economic development reporter Silicon Valley Business Journal



San Jose has the highest median household income among the country’s 25 largest cities. But its residents’ wealth stands in stark contrast to the city’s precarious fiscal position and low levels of public services, such as police staffing and road maintenance.

That’s the key issue a new 69-page report from urban planning organization SPUR seeks to address.

“We took this project to understand how the city got into some of its fiscal challenges and what it can do strategically to grow its revenue base,” said Egon Terplan, SPUR regional planning director and co-author of the report.

San Jose collects the least amount of sales plus secured and unsecured property taxes per capita compared to any other city in Santa Clara County with more than 40,000 residents (See infographic at bottom for full details).

The paper recommends several strategies the city is already undertaking — San Jose is working on a measure for this November’s ballot that would raise the business tax; Measure B, which would create a 15-year quarter-cent sales tax, will be on this June’s ballot; and future housing development is planned for high-density projects with nearby retail located near public transit stations, which Terplan says decreases the cost of providing services to residents while encouraging them to spend money within the city, which would boost sales tax revenue.

SPUR also recommends the city expand its economic development and planning departments to attract more businesses.

That’s unlikely in the coming years, according to Director of Economic Development Kim Walesh. She said the five-year budget forecast predicts a small surplus the first year followed by small deficits in the following years.

If passed, Measure B would generate approximately $40 million a year in new sales tax revenue. Though that money will go to the general fund, the City Council has made hiring new police and road maintenance priorities for receiving additional resources.

Walesh said she was impressed by the report and grateful that SPUR decided to dig into San Jose’s fiscal situation.

“It affirms that the city still has a revenue problem and needs new revenue sources … that was always part of the city’s plan — to cut costs first but then make a major effort to generate more revenue,” she said.

The paper suggested the city can boost its property sales tax base by making loosening restriction on the addition of secondary units, also known as “granny” or “in-law” units.

While secondary unit policy has been looked at from a housing perspective in San Jose and other Bay Area cities, Walesh said she had never looked at the issue from a fiscal perspective.

California’s Proposition 13 restricts property tax rates from being raised by more than 2 percent annually, and the entire value of a property can only be reassessed when it is sold.

But the value of improvements, such as remodels or additions, can be added to a property’s value.

San Jose currently has strict regulations on adding in-law units, and the SPUR report states that given the city’s large number of low-density single family homes, incentivizing residents to add such units could boost property tax revenue significantly.

Bryce Druzin is economic development reporter at the Silicon Valley Business Journal.