Chipping Away at the Tax Base

In a quest for even more affordable housing in San Jose, the City Council voted 10-1 to amend the North San Jose Area Development Policy. I voted no.

San Jose, known for its propensity to approve 99 percent of proposed housing developments, continues to go down the same road. North San Jose is a Redevelopment Agency (RDA) zone, and any housing built in a RDA zone historically must allocate 20 percent of the units for affordable housing. However, the “Palmer Case” changed this so rental housing developments cannot be mandated to set aside affordable units. But housing for sale still has the 20 percent affordable requirement, if a city has an inclusionary housing policy like San Jose.

So, of course, the only thing being built now is rental housing, because it doesn’t have to put aside 20 percent of the units. However, the city of San Jose policy incorporates an affordable housing policy by allocating total housing units by market rate and affordable for different phases of North San Jose development. Now that all of the market rate units have been allocated, this leaves only unused allocation for affordable units. The allocation for affordable units exists because they require millions of dollars in subsidy from the city of San Jose housing department to build. This well is a bit dry now due to the potential elimination of RDA.

Tuesday’s proposal is to enter into a development agreement for additional housing developments, which will be entitled if the developer (wink-wink) allocates 20 percent of the units for affordable AND pays money into a fund to help finance other 100 percent affordable housing projects in North San Jose.

As a result, not only do you get more housing, but you also get more of it by not paying the same taxes and fees as market-rate housing. How do we build a tax base to pay for police and libraries if we allow exemption from taxes? How do we pay back RDA bonds with tax increment if an affordable housing development is not taxable and, therefore, creates no tax increment?  How do we pay to pave roads if there is an exemption for paying road paving fees? Do you feel that a future general tax increase will already be allocated to pay for exemptions?

School districts also lose out, as more than 50 percent of every property tax dollar goes to K-12 school districts compared to approximately 10 percent for cities. So, you have more students from new housing yet no new property tax revenue to pay for instruction.

Remember that San Jose has been the leader in providing affordable housing in the state of California, while other cities have done very little. As I wrote about on a prior blog, affordable housing must be a shared goal and not just in San Jose, because there is a burden to existing residents.

I think a better idea would be waiting until the California Supreme Court renders its decision on RDA in January. If the courts kills RDA, then there is no more 20 percent affordable requirement. The other option is to strike the affordable component from the North San Jose Development Policy, so San Jose can get the maximum amount of property tax, park fees and road paving fees. 

Alas, the heavy heart of San Jose makes it difficult to think about the bottom line.


  1. Why don’t they stuff all the rental housing downtown by building highrise apartments.  What a waste of valuable industrial land and resources.  Downtown needs all the housing and attention it can get.  The city is so screwed up in the real %^* you know what.  Stop building in North San JO!  Build in downtown and maximize the density as possible.  I swear that the city has absolutely no brain once so ever.

  2. PLO says: “…Remember that San Jose has been the leader in providing affordable housing in the state of California, while other cities have done very little…”

    This point must not be overlooked… Remember when the tools at the MercuryNews pop-poo’d the “Safest City” designation saying that it was do the high level of education that San Jose’s residents possessed? And how that highly educated populace held better jobs and earned more money and was less prone to crime?

    According to the Merc it had little to do with the Police Department and pro-active patrol/beat officers – an over burdened but motivated and dedicated Bureau of Investigations, VCET Teams to address the gang problem, METRO to address drugs and prostitution and MERGE to deal with what ever needed doing, and a Traffic Enforcement Unit that used enforcement to educate and keep the streets “safer” for motorists and pedestrians, The horses to patrol parks and downtown and do great PR?

    Ahh those were the days my friends…  Now all this Mayor and City Council does is burden ALL of the City’s resources by approving endless low-income, non-tax gererating residential building!!!

    This Mayor and a majority of the Council have the unabashed audacity to continue approving this type of housing   AND THEN want to vote to declare a “Fiscal and SERVICE Level State of EMERGENCY” and lay the blame on Police/Fire/City Employee Pensions?

  3. What doesn’t seem to be clear to many is that the housing development on North First is an integral part of the planning for the future BART station on the grounds of the Berryessa flea market. 

    The commitments to greatly expand housing of all sorts near the future BART station were made months ago beneath the news radar in order to justify federal and state financing for the Fremont-to-San Jose portion of BART.  City mothers and fathers in city hall are stuck with those commitments.

    A huge expansion of housing awaits us in North San Jose which will, of course, detract from downtown development once again.  The expenditures include 101 ramps at Mabury/Taylor, new school construction, and essentially a new mini-downtown.  Ask to see the traffic department’s sketches of its plans.

    The huge and hugely unnecessary housing project at Berryessa and Flickinger under construction right now is part of the overall planning.

    By the way, there are three levels of “affordable housing” with various rules for qualification.  A very significant portion is set-aside for professionals like school teachers, law enforcement personnel, and so on.  The vision of down-and-out low income residents is mostly just a political red herring.

  4. Subsidized housing fills up with subsidized people. We’re deliberately populating our city with people who’ve been brought up to feel they’re owed something, to take advantage of giveaway programs, to rely on charity and handouts, and who will never stop being a burden on the dwindling ranks of self reliant providers in San Jose.
    Overwhelmingly their names will perpetually remain in the ‘debits’ column of our city’s ledger.

    With this vote the Mayor and most of the City Council have demonstrated that they are not truly serious about addressing our budget problems. They have lent credibility to critics’ argument that employee compensation is being disproportionately targeted while everywhere else it’s business as usual.
    If the mayor wants the voters to support his pension reforms he’d better stop undermining their support and start acting like he’s serious about San Jose’s financial security. That means taking the sort of broad approach that only Pierluigi seems to understand is necessary.

    • I bet I know how you will vote today along with Chuck, Constant and PO on the fiscal emergency for a ballot measure. Thanks Pete for already making up your mind in your email you sent out.

    • John, your first paragraph is seething with discontent for the less fortunate. Are you implying that everyone who ever uses government assistance doesn’t contribute to the city? Myself and my immediate family are no longer “burdens on the self reliant” of this city. I acknowledge that we’re not the norm, but broad distinctions like yours are why many of these programs are simply dismissed by the conservative in our community.

      PLO is correct here, but his priorities are still convoluted as evidenced by his campaign sign “rearranging” incident that can be found on You Tube. I propose that he goes for a ride along in Sam or Frank to see just how well the annexation has been working out along San Carlos and Parkmoor. There’s a whole lot of pro activity that’s missing along that stretch with the current staffing shortage.

      • I’m not so much seething with discontent for the ‘less fortunate’ as I am for government programs that pander to the false notion that there’s no opportunity for them and that the government is their only salvation.
        Of course I realize there are exceptions but it’s my sense that due to the existence of so many entitlement programs there are more dependent people than there would be otherwise.

  5. Well, JMO, we don’t often see eye to eye, but in this respect, we are in complete agreement. This is yet another slap in the face to an overworked public safety infrastructure and another blow to fiscal responsibility.

  6. Okay now the real news comes out.

    1. Ball park fails=Area for more affordable housing.

    2. Licarrdo lining up to be Mayor=Attack on public employees worse than ever.

    3. This all equals less public safety, more affordable housing, more crime, less business, an even greater unfunded problem.

  7. With the citys buying property for the ball park.  Why not have them buy homes for the affordable housing people.  By the house next to the mayor beside the City Mgr.  Maybe behind them as well.  This will help and make a better understanding for the decisions they make.

  8. Now people are gettin’ that the next Mayor will be rich kid from Saratoga, Sam Liccardo since Tom McEnery and other political insiders that elected Chuck want to continue to get their tax millions each year from city which is only possible by continuing to cut services, layoff employees, raise taxes and not maintain streets, building or infrastructure

  9. “Affordable housing” is the current euphemism for “low income housing”, which in turn is a euphemism for “housing for poor people”.

    So let me see if I’ve got this straight—the City of San Jose is permitting the building of housing to lure more poor people to live in San Jose.  By definition, poor people pay no taxes, while sucking up a disproportionate share of government-provided services, which are paid for by middle class and rich people.

    So, as I see it, the mayor and council, except for Pierluigi,  have just voted to build a brand new ghetto in North San Jose, which will soon require a disporportionate share of already limited public safety personnel.


    Have the mayor and the council, except for Pierluigi, been partaking of too much “medical” marijuana?

    • Not so fast there JMO.  First, doesn’t current Urban Legend tell us that the Medical Marijuana actually makes one think more clearly and radically improve the decision making process?

      Second,  It is very easy for PLO to claim he has seen the light and is now the perpetual “lone dissenting vote” on this reoccurring issue. He has voted for his share of housing and annexation when the development is to occur in his district on the condition of course that there is retail development to support the housing.  It is a form of grandstanding that pols become expert at: publicly oppose something everyone else publically supports to when the thing fails you can say “see I told you so….”

      Truth be told, PLO like the entire REST of this COUNCIL is actually in favor of approving more and lower income housing. 

      By voting “no” PLO has nothing to loose and everything to gain.

  10. Cities should stay out of the area of advocating, legislating and funding affordable housing. This is nothing more than intrusive social engineering. Housing is not a net tax producer and in fact uses more resources. Cities such as Palo Alto, Los Altos and Saratoga do not actively pursue the building of affordable housing. Despite threats from the State of California, there is no punishment. San Jose needs to expand its tax base and quit being the housing community for Silicon Valley. San Jose provides the housing for the labor pool in other cities yet derives no tax benefit from this.

  11. City Council intends to implement downtown – Plan A – the A’s Ballpark Stadium or Plan B – High Rise Housing which has been in planning for over 10 years to make sports team owners / housing developers ( many time same people ) richer while city residents get less for higher taxes, employees more layoffs, city will be less attractive for residents, more businesses will leave and San Jose will decline further