The State of the Valley 2012

Last Friday, Joint Venture Silicon Valley (JVSV) hosted its annual State of the Valley. I was one of the 1,000 people in attendance at the convention center. JVSV started in 1993, during a recession, to promote economic growth through public-private partnerships. Several demographic statistics were pointed out during the presentation representing Silicon Valley, including Santa Clara and San Mateo counties:

— 37 percent of residents are foreign born .
— 2.53 million people live here, with 1.2 million jobs.
— 43 percent have college degrees.
— 83 percent graduated from high school.
— 17 percent are employed in science and engineering .
— 12 percent of all patents in the USA come from our region, which makes up 50 percent of the patents in California. There have been 13,000 patents in the last 12 months.

JVSV also shared statistics on employment. There were 42,000 new jobs created in Silicon Valley in the last 12 months. Job growth was primarily in technology and unemployment was at 8 percent in the region, while it stands at 11 percent across the state.

While there is job growth in technology, the region is still losing public sector jobs in defense, construction, arts and entertainment and administrative. Job growth has brought less commercial vacancy, which is good. There has also been a 17 percent increase in venture capitalist (VC) spending on cloud computing, medical devices and clean technology.

Initial public offerings continue to be well below the bubble, with only 12 in 2011. Per capita income peaked in 2000 at just short of $80K; it now sits at $66K. Median income is $86K.  Revenues for local government continue to be squeezed with a reliance on property tax.
Change in assessed value dropped from $20B in 2006 to $5B in 2011.

There was also a discussion on Prop 13. The speaker felt that Prop13 was not working and that the topic was complicated.

For a background of Prop 13, in the years 1971-1978 there was a 164 percent increase in median home value, and with that came increased property taxes. Property tax revenues grew at 9 percent for decades and so did spending. Prop 13 passed with 65 percent of the vote, and it did five things:

1. Capped annual assessment of 1 percent.

2. Capped increases of 2 percent assessed value.

3. Prohibited tax increases by schools and local government.

4. Required a 2/3 majority vote for special taxes.

5. Gave the state the power to allocate property tax revenue.

Two ramifications resulting from Prop 13 are funding for education shifted to the state, and cities with less revenue had to introduce new fees and taxes.  Between 1980-2008, property tax revenues remained strong because of rising prices. With the turnover on residential properties increasing, we now have a 70-30 housing to commercial split on property tax revenues.

The “new normal” is that home prices dropped, as did new construction, which locked in low property values that can only rise at 2 percent. The question discussed at JVSV was: How can Prop 13 be modified to bring in more revenue for government? And would you support modifying Prop 13? How? Why?

18 Comments

  1. State of the valley is a disaster!  Most of the growth focused in the north county. It’s either pointed to San Francisco or very narrow minded suburban.  Downtown SJ is completely left out!

    • After the RDA spent close to $3billion, most of it downtown, and still has $4.25 billion in debt, DT SJ is still a wasteland.  Yeah, there’s some shiny new buildings, but it’s dead at night and day and night on weekends.

      Just goes to show you that throwing money at a problem won’t necessarily solve it.

  2. No mention of the elephant in the room (or blog… in this case)? The ethics violation committed by Mayor Reed… You participated in the declaring of a fiscal emergency; any comment?  Thanks, that is, if I get a response….

  3. “For a background of Prop 13, in the years 1971-1978 there was a 164 percent increase in median home value, and with that came increased property taxes. Property tax revenues grew at 9 percent for decades and so did spending. “

    —coupled with an inflation increase of 50%, effectively cutting the workingman’s buying power during this stagnant economic period in half (inflation + stagnant economy = stagflation), and making it hard for a fixed-income retiree to buy his groceries and impossible to pay his ever-rising property taxes (which around here might double every few years).

    “Two ramifications resulting from Prop 13 are funding for education shifted to the state…”

    —misleading. Education funding was ordered shifted to the state by the courts in response to a 1971 lawsuit (Serrano v. Priest), and in 1977—the year before Prop 13, the court set a six-year timetable for implementation of the switch. (Note: this lawsuit was intended to equalize education and close what is now referred to as the achievement gap—FAIL).

    “Between 1980-2008, property tax revenues remained strong because of rising prices.”

    —If you call revenues increasing by 1000% just remaining strong, and outpacing inflation by 142%, I guess you’re right (I’d factor in the population increase but since our politicians have seen fit to allow our state to be overrun with tax-avoiding, penniless illegals, that factor is null and void).

    With the economy still in the tank (unCHANGEd) and people still losing their houses, you’ve got to wonder, “How much more do the bloodsuckers want?”

  4. “Change in assessed value dropped from $20B in 2006 to $5B in 2011.”  Something is very wrong here and I shouldn’t have to catch such a grievous error.  SC County’s tax roll did not drop in value by 75% in the last five years!

    In any event, I would not modify Prop 13 in any way and I certainly would never trust city government to do the right thing.  My feelings are based upon the greasy, crooked Gonzales and Reed administrations.

  5. Always interesting to this politically incorrect guy, never mentioned is the nationality of those benefiting from “job growth”. First, how many of the 43K jobs pay $75k or more? 2nd, of those, how many are going to foreign born? 3rd, of those how many are going to non-citizens?. We all secretly know that the “American Dream” in Silicon Valley is increasingly going to other than Native Citizens. I AM TALKING ABOUT JOB GROWTH! Not total jobs. Don’t dilute the message. Yes plenty of good jobs for the wealthy Americans who’s parents can afford a good education. You will find the same “demographic” attributed to private school GROWTH also, for example. It all fits in, despite the Leadership Group rhetoric about education here. The Occupy group are even more relevant here. Not does this valley have a higher percentage of the “1%” than other regions, but we also import the “1%” of China and India. Who needs public education? Not the JV folks!

  6. …“promote economic growth through public-private partnerships”. Oh great. Just what we need.
    This JVSV thing sounds like a hotbed of promiscuous political behavior. Next thing we know they’ll be conducting their meetings in a steamy bath house.
    Do these people not pay any attention to the news? Are they unaware that the epidemic of corruption that has swept the nation is the result of the unnatural and irresponsible insertion of government into business and vice versa?

    The risk of one party transmitting infection to the other is too great when business gets together with government. Private and Public should be DIScouraged from forming these ‘partnerships’. Despite the attraction felt by some to members of the opposite persuasion, the safest policy is one of abstinence and the efforts of the JVSV should be frowned upon.

    • > …“promote economic growth through public-private partnerships”. Oh great. Just what we need.
      This JVSV thing sounds like a hotbed of promiscuous political behavior. Next thing we know they’ll be conducting their meetings in a steamy bath house.

      If anyone ever sees a public-private partnership taking place next time they’re in a steamy bath house, for God’s sake, throw a bucket of ice water on ‘em.

  7. Raising property taxes?  Seriously?

    Instead…

    How about the city exit the affordable housing business, living wage business, and all other social justice / social engineering businesses.

    How about getting out of the living-roof-on-police-substation-business and other such acts of green lunacy.

    How about getting out of the outdoor-smoking-banning business and plastic-bag-banning business and other such acts of petty tyranny imposed by our beloved council.

    Consider forsaking the baseball stadium land giveaway business.

    The Pot club quagmire?  Thanks for dragging the city into that septic tank.

    – and on and on

    City council has no standing.  No credibility. None.  It’s a punchline.  A veritable circus.

    “California is blessed with the most equitable climate in the entire Western Hemisphere; it has the most bountiful resources anywhere in the continental United States; it is poised on the Pacific Rim in a position to dominate world trade for the next century, and yet people are finding a better place to live and work and raise their families in the middle of the Nevada Nuclear Test Range. 

    I submit to you that no conceivable act of God could wreak such devastation.  Only acts of government can do that.  And they have.” —Tom McClintock

    Our city council is exhibit A – and I submit that there are a lot of people waiting for the last straw to pack it up and go.

    So go ahead Pier, cook up a hare brained tax scheme.  Just be prepared to collect it from the folks that remain.  ie.  The affordable housing denizens and illegals.

  8. Meyer Weed,

    I have a different perspective regarding the Mercury News coverage of the LMS (Lying Mayor Scandal); I believe the paper has increased its credibility by its tactics of downplay and dismissal. Not its credibility to the public, mind you, but its credibility to this valley’s power elite as an indispensable ally.

    As the only real game in town (sorry Metro), the Merc is for all intents and purposes the newspaper of record for San Jose and, to a lesser degree, Silicon Valley. If a riot occurs at a hip hop party, bringing violence and terror to a particular part of town, and the Merc decides not to cover it (as has often been the case), who’s to say it happened, other than the few hundred people affected? That riot and the related stories of injury and property damage will vaporize, and most importantly, any undesired implications that readers might draw from it (and other similar incidents) will never materialize. Conversely, when a half-assed swastika stains a fence in Willow Glen—the obvious work of middle school morons, the paper will likely cover the story from several angles, alarming its readers to the looming threat of hate and intolerance (a favored theme), and frightening the police chief into issuing a somber statement.

    Face it, the Mercury News made DA Delores Carr disappear, a fact noted by every politician in the valley. If the Merc can do that—in this liberal, feminized valley, then why shouldn’t it expect to do the same to the mayor’s 650 million dollar lie?

    As it is here it is everywhere else in this nation: the biggest enemy of truth, justice, and the American way wields not Kryptonite, but ink.

  9. @BSM – I cannot disagree with your analysis. For anyone who thinks two things cannot be equally true please refer to MW and BSMs posts and perspective on this tragically leaderless Valley Capital.

  10. The State of the Valley 2012 overall is not too bad. Police agencies all around the county hired some of the officers Mayor Reed and City Manager Figone caused to be laid off. Those officers now see more take home pay, the possibility of a true 90% retirement after 30 years of service (i hope they were wise enough to take advantage of “reciprocity” so that their san jose time counts towards that 30), less acrimony between citizens and the police due to less muckraking by the likes of the yellow-journos employed at the MercuryNews.

    On the otherhand, the State of the so-called “Capital” of the Valley 2012 is a train-wreck in-progress due to the style of leadership exhibited by Mayor Chuck “$650Mil” Reed. A style that is well known within City circles, discussed in web forums such as SJI, and is finally being reported thanks to the folks at KNTV-11.

    Reed, the self-proclaimed “straight shooter” who claims that he learned his leadership style in the Air Force Academy and honed it as an officer in the USAF, has single-handedly destroyed the morale of career police officers, fire fighters and other city employees. Reed says he is “telling it like it is,” but recent reports indicate that Reed is lying to fool the public into believing the City is in a condition that Reed needs it to be so that he can continue to provide wealthy real estate speculators with land purchased with our tax dollars. Reed claims that his efforts should not be questioned because the upside to his stadium gamble might net City coffers about $3million per year.

    Reed’s $650million exageration is turning out to be a $360million LIE ($650mil projected cost) minus ($290mil current estimated actuarial cost) = $360mil. ALL so that the General Fund might increase by a mere $3mil/year?  Is there something else going on that Reed is not telling us about? that is a big lie for a little money!

    HINT to the Merc: if ever you had an opportunity to achieve some amount of credibility after your egregious track record of outright fabrications such as the COINTELPRO series, tainted justice series and darn near every piece you have ever published about your police department or city employee unions ….YOU NEED TO JUMP ON THE MAYOR REED ETHICS SCANDAL it will make the City Hall tech scandal look like chump change (really that was what? $45mil?)

    • Problem with Chuck if he is spoon feeding the public lies.  Listening to the Mayor you think every public employee retires when they feel like it and get a 90% pension, plus a huge payout for sick, vacation and comp time, plus free medical for life.

      This is some much hog wash.  If your public safety you have to do 30 years to get 90, and less that 10% do that much time unless your a lazy Chief who just has to sit at a desk.  Second most of the last 10 years are back loaded so to come close forget about max. out.

      The mayor is about to take sick time payouts off the books for forget about that.  The city limits the hours you can build up sick time, which is not that much.  And with time off almost impossible employees are taking a sick day to get an extra day off. Policy now use it or lose it!  Getting comp time now is almost impossible without approval, build up to much and get sent home to it gets lower.

      Free medical is BS, even Kaiser the lowest is going up.  I paid almost 2500.00 last year and that was just for check-up and prescriptions with no issues.

      So I do not want to hear his inflated 650 million dollar costs when he uses projected numbers for officers who are no longer even on the payroll due to layoffs or fleeing to other departments.  Won’t see this coming out of the mayors mouth or in the Merky News.

    • Did the city council spend 40,000K on a micro survey to see if we would support a ballot measure to raise taxes.  HELL NO, was it worth it.  Another waste of our money.

      • I laughed when I saw this survey mentioned on the Murky News website, and how it was touted that residents seem to support the idea of raised taxes.  I would like to know how a survey of 904 adults, HALF of whom were identified as likely voters, understands and speaks for the rest of the 900,000+ residents living in San Jose.  Talk about a waste of money….

  11. ” VSV also shared statistics on employment. There were 42,000 new jobs created in Silicon Valley in the last 12 months. Job growth was primarily in technology and unemployment was at 8 percent in the region, while it stands at 11 percent across the state. “

    What was number of new Jobs in San Jose not Silicon Valley ?  Anyone know ?  City Hall is hiding new San Jose jobs AGAIN – is is soooooo low it is a political embarrassment to Mayor and Council

    Based on San Jose’s historical Council and City Hall anti business attitude, very high city imposed costs, difficult business city approval process, insider city tax revenue losing tax subsidy deals etc

    San Jose probably got 100-500 new jobs NET ( Job Gains – losses = Net New Jobs )  San Jose for years has lost more jobs to other cities or went out of business than city gained

    ” Out of Touch ” Council Idiots want to raise business taxes again – and – Do Not Get – Basic Business Economics

    Council should be required at every meeting to Repeat 5 times – –

    ” High government imposed business costs equal less jobs and city tax revenue not mote tax revenues ” – again, again, again, and again

    Raising price / cost drives business / customers away

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