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?