Despite the economic slump, San Jose reaps more revenue today than it did a decade ago when it had a much larger workforce serving fewer residents.
But as they confront an 11th straight budget deficit, many city leaders say new taxes are needed, and they are weighing a host of possible measures to put before voters in November — even though revenue from the sales tax they’re most keen on raising has been on the rise the past three years.
The tax debate continues at Tuesday’s meeting. Mayor Chuck Reed and Councilwoman Nancy Pyle want the city in June — after Reed’s pension reform measure goes to voters — to consider polling to test the appetite for new sales and business taxes and a bond measure to fund road repairs.
“Our revenue streams haven’t kept up with our population growth at all,” Pyle said. “We have to get the revenue we need to continue functioning as a first-rate city.”
Pyle argues that San Jose has added about 45,000 residents in the past five years, a population almost the size of Gilroy, and that revenues to serve them haven’t kept up. General revenue per capita has dipped, from about $768 to $725 since 2007, according to city revenue figures and state population estimates. That suggests the city would have about $41 million more to spend each year if revenues had kept pace with growth.
But others such as Councilman Pete Constant disagree the city needs more taxes, noting that revenues still rose over the past decade, but were outpaced by growing employee pay and benefit costs, forcing the city to shed about 2,000 jobs to resolve deficits.
“If you take a historical perspective, our revenues have consistently increased,” Constant said. “I really don’t think we have a revenue problem; I think we have a spending problem.”
The tax debate was spurred by annual city-commissioned surveys Reed has sought to gauge public sentiment on solving the city’s chronic budget problems. The latest suggested that voters who have seen everything from police and fire protection to library hours pared are warming to new taxes.
But those surveys also showed residents prefer trimming costs for city workers to new taxes and service cuts. Reed’s answer to that is the controversial June ballot measure to reduce pension benefits for new hires and make current workers pay more for their benefits if they don’t switch to a more modest retirement plan.
Pat Sausedo, spokeswoman for the San Jose Silicon Valley Chamber of Commerce, said local businesses want the city to curb its ballooning employee costs before considering new taxes, a position Reed echoes.
“Current pensions and benefits in the city of San Jose are unsustainable,” Sausedo said.
Pyle doesn’t argue the need for pension reform — “you can’t ask people to help out when you’re not doing your part,” she said — but still believes the city needs more dough.
Pyle and Reed say the city should further probe public support for both a quarter-cent and half-cent sales tax. If voters approved, a quarter-cent tax would add $35 million a year to city coffers and a half-cent would boost the haul to $70 million.
The recent city survey suggested a majority of residents would approve a general sales tax, with higher support for the smaller rate.
But the survey also showed much of the apparent voter support was tentative. Unknown is how other tax increases might affect support. A one-eighth-cent sales tax linked to the Measure A funding for the BART-to-San Jose project kicks in July 1, assuming final signoff in March. And Gov. Jerry Brown, for example, plans to seek a new half-cent state sales tax in November.
The current San Jose sales tax rate is 8.25 percent everywhere in Santa Clara County except for Campbell, where it is 8.5 percent. The rate is 8.5 percent in San Francisco and 8.75 percent in Oakland. Milpitas, which just declared a fiscal emergency, also is considering raising its sales tax.
Other revenue measures Pyle and Reed want to explore include raising the city business tax, unchanged since the 1980s, and a bond measure for road repairs like the one San Francisco voters approved in November. It allows for an increase in property taxes if needed to pay for the bonds.
Voters have raised taxes four times since Reed took office, adopting a “fee” for 911 dispatch operations that would otherwise expire, modernizing a telephone utility tax to cover digital technologies, raising the tax on card rooms and imposing a new tax on marijuana.
Constant fears each new tax will make it harder for local businesses to survive. Surrounding his West San Jose district are cities that could wind up with lower sales taxes and lure away San Jose shoppers.
“We have to ask how much burden can we continue putting on people,” Constant said. “It’s not like these people have endless deep pockets we can reach into.”
Contact John Woolfolk at 408-975-9346.
