Just the Taxes, Ma'am

By Ed Rast

Do you know why San Jose city administration year after year has recommended police staffing and budget cuts?

The primary reason is for the last eight years San Jose has had a “structural budget deficit” — in other words, city government’s projected revenues (from taxes, fees, licenses, service charges and other sources) are less than projected spending. State law requires cities to have balanced operating budgets for each year when city revenues are equal to or less than projected spending.

San Jose revenues increased steadily from 1990 through 2007-08, at a rate between 1% and 13% a year, except for FY 2002-03 and 2003-04 when they declined 3% and 1% respectively following the burst of the dot com bubble. City revenues decreased again in 2008-09 and are projected to fall once more in 2009-10 due to the ongoing economic recession.

Have a look at these three tables:

• California General Revenues by city/county
• Population — California Department of Finance Demographics
• General Revenues per Resident

(Source: Computations by CaliforniaCityFinance.com from State Controller and Dept. of Finance data, 1991-92 through 2005-06.)

San Jose’s average General Fund revenue of $663 per resident ranks around the middle of both the 15 cities in Santa Clara County (5th of 15) and the 12 largest cities in California (5th of 12). (On a brighter note, this has improved from 1991-92, when we were 9th out of 15 in Santa Clara County and 8th out of 12 large California cities.)

The cities in Santa Clara County with higher tax revenues than San Jose have more jobs and businesses, more sales taxes, or both. Here’s the top ten and how they rank for total revenue per resident, jobs per 100 residents, and consumer sales tax revenue per resident:

1. Palo Alto: $1,194 revenue per resident; 254 jobs per 100 employed residents; and $228 consumer sales tax revenue per resident
2. Mountain View: $998; 147; $125
3. Los Gatos: $860; 143; n/a
4. Santa Clara: $ 848; 218; $159
5. San Jose: $663; 88; $82
6. Gilroy: $658; 83; $200
7. Milpitas: $655; 164; $133
8. Sunnyvale: $628; 125; n/a
9. Campbell: $607; 108; $138
10. Cupertino: $581; 147; $82

San Jose does not have sufficient jobs for all of our employed residents and during the workday loses 50,069 or 5.6% of our residential population when they commute to other cites for jobs. The resulting loss of sales tax from spending by both individuals and business and other business-related revenues is in the tens of millions of dollars per year.

In July 2008, the U.S. Census estimated San Francisco’s residential population at 808,976 with daytime population increasing by 168,747 (21.7%) due to work commuting, for a grand total of 977,723. At the same time, San Jose’s residential population of 948,279 drops to 898,210 during the workday.

By comparison, Palo Alto adds 47,707 workers or 81% of its residential population, while Santa Clara adds 54,655 workers (63%), Milpitas 18,948 (30%), Mountain View 18,972 (26%), Cupertino 11,119 (22%), and Sunnyvale 18,163 (13%).

Here’s how San Jose compares to other large California cites in terms of revenue per resident:

1. San Francisco: $2459
2. Oakland: $873
3. Los Angeles: $768
4. Sacramento: $758
5. San Jose: $663

All four cities ahead of San Jose have a higher ratio of jobs per resident, and many have higher sales tax revenue per resident.*

In coming weeks, we will continue this discussion about San Jose’s structural budget deficit, city revenue sources, where taxes are being spent, other city budget comparisons, policies/practices that affect our city budget and revenue, and spending and policy recommendations.

In the meantime, to better understand San Jose’s budget and how it compares to other city’s budgets, you can track back and read my June 30th “Dollars and Sense” blog and last week’s “Priorities and Objectives".

* Data sources:
1. General Tax revenue comparisons 2005-06 data by city, jobs per employed resident and sales tax revenue per resident from CaliforniaCityFinance.com
2. City Population and Commuting Workers from U.S. Census
3. 2007 Consumer Sales Tax from City of San Jose / MBIA – Consumer Sales Tax Retail, Transportation and Food Products from SJEconomy.com