More Housing Won't Pay the Bills

By Ed Rast

Did you know that San Jose has over 53% of Santa Clara County’s population but only 40% of its jobs?

Don’t believe me? Have a look at these charts. Pay particular attention to the charts for population and jobs. You'll find that San Jose's percentage of Santa Clara County's population rises from 52.9% to 53.8% between 1990 and 2010 (projected). You'll also see that San Jose accounts for only 35.8% to 39.6% of jobs countywide over that same span.

Why are the ratio of jobs to employed residents and the jobs/housing balance important for having an adequate city budget?

From a City of San Jose document on population, jobs, and housing:

“Historically, San José has had a shortage of jobs compared to the number of employed residents living in the City, commonly referred to as a jobs/housing imbalance. A jobs/housing imbalance, especially when there is a relative deficit of jobs, can be problematic because it results in longer commutes as City residents travel to other locales for employment. This same imbalance can result in financial hardships for a city due to the costs associated with providing services to residential land uses in relation to revenue generated.”

Table 4.13-1 in this document provides an overview of the historic and projected number of households, jobs, employed residents, and population in San José. The data in Table 4.13-1 indicates that the City was having success in correcting the historic imbalance, but recent jobs data shows that we slipped back again, making our budget deficit worse, thus requiring a reduction in staff and city services

In the Mercury News from Wednesday, October 24 2007, Mayor Chuck Reed said, “Eliminating San Jose's status as Silicon Valley's bedroom and better balancing the growth of new jobs with new housing is the key to getting out of this structural budget deficit." I would tend to agree.

So, how are we doing at achieving the Mayor’s goal? Let’s have a look at the San Jose General Plan Update: Projections of Jobs, Population and Households For the City of San Jose (Table 3, Page 9). This update predicts San Jose will account for 44.2% of countywide jobs by 2040, but if you crunch the numbers here, you’ll find that ABAG has allocated San Jose slightly over half of the County’s projected job growth. That's a pretty rosy prediction given the current business environment in our city.

Homes, unless they are very expensive, do not generate enough city tax revenue to pay for the services they require to maintain, thus generating a budget deficit. This is unlike businesses, which generate more revenue that their services cost based on California public finance policy.

Population growth without the required jobs to pay for city services and infrastructure has an adverse affect on the general fund budget and San Jose’s ability to provide adequate city staff, services, and infrastructure to residents and businesses

San Jose receives back from the state about $11-12 cents of every property and sales tax dollar. Property taxes are about 21% and sales taxes range between 24-29% of the general fund budget, with imposed taxes from other cities, licenses, user, or service fees — mostly paid by businesses — plus revenue from state and federal governments making up the rest of general fund revenues.

Jobs-rich cities like Palo Alto, Santa Clara, Milpitas, Campbell and other Santa Clara County cities that have more jobs than employed residents have the excess business tax revenue to pay for services for their residents. Almost a decade of budget deficits and the highest cost of doing business in the county has discouraged business and job growth in San Jose. See my previous posts, “Cost of Doing Business” and "Just the Taxes, Ma'am" for additional information about jobs and taxes.

To ensure that the City’s fiscal condition is stable, predictable, and adequate in the long term to serve the proposed development without detrimental impact to services for the rest of the city.

San Jose should strongly consider setting: 1. jobs/housing triggers as proposed in Coyote Valley or other residential growth controls; and 2. a jobs-per-employed-resident target of 125 jobs rather than current 100, which has never been met.