San Jose, Capital of Silicon Valley, Out of Money

San Jose, once viewed as a jewel, called “America’s safest big city” and known as the prime bedroom community of Silicon Valley, now has little money. Its libraries close some of the time, its potholes remain unfixed, and its police force goes understaffed.

According to the San Jose Mercury News, the reasons for the city’s downfall include:

1. The city rakes in less money in taxes per resident than other major cities because of a paucity of shops and businesses; the average resident pays $142 in sales tax each year, lowest in the county. (Palo Alto, Cupertino and Santa Clara all receive more than double that amount.) The property tax revenue per capita is also lower in San Jose, because much of the housing is for lower-income areas.
2. Residents shop more in other towns than their hometown, as the city remains the only city of the nation’s 20 largest cities where the population shrinks during the day because residents work elsewhere.
3. Only 18% of San Jose’s land is available for businesses; the rest of the county offers between 25 and 30%. There is little land left, and building up instead of out is hampered by the city’s location within the flight path of Mineta San Jose International Airport. Developers would rather build homes for more profits, and residents want new housing to escape soaring rents and home prices.

San Jose decided decades ago to annex huge swaths of residential areas, leaving the city four times the size of San Francisco. But Proposition 13 cut the amount the city received in taxes, and Mayors Susan Hammer and Ron Gonzales and the City Council, compounding the problem, changed 1,400 acres of land intended for businesses and made them residential projects. Chuck Reed, who followed as mayor, attempted to reverse course, changing roughly 250 acres of residential land to commercial use.

Still, the city trails every other big city in the nation in its ratio of homes-to-jobs. There is some good news: Samsung will build a 650,000 square foot office in San Jose, and a yet-to-be-named company is moving to a two-million-square-foot campus site. In addition, San Francisco’s exorbitant rents and congestion may force businesses to relocate to San Jose.

One suggestion that has been floated is raising the sales tax; which has only been attempted by one other city in the county, Campbell, in 1976. The problem is that raising the sales tax would prompt shoppers to buy elsewhere.