Hear from our Deputy Director, Michael Lane on the feasibility of potential tax measures for the upcoming 2020 ballot…

See the original story in San Jose Spotlight

Contact Grace Hase at grace@sanjosespotlight.com or follow @grace_hase on Twitter. Published 5/26/2019

After saying “yes” to hundreds of millions of dollars in general obligation bonds in recent years, new polling shows San Jose voters aren’t so keen on supporting another tax – even if it’s to address homelessness.

San Jose administrators this month studied three potential tax measures for the 2020 ballot. Only one of the three polled above the threshold needed to pass.

“Silicon Valley’s affordable housing dilemma is a symptom of regulatory failure,” said Pat Waite, president of Citizens for Fiscal Responsibility, which will likely oppose new tax measures next year. “Governments simultaneously make it expensive to build — with development fees exceeding $150,000 per unit — and difficult to site with restrictive zoning policies. The city should focus its efforts on reducing fees and making building residential units for all income levels easier.”

In a survey of 1,251 registered voters, city leaders tested support for a pair of general obligation bond measures – one to fund affordable housing for workers and for homeless residents near transit and another for homeless housing. Both measures need a two-thirds threshold, or 66.6 percent to pass. They polled at 55 percent and 59 percent, respectively.

“The two potential general obligation bond measures that the administration tested were significantly below the required two-thirds threshold for approval,” Housing Director Jacky Morales-Ferrand and Lee Wilcox, chief of staff to City Manager Dave Sykes, wrote in a new memo.

A similar initiative on the Nov. 2018 ballot, Measure V – a $450 million affordable housing general obligation bond – failed by less than three percent at the hands of San Jose residents. Voters did, however, approve a $950 million affordable housing bond, Measure A, in 2016.

But with a lack of support from polling and the bleak outcome of Measure V, Morales-Ferrand and Wilcox recommend killing any future analysis on a general obligations bond.

But city officials, who say new revenue is sorely needed to fund affordable housing following the 2012 dissolution of the state’s redevelopment agencies, which provided millions for such projects, aren’t giving up. They’re looking at a real property transfer tax instead.

According to the memo, a real property transfer tax polled favorably – accruing 59 percent for a measure that needs 50 percent plus one to pass.

A real property transfer tax is paid when a property is sold or the ownership transfers. San Jose currently has a rate of $3.30 per $1,000 that goes to libraries, fire protection facilities, parks and other general improvements. The proposed tax measure would tax residents $4.99 per $1,000 to address homelessness among seniors, veterans and the disabled, help homeless residents move into housing with supportive services and clean up graffiti, trash and pollution.

If approved by voters, the real property transfer tax would raise $54 million annually, based on recent market conditions, such as the sales price and number of property transfers.

But while a real property transfer tax polled favorably, and has passed with large margins in nearby cities like Berkeley and Oakland, its ability to raise funds can be unstable.

“Real property transfer tax is highly volatile and subject to market conditions,” Morales-Ferrand and Wilcox wrote. “The existing conveyance tax has fluctuated over the past twenty years, with highs of $48.7 million in 2005-2006  to the low of $20.3 million in 2010-2011 during the Great Recession.”

Michael Lane, deputy director at Silicon Valley at Home, said it’s necessary for the city to find a revenue measure that will be successful on the ballot.

The city’s poll results related to new tax measures in 2020 come a week after Santa Clara County released its new homeless count numbers. This year’s survey, which counts the number of people on the streets, showed dramatic spikes in homelessness. The county’s homeless count went from 7,394 in 2017 to 9,706 this year – a 31 percent spike – and the city’s homeless count spiked from 1,822 in 2017 to 6,172 this year, a 42 percent increase.

“If we do have a revenue measure, that (can be) paired with Measure A funds at the county level and state and federal resources to maximize the potential to develop affordable housing,” Lane said. “And the city (can) address the increase of homelessness the past two years.”

But Waite said revenue from real property transfer taxes cannot be earmarked for a specific purpose and he fears it’ll go into “the black hole” of the city’s unfunded pension liability, which has tripled to about $3 billion since 2008. He also said the county and the state are already taxing residents to address the housing crisis and subsidized housing is not part of San Jose’s “core services mandate.”

City administrators recommend conducting additional survey research on a real property transfer tax and reporting back to the City Council in August.

Contact Grace Hase at grace@sanjosespotlight.com or follow @grace_hase on Twitter.

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