After heated debate, San Jose approves drafting new property tax measure
San Jose City Hall is pictured in this file photo. Photo by Nadia Lopez.

San Jose lawmakers Tuesday voted 8-2 to put a new property transfer tax applying to all properties valued at $2 million or more on the March 2020 ballot, following a heated debate on tax burdening residents and how city funds are used to solve the region’s housing crisis.

Councilmembers Johnny Khamis and Sergio Jimenez voted against putting the tax on the ballot — one of a handful of times the lawmakers agreed on a policy initiative — concerned that residents here are already being overtaxed.

Councilmember Dev Davis was absent for Tuesday’s vote.

“We already have money coming in, we’ve already passed several taxes and this will be the fifth tax that we’re proposing in the last four years,” said Khamis. “I really want to highlight the fact that it takes more than money to build housing. It actually takes people to want housing next to them and it takes land, and the cost of construction was one of the biggest problems that we have. This ballot measure would not solve those issues.”

Jimenez said he can’t support the money streaming directly into the city’s general fund, which means the City Council could use it for whatever purpose they see fit in the future.

“Tax fatigue is real, the sentiments exist and it’s something we need to grapple with,” Jimenez said. “I don’t necessarily feel comfortable about the money going into the general fund. I think that presents challenges that we can’t dictate where that money is going to flow.”

But several lawmakers said the tax is necessary to address the region’s housing woes, considering the city is stretched thin on resources. While many lawmakers recognized that locals are feeling tax burdened, they couldn’t sign onto voting against the measure. The city needs critical funding for affordable housing and homeless prevention in the midst of the region’s ongoing housing crisis, some argued, despite residents’ concerns.

“I believe in fiscal responsibility but it’s hard to exercise when the members of this council are given very limited opportunities to exercise discretion, when we are, as a city, facing annually $20 million in shortfalls and really trying to get things done with what little we can,” said Councilmember Lan Diep.

But Khamis fired back that the city should look for other revenue streams, such as using money donated by big tech companies like Facebook and Google for housing projects. Diep and Mayor Sam Liccardo reminded him the city has been critically underfunded for years and that money coming from other sources was not just reserved for the city to use.

“Commitments made by Google, Facebook, Apple and others while helpful are by no means confined to the city. We have no control over them,” the mayor said.

The lawmakers also approved including strong accountability and transparency measures in the ballot draft, requiring a 60-day notice and a two-thirds council vote before lawmakers shift funding, and creating a citizens oversight committee. In addition, city officials will reach out to labor representatives to develop a strong workforce standard policy for workers who build housing under projects funded by the tax revenue.

After several of the lawmakers revealed different spending plans on how to divvy up the funds for affordable housing projects and homeless services, Liccardo reminded his colleagues at the meeting Tuesday that future discussions can determine how the revenue can be spent.

Unlike a general obligation bond, which needs approval from two-thirds of voters, the potential tax only needs a simple majority to pass. Earlier this month, city officials funded a poll by FM3 Research that found more than 60 percent of San Jose voters support the potential tax.

The survey, which polled 806 registered voters likely to vote in the March 2020 primary, found a majority of San Jose voters support the tax to generate funds for affordable housing and homeless services.

But many concerned residents spoke out against the potential tax at the meeting and submitted angry letters to the council.

“We are adamantly opposed to any new taxes put on those desiring to buy or sell their homes or businesses in San Jose,” wrote longtime resident Barbara MacNeil in a letter to the City Council. “Longtime residents, and those who own businesses, are fleeing San Jose and California precisely because of high taxes. We will remember each and every one of you who vote for this added tax, because you obviously don’t understand or care about the negative effects it will create for San Jose businesses or residents, whether they are buyers or sellers.”

Still, many community organizations and nonprofit leaders expressed support for more housing projects, especially those that prioritize the city’s most vulnerable residents subject to displacement and homelessness.

Councilmember Sylvia Arenas agreed, saying the majority of residents will not have to pay the tax, as city officials estimate that only 5 percent of all single-family homes, condominiums and townhomes in San Jose will be affected.

“It doesn’t just include residential. It’s not going to impact the majority of our folks out there, and it’s going to bring in significant funds,” Arenas said.

Councilmember Pam Foley also asked city officials to study how the tax will affect residents when the median home price hits $2 million, and asked them to return to the council with an analysis on a potential exemption for those homes.

City officials will return to the council by Dec. 3 with a ballot language draft, limited to 75 words.

Contact Nadia Lopez at nadia@sanjosespotlight.com or follow @n_llopez on Twitter.

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