San Jose budget could reallocate affordable housing funds

San Jose voters passed a property transfer tax to help fund affordable housing, but the mayor wants to reallocate more than 50% of those dollars for other uses.

The city manager’s budget unreleased proposal, obtained by San José Spotlight, shows that $38 million of the $70 million in Measure E funds earmarked for affordable housing may shift to homelessness services. This would be a significant reallocation from council’s direction last year, where they voted to spend 75% of Measure E dollars on affordable housing development.

Measure E is a property transfer tax approved by voters in 2020 that applies to property transfers of $2 million or more. The millions received by the city are used to address the housing and homeless crisis.

The upcoming discussion on how to spend the Measure E funds is likely to be one of the most controversial parts of the budget cycle. When the mayor released his March budget message, councilmembers and residents contested his proposal to spend Measure E dollars on a mental health facility, arguing it should be applied toward affordable housing.

While that part of his proposal did not make it to the city manager’s May budget message, there are other initiatives suggested. If approved, $20 million of the $38 million would go to interim housing for homeless residents, most of which would go toward construction and acquisition costs.

The city manager is also proposing the creation of a homeless coordination team comprised of three people who would act as the bridge between the city, county and homeless service providers. The three positions would be contracted for three years at a total cost of $1.8 million. Money would also be used for trauma specialists, data collection, homeless outreach services and moving homeless residents into shelters.

“We definitely need emergency interim housing, but we also need to make sure that we’re dedicating dollars for the development of affordable housing,” Councilmember Peter Ortiz told San José Spotlight. “Measure E is one of our only sources (for that).”

He said for that reason, he doesn’t want any of those funds reallocated. Ortiz said the council already voted last year to spend the majority of Measure E funds on affordable housing development, and switching gears would be an “affront to voters.”

Homeless or affordable housing

Pat Waite, president of Citizens for Fiscal Responsibility, said at the end of the day Measure E is a general tax. San Jose could theoretically spend it on anything, which is why his organization opposed the measure from the start, he said. But the city said all along that those dollars would be used for affordable housing and helping the homeless move into shelters, and so far it hasn’t deviated from that, Waite said.

“I don’t think it’s a violation of the voters’ trust,” Waite told San José Spotlight. “I think there’s going to be some flows on what government spends and part of the reason we elect our representatives is to make these decisions. The environment today is different than what it was three years ago when this got passed.”

Councilmember Sergio Jimenez said the city needs to find a solution to street homelessness, which is why he would be open to changing the Measure E spending plan the city voted on last year.

“I am open to exploring any possibility that helps alleviate the crisis that we have on the streets, so I am not married to the current formula,” Jimenez told San José Spotlight.

But Mathew Reed, director of policy at SV@Home, said street homelessness is the product of a systemic problem due to a lack of affordable housing. Until the city has enough affordable housing, any other solution is a Band-Aid. He believes allocating most of Measure E to affordable housing development is the wisest move because it’s the city’s main funding source.

“These are all important, the long-term and short-term solutions,” Reed said. “But it’s sort of pennywise and pound foolish to not figure out how to maintain the balance of the solutions that we know we need to respond to the crisis that we face.”

Ortiz said the San Jose City Council is going to be split on the Measure E spending proposal when it’s released. He thinks the deciding vote will fall on Vice Mayor Rosemary Kamei.

Kamei told San José Spotlight she’s unsure if she will support changing the funding allocation.

“I would say let’s evaluate if the current percentages are giving us the results that we want. If it’s not giving us results, then we need to say why not?” Kamei told San José Spotlight. “What I do know is that cost of things are going up—production and new materials—so we have to evaluate.”

The city manager’s budget proposal will be released sometime this week. The budget study sessions will be held May 10-16 and the first public hearing is scheduled for May 16. The council will vote on the final budget June 13. Learn how to watch and participate.

Contact Jana Kadah at [email protected] or @Jana_Kadah on Twitter.