San Jose City Hall rotunda and building behind Fourth Street intersection lights
San Jose officials are in the middle of budget season. Photo by B. Sakura Cannestra.

San Jose is facing its most challenging budget environment since the start of the COVID-19 pandemic, Mayor Matt Mahan wrote in his June budget message Tuesday — with funding meant for affordable housing construction on the line.

Mahan’s recent budget message updates his earlier March version, including new proposals from councilmembers for funding projects that enhance community spaces like the city’s rose gardens, libraries and recreation centers. He also noted proposals to step up holiday events in the community, and allocate tens of thousands of dollars in one-time funding to nonprofits, small business associations and programs for youth across San Jose.

But the mayor hasn’t changed his overall stance on proposing that Measure E dollars be reallocated from long-term affordable housing to immediate solutions that address homelessness along the city’s waterways.

“We began the budget planning process with a $4.5 million projected deficit and an overall structural shortfall greater than $50 million, driven by growing costs, slower revenue growth, and our need to address the impact of encampments along the city’s waterways,” Mahan wrote.

Mahan’s latest budget message proposes about 65% of the total $50 million in 2024-25 Measure E funding go toward temporary housing and support services for unhoused residents — including those living along waterways. The revised plan leaves $11 million for affordable housing, as opposed to $35.6 million in recommended funds.

“I am opposed to diverting funds from Measure E. Funds (which were) always supposed to be for affordable housing, not for temporary housing,” South Bay Community Land Trust Board Vice President Sandy Perry told San José Spotlight.

Voters first approved Measure E in 2020, a property transfer tax that applies to property transfers of $2 million or more. The San Jose City Council then adopted an allocation plan prioritizing 75% of funds for affordable housing development and 25% for temporary housing and homeless services.

Affordable versus temporary housing

Housing nonprofit HomeFirst spokesperson Lori Smith said ensuring that funds are allocated to support a full spectrum of housing needs can have a more effective and lasting impact on homelessness in the community.

“We appreciate the mayor’s focus on this urgent issue and believe a balanced approach is essential. Interim housing provides immediate relief and stability, while affordable housing offers long-term, sustainable solutions vital for breaking the cycle of homelessness,” she told San José Spotlight.

Encampments along the waterways became a top concern for San Jose residents and city officials this year, Mahan wrote, with city stormwater direct discharge plans repeatedly rejected by the Regional Water Quality Control Board because of related pollution.

Mahan has argued the city faces $60,000 in daily fines per pollutant if the city doesn’t address pollution from homeless encampments near creeks by June 2025. It’s driving his renewed push to reallocate affordable housing dollars. But state officials say the amount being cited would only happen if the Environmental Protection Agency pursued enforcement action through the courts. The most the water board could fine the city is $10,000, but even then it reserves fines for severe violations.

It’s the second year city officials are proposing to cut Measure E funds from affordable housing construction.

“It was clear in March that the city council was really concerned about the redirection of money from Measure E, which was used to backfill a number of costs that weren’t being filled at the interim housing sites,” SV@Home Policy Director Mathew Reed told San José Spotlight.

A similar proposal by Mahan last year was met with fierce opposition, and the council settled on a spending plan that favored affordable housing development, as opposed to temporary homeless housing.

“The City Manager’s Proposed Budget includes funding to complete the 784 emergency interim housing beds in our pipeline by July 31, 2025, expand safe parking opportunities and continue our eviction diversion program to prevent more families from falling into homelessness,” Mahan wrote.

Reed said 13 affordable housing projects in San Jose applied for funding with the city, but they’re on waitlist for funding availability.

“Developments are ready to go, the only thing stopping them is the city is not committing the money meant to be committed for these projects,” he said.

​​San Jose’s higher than projected sales tax revenue allows the council to fully fund the $40 million for affordable housing outlined in the city manager’s projection, while investing in immediate solutions to get people suffering in unsafe conditions off the streets as fast as possible, Mahan’s spokesperson Tasha Dean told San José Spotlight.

“We’ll still be working hard to bring home additional regional, state and federal dollars to continue our all-of-the-above approach to ending homelessness in San Jose,” she said.

City Manager Jennifer Maguire wrote in a recent budget message that one of the city’s four strategies to spend within the proposed budget is reallocating Measure E revenue.

Councilmembers are set to vote on the mayor’s June budget message on June 11 and on the budget June 18.

Contact Vicente Vera at [email protected] or follow @VicenteJVera on X, formerly known as Twitter.

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