San Jose parks lose millions as developers get tax break

San Jose is cutting taxes and fees for at least 14 high-rise development projects or more than 4,000 homes in downtown.

The San Jose City Council on Tuesday voted unanimously to extend the existing Downtown Residential High-Rise Program to reduce developer costs in an effort to spark more incentives for housing construction. Under the new program, developers who build the first 2,000 homes receive a 100% cut in construction taxes and a 50% reduction in park fees. The next 2,000 homes developed will receive a 50% cut in construction taxes and a 30% cut in park fees.

But some community advocates, including members of the Parks and Recreation Commission, say the program’s extension comes at the expense of city park funds and tax revenue.

High-rise discounts proposed for the 4,078 homes downtown total more than $20 million, which could be used to make significant improvements to a number of nearby regional parks, according to the Parks and Recreation Commission.

“These projects have been really challenged in San Jose, in fact it’s precisely the lack of cranes that leads us to look at extending and deepening this incentive and finding other things to do,” Mayor Matt Mahan said Tuesday. “Especially in terms of the levers we have at our disposal.”

Since 2017, downtown developers paid a parks fee of up to $14,600 per home built.

Developers for the future 6,000 homes built under the program won’t receive a reduction in park fees, though they will still receive a 50% cut in construction taxes.

City officials say three developments have been started under the program that have produced less than 2,000 homes — which concerned Councilmember David Cohen.

“We shouldn’t make permanent decisions based on current market trends,” Cohen said Tuesday. “I’m not convinced that this is the right approach. I feel like there’s a timeline we could put in here to incentivize us to have conversations regularly on what are the right incentives to (spur) development downtown.”

Councilmembers Arjun Batra and Peter Ortiz said they are supportive of housing development incentives, but not at the cost of higher rents in the city.

Parks and Recreation Commission Vice Chair Larry Ames recently sent Mahan and councilmembers a letter stating five of their members denounce the reduction of parks fees. The city can’t attract economic investment without quality parks, Ames said.

“Giving a few thousand dollar discount in the park fee won’t offset a half-million-dollar-per-unit imbalance to make housing profitable now, but the discounts would severely impact the park system in the future,” the letter dated June 5 stated.

The Parks, Recreation, and Neighborhood Services Department depend on estimates of future collections to match long-term planning and park construction efforts with funding needs. Ames wrote in the letter that parks deserving of improvements include Guadalupe River Park, Plaza de Cesar Chavez and Arena Green.

River Oaks Neighborhood Association Vice President Michael Bertram said the city’s plan to cut park fees for downtown high-rise developers could lead to park fees being cut citywide.

“We feel that high-rise development introduced into existing neighborhoods is negatively impactful for their neighborhoods. One of the small benefits we get is the development of parks — and we don’t want to see that end,” he said Tuesday.

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