San Jose leaders have signed off on Mayor Matt Mahan’s budget message centered around demonstrating outcomes and accountability for the upcoming year amid the anticipated financial challenges the city could face.
After several hours of spirited public testimony and discussion, the City Council in a 7-4 vote approved prioritizing reducing unsheltered homelessness, increasing community safety, cleaning up neighborhoods, growing the economy and building more housing in next year’s budget.
“It takes courage to challenge the status quo,” Mahan said. “It takes courage to pass bold initiatives. It takes courage to stand up for what you believe in.”
Facing a projected shortfall of $45.7 million this year and another $52.9 million next year, Mahan framed this year’s budget message around instilling a culture shift and leading with pragmatism, efficiency and the need for accountability.
He has proposed three core policy initiatives that include adding more flexibility to shift Measure E funds from affordable housing projects to interim homelessness solutions, amending the municipal code to allow trespassing charges for homeless residents that refuse available shelter three times and putting out a ballot measure that would tie merit raises for the city’s elected leaders and top brass to performance metrics.
Mahan has said by shifting the Measure E funds, San Jose’s projected shortfall for this year would drop to a few million dollars, limiting potential impacts on the city’s workforce.
Approval of the budget paves the way for the city to create next year’s operating and capital budgets, which will be released late next month. The City Council will vote separately on the policy initiatives surrounding the pay-for-performance ballot measure and trespassing code change in June when the budget is up for adoption.
With homelessness again a top concern of residents, Mahan has targeted several refinements to the San Jose’s shelter system to show residents that the city is making meaningful progress. With hundreds of millions of dollars already spent on the problem and cost identified as the biggest hurdle to building out the system, San Jose will consider reducing the operating expenses of shelters by at least 20%. The city may also look at amending the city code to require vehicles to move at least 1,000 feet away every 72 hours, mirroring an ordinance in Fremont, as a possible solution to augment the city’s existing pilot program targeting RV encampments and lived-in vehicles that have become contentious for neighborhoods.
The city is also exploring the possibility of creating a campus similar to San Antonio’s Haven for Hope, which offers the full continuum of shelter, housing and supportive services.
One of the other major issues facing San Jose is its struggle to increase housing stock. Despite planning for 62,200 new housing units by 2031, the city only permitted 2,666 new homes last year, putting it well behind the 7,775 average it needs to meet that goal.
Mahan has proposed removing some barriers or adding more flexibility to rules that have lengthened the building process. These include allowing limited construction hours on weekends and longer entitlement periods and prioritizing California Environmental Quality Act reforms that otherwise have delayed projects or driven up costs.
But despite the city’s plans, some residents and housing advocates said they could not support the mayor’s budget, balking at San Jose once again diverting Measure E funds away from potential affordable housing projects as more residents become priced out of San Jose.
“Measure E funding should be used for its intended purpose, not to cover gaps in the budget,” said Father Jon Pedigo, executive director of People Acting in Community Together. “Push tenant protections. Don’t push people out. We cannot support a budget that doesn’t support the values of our community.”
Facing potential revenue constraints due to declining sales tax, the city is also considering bolstering the experience economy that has already helped downtown San Jose recover on nights and weekends. San Jose could see an infusion of hundreds of millions of dollars in economic activity with the Super Bowl, FIFA World Cup and NCAA Men’s Basketball Tournament coming to Silicon Valley. Mahan’s long-term vision is to create a sports and entertainment district in downtown and explore expanding the convention center so that the city would be eligible to host most events.
The city’s economic development plan also envisions cashing in on the artificial intelligence boom and need for data centers, which could generate millions of dollars in steady general fund revenue, drawing the praise of business leaders.
“We are particularly encouraged by the focus on economic development, especially expanding San Jose sports and entertainment economy, with these major sporting events coming to 2026 as hundreds of millions of dollars that can support our general fund if we invest in the infrastructure for going forward,” San Jose Chamber of Commerce CEO Leah Toeniskoetter said. “This further improves our opportunities.”
