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San Jose Mayor Mahan releases FY25 budget priorities

San Jose Mayor Mahan releases FY25 budget priorities
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San Jose Mayor Matt Mahan has made ending street homelessness one of his major priorities — but getting there will be expensive, and it will likely come at the cost of other city services, he said during a press conference Wednesday to announce his budget priorities for the upcoming 2024-25 fiscal year.

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One of the priciest items? The $25 million the city will need to spend to clear 1,000 homeless people from encampments along creeks and rivers by June 2024, in response to a mandate from the San Francisco Bay Regional Water Quality Control Board. If the city doesn’t comply, it could face litigation and $60,000 in daily fines.

“Our current financial and environmental realities this season are going to require us to do what is right, and that is to create basic, dignified places for people to go with an urgency and at a scale that we haven’t seen yet,” Mahan said.

That, along with some other one-time project costs from the current fiscal year that Mahan hopes to carry on in the next fiscal year — such funds to bolster police recruitment, trail patrols along Coyote Creek and the Guadalupe River, and trash pickup program BeautifySJ — could lead to a $52.1 million shortfall.

The city is forecasting its revenue will increase next year  — primarily from increases in property taxes, with the region’s strong home values. But the city’s operating costs are going up significantly — employee compensation is set to increase $25.3 million in the coming fiscal year, and retirement contributions are set to increase by $14.3 million.

“Given these budget realities, we’re going to have to be willing to talk about more than just (emergency interim housing) and affordable housing,” Mahan said, stressing the need for more safe sleeping sites and congregate shelters. “We have limited dollars to achieve this goal, which is getting thousands of people off our streets.”

While clearing the encampments and building interim shelters is costly, the mayor and his allies argue that it is far cheaper than the alternative — permanent supportive housing — which can cost up to $1 million per unit.

To pay for these services, Mahan is once again pushing to reallocate funds from Measure E — a real estate transfer tax approved by voters in 2020 and meant to fund housing for low-income and homeless residents. Last year, Mahan sought to take $38 million from Measure E funds for affordable housing and divert it toward interim housing solutions, but after months of intense debate, the City Council approved just $12.3 million.

Even if Mahan can convince the council to spend more Measure E money on his interim housing plans, the city will have to cut back some services to achieve a balanced budget, he said — though he didn’t specify programs or departments that were on the chopping block, saying that further “analysis” would be required. To cut costs, the city could also eliminate some of its nearly 800 vacant positions, he proposed, leading to modest savings of less than $10 million. Union leaders have long suspected the city was purposefully leaving positions vacant with the hope of diverting funds elsewhere.

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In addition to more emergency housing, the mayor’s budget priorities also included:

— One-time funding for a pilot “Homeward Bound” program that would pay to “reunite homeless residents with loved ones” by paying for transportation and relocation costs

— Additional investments in police recruiting, especially for women

— Increased traffic monitoring, including speed safety cameras, especially near school zones

— Increased investments in downtown to spur economic growth there, including through events and grant programs for local businesses

— Explore pausing or reducing development fees to create incentives for new housing construction

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The City Council will vote on the mayor’s priorities next Tuesday, at which point the city manager will propose an operating budget based on the direction in the approved budget message.



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