2025-2026 PROPOSED
OPERATING BUDGET
OVERVIEW
May 7, 2025
2025-2026 Budget Study Sessions
Slide 2
PRESENTATION AGENDA
• Opening Remarks
• Proposed Budget Overview
• Budget Balancing Strategy and Recommended Budget Actions • Next Steps in the Budget Process
• Economic Outlook
2025-2026 PROPOSED OPERATING BUDGET
GENERAL FUND OPERATING MARGIN
Slide 3
2025-2026 2026-2027 2027-2028 2028-2029 2029-2030
Five-Year
Surplus/
(Shortfall)
Incremental
Surplus/
(Shortfall)
($35.6)2 ($52.9) ($3.7) $4.0 $1.2 ($87.0)
Total
Cumulative
(Shortfall)
($35.6)2 ($88.5) ($92.2) ($88.2) ($87.0) ($87.0)
2026-2030 Revised General Fund Five-Year Forecast
($ in millions)1
2 This figure was revised from the $45.7 million shortfall as presented in the February 2024 Forecast as a result of continued analysis of projected revenues and expenditures.
1 Does not include 1) costs associated with services that were funded on a one-time basis in 2023-2024; 2) costs associated with unmet/deferred infrastructure and maintenance needs; and 3) one-time revenue sources or expenditure needs. 2025-2026 PROPOSED OPERATING BUDGET
OVERVIEW
Slide 4
• Balanced all funds (General Fund, Special and Capital Funds) • General Fund projected shortfall of $35.6 million fully resolved, with additional actions taken to reduce the $52.9 million projected shortfall in 2026-2027 to $25.9 million • Investment Priorities:
Reducing Unsheltered Homelessness
Improving Community Safety
Cleaning Up Our Neighborhoods
Growing Our Economy
Building More Housing
Other investment priorities included select areas of important and ongoing Core Service work within other community services, strategic support services, and deferred infrastructure areas • Budgeted Positions (all funds) grow by 5 positions, from 6,994 to 6,999
2025-2026 PROPOSED OPERATING BUDGET
OVERVIEW
Slide 5
2025-2026 PROPOSED CITY BUDGET 1: $5.6 billion
TOTAL NUMBER OF FUNDS: 145
TOTAL NUMBER OF POSITIONS (FTE): 6,999
1 An adjustment of $891 million is necessary to arrive at the $5.6 billion net 2025-2026 Proposed City Budget to avoid the double-counting of transfers, loans and contributions between City funds.
General Fund,
$1,685.8 , 26%
Special Funds,
$3,593.1 , 56%
Capital Funds,
$1,186.3 , 18%
$ in millions
2025-2026 PROPOSED OPERATING BUDGET
USES BY CITY SERVICE AREA (ALL FUNDS; $ IN MILLIONS)
Slide 6
Community and Economic
Development, $203.2 , 6%Environmental and Utility Services, $1,005.2 , 30%
Neighborhood Services,
$334.7 , 10%
Public Safety, $906.9 ,
27%
Transportation and Aviation Services,
$330.8 , 10%
Strategic Support, $560.0 ,
17%
* Excludes Fund Balance, Transfers, Reserves, and Capital Fund (project) expenditures. 2025-2026 PROPOSED OPERATING
BUDGET OVERVIEW – FUND CATEGORIES
Slide 7
* Capital Fund expenditures include only personal services and overhead reimbursements. $142.24
$12.76
$39.89
$64.64
$88.34
$89.95
$112.99
$132.31
$196.08
$456.31
$554.12
$1,441.07
$- $250 $500 $750 $1,000 $1,250 $1,500
Capital*
Parking
Convention & Cultural Affairs
Other
Internal Service
Development Fee
Housing
Benefits
Airport
Energy
Sewer, Storm, Waste, Water
General Fund
2025-2026 Proposed Operating Budget by Fund Category (exc. Transfers, Reserves, and Fund Balance) 2025-2026 PROPOSED OPERATING BUDGET
GENERAL FUND SOURCES
Slide 8
Total General Fund Sources: $1,685,752,026
2025-2026 PROPOSED OPERATING BUDGET
GENERAL FUND USES BY CATEGORY
Slide 9
Personal Services
68%
Non-Personal/Equipment
11%
City-Wide Expenses
5%
Capital Contributions
1%
Transfers
2%
Earmarked Reserves and
Contingency Reserve
7%
Encumbrance Reserve
6%
Total General Fund Uses: $1,685,752,026
2025-2026 PROPOSED OPERATING BUDGET
GENERAL FUND BUDGET BY CATEGORY
Slide 10
$541.26 $303.09
$151.02
$60.54
$0 $100 $200 $300 $400 $500 $600
Police Department
Fire Department
Parks, Recreation and Neighborhood Services…
Public Works Department
Transportation Department
Library Department
Information Technology Department
Office of the City Manager
Finance Department
Office of the City Attorney
Planning, Building and Code Enforcement Department
Mayor and City Council
Other Departments
Environmental Services Department
Energy Department
Housing Department
Human Resources Department
City Manager - Office of Economic Development and…
Office of the City Clerk
Office of the City Auditor
Independent Police Auditor's Office
City-Wide
Capital Contributions
Transfers to Other Funds
Reserves
Millions
Non-Personal Personal
DepartmentalNon-Departmental
2025-2026 BUDGET BALANCING STRATEGY
GENERAL FUND
Slide 11
Key strategies to fully resolve the $35.6 million shortfall on an ongoing basis in 2025-2026 and resolve a portion of the additional $52.9 million shortfall in 2026-2027, while also minimizing impacts to existing services and allowing for targeted new funding for the City Council’s most urgent priorities.
Reallocation of homeless sheltering and support costs from the General Fund to Measure E • Shifts $39.2 million in 2025-2026 ($42.8 million ongoing) from General Fund to Real Property Transfer Tax Fund Identification of new revenue
• $12.5 million in 2025-2026 ($9.0 million ongoing)
• Delayed impact of Cardroom Business Tax decline, Fire First Responder Fee, Business Tax Amnesty Program, fees and charges adjustments, new grant revenue
Cost and service reductions
• $11.7 million in 2025-2026 ($14.9 million ongoing)
Deferring full activation of Fire Station 32 and activation of South San José Police Substation • Fire Station 32 opening as a one company station ($826,000 savings in 2025-2026, $5.6 million ongoing) • Open the Police Training Center, but defer the subsequent full activation of Substation previously anticipated in 2026-2027 after opening of the new Police Training Center ($1.9 million in 2026-2027) Strategic use of limited reserve funding (one-time uses) • Community and Economic Recovery Reserve ($11.5 million), Budget Stabilization Reserve ($7.0 million) 2025-2026 BUDGET BALANCING STRATEGY
GENERAL FUND
Slide 12
2025-2026 Ongoing
T otal General Fund Shortfall $ (35.6) $ (35.6)
Recommended Balancing Strategy
– Changes in Sources $ 35.0 $ 9.0
– Changes in Uses (0.6) (26.6)
T otal Balancing Strategy $ 35.6 $ 35.6 Amount Remaining $ 0 $ 0 2025-2026 PROPOSED BUDGET ACTIONS
GENERAL FUND USES
Slide 13
Use of Fund 2025-2026
Adjustments
Ongoing
Adjustments
2026-2027 Future Deficit Reserve - $27.0 million
Unmet/Deferred T echnology, Infrastructure, and Maintenance $20.5 million $0.9 million Transfer to the Emergency Reserve Fund
(FEMA Non-Reimbursable Expenses) $10.0 million -
Service Level Enhancements $10.2 million $3.6 million
Earmarked Reserves $7.8 million $1.4 million
Previously One-Time Funded Services (from 2024-2025) $5.9 million $2.5 million Other Fee Programs/Grants/Reimbursements $1.5 million $1.6 million New Infrastructure/Equipment Operations and Maintenance $1.5 million $6.3 million Cost Shift to the Real Property Transfer Tax Fund (Measure E Reallocation) ($39.2 million) ($42.8 million) Cost Reductions/Service Delivery Efficiencies/Fund Shifts ($11.7 million) ($14.9 million) Use of Reserves (Committed Additions, Deferred Infrastructure, and Police Equipment Sinking Fund) ($7.1 million) ($12.2 million)
T otal ($0.6 million) ($26.6 million)
2025-2026 PROPOSED BUDGET
MEASURE E FUNDING
Slide 14
*One-time funding shift from the General Fund to the Real Property Transfer Tax Fund; these services will again be funded in the General Fund in 2026-2027 and ongoing.
Recommended Allocation of Measure E Revenues ($ Millions) 2025-2026 2026-2027
Program Administration (5% of total revenue) 2.75 3.00
Homelessness Prevention (10% of remaining revenue) 5.23 5.70 Homelessness Support and Sheltering (90% of remaining revenue) 47.02 51.30 Original 15%
Interim Housing Construction and Operations (Base Budget) 7.84 8.55 Reallocated 75%
Interim Housing Construction and Operations (Additional Contribution) 25.00 39.25 Outreach, Sanitation and Other Support Services 3.50 3.50 Beautify San José Encampment Management Services* 6.68
Homeless Rapid Rehousing* 4.00
Total Amount Reallocated 39.18 42.75
Total Estimated Measure E Revenues 55.0 60.0
2025-2026 PROPOSED BUDGET
AFFORDABLE HOUSING RESOURCES
Slide 15
Resources for New Affordable Housing Commitments in 2025-2026 • $60 million prior year Measure E and other Housing funds for Notice of Funding Availability (NOFA) • $100 million targeted from a combination of:
o Issuance of a Housing Bond backed by loan repayments from City’s existing permanent housing loan portfolio o Asset Refinancing
o Master Leasing Financing
2025-2026 BUDGET BALANCING STRATEGY
STRATEGIC AND EQUITY-FOCUSED APPROACH TO COST AND
SERVICE REDUCTIONS
Slide 16
Non-Personal/Equipment Savings
• Identify efficiencies and cost savings through reductions in consulting services, supplies, materials and other contractual services with minimal service impacts ($1.0 million) Strategic Support Reductions
• Implement targeted reductions that minimize disruptions to community-facing departments while still preserving the back-of-house infrastructure necessary for day-to-day service delivery ($4.1 million) Public Safety Services
• Achieve meaningful reduction in net General Fund impact within the Police and Fire Departments while still maintaining public safety, especially in historically underserved neighborhoods (e.g. Fire Station 32 single company, Substation activation deferral, and Fire First Responder Fee yields a net General Fund improvement of $2.8 million in 2025-2026 and $10.6 million ongoing)
2025-2026 BUDGET BALANCING STRATEGY
STRATEGIC AND EQUITY-FOCUSED APPROACH TO COST AND
SERVICE REDUCTIONS
Slide 17
Community Services
• T o the maximum extent possible, preserve the City’s basic core services that are vital to low-income communities, communities of color, immigrants, and other historically marginalized residents ($3.2 million in 2025-2026 and $4.2 million ongoing)
• Intentional in evaluating budget reductions, informed by data to understand community usage and impacts, and ensuring that reductions do not have unintentional consequences for those who most rely on City services • Looked at services outside the City’s traditional core competency, services with lower levels of participation or impact, services or programs that have shrunk in recent years, and/or services where alternative service providers are identified
• Budget does not
cut library hours, parks maintenance, staff-led community center and recreational programming, aquatics, scholarships, or senior nutrition
2026-2027 Reductions
• Authorize reductions now that will take effect in 2026-2027 ($3.0 million) • Allows impacted service providers and community members to identify alternative services or other mitigation strategies
• Allows time for impacted employees to transition into new assignment to avoid potential layoffs
COMMUNITY AND ECONOMIC DEVELOPMENT CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 18
Growing Our Economy
2026 Sporting Events ($1.5 million)/City-Wide Expenses
Energy Customer Development Team
($1.2 million)/Office of Economic Development and Cultural Affairs and Public Works
Storefront Activation Grant Program ($350,000)/City-Wide Expenses Business Outreach and Development Staffing ($525,000)/Office of Economic Development and Cultural Affairs
Sports and Entertainment District Preliminary Development ($250,000)/Office of Economic Development and Cultural Affairs Small Business ADA Legal Support ($120,000)/City-Wide Expenses Supplemental Arts and Cultural Funding ($100,000)/City-Wide Expenses Building More Housing
Housing Grants Program Management Staffing ($310,000)/Housing ProjectDox Software Upgrade ($280,000)/ Planning, Building and Code Enforcement
CEQA Process Improvement ($250,000)/Planning, Building and Code Enforcement
Contracts Monitoring and Compliance Staffing ($238,000)/Housing Cost Reductions/Service Delivery Efficiencies/Funding Shifts/Revenues Public Works Staffing Plan (-$709,000)/
Public Works
San José Works – Youth Jobs Initiative
(-$490,000)/City-Wide Expenses
Planning Staffing (-$335,000)/Planning, Building and Code Enforcement Administration and Fiscal Oversight Staffing
(-$327,000)/Planning, Building and Code Enforcement
Permit Center – Supervision Staffing
(-$239,000)/Planning, Building and Code Enforcement
Non-Development Fee Program Realignment
(-$210,000)/Fire
ENVIRONMENTAL AND UTILITY SERVICES CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 19
Important and Ongoing Core Service Work
Dewatering Facility Electricity Costs ($7.5 million)/ Environmental Services
Chemical Costs Increase ($1.9 million)/ Environmental Services Regional Wastewater Facility Security Improvements ($1.8 million)/Environmental Services
Heavy Equipment Purchases ($1.6 million)/ Environmental Services Distributed Control System and Windows 11 Upgrades
($937,500)/Environmental Services
Contamination and Recycling Tagging Project
($461,000)/Environmental Services
Security Services ($460,000)/Environmental Services
Retail Recycled Water Distribution Facilities ($350,000)/Environmental Services
Energy Regulatory Policy & Compliance Staffing ($283,000)/Energy Environmental Inspection Vehicles ($283,000)/Environmental Services Pump Station Site Improvement ($250,000/Environmental Services Department
New Green Stormwater Infrastructure Maintenance
($186,000)/Transportation
Storm Drain Inlet Markings ($145,000)/Transportation Department; ($102,000)/Environmental Services Department
Cost Reductions/Service Delivery Efficiencies/Funding Shifts/Revenues Staffing Consolidation and Realignment
(-$1.1 million)/Environmental Services
Climate Smart Program Fund Shift (-$453,000 in the General Fund)/Energy
NEIGHBORHOOD SERVICES CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 20
Cleaning Up Our Neighborhoods
Code Enforcement Re-Engineering Implementation Reserve
($400,000)/General Fund Capital, Transfers and Reserves Gateway Maintenance ($250,000)/City-Wide Expenses
Neighborhood Blight Enforcement ($250,000)/City-Wide Expenses BeautifySJ Grant Program ($150,000)/City-Wide Expenses
Enhanced Vacant/Dangerous Downtown Building Inspection
($150,000)/Planning, Building and Code Enforcement
Non-Profit Creek Clean-up Partnerships ($75,000)/Parks, Recreation and Neighborhood Services
Reducing Unsheltered Homelessness
Homeless Outreach and Support Services Staffing ($1.5 million)/ Housing
Eviction Prevention Staffing ($654,000)/Housing
Facilities Management – Interim Housing Maintenance Staffing ($166,000)/Public Works
Housing Grants Program Management Staffing ($357,000)/Housing Homeward Bound ($200,000)/Housing
Other Important and Ongoing Core Service Work
Acquisition of Materials ($500,000)/Library
Veterinary Contract Services ($200,000)/Public Works
City-Wide Sports Fields Staffing ($181,000)/Parks, Recreation and Neighborhood Services
Digital Communications Staffing ($150,000)/Public Works Animal Adoption Pop-Up Events ($125,000)/Public Works
Staff and Volunteer Workforce Management Software ($75,000)/Public Works
NEIGHBORHOOD SERVICES CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 21
Cost Reductions/Service Delivery Efficiencies/Funding Shifts/Revenues Action Sports Park Service Delivery Change (Effective 2026-2027, -$879,000)/Parks, Recreation and Neighborhood Services
Hybrid Community Center Drop-In Program Reduction
(-$841,000)/Parks, Recreation and Neighborhood Services Senior Health and Wellness Grant Program Providers
(-$526,000)/Parks, Recreation and Neighborhood Services SJSU/City of San José Joint Agreement for Dr. Martin Luther King, Jr.
Library Operating Cost Savings (-$500,000)/Library
Family, Friends and Neighborhoods (FFN) Caregiver Support Network Program Staffing (Effective 2026-2027, -$498,000)/Library College and Career Pathways and Workforce Development Staffing (-$439,000, Shift to SJ Library Foundation Funding)/Library Out of School Time Program School Consolidation (-$277,000)/Parks, Recreation and Neighborhood Services
MLK Access Services/Materials Processing Staffing (Effective 2026- 2027, -$259,000)/Library
Family Camp 2025 Season Closure (-$240,000)/ Parks, Recreation and Neighborhood Services
Neighborhood Engagement Model Staffing Realignment
(-$180,000)/Parks, Recreation and Neighborhood Services Placemaking Fundraising Efforts (-$165,000)/Parks, Recreation and Neighborhood Services
PUBLIC SAFETY CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 22
Increasing Community Safety
Mobile Data Computer Replacement ($5.2 million)/ City-Wide Expenses Police Department Sworn Backfill Reserve
($5.0 million)/General Fund Capital, Transfers and Reserves 2026 Sporting Events – Police Department
($3.0 million)/Police
Police Training Center Fixtures, Furniture and Equipment ($3.0 million)/General Fund Capital, Transfers and Reserves
Police Department Neighborhood Quality of Life Unit ($2.1 million)/Police
Police Department Equipment Replacement ($985,000)/Police Fire Station 32 (Single Company) ($673,000)/Fire
Coyote and Guadalupe River Trail Patrol ($650,000)/Police Disaster Preparedness and Emergency Response Modeling Software ($580,000)/City Manager’s Office
Real Time Intelligence Center Technologies ($485,000)/Police Controlled Substance Security Devices ($200,000)/Fire
Police Officer Lateral Incentive Program ($200,000)/Police Community Evacuation Notification Software ($167,000)/Fire Automatic License Plate Readers ($120,000)/Police
Fire Communications Staffing ($72,000)/Fire
Cost Reductions/Service Delivery Efficiencies/Funding Shifts/Revenues First Responders Fee Program
($2.0 million)/General Fund Revenues
Fire Station 32 Truck Deferral (-$5.6 million)/Fire
Police Substation Activation Deferral (Effective 2026-2027, -$1.0 million)/Police
Unstaffed Unit Reduction (-$1.3 million)/Police
Megan’s Law Enforcement Reorganization
(-$586,000)/Police
Front Lobby Hours – Saturday and Sunday Closure (-$492,000)/Police Auto Theft Unit Reduction (-$250,000)/Police
TRANSPORTATION AND AVIATION SERVICES CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 23
Growing Our Economy
2026 Sporting Events Destination Marketing and Support
($300,000)/Airport
Cleaning Up Our Neighborhoods
Earmarked Reserves: Oversized Lived-In Vehicles Enforcement Reserve ($1.0 million)/General Fund Capital, Transfers and Reserves Other Important and Ongoing Core Service Work
Measure T Bridge Maintenance Program Staffing
($427,766)/Transportation
Airport Deferred Preventative Maintenance Staffing ($332,337)/Airport Sidewalk Repairs at City-Owned Properties ($250,000)/Transportation Airport FAA Mandate Safety Management System Staffing
($189,819)/Airport
Fire Sprinkler Testing ($180,000)/Airport
Sustainability Program Initiatives ($100,000)/Airport
Cost Reductions/Service Delivery Efficiencies/Funding Shifts/Revenues Our City Forest Office Space
(Effective 2026-2027, -$175,000)/Transportation
Invasive Shot Hole Borer Beetle Management and Community Forest Management Plan (-$250,000)/Transportation
Oversized and Lived-In Vehicle Enforcement (OLIVE) Program and Elimination of Extended Parking Stay (EPS) Contractual Enforcement Program (-$27,878)/Transportation
STRATEGIC SUPPORT CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 24
Cleaning Up Our Neighborhoods
San José 311 Program Support and Staffing ($801,000)/Information Technology
Legal Representation Staffing ($241,000)/City Attorney’s Office Other Important and Ongoing Core Service Work
9-1-1 Dispatch Backup Generator Replacement ($5.0 million)/General Fund Capital, Transfers, Reserves
Hyperconverged Infrastructure Refresh
($2.3 million)/Information Technology
Tech Museum Corroded HVAC Pipes Remediation ($1.0 million)/ General Fund Capital, Transfers, Reserves
Essential Services Reserve ($1.25 million)/General Fund Capital, Transfers, Reserves
Cybersecurity Staffing and Services ($612,000)/Information Technology Center for Performing Arts Chiller Replacement ($600,000)/ General Fund Capital, Transfers, Reserves
Equity Through Data Lead ($302,000)/Information Technology Public Information Manager ($274,000)/Information Technology Performance Measure Management Staffing ($255,000)/City Manager’s Office
Animal Care and Services – Various Improvements ($250,000)/General Fund Capital, Transfers, Reserves
Facility Lighting Replacement ($250,000)/General Fund Capital, Transfers, Reserves
Immigrant Community Support Services ($250,000)/City Manager’s Office
Fleet Vehicle Acquisition and Build Up Staffing ($164,000)/Public Works
STRATEGIC SUPPORT CSA
KEY BUDGET ACTIONS (PARTIAL LIST)
Slide 25
Cost Reductions/Service Delivery Efficiencies/Funding Shifts/Revenues Public Works Department Staffing Plan – Capital Improvement Plan (-$939,000)/Public Works
Transfer to the Vehicle Maintenance and Operations Fund (-$500,000)/General Fund Capital, Transfers, Reserves
Legal Transaction Staffing (-$446,000)/ City Attorney’s Office Electrical Maintenance Staffing (-$416,000)/Public Works SharePoint Project Support Staffing
(-$264,000)/Information Technology
Project Management Staffing
(-$260,000)/Information Technology
Recruitment & Development Staffing
(-$253,000)/Human Resources
Enterprise Resource Planning Project Staffing
(-$241,000)/Information Technology
Disaster Recovery and Grants Management Reorganization
(-$237,000)/Finance
Transfer to the Communications Construction and Conveyance Tax Fund (-$200,000)/General Fund Capital, Transfers, Reserves Unanticipated/Emergency Repair and Maintenance (-$200,000)/General Fund Capital, Transfers, Reserves
Mayor and City Council Offices (-$179,000)/Mayor and City Council Program Performance Audit Staffing (Effective 2026-2027, -$141,000)/City Auditor
RECOMMENDED BUDGET ACTIONS
FEES AND CHARGES ADJUSTMENTS
Slide 26
• Utilities:
– Storm Sewer Service Fee: No fee increase
– Sewer Service and Use Charge Fee: 4% overall revenue
increase
– Recycle Plus Rates: 2% increase for single-family and 2% for multi-family dwellings
– Municipal Water System Rates: revenue increase of 3%
increase (rates will vary by user)
• Development Fee Programs: fee increases of approximately 10% recommended for Fire, Planning, and Public Works.
Building Development fees will not increase.
RECOMMENDED BUDGET ACTIONS
INVESTMENTS NOT MADE AND OTHER RISKS
Slide 27
While the 2025-2026 Proposed Budget contains some very modest investments in deferred capital maintenance and rehabilitation, and only modestly dips into reserve funds, there are risks on the near-term horizon:
• $100s of millions of unfunded capital projects at City facilities • Parks and libraries deferred infrastructure maintenance • Potential revenue loss
• Property Tax ERAF ($9.5 million ongoing at risk, up to $35 million claw back) • Outstanding COVID-19 era FEMA reimbursements ($30 million) • Pullback in federal funding (TBD)
• Unfolding economic impacts (TBD)
• Potential retirement system investment loss (TBD)
RECOMMENDED BUDGET ACTIONS
LIMITED GENERAL PURPOSE RESERVES
Slide 28
BUDGET STUDY SESSIONS
Slide 29
Wednesday, May 7 - 9:00am – 12:00pm
Overview, Community and Economic Development CSA
Thursday, May 8 - 9:30am – 12:00pm
Transportation & Aviation Services CSA, Environmental & Utility Services CSA Monday, May 12 - 9:30am – 5:00pm
Neighborhood Services CSA (incl. Lived-In Vehicles), Public Safety CSA (incl. Responsibility to Shelter), Strategic Support CSA/Appointees (incl. Pay for Performance and City Council Referral Recommendations), Fees and Charges, Capital Program Overview Wednesday, May 14 & Thursday, May 15 - 9:00am – 12pm
Held should additional discussion be required
NEXT STEPS FOR REVIEW, INPUT, AND APPROVAL
Slide 30
May 7th through 15th City Council Budget Study Sessions May 7th through 28th Budget Town Halls
May 13th/June 9th Public Budget Hearings
June 2nd Mayor’s June Budget Message Released
June 10th Council Review/Approval of Mayor’s June Budget Message, Proposed Budget, and Measure E Spending Allocations
June 17th Adoption of the 2025-2026 Budget and Fees and Charges 2025-2026 PROPOSED OPERATING
BUDGET OVERVIEW
Jim Shannon
Budget Director
Bonny Duong
Assistant Budget Director
Claudia Chang
Deputy Budget Director
Selena Ubando
Financial Status Coordinator
Bryce Ball
Operating Budget Coordinator
William Yu
Operating Budget Coordinator
Jennifer Tell
Capital Budget Coordinator
May 7, 2025
Blage Zelalich, Deputy Director
Office of Economic Development + Cultural Affairs
FY25/26
Economic
Context
A Look at the National Economy
California’s Economic Landscape
What’s Happening at the Local Level
The Road Ahead
GDP and Consumer Spending
Trade Policies
Jobs and Unemployment
Inflation and Interest Rates
A Look at the National Economy
Strained Foreign Relations
Consumer Confidence
“Vibecession” Phenomenon
Trickle Down Concern of Uncertainty
A Look at the National Economy
California’s Economic Landscape
Trade and Tariffs
Population and
Labor Market
Housing Affordability/Cost of Living
Tech Sector Volatility
Climate Risks
What’s Happening at the Local Level
UnemploymentReal Estate
Supply ChainSales Tax
Access to Capital
Cost of Doing Business
Back-to-Office Barometer
Data: Kastle Systems
Passenger Volume @ Mineta San José International
202
1 202
0 2022
Data: Airport
San José Hotel Market: Still in Recovery
Data: STR/Costar
Occupancy Rate, San José Hotels, 2020-2025 YTD
City Budget Drivers: Sales Tax
Sales Tax: Facing Headwinds
Data: Avenu Insights
City Budget Drivers: Commercial Real
Estate, Development, Investment and
Housing
Commercial Market: Office Sluggish, Industrial Strongest 2012
Source: CoStar Realty Information
San José Vacancy Rates for Office, Flex, Retail, Industrial, 2020-2025
Growing Business in San José
CRE Property Sales have Declined Dramatically since 2022 2012 2013 2014
Source: CoStar Realty Information
Commercial Property Sales Volume, San José, 2015-2025 YTD
San José Development: Slowing Starts Following 2021
Source: CoStar Realty Information
San José Office, R&D, and Industrial Starts 2015-2025 YTD Square Footage
2012 2013 2014 2015
Incorporated City Land Area
37.3%
49%
13.7%
Employment
Residential
Public, Open Space, Other
Apartment Availability and Asking Rents
Source: CoStar Realty Information
Residential Sale Values
Source: Santa Clara County Association of Realtors
Affordable residential construction surged
2012
Source: City of San Jose
Affordable Residential Building Permits (units)
Market-rate residential construction faces headwinds
2012
Source: City of San Jose
Market Rate Residential Building Permits (units)
2,248
717
1,081
318
1,098
404
30 2019 2020 2021 2022 2023 2024 2025 Q1
Economic Context: Employment and
Occupations
Economic Context: Employment and
Occupations
Year-over-Year Jobs
Information
-1,900
Private Education
Services
+ 1,300
Construction
- 2,400
Some
sectors have
gained
jobs…
Data is from EDD April 2025 and is for San Jose MSA
Government
+1,800
Health care &
Social Assistance
+7,700
…but others
have lost
Manufacturing
- 4,200
Professional and
Business Services
- 6,200
Year-over-Year Jobs
Information
-1,900
Private Education
Services
+ 1,300
Construction
- 2,400
Some
sectors have
gained
jobs…
Data is from EDD April 2025 and is for San Jose MSA
Government
+1,800
Health care &
Social Assistance
+7,700
…but others
have lost
Manufacturing
- 4,200
Professional and
Business Services
- 6,200
The Road Ahead
• Managing the effects of uncertainty
• More difficult to facilitate economic prosperity for all • Job and revenue creation are key
• Responding to population change
• Increased importance of public-private partnerships
Blage Zelalich
Deputy Director, Business Development
Office of Economic Development and Cultural Affairs
[email protected]
Chris Arkley
Nathan Donato-Weinstein
Vic Farlie
Doug Moody
Noelle Rabago
Jeff Ruster
Minh Tran
Lawrence Thoo
Carlos Velasquez
Acknowledgements