By practicing fiscal responsibility, Mayor Reed has worked to preserve core city services when faced with chronic budget deficits.
Understanding the City of San José's Budget
As the nation’s 10th largest city with a population of nearly one million residents, the City of San José has a budget of about $2.8 billion. The budget is funded by a wide array of taxes, fees, fines, penalties, bond proceeds, grants and other government agencies. Any money collected by the City is deposited into one of 113 individual funds, each with a defined purpose for how that money is spent. Together, these funds pay for all of the city services and programs that we use and count on in San José, including the police department, garbage collection, neighborhood services and special projects.
By far, the largest single recipient of city revenue is the General Fund, which pays for most day-to-day operations. The General Fund makes up approximately 27% of San José’s entire budget and totals approximately $906 million for the 2011-2012 fiscal year. Discussion on the city's budget and structural budget deficit typically centers around the General Fund.
Other revenue collected by the city is dedicated to a specific purpose and deposited into one of the city’s 112 remaining funds, which can be broadly categorized as either Capital Funds or Special Purpose Funds. Money in these funds is restricted and must be spent in accordance with the fund’s intended use. You can find a listing of all funds in the San José Budgeted Funds Guide.
Learn more about the various funds that make up the City of San José budget.
The City’s General Fund receives its revenue from a wide variety of sources. Based on the FY 2011-2012 Adopted Budget, the breakdown of General Fund revenue sources includes:
Property Tax: a portion of the state tax levied on land, buildings, and other personal property (26%)
Sales Tax:
a portion of the state tax levied on merchandise and other purchases (19%)
Utility Taxes & Franchise Fees:
charged to utilities and users of the utilities, like PG&E (17%)
Licenses, Permits & Fees: i.e. building permits, safety-related licenses, fines, forfeitures, and penalties (9%)
Other Agencies: funding from various levels of government (7%)
Transfers & Reimbursements: money can be moved from other city funds in certain circumstances, like reimbursements for overhead and services (9%)
Other Sources: i.e. Transient Occupancy Tax, Telephone Tax, Business Tax, money and property, departmental charges (13%)
Note: The breakdown of General Fund sources (and the corresponding percentages) does not take into account the starting Fund Balance that is carried over from the previous fiscal year.
While sales and property taxes are major sources of funding for the city, it is important to note thatSan José only receives a small percentage of the overall taxes levied by the State of California.
For instance:
Property Tax: San José only receives about 0.09% of the property’s assessed value. A San José resident who owns a home assessed at $450,000 pays about $4,500 in annual property tax (1%). But San José only receives about $405.
Sales Tax: San José only receives about 1% of the total purchase price. If you buy a new computer in San José that costs $1,000, you pay $82.50 in sales tax (8.25%). But San José only receives $10.
Furthermore, many of these revenue sources – including sales taxes, gasoline taxes, vehicle license fees, and others - pass through the state coffers before being disbursed to the City. This has allowed the State of California to take (or hold onto) hundreds of millions of dollars in revenues due to the City of San José over the past decade.
The General Fund is the primary funding source for many of the core city services that San José residents use every day. Money from the General Fund also supports city-wide expenses, shores up City reserves, and can be invested in various other enterprise, capital and special revenue funds.
Based on the FY 2011-2012 Adopted Budget, General Fund expenses can be broken down into the following uses:
Public Safety: providing for the
safety of the public through crime and fire
prevention and suppression efforts (50%)
Community Services: providing
programs that affect citizens on a daily basis (11%)
Capital Maintenance: providing
for the construction and maintenance of the City's infrastructure (6%)
General Government: providing
the City's overall management and administrative
functions (8%)
Non-Departmental: i.e. city-wide expenses, transfers to other funds and
payments into reserves (25%)
Half of all General Fund expenditures are allocated for public safety services. However, when you exclude non-discretionary expenditures – such as annual retirement contributions, grants, debt service, insurance and workers’ compensation – public safety accounts for 72% of the remaining General Fund expenses.
Listed to the right is a breakdown of General Fund expenses by department.
Within all departments, employee costs make up a large majority of General Fund expenses.
Personnel costs, which include employee salary and benefits, total approximately 66% of the General Fund! Read about growing employee costs.
General Fund Expenditures - Key Departments FY 2011-2012 Adopted Operating Budget
The City of San José has more than 40 capital funds, totaling $1.064 billion in the FY 2011-2012 Adopted Budget. Capital funds are used to manage money that is designated for capital projects and infrastructure improvements. These funds often come from bond proceeds, grants, and developer and usage fees. San José has capital funds dedicated to improvements for facilities and infrastructure like the airport, parks, libraries, community centers, water pollution control plant, and sanitary/storm sewers.
Example: Branch Libraries Bond Projects Fund
Purpose of the fund: Accounts for proceeds from the $212 million Library bond measure approved by voters in November 2000 to improve existing branch libraries and build new facilities.
Source of funds: Sale of bonds, interest earnings
Restrictions: Moneys in this fund, including interest, may not be transferred to other funds; they can only be used for the purposes described in the San José Neighborhood Libraries Bond Measure (Measure O).
Other examples of capital funds include:
Airport Capital Improvement Fund - for Airport equipment and capital improvements.
Parks and Recreation Bond Projects Fund - for park and recreation improvements.
Neighborhood Security Act Bond Fund - to build and improve public safety facilities (i.e. fire stations).
Special purpose funds, which together account for $1.411 billion in the FY 2011-2012 Adopted Budget, include enterprise funds and special revenue funds. Money from these types of funds can only be used for the fund's defined purpose.
Enterprise funds are used for city operations where the intent is that all expenses are financed and recovered primarily through user charges.
Special Revenue funds are used to account for revenues derived from specific taxes or other direct revenue sources.
Example: Sewer Service and Use Charge Fund (Enterprise Fund)
Purpose of the fund: Accounts for the financing, construction, operation, and maintenance of the City’s sewage collection system and for San José’s share of the San José/Santa Clara Water Pollution Control Plant.
Source of funds: Fees levied and paid by residential, commercial, and industrial users of the sanitary sewer system; interest earnings.
Restrictions: Funds may only be used for uses specified in the San José Municipal Code 15.12.450, including: the acquisition, construction, reconstruction, maintenance and operation of the sanitary sewer system of the City of San José; to repay principal and interest bonds; and to repay federal or state loans or advances.
Other examples of special purpose funds include:
Airport Maintenance and Operation Fund(Enterprise Fund) - for all revenues and expenditures related to airport operation.
Housing Trust Fund(Special Revenue Fund) - for money dedicated to addressing low-income housing needs.
Integrated Waste Management Fund(Special Revenue Fund) - for expenditures and revenues related to recycling and garbage collection.
Office of Mayor Chuck Reed
200 East Santa Clara Street San José, CA 95113
tel. (408) 535-4800 fax (408) 292-6422 mayoremail@sanjoseca.gov
The City of San Jose is committed to open and honest government and strives to consistently meet the community’s expectations by providing excellent service, in a positive and timely manner, and in the full view of the public.
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