# Even with hotel tax passing, mayor warns of remaining financial threats to San Jose > Source: > Published: 2026-06-05 21:29:28+00:00 **Getting your** [Trinity Audio](//trinityaudio.ai)player ready...Despite voters appearing to show overwhelming support for the [San Jose hotel tax measure at the polls in the primaries](https://www.mercurynews.com/2026/06/02/san-jose-measure-a-hotel-tax-election-results/), the city’s financial worries are far from over. Apart from its $50 million budget deficit, the mayor has identified roughly $65 million in other potential financial losses that could impact the city’s budget in the coming years. In his newly released June budget message, San Jose Mayor Matt Mahan identified two other key threats to the city’s stability and financial future — tens of millions in potential losses from card rooms due to changing state regulations, as well as a pending state audit of Santa Clara County’s method of collecting and disbursing property tax revenues to local governments, which could force San Jose to pay a massive refund to the state. “Collectively these three items could result in a net loss of $75 million,” Mahan said in his memo released a day before the primary election, citing a figure that included the potential failure to pass the transient occupancy tax. “Together, those risks could create significant additional pressure on the General Fund, underscoring the need for continued fiscal restraint and responsible budgeting.” However, as of Thursday afternoon, 66.15% of voters supported the measure, with 23.93% of ballots across the county counted so far. Even with the likelihood of the measure passing, that is still a potential $65 million loss that could hit the city’s budget not only this year, but in future budgets as well. Although the potential losses are largely due to policy changes and processes beyond the city’s control, the impact would be no less consequential. Last month, [a San Francisco judge temporarily stopped](https://www.mercurynews.com/2026/03/11/california-cardrooms-file-lawsuits-to-keep-blackjack-ahead-of-rule-change/) the state from enforcing new rules eliminating blackjack-style and other card games. However, with the uncertainty of what happens after the next legal review later this month, the regulations could still result in a $25 million loss for the city. The changes would directly impact San Jose’s two licensed card rooms: Casino M8trix and Bay 101. Another potential financial hit involves the Educational Revenue Augmentation Fund. Santa Clara County collects local property tax revenues and disburses a portion to support schools, with the excess returned to local governments like San Jose. The California State Controller is expected to perform an audit that challenges the county’s way of calculating and collecting those property taxes. “The County has preemptively filed litigation to dispute this audit but there is little certainty regarding the timing of a resolution,” Mahan said. Depending on the outcome of that litigation, the city could lose $9 to $10 million annually on an ongoing basis and could be subject to a one-time payback of $35 to $39 million. Should these potential losses materialize, the city would be forced to tap its cash reserves. However, city officials estimate that only $25 million will remain in the budget stabilization reserve after the current budget is adopted. Those funds would not be enough to cover the entire amount, and “necessarily would require deeper reductions to community-facing programs that would be reduced in scope or eliminated.” Beyond the reductions already planned, the memo did not identify what programs would be impacted should the new threats materialize. [To fill the existing $50.3 million budget hole](https://www.mercurynews.com/2026/05/06/san-jose-budget-deficit-hotel-tax-cuts/), the city has already identified a mix of program, service and staffing reductions. The city also expects a total of $19.1 million from new revenue sources — including the anticipated hotel tax revenues, fund transfers, adjusted fees, improved revenue collections, and new grant revenue. Among the expected cuts is a net loss of 85 city positions, a majority of which are vacant. The memo noted that displaced workers will “have opportunities to be reassigned.” The proposed budget also includes $5.4 million in near-term cuts to homelessness-related programs, including suspending operations at the Taylor Street Safe Sleeping site starting in January. It proposes reducing general fund contributions to interim housing, which would save $1.25 million this year. It would also scale back community events, such as Viva Calle, reducing the popular open-streets event from three to two. Other expected cuts include delays in opening police and fire station facilities, saving the city millions in the near term, and [closing public access to the King Library California Room](https://www.mercurynews.com/2026/05/06/san-jose-budget-california-room-library-pizarro/) to save nearly $400,000. According to the mayor’s office, the budget message focuses on improving public safety, reducing unsheltered homelessness, cleaning and beautifying neighborhoods, growing San Jose’s economy, and supporting immigrant families through maintaining $500,000 in immigrant services funding and “creating an additional one-time $500,000 reserve to respond if immigration enforcement activity escalates.” “San Jose families are stretching every dollar in a tough economy, and City Hall should be held to the same standard,” Mahan said in a statement. “This balanced, responsible budget closes our projected shortfall while still making meaningful progress on the basics.” The public will have one of its final chances to weigh in on those priorities during a June 8 hearing, before the council votes to approve the budget on June 9. Its final adoption is expected by June 16.