Getting your
Trinity Audioplayer ready...Already facing financial uncertainties, San Jose could lose millions in vital tax revenue if a statewide initiative on the November ballot succeeds in changing voting thresholds for local tax measures, city officials warned this week.
The City Council’s Rules and Open Government Committee on Wednesday unanimously recommended the city officially oppose the initiative. Highlighting a profound threat to San Jose’s housing and homelessness programs, the committee forwarded the memo to the full council for discussion next week, noting the proposal could destabilize an already precarious city budget.
During the meeting, Councilmember David Cohen warned that the initiative “makes it almost impossible” for local governments to raise revenue, noting that it would retroactively strip away the city’s right to collect a voter-approved real estate transfer tax.
“It would, within a year, invalidate Measure E, which is a huge hit to our budget,” Cohen said.
If passed, the proposal – officially titled “Limits Ability of Voters to Raise Revenues for Local Government Services” – would directly threaten between $55 million and $70 million in annual revenue tied to Measure E. The local policy – a one-time real estate transfer tax levied upon the sale of properties valued at $2 million or more – was approved by San Jose voters in 2020 with just over 53% of the vote. According to data from the city’s housing department, Measure E funds are currently used to build new affordable housing for moderate- to extremely low-income households, with the remaining revenue allocated to homelessness prevention, rental assistance, legal services, gender-based violence programs, and shelter construction and operations.
City documents show the initiative would also ban another San Jose property tax — eliminating upward of $45 million in projected revenue that currently helps support neighborhood parks, public libraries, fire stations, and city service yards, among other public resources
According to the California Secretary of State, the initiative qualified for the ballot on April 21 with 1.3 million signatures. It has yet to receive an official proposition title.
Although the state initiative would force future local taxes to clear a two-thirds supermajority, the measure itself requires only a simple statewide majority to become law.
Local tax measures can typically bypass California’s strict two-thirds supermajority requirement – established by voters in 1978 under Proposition 13 – in two ways. Under current state law, special taxes proposed through citizen-led petitions only require a simple majority to pass. Measures can also be placed on the ballot by a city council – like San Jose’s Measure E – and do not require supermajority support if they are structured as general taxes, meaning the revenue goes into a city’s general fund rather than legally locked into a specific program.
While the difference between special and general taxes is usually defined by where the money goes, the state initiative – placed on the November 2026 general election ballot – also addresses where the money comes from. The measure forces all citizen-led special taxes to clear a two-thirds voter threshold while also completely banning charter cities from keeping local real estate transfer taxes above state limits. Supporters of the initiative say the proposal protects Proposition 13 – which capped property taxes and established the state’s two-thirds vote requirement – and closes “court-created loopholes” that make it easier for local governments to raise sales, parcel, and real estate taxes.
Backed by a coalition of business, taxpayer, and real estate organizations, the measure’s prominent supporters include the Howard Jarvis Taxpayers Association, the California Business Roundtable, the Apartment Association of Greater Los Angeles, and Reform California.
While the measure impacts voter-proposed special taxes across the state, it applies a restrictive, retroactive layer to local real estate taxes that exceed state caps. This is the core concern for San Jose officials – as the city, consistently ranked among the most unaffordable cities in the nation, faces losing a massive chunk, if not all, of the revenue generated by Measure E. This loss would “decimate” the city’s efforts to build affordable housing and address homelessness, according to the memo authored by Councilmembers Cohen, Pamela Campos, Rosemary Kamei, and Anthony Tordillos. The memo’s authors warned against further hits to city funds, stating, “the city cannot fill the gap following the elimination of Measure E.”
“California voters have repeatedly entrusted local communities to determine how to fund services and infrastructure that meet their unique needs,” the memo read. “By retroactively overturning voter-approved measures and imposing additional barriers to future local revenue decisions, the initiative would weaken the ability of San Jose to respond to local needs and maintain essential public services.”
This proposal arrives at a delicate moment for San Jose’s finances. The committee’s move comes just a day after the city approved a $5.5 billion budget that closed an immediate $50 million shortfall through a mix of cost-saving measures, reliance on reserve funds, and targeted program cuts to housing, homelessness, and public safety.
While the budget is technically balanced, maintains funding for most city services, and avoids layoffs among an already lean staff, the fiscal outlook remains fragile as local revenues slow due to cooling economic conditions and rising inflation. Mayor Matt Mahan earlier this month highlighted three threats to the city’s financial stability in his June budget message. Originally totaling $75 million in potential losses over the next several years, those risks included changing state regulations over cardroom games, an upcoming state audit on how the county disburses real estate taxes to cities, and a potential $10 million shortfall if Measure A – the local general hotel tax – failed to pass.
Because voters ultimately approved Measure A, that looming threat now sits closer to $65 million. This initiative poses only the latest and potentially devastating hit to the city’s coffers, officials noted.