Almaden Resident

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General fund aided by city program, but SJ transit funds hurt

By Monica Heger

A "special tenant improvement" program designed to attract innovative businesses to San Jose has been extended past its October expiration date to April 30, 2008.

The program, unanimously approved by the San Jose City Council on Oct. 24, suspends the collection of building and structure construction taxes for tenant improvements to research and development, office and industrial spaces.

The program was started in 2002 and since its inception has generated and maintained 9,750 jobs in San Jose. The program has also been responsible for filling 6.1 million square feet of vacant space. In June, San Jose still had 18 million square feet of vacant space.

The program has also been a revenue generator for the city. During the program's first 18 months, the city gained an additional $46,000 in revenue through the collection of property, utility and sales taxes from the companies that moved into the spaces. Each subsequent 18-month period has shown an increase in revenue, which has gone into the city's general fund.

But while the general fund is seeing an increase in revenue, the Department of Transportation is seeing a decrease. While property, utility and sales taxes go into the general fund, construction taxes go to transportation. The Department of Transportation is losing funds due to the suspension of the construction taxes.

The continuation of the special tenants improvement program is estimated to cost the Department of Transportation an additional $593,000. This is on top of a $370 million backlog of unfunded transportation projects.

The council was concerned about the reduction in funding for transportation improvements and directed city staff to look for additional ways to restore the lost revenue.

"We need to make sure money goes back into the pot it's taken out of," vice mayor Cindy Chavez said.