SAN JOSE — In one of the most contentious votes of the year, the city’s elected leaders this week sparred over imposing a fee on new commercial development to fund affordable housing projects as San Jose’s sky-rocketing rents hit new highs.

And while political insiders this year applauded a harmonious San Jose City Council on most issues, the split 7-4 vote Tuesday to defeat the fee on business revealed the factious labor versus business divide brimming just below the surface.

With the battle lines drawn, the vote also carved out Mayor Sam Liccardo’s coalition — his much-needed council majority — at the end of a whirlwind first year in office.

Aerial view of downtown San Jose, September 2015, with SAP Center in the foreground. A major office, retail and housing project has been proposed for more

Aerial view of downtown San Jose, September 2015, with SAP Center in the foreground. A major office, retail and housing project has been proposed for more than eight acres between the arena and Highway 87. (Karl Mondon, Bay Area News Group) ( (Karl Mondon/Bay Area News Group )

“I think he’s used this first year very successfully to come up with workable majorities again and again, even though on paper the council was split,” said Larry Gerston, political science professor emeritus at San Jose State.

At the center of the debate was approving two studies to explore charging a fee to new commercial development — industrial, office, hotel, retail and research and development facilities — to help build affordable housing, similar to an impact fee approved last year for new residential development.

But Liccardo lined up support from business-friendly council allies to shelf the idea until San Jose increases its jobs-per-employed resident ratio. For every 100 employed San Jose residents, there are only 84 jobs — one of the worst jobs-housing imbalance in the region.


Liccardo suggested holding off on the study until San Jose reaches a ratio of one job per employed resident. But critics say the city won’t ever hit that goal — at least not anytime soon. At its highest, San Jose in 2000 reached 98 jobs per 100 employed residents.

“The issue here for me is I don’t think we’re going to get there,” said Councilman Raul Peralez. “Accepting that language is kind of saying in my immediate lifetime we won’t be studying this.”

But another statistic is equally painful: San Jose rents increased 11.5 percent last year, making it the third-most expensive place to rent in America. Rents have risen over 45 percent in the past four years.

Councilman Donald Rocha said he’s disappointed that San Jose — a city that once paved the way on efforts like this — now puts “corporate profits over people.” Rocha and Peralez, along with council members Magdalena Carrasco and Ash Kalra, voted against postponing the study.

“To suggest that we’re scaring off all these corporations because of a commercial fee is a bit of a scare tactic,” Rocha said during the meeting. “You can scare me all you want, but I really miss the San Jose when people packed these chambers and thanked us for being a leader.”

Liccardo fought back by highlighting a divide between the north and south Bay Area cities. In the last five years, Mountain View built 1.8 million square feet of new commercial development, Sunnyvale had 4 million, Santa Clara had 3.6 million while San Jose lagged behind with 1.5 million square feet, establishing itself as a “bedroom community.”

People sleep here but work elsewhere — draining the city of tax revenue needed to fund services like police, parks and libraries. “We just aren’t seeing the shovels hit the ground yet,” Liccardo said Tuesday. “We continue to be mired in serious fiscal challenges that have their roots in jobs crisis.”

Liccardo, who voted in November 2014 to explore a commercial fee, eventually compromised on waiting to reach the 1:1 ratio, but said he still wants to see demonstrated job growth before studying the fee. Other Bay Area cities such as Cupertino, Mountain View, Palo Alto, and Sunnyvale have commercial fees.

The controversial vote sent mixed messages to advocates about the City Council’s stance on social issues like affordable housing and homelessness — especially after the council ranked housing as its top priority during the same meeting Tuesday.

On one hand, the council this year has supported measures declaring a shelter crisis, using churches as a temporary shelter and converting motels into homeless housing. But, on the other, they’ve squabbled over creating sanctioned homeless encampments, raising minimum wage and strengthening rent control laws.

And even with the $17-per-square-foot residential fee approved last year on new market-rate housing, it excludes downtown high-rises for five years — the hub of growth in recent years.

“The message that is coming out is that they do care about affordable housing and homeless, but not enough,” said Robert Aguirre, a founder of the advocacy group H.O.M.E.L.E.S.S. “When it comes down to it, they’re not willing to make the choice that will help people.”

Follow Ramona Giwargis at Twitter.com/ramonagiwargis or contact her at 408-920-5705.