Measure E reallocation would prioritize interim sheltering and supportive services; council strategy would preserve 10% for prevention

San Jose budget staff told the City Council at a May 7 study session that the proposed FY25–26 budget would reallocate most Measure E revenue toward interim sheltering and supportive services, while preserving a 10 percent set‑aside for homelessness prevention.

Housing staff and the budget office described a policy recommendation to increase the share of Measure E devoted to sheltering and services from a 15 percent baseline to a sliding scale up to 90 percent (the proposal staff presented sets the ongoing allocation at 90 percent for sheltering/supportive services). Officials emphasized the change reflects council direction to prioritize immediate shelter operations and outreach.

Eric Soloman, Housing Director, said staff project Measure E revenues of about $55 million in FY25–26 and about $60 million in FY26–27. Under the administration’s recommended allocation, $39.2 million of Measure E would be repurposed in FY25–26 (rising to $42.8 million the following year) to support interim housing operations, outreach and supportive services. The presentation showed a planned interim‑housing portfolio allocation of $25 million in FY25–26, increasing to about $39.25 million in the following fiscal year.

Soloman and budget staff said Measure E proceeds would fund outreach, sanitation and supportive services primarily along waterways, and that Measure E would not be used for abatement work. The presentation also noted a one‑time shift of some Beautify San Jose encampment management services into Measure E for FY25–26 and the temporary realignment of some general fund rapid‑rehousing support.

Housing staff described a broader funding picture for affordable housing production that does not rely solely on Measure E. The administration estimates roughly $60 million of notice‑of‑funding availability (NOFA) resources are available from prior‑year Measure E and other housing funds, and outlined potential long‑range financing approaches — including a housing bond, refinancing existing city assets and master‑leasing strategies — that staff estimate could unlock about $100 million in additional capacity over time.

Budget director Jim Shannon cautioned that Measure E revenue is variable year to year. He said the policy approach adopted earlier by council directs staff to issue NOFAs in years when revenues exceed base needs; staff pointed to a prior year pool of loan repayments and other housing funds that together form the next NOFA resource pool. Shannon also warned of revenue risks: educational revenue augmentation fund (ERAF) receipts have shifted and could be subject to a state‑level dispute and potential clawback; FEMA reimbursements are uncertain; and broader federal and economic actions could further affect local revenue.

On programmatic protections, staff said 10 percent of Measure E would remain dedicated to homelessness prevention. Housing staff said this ongoing prevention set‑aside would expand the existing prevention system (a county collaboration) and that current prevention spending in the current fiscal year totaled $7.5 million; under the proposed allocation, ongoing prevention funding would be slightly higher in FY25–26.

Council members asked staff to confirm that reallocating Measure E does not yet represent a final council decision. Several members noted the policy change requires formal council action and that funding allocations could be revisited during the formal budget process. Officials said the recommended reallocation follows previously adopted March budget direction but can be revised by the council during the upcoming hearings and adoption steps.

Soloman and other housing staff said the city would continue to pursue affordable housing financing strategies and still plan to issue NOFAs when revenue conditions allow. The presentation also flagged ongoing efforts to align capital stacks with state and county partners to move affordable projects into construction, and said a portfolio of projects is positioned to use the capital once fully aligned.