San Jose council adopts 2024–25 midyear budget adjustments amid sales-tax shortfall; vote 10-1

San Jose City Council adopted a set of midyear budget adjustments for fiscal 2024–25 on Feb. 11, approving staff's recommended technical changes and one-time uses of reserves to cover emerging costs after staff reported a projected $25 million to $30 million shortfall in sales-tax revenue.

The midyear review presented by Jim Shannon of the city manager's budget office said revenues are generally tracking as expected, but sales-tax receipts have underperformed. Shannon said the city tentatively projects a $25 million to $30 million shortfall in sales-tax revenue and currently expects roughly $10 million in expenditure savings for the year that will help offset the gap. "We expect that figure to grow," he said of the savings.

The report recommended recognizing several grants and reimbursements, making targeted expenditure adjustments and using one-time reserves to cover unavoidable costs. Major clarifying figures presented by staff included a newly recognized $9 million state reimbursement for the Cherry EIH project; about $4.5 million in additional workers' compensation payments; nearly $1 million of increased electricity costs for street lights and signals; a $570,000 correction to fund an ongoing tow contract; and a proposed drawdown of the budget stabilization reserve from $61 million to about $53 million. Staff also identified $1.25 million of culture-facilities capital maintenance funds as a source of one-time savings to help balance the midyear package.

Public speakers urged the council to avoid cuts to services and layoffs. "Layoffs are not a solution. The city has the funds," said Riley Knight, a supervising environmental service specialist and member of IFPTE 21. Christa Dela Torre, a representative of IFPTE Local 21, said other revenue sources such as transient occupancy tax, business tax and utility tax were growing and argued that combined expenditure savings and higher-than-expected revenues should help cover the sales-tax shortfall. "We must prioritize collecting critical revenue so that unnecessary cuts to public service don't happen, including layoffs," Dela Torre said.

Council members pressed staff for additional context on reserves and year-end balances. Shannon and other budget staff explained the distinctions among the budget stabilization reserve, contingency reserve and claims reserves and said city council policy aims for the three reserves combined to equal 10% of general-fund operating expenditures; the city currently stands below that target.

A separate council discussion focused briefly on History Park and a proposed contribution to move and preserve a historic house. Councilmember (surname recorded in transcript as McMahon) proposed holding $150,000 of the insurance proceeds from the History Park fire as an incentive for History San Jose's fundraising to relocate the house; that motion was withdrawn after colleagues said it would signal city support before History San Jose had exhausted private fundraising. Staff confirmed the insurance proceeds were already included in the midyear balancing strategy.

After discussion, the council voted 10–1 to adopt the staff recommendation on the midyear budget review. Councilmember Kamay cast the lone no vote. The meeting record shows the motion was moved and seconded by council members not identified by name in the transcript excerpts; the vote tally reported by the clerk was 10 yes, 1 no.