City of San Jose Construction Taxes

City of San Jose Construction Taxes

San Jose has four construction-related taxes, but for the purposes of this discussion only two are pertinent: The Building and Structures Construction Tax, and the Commercial- Residential-Mobilehome Park Building Tax (also known as the CRMP Tax). These two taxes represent a sizeable proportion of the cost of many building permits issued by the City of San Jose and fund the majority of the Traffic Capital Improvement Program, that includes projects and programs such as pedestrian and traffic safety, pavement maintenance, traffic signals, and grant project required local matches. The remaining elements of project permitting costs can be attributed to administration, plan check and inspection fees, which are 100% cost-recovery, and Impact Fees (parks, traffic, affordable housing etc.).

City Identified Problems:

  • Root cause of the problem lies with outdated ordinance enacted in the 1970’s that narrowly defines “Industrial” and “Commercial” uses.
  • The way that buildings are being used now, and the way city zoning code defines them, is different than it was 10, 20 or 30 years ago.
  • Standard operating procedure has always been to consider anything that is not explicitly “Industrial” (1%), as “Commercial” (4.5%).
  • Construction taxes are applicable to all building permits including both new construction and ongoing tenant improvements.
  • Construction taxes are collected against the valuation of the project derived from the higher of either the International Code Council’s building valuation data table or the submitted valuation estimate by the project proponent (not market value).
  • Building Department Permit Specialists administer the process/advise applicants on their use.

Why now:

  • Current suspension for “office, research and development” ends March 31, 2017

City Staff Goal:

  1. Create Implementation Clarity and Consistency – Clear definitions and consistent treatment to aid staff and development community, minimize required refunds
  2. Maintain funds for transportation infrastructure – Ensure any changes do not to impact transportation infrastructure funding
  3. Limit the Impact to Development – Avoid impacting to San Jose’s attractiveness to driving industry companies

Recommendation:

  • Create a new suspension from the commercial rate (4.5%) for all “office uses” reducing to 2.5%

SVO POSITION: N/A

STATUS: Going to San Jose City Council April 4

Questions? Please contact Victor Cuauhtémoc Gomez, Sr. Director of Public Policy at victorg@thesvo.com

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