San Jose looks to visitors to help fill budget gaps through hotel tax measure

Facing a $56 million budget shortfall, San Jose is asking voters to approve a hotel tax hike on the June 2 primary ballot to bridge an estimated $10 million of the gap.

If approved, Measure A — which requires support from more than half of voters to pass — would raise San Jose’s hotel tax from 10% to 12% starting Oct. 1. The tax would be added directly to room bills and apply to more than 80 hotel properties citywide, as well as over 2,100 active Airbnb and Vrbo listings.

City officials are pitching the measure, officially known as the transient occupancy tax, as a way to raise money for critical public services without asking residents to pay more. By shifting the cost to visitors, the city hopes to avoid another fee hike on locals who have already approved several recent measures.

Critics, however, warn the increase will squeeze hotel owners and make San Jose less competitive for the tech conferences and business travelers that drive the local economy.

Once existing fees are included, the total tax on a night's stay could hit 17.1% if Measure A is approved, nearing the high rates guests already pay in neighboring Santa Clara and San Francisco. Hotels are required to remit the tax revenue to the city on a monthly or quarterly basis.

Under existing city rules, half of the hotel tax is intended to pay for the convention center, tourism marketing and local arts programs. According to the ballot measure, the remaining half would see an increase from its current 4% to 6%, which would flow into the general fund, where the City Council has the discretion to spend it on any municipal service.

City officials are looking to leverage visitor traffic to shore up San Jose’s finances. They hope Measure A will expand the revenue potential of events like the Nvidia 2026 GTC conference in March, which drew thousands of visitors, triggered a spike in hotel bookings and filled downtown cafes, restaurants and bars.

Mayor Matt Mahan’s March budget memo highlighted the city’s precarious financial position as the driving force behind the proposed hotel tax.

“Our property and sales tax revenue growth is slowing, just as we continue to have rising costs in labor and other core services we've committed to,” Mahan wrote.

To manage those rising costs last year, San Jose partially froze hiring and reduced some city services.

Mahan, who is running for governor, said in his official argument for Measure A that the revenue priorities include faster police, fire, and emergency response, as well as cleaning graffiti and maintaining parks.

“San Jose has long delivered services with fewer resources per capita than nearly any major city in California,” Mahan said. “As costs rise and demands increase, we must ensure we have the resources to keep our neighborhoods safe, clean and welcoming.”

When the measure was introduced in February, Krista De La Torre, a representative for the International Federation of Professional and Technical Engineers Local 21, said it was vital as federal funding remains uncertain.

“When Washington is chaotic, it is even more important for local leaders to act with clarity and foresight,” De La Torre said. “This is that moment.”

Despite broad support from City Council, the measure drew skepticism from some arts advocates. Because the city did not lock in strict legal rules for spending the new funds, leaders could technically divert the cash from intended areas like the arts to other priorities later on.

Peter Allen of San Jose Arts Advocates noted that while arts programs are often overlooked, they play a crucial role in public safety. Pointing to a shooting last year at Valley Fair on Black Friday, Allen argued that cultural programs help youth stay out of trouble by providing a sense of community.

“That’s because youth often lack belonging, especially in communities of color and low-income communities,” Allen said. “The arts, culture and the entertainment economy create belonging.”

The San Jose Chamber of Commerce got on board with the tax, though its push to lock in a promise that the city would put the new money back into the sports and entertainment businesses that help earn it didn’t make the final cut.

“The concern was that the proposal pulls away a mechanism to reinvest and promote their business without an alternative,”said San Jose Chamber President and CEO Leah Toeniskoetter said. “What we're asking the city is to find ways to work with the chamber and other partners… to find ways to reinvest and pull those levers that will bring growth to San Jose’s economy.”

The most vocal opposition comes from the Silicon Valley Taxpayers Association, a fiscal watchdog group that evaluates local tax policy. Omar Chatty, a board member and spokesperson for the group, told this news organization that while costs aren't passed to residents, the city risks losing its “competitive advantage” in the convention market.

“If we're par with everybody else, we lose our advantage,” Chatty said, referring to neighboring cities such as Santa Clara, Mountain View and Palo Alto. “We want to have a competitive advantage as San Jose grows and prospers and we continue to be the heart of Silicon Valley.”

Chatty maintained that the city should prioritize internal audits over new taxes. He pointed to what he called “excessive” spending in San Jose’s transportation department — specifically on projects like right-turn safety islands — as evidence that the city can find savings within its current budget.

“Let’s get some more conventions in the city,” Chatty said. “But cost control is really serious. Stop spending money where you don’t have to spend it.”

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This story was originally published May 1, 2026 at 5:42 AM.