San Jose and Santa Clara County’s Five Biggest Gov't Failures

The problems we see every day in our cities are not Acts of Nature. They are the predicted and avoidable results of generations of flawed decision making from our local political representatives, says Randall O'Toole of the Thoreau Institute. He breaks down the five most notable government blunders over the last half-century and finds a troubling linking theme: big government hubris and arrogance. An Opportunity Now exclusive.

Santa Clara County is one of the wealthiest counties in the United States. Its gross domestic product of $340 billion is more than all but four other counties and all but sixteen states. That’s pretty good for what was little more than a sleepy backwater seventy years ago.

Yet the county is far from perfect. Housing is outrageously expensive. Traffic is congested. Tax rates are high. These are not a result of the county’s wealth but are impeding it. Just think of how much better off all its residents could be if these problems were solved.

Most of these problems can be traced to a few disastrous decisions made by city and county officials since 1970. Here are the five biggest policy failures in Santa Clara County’s history.

1. The Urban-Growth Boundary

In the 1950s and 1960s, what would become Silicon Valley was the fastest-growing urban area in the United States. Santa Clara County’s population grew from under 200,000 people at the end of the war to more than a million in 1970.
In the late 1960s, growing concerns about the environment led to a slow-growth political movement. Claiming that their goal was to save San Jose from becoming like Los Angeles, the slow growthers took over the San Jose city council in 1969. With the cooperation of Santa Clara County, one of the most important things they did was adopt an urban-growth boundary, outside of which development would be practically prohibited, in 1974.

After the legislature passed the California Environmental Quality Act in 1990, state courts ruled that the county could not move the boundary without writing a detailed and expensive environmental impact report. Since the boundary kept most new growth (and the tax revenues it produced) in the limits of existing cities, none of them were interested in paying for such a report. As a result, the boundary has never changed.

Forcing almost all new growth inside the boundary dramatically increased population densities. The San Jose urban area’s density grew from 3,700 people per square mile in 1970 to 5,400 people per square mile in 2010. Ironically, in doing so, the growth boundary was turning San Jose into Los Angeles, which was and is the densest urban area in the United States.
Prior to the growth boundary, developers could buy a few hundred or thousand acres of land, subdivide it, and build thousands of homes in master-planned communities. The use of mass-production methods kept housing affordable while people quickly customized their homes and yards to fit their needs.
The boundary dramatically increased the price of land. A 2002 report in the Mercury News indicated that a 2,500-square-foot lot in San Jose cost eight times as much as a 7,000-square-foot lot in Dallas. In turn, Silicon Valley housing is among the most expensive in the nation. Unquestionably, the growth boundary is one of the worst things to happen to Santa Clara County, as it has dramatically increased wealth inequality, forced many people to commute 80 miles or more to work, and pushed low-income people out of the region.

2. Congestion Management

In 1984, Santa Clara County voters agreed to a half-cent sales tax to build new highways. Personally, I think new roads should be paid for out of gas taxes, tolls, or other user fees, but the new highways built with this sales tax had a measurable effect on congestion. According to the Texas Transportation Institute’s 2001 Urban Mobility Report, as new roads opened, congestion stopped growing and even declined between 1988 and 1995.

In 1990, California passed a law requiring all counties to create a congestion management authority that would coordinate resources to reduce congestion. Congestion management authorities decide where to best spend federal, state, and local dollars to get the most congestion relief--the biggest bang for the buck.
In 1995, Santa Clara County made the fateful decision to combine its congestion management authority with its transit agency, creating the Valley Transportation Authority. This was a clear conflict of interest, as any funds that the congestion management authority decided to spend on transit would go into its own budget while funds it spent on roads would go to someone else’s budget.

Transit ridership in San Jose is so miniscule that it has no effect on congestion. Despite this, by 2000, VTA persuaded voters that all the one-half-cent sales tax that was being spent on roads should be spent on transit instead. Congestion started increasing again and more than doubled by 2019. Not only was this not the biggest bang for the buck, it turned out to be a negative bang for the buck since transit ridership collapsed after 2001, largely because VTA was too focused on spending money on light-rail construction to keep its bus system going.

3. Light Rail

Ron Diridon, a Santa Clara County commissioner from 1975 to 1995, was the son of a Southern Pacific Railroad employee and worked for the railroad himself to pay his way through college. In the 1980s, he persuaded the county commission that light rail was the solution to the region’s transportation problems. Light rail, he said, would be less expensive than buses and would take more cars off the road, thus relieving congestion.

He turned out to be completely wrong. Light rail is an expensive, inflexible, obsolete technology that only became popular because construction companies convinced Congress to fund part of the cost. In the same amount of space, buses can move two to three times as many people per hour as light rail and do it for a fraction of the cost. Moreover, buses can go almost anywhere while trains can only go where the rails are, and since it costs more to build a mile of light rail than a mile of a multi-lane freeway, not many rail lines are built.

Transit only works well in places like San Francisco where there are lots of downtown jobs. Most of Santa Clara County’s jobs are scattered among numerous corporate campuses. Buses are the only way for transit to effectively serve such campuses. Santa Clara County’s emphasis on light rail rather than buses is one reason why Google, Apple, and other companies had to buy their own bus fleets. As a result, VTA has one of the worst-patronized light-rail systems in America.

VTA compounded this with bad financial management, borrowing heavily to pay its share of light-rail construction costs. When the dot-com crash hit in 2001, VTA had to keep up payments on its loans even though tax revenues had declined. This forced it to deeply cut both bus and light-rail service. Ridership plummeted from more than 57 million bus and rail riders in 2001 to under 38 million by 2005. It never fully recovered and by 2019 ridership was even lower than in 2005.

4. BART to San Jose

Santa Clara County compounded the problems caused by light rail by insisting on building an extension of BART to San Jose. Originally, San Mateo and Santa Clara counties refused to join BART, partly because voters and politicians realized that it would benefit San Francisco at the expense of the surrounding counties.

In the late 1990s, BART convinced San Mateo County to support a line to the San Francisco International Airport. Ridership on the line, which opened in 2001, was 30 percent short of expectations, and since the San Mateo transit agency had agreed to cover operating losses, it was forced to cut bus service.
Rather than learn from this mistake, Santa Clara County decided to support a BART line to downtown San Jose. Projections revealed that the cost per new rider (someone who wasn’t previously riding transit) would be more than $100 per trip. Under Federal Transit Administration rules, this wasn’t considered cost effective, but rather than scrap the project VTA convinced Congress to exempt the BART line from the rules.

If anything, $100 per new trip will turn out to be conservative. The line has suffered multi-billion-dollar cost overruns. Meanwhile, the pandemic has darkened the future of urban transit. More people working at home combined with fewer people willing to risk infections by riding crowded transit vehicles mean that ridership of the BART line when it finally opens will be a small fraction of the numbers that were originally predicted. This line is nothing more than a giant money pit.

5. Downtown San Jose Redevelopment

San Jose’s population crept ahead of San Francisco’s in the 1980s, but downtown San Jose will never be anything like downtown San Francisco. Based on 2006–2010 census data, demographer Wendell Cox estimated that downtown San Francisco had nearly 300,000 jobs while downtown San Jose barely had 31,000.

Between 1990 and 2010, the San Jose redevelopment authority spent more than a billion dollars trying to make downtown into a retail, office, and entertainment destination. This money came from tax-increment financing, which was essentially a way for redevelopment agencies to take money from schools and other property-tax-dependent agencies and spend the funds subsidizing developers. The result? According to Cox, by 2014 downtown San Francisco had gained 25 percent more jobs while downtown San Jose jobs had lost 6 percent.

The good news is that Governor Jerry Brown persuaded the legislature to revoke the authority of redevelopment agencies to use tax-increment financing. The bad news is that a billion dollars or more went down the drain with little or nothing to show for it.

All five of these disasters are derived from the same core principle: people don’t know how to take care of their property, travel around, or spend their money, so the government should do it for them. This is a principle that Americans supposedly reject, yet we get sucked into supporting these kinds of programs based on pretty lies such as that government regulations can make land-use more efficient, spending money on transit can relieve congestion, and diverting tax dollars to downtown property owners benefits the entire region. None of these are true but until voters learn to sort truth from nonsense, they are likely to be convinced to support even more disasters in the future.

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Image by Randy Vazquez