On Feb. 11, 2026, the San Jose City Council agreed to place a measure on the June ballot that would increase the city’s hotel tax by 2 percent. If approved by voters, the measure could generate $10 million in annual revenue for San Jose’s general fund.
The proposal comes as city leaders seek new sources of funding amid ongoing budget challenges. San Jose faces an estimated shortfall of $55 million to $65 million next year due to a sluggish economy and stagnating revenue. The city has already implemented service cuts and a hiring freeze to balance this year’s budget.
Assistant City Manager Lee Wilcox said, “This is part of a broader strategy to strengthen the city’s fiscal foundation and protect essential services to our community (…) San Jose has long operated under a structural mismatch. We provide big city services, but with a tax base that falls well below our peer cities.” According to Wilcox, previous efforts to balance budgets have included cutting services and reducing staff, leaving departments stretched thin.
The proposed increase would raise the transient occupancy tax from 10 percent to 12 percent. City officials say this adjustment would keep San Jose competitive with other major California cities, where effective hotel tax rates range from 15.75 percent to 17.5 percent. If passed, San Jose’s rate would rise to between 16.5 percent and 17.1 percent when including other taxes and fees.
Some business owners expressed concerns about the impact on smaller hotels. Shyam Panchal of Clarion Inn Silicon Valley wrote that small hotels could face financial strain or closure if margins decline further due to higher taxes. The San Jose Chamber of Commerce also requested delaying the measure until November for further analysis and industry input.
Councilmember Michael Mulcahy supported placing the measure on the ballot but highlighted the importance of directing more funds toward arts and culture organizations in shaping San Jose’s experience economy.
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