Commentary: Slow-Growth Plans and Regulations Lose the Way for San Jose

By Randal O’Toole

California is a garden of Eden,
A paradise to live in or see;
But believe it or not, you won’t find it so hot
If you ain’t got the do re mi.
– Woody Guthrie

California’s scenic beauty, mild climate and economic opportunities have attracted more than 36 million people. But, as suggested by Woody Guthrie’s song, California’s economic opportunities have been restricted by the state’s high cost of living. Most notably, California cities have the least-affordable housing and worst traffic congestion in the country. 

The experience of San Jose, the self-proclaimed capital of Silicon Valley, reveals how California achieved these dubious rankings. Amid some of the fastest-growing industries in the world, San Jose should be one of the fastest-growing urban areas in the country. Thanks to growth-stifling plans and regulations, however, it is one of the slowest. 

For example, during the 1990s – a period of wild growth in the high-tech sector – the San Jose urban area grew by a paltry 0.7 percent per year. By comparison, the Las Vegas urban area grew by 6.5 percent per year, Atlanta by 5.0 percent, Phoenix by 3.8 percent, and Houston by 2.8 percent. Indeed, some 250 U.S. urban areas, including Philadelphia, Indianapolis and even Baltimore, grew faster than San Jose in the 1990s. 

The plans and rules that have inhibited San Jose’s growth were supposed to keep the region livable, reduce urban-service costs, and save San Jose from becoming like Los Angeles, the nation’s most-congested and most-polluted urban area. Instead, these plans have made San Jose unaffordable, congested and heavily taxed. Ironically, they have also made San Jose more like Los Angeles than almost any other urban area in the United States. 

San Jose’s slow growth is not simply the result of a debate over growth vs. livability. Instead, it is the product of several little known institutions that are somewhat peculiar to California politics. Two such institutions are the local agency formation commission (LAFCo) and the congestion management agency (CMA). 

A 1963 California law required almost every county in the state to form a LAFCo to oversee city incorporations, annexations, and the formation of service districts. Each commission is generally run by a board dominated by members of the various city councils in the county. Because these city governments have an interest in keeping the taxes generated by growth within their boundaries, they have effectively become a tool to use against so-called sprawl, that is, suburban development outside a city’s limits. The result is that California’s urban areas are the densest, most-congested, and least-affordable housing markets in the United States. 

Meanwhile, CMAs, which were conceived in 1990 with the aim of reducing congestion, have been used in San Jose and other California regions in ways that actually increase congestion. In 1984, voters in Santa Clara County (where San Jose is the county seat) agreed to a half-cent sales tax to be spent on new highways.  

In 1990, California voters agreed to increase gasoline taxes by nine cents per gallon. That ballot measure also required every urban county to create a congestion management agency that would spend the county’s share of the gas tax to relieve congestion. In 1995, Santa Clara County merged its congestion management agency with the county’s transit agency to create the Santa Clara Valley Transportation Authority. The CMAs for Los Angeles, Yolo, and other counties are also run by or closely linked to those counties’ transit agencies. 

These linkages create a conflict of interest that leads the transit agencies to use their authority as the county CMA to capture transportation funds for transit projects rather than for highways. Nearly all California gasoline taxes are dedicated to highways. But between 1995 and 2000, the Santa Clara authority successfully transferred 100 percent of the one-half-cent sales tax from highways highways to transit.

Now the San Jose region is poised to spend more than 80 percent of its transportation funds on the 1 percent of travel in the region that goes by transit. Paradoxically, the Santa Clara authority is now both awash with money for capital improvements and suffering from one financial crisis after another due to a shortage of funds to operate the expensive transit system it is building.

The result has been a 34 percent decline in transit ridership and several investigations suggesting that the authority deserves the title of the nation’s worst-managed transit agency. 

No-growth and slow-growth advocates certainly played a role in inhibiting San Jose’s growth. But they probably would not have succeeded were it not for the local agency formation commission and CMAs that, ironically, were designed to facilitate growth and relieve congestion.

The 2007 Preserving the American Dream conference in San Jose, Calif., from Nov. 9-12 will feature more than three dozen experts to show how places like San Jose can recover from years of inept government planning, and how other places can avoid the same problems. For information, see 

This commentary is an excerpt from “Do You Know the Way to L.A.?” a policy analysis on California land-use and transportation planning released this week by the Cato Institute and written by Randal O’Toole,  a senior economist at the Thoreau Institute and senior fellow at Cato Institute. For the full analysis, go to

Reprinted with permission by The Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (October 19, 2007). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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