This valley is their valley

And so, Palo Alto spends about $2,400 of its general budget on each of its residents per year; San Jose spends about $900. This buys Palo Alto about 25 police officers per 10,000 residents; San Jose has enough for about 10. Palo Alto spends about six times more per resident than San Jose on parks and community services alone. “We have a children’s theater, we have a junior museum, we have an art center…We have a lot of things that a city our size wouldn’t normally have,” said Claudia Keith, chief communications officer for the city of Palo Alto. “I don’t think you’d find six libraries in too many other cities this small.” Indeed, you wouldn’t: most cities Palo Alto’s size (some 66,000 people) don’t have their own libraries at all, relying instead on county systems.

Even as countless municipalities across the state have privatized their utility systems piece by piece over the decades, Palo Alto has remained the only city in California that owns and operates its entire utilities suite — water, electric, gas, sewer, storm sewer, and trash collection. Never to be outflanked on the tech front, Palo Alto is en route to installing citywide fiber optic Internet.

Peaks and troughs

This fiscal asymmetry is intertwined with broader inequalities in the way wealth is distributed across the region. While many wealthy people live in San Jose’s upscale neighborhoods, they tend to cluster disproportionately in the smaller cities to the north and west. Palo Alto, Cupertino, and Mountain View combined, for example, have about 13 percent of the population of Santa Clara County, but 21 percent of the county’s residents earning more than $200,000 a year. Similarly, those cities have almost 19 percent of those who earn income from interests and dividends, but only 6.5 percent of people on public assistance.

On the other side of the divide, San Jose has about half the population in the county, yet it houses — mostly in poor neighborhoods on the east side — about 65 percent of the people who receive public assistance, and nearly 70 percent of the adult population without a high school diploma.

This social polarization is reinforced by the fiscal imbalance. “The most direct impact is going to be on the school system,” said Benner. In California, the state allocates money to schools based on attendance. “But what [an analysis of the budget] misses is that an awful lot of resources for the schools, especially for the extra things, come from the parents.” It is common in rich enclaves throughout the Valley for parent-run nonprofits to raise hundreds of thousands if not millions of dollars a year to supplement local schools. Needless to say, parents in poor neighborhoods cannot afford to raise such funds.

“That kind of inequality exists dramatically in Silicon Valley, where schools in East San Jose are simply not going to have the kinds of resources that schools in Cupertino or Sunnyvale will,” Benner said. “And, of course, on top of that, when you’re surrounded by other relatively wealthy families with highly educated parents who are actively involved in the school system, the quality of the education is going to be higher.”

The concentration of rich and poor in different parts of the Valley has been accompanied by a squeezing of the middle class — between 2006 and 2012, according to Joint Venture Silicon Valley, the percentage of middle-income households in the Valley (defined as having incomes between $35,000 and $99,000) dropped from 40 to 35 percent. The clearest driver for this phenomenon is the steep and steady rise in the price of housing.  According to Working Partnerships, since 2010, rent increases in the San Jose metro area have been the highest in the nation. Twenty-five percent of renters in San Jose proper pay more than half their income in rent; in Palo Alto, the figure is 15 percent. Housing values, too, have soared, pushing middle-class households almost completely out of the most expensive cities. Not even the people employed directly by these cities can afford to live in them: out of the thousand plus people who work for Palo Alto’s city-owned utilities, only between 5 and 7 percent live in Palo Alto.

San Jose is, in large measure, the bedroom community for workers like these. But there, too, rising housing costs have squeezed middle-income families and, in many cases, displaced them outright. This creates a commuting pattern that Benner described as shaped like an inverted U: the large majority of those who commute into the Valley every day are middle-class workers, with very few commuters on the upper and lower ends of the income scale. “If you’re wealthy, you can live in the Valley. High housing costs don’t mean much to you,” Benner explained. “But if you’re middle class, you have to commute a much longer distance — you live out in Livermore or Tracy,” cities on the periphery of the Bay Area. “Because your housing costs are lower, your transportation costs are higher, but you can afford the trade-off.”

Then there is the bulging underclass, an increasingly stagnant group of low-wage, predominantly immigrant workers in the service sector. As Hancock described them: “The people who mow our lawns and clean our houses.” According to Working Partnerships, the number of households making less than $10,000 a year doubled in the first decade of the millennium. Unlike people in the middle range, these workers cannot afford a long commute, so they need to live somewhere in the Valley, but they also can’t afford the housing. “So how do you do that?” asked Benner. “Well, you double up, triple up, quadruple up.”