PREPARED BY: MATT RODRIGUEZ DATE OF MEETING: 03/16/2026
SUBJECT:
TITLE
CONSIDER ADOPTING A RESOLUTION (1) RATIFYING A PRIOR REQUEST SUBMITTED BY THE CITY MANAGER ON MARCH 3, 2026; AND (2) AUTHORIZING A FORMAL REQUEST FOR THE INCLUSION OF THE CITY OF SAN PABLO IN SENATE BILL 762 (ARREGUIN) LEGISLATION, WHICH ADDRESSES AN EXEMPTION FROM STATE STATUTORY LIMITATIONS UNDER SECTION 7251.1 OF THE CALIFORNIA REVENUE AND TAXATION CODE PERTAINING TO TRANSACTIONS (SALES) AND USE TAX
CEQA: This proposed action is not a project as defined by CEQA.
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statements
Fy 2025-27 council priority workplan compliance statement
Under major policy goal: focus on Economic Development & Fiscal Diversification, Policy No. #405 and #405.3: Explore feasibility and implementation of new general fund revenue mechanisms by gathering and conducting polling and survey analysis for a future City Council approval process during 2025-2027 period under a proposed Tier I, II and III implementation plan with necessary data, are adopted policy items contained in the FY 2025-27 Council Priority Workplan, effective April 7, 2025.
CEQA Compliance Statement
This proposed action is not a project as defined by CEQA.
BACKGROUND
On December 16, 2024, NBS Government Finance Group presented seven (7) potential options for new General Fund revenue enhancements to the City Council. These included the following potential new mechanisms to expand revenue capacity for the City’s General Fund, as follows:
(1) Master Fee Schedule Update (with Cost Allocation Plan)
(2) City-wide LLAD Property Assessment Increase
(3) Stormwater Drain Fee Property Assessment
(4) City Charter Amendment (Majority Vote Requirement)
(5) Real Estate Transfer Tax (Majority Vote Requirement)
(6) ½ cent (0.50) or 1 cent (1.00) Sales Tax Increase (Majority Vote Requirement)
(7) Utility User Tax Increase (Prop. 218 Special Purpose Requirement)
To explore feasibility and viability, the City Manager worked together with Strategy Research Institute, Inc. (SRI), the City’s community outreach consultant, to conduct polling of the community at-large to determine general support for these potential revenue mechanisms during the City’s’ 2024 Annual Year-End Survey process, with survey results presented on March 3, 2025 to the City Council.
Following this presentation, the City Council adopted Resolution 2025-035 which authorized the City Manager to explore the feasibility and viability of these potential revenue mechanisms under a phased-in/tiered implementation, for future formal City Council consideration and approval. These potential revenue mechanisms were incorporated into FY 2023-25 Council Priority Workplan under Major Policy Goal: Economic Development and Fiscal Diversification under Policy #405 which was updated to enable the City Manager to explore their feasibility and viability for potential implementation, as follows:
Policy No. #405.3: Explore feasibility and implementation of new General Fund revenue mechanisms by gathering and conducting polling and survey analysis for a future City Council approval process during 2025-2027 period under a proposed Tier I, II, and III implementation plan with necessary data, as follows:
TIER I Implementation: (Administrative - Related)
• Master Fee Schedule Update (with Cost Allocation Plan)**
TIER II Implementation: (Property Related - 2025-26 Property Protest Process)
• City wide LLAD Assessment Increase
• Stormwater Drain Fee
TIER III Implementation: (Electorate vote - 2026 Election Cycles)
• City Charter Amendment (Majority Vote Req.)
• Real Estate Transfer Tax (Majority Vote Req.)
• ½ cent (0.50) or 1 (1.00) cent Sales Tax Increase (Majority Vote Requirement**
• Utility User Tax Increase (Prop. 218 Special Purpose Requirement)
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**Note: The City Council identified the Master Fee Schedule Update and the Half-cent Sales Tax funding mechanism as the two most viable options to pursue on March 3, 2025, via Resolution 2025-035.
Since this Council formal action, the City Manager has worked collaboratively with Strategy Research Institute, Inc. (SRI) to conduct additional polling on our community at-large and local electorate to determine support for these potential revenue mechanisms going forward during FY 2024-25 and FY 2025-26 periods to date.
New Revenue Mechanisms for Implementation
During FY 2025-26, the City Council determined that the Tier III - Half-Cent (0.50) Sales Tax Measure was the most practical revenue option available give the level of initial community support. Additionally, the Tier I - Master Fee Schedule Update/Cost Allocation Plan was also acknowledged as a favorable revenue mechanism which the Council subsequently approved on November 17, 2026, via Resolution 2025-141. As a result, the Master Fee Schedule Update is expected to generate new revenue of $200,000 to $400,000 annually for the City’s General Fund, starting with the implementation of increased City fees prospectively from January 2026 onward.
Tier III Implementation - Proposed Half-Cent Sales Tax Increase (November 2026)
On March 3, 2025, the 2024 year-end survey results conducted by SRI were presented to the City Council which indicated there was substantial community at-large support (63%), and local Opinion Leaders support (50.5%) for a proposed half-cent (0.50) sales tax measure for potential consideration on the November 2026 ballot.
On March 16, 2026, the 2025 year-end survey results conducted by SRI were presented to the City Council which indicated there was electoral support (51%), and Local Opinion Leaders Support (56%) for a proposed half-cent (0.50) sales tax measure for potential consideration on the November 2026 ballot. As previously directed, the City Manager continues to explore the feasibility and viability of this proposed sales tax measure to be placed on the November 2026 ballot.
In May-June 2026, SRI will be conducting further community polling of the local electorate by testing specific ballot language under a GO/NO-GO process for the proposed half-cent (0.50) sales tax measure proposed for November 2026.
San Pablo’s Current Transaction (Sales) and Use Tax Rate
Currently, San Pablo’s transaction (sales) and use tax is 9.50% as of October 1, 2022. (See Table below provided by the City’s sales tax consultant, HdL)
The following local sales tax measures were previously adopted by local San Pablo voters since 2012 to date which include:
• San Pablo Measure K (2014):
Following adoption of San Pablo Measure K sales tax measure, which local San Pablo voters passed with 70.80% support in June 2014, the City’s sales tax rate was increased by a quarter-cent (0.25) effective October 1, 2015, with no sunset clause to fund emergency medical services at County Fire Sation #70 due to the closure of former Doctors’ Medical Center in 2015.
• San Pablo Measure S (2020):
San Pablo Measure S sales tax measure (a continuation of the previous Measure Q set to expire on September 30, 2022), which local San Pablo voters passed with 79.19% support in November 2020, the City’s sales tax rate was increased by a half-cent (0.50) effective October 1, 2022 for a five-year period, decreasing to a quarter-cent (0.25) on October 1, 2027 for the next five-year period. This results in a reduction of the City’s overall sales tax rate to 9.25% until September 30, 2032, to fund general municipal services, including but not limited to: public safety, gang prevention, youth services, job creation, training and job placement for local residents (including the disenfranchised) and all other general City services.
Other Proposed Sales Tax Measures in 2026
In addition to exploring the viability of a proposed half-cent (0.50) sales tax increase for November 2026, the City Manager has been monitoring other proposed sales tax funding measures being planned for the Contra Costa County region during 2026. These include the following proposed sales tax measures:
• Connect Bay Area Act Half-Cent (0.50) Transaction (Sales) and Use Tax Measure: A proposed half-cent (0.50) sales tax, known as the MTC/BART Connect Bay Area Act, is planned for the November 2026 ballot to prevent severe service cuts at BART and other transit agencies. The measure would increase sales taxes by 0.50% in Alameda, Contra Costa, San Mateo, and Santa Clara counties, and by 1.00% in San Francisco to generate nearly $1 billion annually for a 14-year period.
• Contra Costa County (0.625) General Retail Transactions (Sales) and Use Tax Measure: On March 3, 2026, the Contra Costa County Board of Supervisors voted 4-1 to adopt an Ordinance to propose a 0.625% sales tax for placement on the June 2, 2026 state-wide ballot to prevent service reductions and cuts imposed by the Federal government on Medicaid, and other several County provided programs and services, leading to a strained health care system across the County, with more emergency room visits and longer wait times for patients.
State Statutory Limitations on Transaction and Use Tax Increases
Pursuant to Section 7251.1 of the California Revenue and Taxation Code, State statutory limitations under this section limits the combined rate of all transactions (sales) and use taxes imposed by local cities/counties to a maximum of 2 percent (2%).
Many cities across the state have requested exemption from the 2% State statutory cap, allowing local voters to decide on sales tax increases in their communities. Most recently, the cities of El Cerrito (Measure R) and Pinole (Measure I) sought exemptions in previous years for their respective sales tax measures in 2014 (El Cerrito; extended in 2024), and 2024 (Pinole). Currently, these two (2) cities have the highest sales tax rate within the Contra Costa County region amongst all cities (and West County cities) at 10.25%, respectively (See data below).
WEST CONTRA COSTA CITIES
Current Transaction (Sales) and Use Tax Rates
March 1, 2026
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City Current Sales Tax Rate
City of El Cerrito 10.25%
City of Pinole 10.25%
City of Richmond 9.75%
City of San Pablo 9.50%
City of Hercules 9.25%
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Impacts to San Pablo’s 2% State statutory cap
MTC/BART’s proposed half-cent sales tax for November 2026 will not impact San Pablo’s 2% State statutory limit, as MTC/BART did obtain an exemption from the State statutory 2% limit pursuant to adoption of SB 63 legislation in October 2025. Additionally, Contra Costa County (County) is seeking an exemption from the State statutory 2% limit for the proposed (0.625%) sales tax increase after the June 2, 2026, ballot vote. The County’s ordinance was adopted by the County BOS on March 3, 2026, with a 4/5th vote to proceed forward.
Historically, in 2020, the County pursued an exemption from the 2% State cap limit via SB 1349 (2020), which allowed Contra Costa County to bypass the State statutory limit enabling a 0.5% tax increase for transportation and services enacted under County-wide Measure X sales tax measure. This exemption obtained by the County did not impact San Pablo’s state statutory 2% limit enabling San Pablo’s Measure S sales tax measure (2020) to be decided upon by local voters adopted with 79.19% support, respectively.
Current San Pablo Sales Tax Capacity under 2% State Statutory Limit
Currently, San Pablo’s State statutory 2% limit, a quarter-cent (0.25) sales tax rate capacity is available for the City to pursue in November 2026. However, due to the Measure S sales tax measure adopted in November 2020, San Pablo’s Measure S will shift from half-cent (0.50) to quarter-cent (0.25) on October 1, 2027, as adopted by local voters in 2020, raising the City's allowable rate to half-cent (0.50) under the current State’s statutory 2% limit. However, local voters will need a clear explanation of the Measure S tax rate shift which would take up considerable ballot language; and thereby, confuse local voters on the specific need and purpose of the City’s proposed half-cent (0.50) sales tax measure in November 2026.
CITY OF SAN PABLO
ANALYSIS OF STATE STATUTORY (2%) LIMITATION UNDER SECTION 751.1 CA REVENUE AND TAXATION CODE REQUIREMENTS
March 2026
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2% STATE LIMIT (CAP) FOR SAN PABLO: 9.25%
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SAN PABLO TAX RATE IMPACTS: (1970 - 2020)
• State Cap Rate (8.75%) +1.5% (1.50) County Sales Tax Measures: 8.75%
- BART (0.50) (1970 - No sunset; less 7251.1 Exemption per AB 723/SB 1349)
- Measure J (0.50) (1989 - 2034; less 7251.1 Exemption per AB 723/SB 1349)
- Measure X (0.50) (2021 - 2041; less 7251.1 Exemption per AB 723/SB1349)
• San Pablo Measure K (Quarter-cent (0.25) adopted June 2014 +(0.25)%
• San Pablo Measure S Half-Cent (0.50) + Quarter-Cent (0.25) +(0.50)%
adopted Nov. 2020 (Note: Measure S shifts on 10/01/2027)
• MTC / BART Half-Cent (0.50) for Nov.2026 (less 7251.1 -(0.50)%
Exemption per SB 63)
• Contra Costa County +(0.625%) for June 2026 (less 7251.1 TBD
Exemption AFTER adoption on 06/02/2026)
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Sub-Total of San Pablo Sales Tax Rate Impacts: 9.00%
AVAILABLE CAPACITY UNDER 2% STATE LIMIT (CAP): (0.25)
SB 762 (Arreguin) Legislation (Exemption from State Statutory Limits)
In February 2026, the City Manager was informed by lobbyist, Townsend Public Affairs (TPA), regarding new and re-introduced SB 762 legislation a bill by Senator Jesse Arreguin (D-7th) introduced to exempt the City of Hercules from the State’s statutory limit (2% cap) on a transaction (sales) and use tax increase planned for November 2026. In recent discussions with the City of Hercules, their current City’s fiscal condition and interests align with San Pablo in protecting and preserving local revenues for ongoing program and service delivery for its residents. To pursue these funding measures this November 2026, both cities would need an exemption from the State statutory limit (2%) for their respective half-cent (0.50) sales tax measures being proposed for November 2026 via the proposed SB 762 legislation.
Conversely, if the City does not seek an exemption, the ballot language must clarify the complexities of San Pablo’s Measure S shift on October 1, 2027, which makes it extremely challenging to meet the County Election Department’s 75-word maximum ballot language limit. This would potentially confuse and jeopardize the City’s ability to explain to local voters, clearly and legibly, the purpose for the proposed half-cent (0.50) sales tax for November 2026 which is critically needed to preserve and protect local revenue for ongoing program and service delivery to local San Pablo residents.
Other Exemptions from State statutory 2% Limit
To date, TPA has advised the City that there are four (4) other California counties and eleven (11) local cities and special districts pursuing similar exemptions from the State statutory limit (2% cap), with new legislation introduced during the 2026-27 California legislative cycle. TPA has consulted with the Governor’s and Speaker’s Offices about several exemptions being sought by its clients to allow local governments in California to increase revenue through voter approval. Overall, the main purpose of these exemptions being pursued by local cities/counties/special districts are to offset recent federal funding cuts under the HR 1 federal legislation, signed into law in July 2025, and safeguard local revenue for vital City programs and service delivery statewide.
Moreover, TPA has advised the City to specifically request what is needed only (i.e. half-cent sales tax) as many of these exemption requests will likely get consolidated into one legislative package as several bills were introduced by other public agencies seeking similar exemptions for the 2026-27 legislative cycle.
City Manager Letter to Senator Arreguin on SB 762 Inclusion
The State legislative deadline to introduce new bills for the 2026-27 CA legislative cycle was on February 20, 2026.
In accordance with previous City Council action per Resolution 2025-035 on March 3, 2025, the City Manager transmitted a letter to State Senator Arreguin (D-7th) requesting San Pablo’s inclusion in SB 762 legislation due to the February 20, 2026, legislative deadline (See Attachment). Recently, SB 762 legislation was re-introduced from 2025 on January 5, 2025, referred to Senate Committee on January 14, 2025, and has been now ordered to Assembly (held at desk) as of January 27, 2026 (See Attachment)
As stated in the March 3, 2026, transmittal, the City Council will formally request inclusion in SB 762 legislation at its regular meeting on March 16, 2026. A formal Resolution to request this inclusion will enable the City to pursue a half-cent (0.50) sales tax measure for November 2026 and requires a majority vote approval this evening.
Once approved by adopted Resolution, the Mayor will be directed by majority vote of the City Council to sign a letter to State Senator Arrequin (D-7th) to accompany the adopted Resolution.
NOTE: The City Council’s decision to be included in the SB 762 legislation this evening does not constitute formal approval of the proposed half-cent (0.50) sales tax measure for November 2026 at this time.
Adoption of a resolution placing the measure on the November 2026 ballot, will necessitate a four-fifths (4/5) majority vote by the City Council and will be scheduled for formal consideration in July 2026. Additionally, SRI will conduct further polling of San Pablo’s electorate during May-June 2026 to provide additional polling information that will assist the City Council in making its policy decision.
FISCAL IMPACT
None associated with this action.
ATTACHMENTS:
Att A - Resolution
Att B - Letter transmitted to Senator Arreguin (D-7th) from City Manager on March 3, 2026 re: Request for Inclusion in SB 762 legislation
Att C - SB 762 (Arreguin) legislation (version as of January 2026)
Att D - DRAFT Letter of Request for Inclusion into SB 762 (Arreguin) Legislation from San Pablo Mayor Pabon-Alvarado to State Senator Jesse Arreguin (D-07) re: Request for Inclusion in SB 762 legislation