PREPARED BY: MATT RODRIGUEZ DATE OF MEETING: 06/01/26
SUBJECT:
TITLE
CONSIDER RATIFYING LETTER FROM SAN PABLO VICE-MAYOR XAVIER (ON BEHALF OF MAYOR PABON-ALVARADO) TRANSMITTED ON MAY 18, 2026, TO CALIFORNIA GOVERNOR NEWSOM TO REQUEST SUPPORT FOR LOCAL FISCAL FLEXIBILITY AND VOTER AUTHORITY PURSUANT TO SECTION 7251.1 OF THE CALIFORNIA REVENUE AND TAXATION CODE PERTAINING TO TRANSACTIONS (SALES) AND USE TAX EXEMPTION
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt by Minute Action.
Body
Compliance statements
FY 2025-27 Council Priority Workplan Compliance Statement
Under Major Police Area: Focus on Economic Development and Fiscal Diversification is an adopted policy contained in the FY 2025-27 City of San Pablo Council Priority Workplan, effective April 7, 2025.
BACKGROUND
In accordance with previous City Council Resolution 2025-035, which was adopted on March 3, 2025, the City Council authorized the City Manager to explore the feasibility of a new, half-cent (0.50) sales tax measure for funding general municipal services for future consideration for the November 2026 ballot.
2% Sales Tax Cap - Legislative Exemption
On March 3, 2026, the City Manager sent a letter to Senator Jesse Arreguin (D-7th), requesting that the City of San Pablo be included in Senate Bill 762, which was introduced by Senator Arreguin for the City of Hercules, to pursue their City’s legislative exemption request pursuant Section 7251.1 of the California Revenue and Taxation Code pertaining to Transactions (Sales) and Use Tax to support their proposed 1 cent sales tax funding measure for the November 2026 ballot.
After this letter was transmitted by the City Manager, the City Council took formal action by adopting Resolution 2026-036 on March 16, 2026, which officially confirmed the City's inclusion in the SB 762 state legislation and authorized San Pablo to seek the same formal legislative exemption required to advance a half-cent (0.50) sales tax measure for placement on the November 2026 ballot.
To date, a total of sixteen (16) counties and cities, including Contra Costa County, City of Hercules and City of San Pablo, are seeking this same State legislative exemption pursuant Section 7251.1 of the California Revenue and Taxation Code pertaining to Transactions (Sales) and Use Tax increases to proceed with proposed sales tax measures before local voters on the June 2026 and November 2026 ballots.
To facilitate legislative exemptions for several cities and counties during the election cycles of 2026, the Governor’s Office and State Legislature leadership are considering the pursuit of two (2) distinct new bills to address these legislative exemptions enabling these cities and counties to proceed with their respective funding measures, as follows:
(1) one bill targeting counties and cities seeking legislative exemptions for funding measures slated for the June 2026 ballot, and
(2) another bill focused on those counties and cities, including San Pablo, seeking exemptions for funding measures slated for the November 2026 ballot.
This legislative approach ensures tailored solutions for local jurisdictions based on their respective timelines and needs. Therefore, the City must continue to have our interests and needs advocated directly to the Governor and State Legislature leadership to support our legislative exemption previously authorized by City Council action for the November 2026 ballot.
City’s Letter to Governor
Following these new developments, TPA suggests that the City advocate its position directly to Governor Newsom to support statutory flexibility allowing the City to place the half-cent (0.50) Transactions and Use Tax (TUT) measure on the November 2026 ballot. The request is directed at obtaining state-level legislative authorization to exceed the current TUT cap, which would otherwise prevent San Pablo from asking its own local voters to consider this revenue measure. Critically, the City is not asking the State for funding, it is asking for the legal authority to let local San Pablo voters decide (See Attached Letter)
Underlying Fiscal Rationale
San Pablo frames the request to the Governor around a structural local fiscal challenge: General Fund revenues are no longer sufficient to keep pace with declining Casino revenue, ongoing inflation, aging infrastructure, rising pension and health care costs, public safety costs, and growing service demands. The Council has already laid the groundwork by adopting Resolution 025-035 in March 2025, directing the City Manager to study the feasibility of a half-cent TUT for November 2026 ballot. If voters approve, the new revenue will protect general municipal services including but not limited to: public safety, homeless outreach, rental stabilization, neighborhood beautification, illegal dumping enforcement, street maintenance, youth scholarships, and senior meal programs.
Strategic Positioning
The Governor’s letter is carefully crafted to align with the Governor's known fiscal priorities. It opens by acknowledging the City’s fiscal discipline amid the State's structural deficit and explicitly positions San Pablo's request as a self-help solution. The argument is essentially: empowering local voters to fund and sustain their own City services. The letter also leans on the principles of local control and democratic decision-making, noting the request preserves local voter authority.
Summary
In summary, the City of San Pablo is seeking the Governor's direct support for statutory authorization ahead of the November 2026 ballot. Vice-Mayor Rita Xavier signed the attached letter, in Mayor Elizabeth Pabon-Alvarado's absence, and copied it to the City's State legislative delegation, the Governor's Chief of Staff, and Legislative Affairs Secretary, indicating plans to address both the Governor's Office and State Legislature concurrently for their continued support.
City Manager Recommendation
The City Manager recommends that the City Council formally ratify the transmittal of the letter on May 18, 2026 to the Governor’s Office via minute action vote this evening.
FISCAL IMPACT
None associated with this item
ATTACHMENTS
Att A. Letter Transmitted on 05/18/26 to Governor’s Office from San Pablo Vice-Mayor Rita Xavier re: Request for Local Fiscal Flexibility and Voter Authority - City of San Pablo