PREPARED BY: MATT RODRIGUEZ DATE OF MEETING: 09/08/2026
SUBJECT:
TITLE
CONSIDER RATIFYING LETTER FROM SAN PABLO MAYOR PABON-ALVARADO TRANSMITTED ON AUGUST 3, 2026 TO CALIFORNIA GOVERNOR GAVIN NEWSOM URGING HIS SIGNATURE TO SB 762 (ARREGUIN) LEGISLATION PURSUANT TO SECTION 7251.1 OF THE CALIFORNIA REVENUE AND TAXATION CODE PERTAINING TO TRANSACTIONS (SALES) AND USE TAX EXEMPTION
CEQA: This proposed action is not a project as defined by CEQA.
Label
CITY MANAGER RECOMMENDATION
Recommendation
Approve by Minute Order
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 supporting 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 initial legislative approach ensured tailored solutions for local jurisdictions based on their respective timelines and operational needs. Therefore, the City continued to have our interests and needs advocated directly to the Governor and State Legislature leadership to support our legislative exemption from state statute.
SB 762 (Arreguin) Legislation
During the months of May - July 2026, one bill emerged, SB 762 (Arreguin) legislation, which consolidated all jurisdictions pursuing sales tax legislative exemptions for funding measures slated for the upcoming November 2026 ballot.
At the end of May 2026, significant progress and legislative support was obtained through State Assembly Committees on Revenue and Taxation and Local Government for the SB 762 legislation. On July 2, 2026, SB 762 successfully passed out of the State Assembly with a 54-13 majority vote. As a result of this progress made on SB 762 bill, the City Council forged ahead and unanimously adopted Resolution 2026-121 placing the City’s sales tax measure before the local electorate on November 3, 2026.
As of August 3, 2026, SB 762 successfully passed out of the State Senate with 27-8 majority vote and was submitted to the Governor's Office for signature. The Governor signed SB 762 on August 17, 2026. Following State Senate adoption of SB 62 legislation, and at the suggestion of TPA, the City Manager's Office coordinated with Mayor Pabon-Alvarado to draft a letter urging the Governor to sign SB 762 bill. This letter was signed by Mayor Pabon-Alvarado and transmitted to the Governor’s Office on the same day (See Attachment).
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 maintain general municipal services including but not limited to: public safety, crime prevention, homeless outreach, rental stabilization, illegal dumping enforcement, street maintenance, youth scholarships, and senior meal programs.
Note: 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.
City Manager Recommendation
The City Manager recommends that the City Council formally ratify the transmittal of the Mayor’s letter dated August 3, 2026, to the Governor’s Office which urged signature of SB 762 legislation before the August 17, 2026 deadline.
FISCAL IMPACT
None associated with this item
ATTACHMENTS:
Att A. Letter Transmitted on 08/03/2026 to Governor’s Office from San Pablo Mayor Pabon-Alvarado re: Request for Signature on SB 762 (Arreguín): Transactions and Use Taxes for the City of San Pablo