PREPARED BY: MATT RODRIGUEZ; BRIAN HICKEY DATE OF MEETING: 07/13/26
SUBJECT:
TITLE
CONSIDER RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN PABLO PLACING A PROPOSED MEASURE ON THE NOVEMBER 3, 2026 BALLOT SEEKING VOTER APPROVAL OF A GENERAL TEN-YEAR TRANSACTIONS AND USE (SALES) TAX WITH FIVE YEARS AT ONE-HALF OF ONE PERCENT (0.50%), REDUCING TO ONE-QUARTER OF ONE PERCENT (0.25%) FOR THE NEXT FIVE YEARS, THEN TERMINATING ALTOGETHER, TO FUND GENERAL MUNICIPAL SERVICES; AND REQUESTING THAT CONTRA COSTA COUNTY CONSOLIDATE THIS ELECTION WITH THE STATEWIDE ELECTION SET TO OCCUR ON THE SAME DATE
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CITY MANAGER RECOMMENDATION
Recommendation
1. Move to receive and file the Go/No-Go Survey Results on Voter Support for Increasing Sales Tax to Address the City’s Fiscal Challenges, conducted during May 28 - June 10, 2026, and presented by Strategy Research Institute, Inc. (SRI), for the Proposed Sales Tax Measure with results posted on the City's website.
2. Approve a resolution to place the attached Transactions and Use (Sales) tax measure (Ordinance) on the November 3, 2026 ballot, at which time the voters will be asked to approve a temporary ten-year sales tax increase of one-half (0.50%) cent for five years, reducing to one-quarter (0.25%) cent after five years, then terminating altogether, with mandatory auditing, citizens' oversight, and consistent community reporting. This tax is a general tax, funding general municipal services, and requiring a simple majority vote.
Body
Compliance statements
Major Policy Goals: Build A Healthy Community; Enhance Community Resilience; And Improve Public Safety from which existing City programs and services are adopted policy items contained in the FY 2025-27 Council Adopted Workplan, as most recently amended on April 7, 2025.
CEQA Compliance Statement
This proposed action is not a project as defined by CEQA.
BACKGROUND
Transactions and Use Tax Ordinance
The attached “City of San Pablo 2026 Transactions and Use Tax Ordinance” adding a new Chapter 3.27 to Title 3 of the San Pablo Municipal Code, if submitted to and approved by the voters, would impose a tax on retail sales and other transactions involving the use of tangible personal property within the City for a ten-year period, in the amount of one-half (½) cent for the first five years, and then reducing to one-quarter (¼) cent for the next five years, then terminating altogether after ten years.
As explained in more detail below, a local sales tax is paid by purchasers of retail taxable goods from businesses located in San Pablo. Thus, a sales tax is imposed on purchasers of goods, whether San Pablo residents or not. In this way the tax burden is not imposed exclusively on San Pablo residents. Local sales tax measures have enjoyed recent popularity because the cost increment is low, and it is not a property-based tax. Out-of-town visitors share in the cost, and the sales tax is not applied to groceries or prescription medication.
Resolution Placing Ordinance on the Ballot
Procedurally, to place this measure on the November 3rd ballot, the City Council must adopt the attached Resolution (Attachment 1). The Resolution includes relevant and required information such as the type of tax, the tax rate, and the date of the election. The proposed Ordinance imposing the tax (discussed above) is an attachment to the Resolution and, if approved by the voters at the November 3rd election, would be adopted by the “People of the City of San Pablo”. In other words, the City Council does not need to separately introduce and adopt the Ordinance at multiple meetings, but instead would approve the Ordinance through adoption of the Resolution and then, as applicable, act to certify voter approval of the Ordinance through the City Council’s subsequent declaration of election results.
Because the proposed measure makes clear that the revenue may be used for all general municipal services, and is not restricted to any particular purposes, it is a general tax. Accordingly, the City may impose the tax only if two-thirds of all Councilmembers (4 members) approve the attached Resolution to place the measure on the ballot and a majority of registered voters subsequently approve such measure at the November 3, 2026 election.
The specific ballot question is also included in the Resolution The question to be placed before the voters is:
“To provide funding to maintain City services, including crime prevention, police protection, reducing illegal dumping, the City’s daily senior meal program, youth scholarship programs, assisting the homeless, street maintenance, and other general services, shall San Pablo enact a temporary ½-cent sales tax for 5 years, generating approximately $2,000,000 annually, then reduced to ¼-cent for 5 years, generating approximately $1,000,000 annually, then terminate; with all funds staying in San Pablo, citizen oversight, and mandated annual audits?”
OVERSIGHT, AUDITING AND REPORTING
Mandatory Auditing. The ordinance provides that by the end of each fiscal year, the City's independent auditors shall complete a report reviewing the collection, management and expenditure of revenue from the tax.
Citizens' Oversight. Additionally, the ordinance requires the formation of a five-member committee to review and report on the receipt of revenue and expenditure of funds from the tax authorized by this chapter. The committee members shall be either San Pablo residents or representatives of San Pablo businesses. The committee's report and recommendations shall be completed by a date to allow for it to be considered as part of the annual budget process. This is consistent with the previous adoption of the Measure K sales tax measure in June 2014 and the Measure S sales tax measure in November 2020.
Reporting. The committee's report and recommendations shall be a matter of public record and shall be considered by the City Council at a public meeting.
ANALYSIS OF TRANSACTIONS AND USE (SALES) TAX
Although referred to as a "local sales tax" throughout this staff report, this revenue source is formally known as a ”transactions and use tax" under State law. A transactions and use tax is imposed on the same goods and merchandise as sales tax; however, a sales tax (formally known in State law as a Bradley-Burns sales and use tax) is allocated to the jurisdiction where the sale is negotiated or the order for the sale is taken. A transactions and use tax, on the other hand, is allocated to the City where the goods are delivered or placed into use.
For example, merchandise purchased in a "walk-in" retail store is assumed by the State to be used within the city in which the store is located, unless the retailer is asked to ship the merchandise outside the city as part of the sale or it is a motor vehicle that can be driven away. For sales contracts that require shipment of merchandise, the local sales tax (transactions and use tax) is levied for the city to where the merchandise is shipped. A similar situation exists with vehicles that require registration: the local sales tax (transactions and use tax) of the city in which the vehicle is registered applies, regardless of where it was purchased.
Operative Date and State Contracts
If this local sales tax measure passes, San Pablo will enter into two contracts with the State of California Department of Tax and Fee Administration (“CDTFA”), with all revenue remitted to the City minus the State’s administration fee. The first contract will set up the tax and the second contract will be established for ongoing administration. Such tax, once adopted by local voters, shall be imposed at a rate of 0.50% for five years, and then reduced and imposed at a rate of 0.25%, for the next five years until terminating after ten years.
If approved by the voters, and If Senate Bill 762 (Arreguin) becomes law and thereby raises the maximum transactions and use tax rates the City may impose, then the Operative Date of the Ordinance will be the first day of the first calendar quarter that both (i) follows SB 762’s passage, and (ii) begins more than 110 days after the November 3rd election. If SB 762 does not become law in time for the Operative Date to be on or before July 1, 2027, then the Operative Date will be October 1, 2027. Under all circumstances, the tax will be imposed for a period of ten years.
STAFF RECOMMENDATION ON TEMPORARY SALES TAX MEASURE APPROACH
City staff identified that a temporary sales tax measure is the best approach for local voter support to fund general municipal services. The City’s consultant, SRI, Inc. has conducted extensive longitudinal funding analysis on all the City’s sales tax funding mechanisms to generate necessary revenue to the City, with the community at-large and the electorate in San Pablo since June 2012 (See Fiscal Impact section below). Collectively, based on this historical analysis and findings, City staff proposes to generate additional revenue stream with a new temporary sales tax for the next ten (10) year period (2027-2037) based on the following:
Participant Diversity
Sales tax is paid on a wide variety of goods, excluding (primarily) groceries and medicine. It is therefore a highly diversified source of revenue. A sales tax would be paid by a wide variety of individuals, including residents, local businesses, and workers in the City, and individuals from outside the City who purchase taxable goods in the City. Sales tax on motor vehicle purchases would be paid only by individuals registering the vehicle in San Pablo, regardless of where the vehicle was purchased. The sales tax would be paid by the highest number of payers relative to other revenue options such as a parcel tax or increase in the utility user's tax, and therefore has the most participant diversity of the three options.
Impact on Low/Fixed Income Residents
A sales tax increase would be paid only by purchasers of taxable goods in San Pablo. Because low income and fixed income individuals spend a large proportion of their incomes on non-taxable goods and services, a sales tax increase would not have a significant impact on these individuals. Further, many purchases subject to sales tax are discretionary purchases, allowing low- and fixed-income individuals to minimize the impact of the new tax.
Impact on Business Community
A sales tax increase would have a low impact on the business community, as the tax would be paid by purchasers of taxable goods rather than the business itself. Most office and service businesses would see little impact except for their own purchases of taxable goods in San Pablo. Anecdotal data from other California counties where city sales tax measures have been adopted indicates these measures had virtually no impact on the retail sales volumes in those cities, when comparing periods prior to and after adoption of a sales tax.
Impact on Residential Community:
A sales tax would have a medium to low impact on residents. It would apply only to taxable
purchases and not to mortgage, other debt payments, utilities, services, medicine and most grocery purchases, which make up the majority of resident spending. Individuals purchasing a vehicle that is registered in San Pablo would pay the increased tax, regardless of whether the vehicle was purchased in San Pablo or another city.
CITY MANAGER RECOMMENDATION & SRI’S “GO/NO GO” ANALYSIS
In summary, a temporary sales tax is the preferred option as recommended by the City Manager for extending and reenacting a critical revenue stream for another ten (10) year period.
Furthermore, as a result of the Go/No-Go Survey Results on Voter Support for Increasing Sales Tax to Address the City’s Fiscal Challenges, conducted during May 28 - June 10, 2026 by Strategy Research Institute, Inc. (SRI), with findings presented to the City Council this evening, further recommends that the City Council proceed with a “GO” to support placing the temporary sales tax measure before local voters on the November 3, 2026 state-wide and local municipal ballot.
Moreover, the proposed temporary sales tax would be a highly diversified revenue source and would be continued and paid by many users of City services, both resident and non-resident. It would have the least negative impact on low and fixed-income households, a low impact on businesses, and a low to moderate impact on residents in general. Additionally, funds from a local sales tax measure are required to stay in San Pablo, providing a relatively stable source of funding to help maintain local services; no funds can be taken by the State of California. The sales tax ordinance will require stringent fiscal accountability measures, including citizens' oversight, mandatory financial audits, and yearly reports to the community to ensure the funds are spent appropriately.
FISCAL IMPACT
The City of San Pablo’s current sales tax rate is 9.50%, effective July 1, 2026. For comparative purposes, surrounding West County cities’ current sales tax rates include: City of Richmond (9.75%); City of El Cerrito (10.25%); City of Hercules (9.25%); and City of Pinole (10.25%), effective July 1, 2026. (See State of CA Department of Tax and Fee Administration website link at:
<https://cdtfa.ca.gov/taxes-and-fees/rates.aspx>
As sales tax is paid only on the purchase of taxable goods from businesses in San Pablo, this revenue would fluctuate in response to changes in the local, state and national economy, as well as the relocation of retailers into and out of the City's boundaries. As the economy continues to fluctuate, the City would see both positive and negative variations in this revenue source. Based on previous audited financial statements from the City’s Auditor under the City’s Annual Comprehensive Financial Reports (ACFR) for periods ending June 30, 2015 through June 30, 2025 for previous Sales Tax Measure Q (adopted in June 2012) and Sales Tax Measure S (adopted in June 2020) by local voters, the City estimates that a one-half cent (0.50%) sales tax would generate about $2,000,000 annually for the City’s General Fund, while a one-quarter cent (0.25%) sales tax would generate roughly $1,000,000 million per year, pending annual audits completed for future periods ending June 30th of each fiscal year prospectively.
Previous Funding Mechanisms Findings
During the ensuing years of 2012-2026, City staff and the City’s consultant, SRI, Inc. have extensively conducted polling on three (3) sales tax funding measures with the community at-large and electorate to gauge support for bringing in necessary revenue sources to the City which include: a temporary sales tax, an increase in the utility user's tax, or a parcel tax. A temporary sales tax measure has been the preferred funding mechanism supported by the community at-large and electorate over-time since original adoption of the Measure Q sales tax measure by local voters in June 2012, the Measure K sales tax measure by local voters in June 2014, and most recently, the Measure S sales tax measure by local voters in November 2020.
On March 3, 2025, upon being presented these most recent analysis and findings by SRI, Inc. regarding potential community at-large and electorate support, the City Council adopted Resolution No. #2025-035 which authorized the City Manager to proceed with prioritization and planning of new Sales Tax Measure Funding Mechanism for the November 2026 ballot.
This evening, SRI, Inc. will present survey results from the GO/NO-GO Survey on Voter Support for Increasing Sales Tax to Address the City’s Fiscal Challenges to the City Council showing significant majority support among local voters for the proposed sales tax measure under consideration by the City Council for the November 3, 2026 ballot.
Attachments:
Att 1. Resolution
Exh A. Ordinance
Att 2. Comparative Analysis on West County Cities’ Sales Tax Rates as of July 1, 2026