City of Costa Mesa
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
Item #: 26-372
Meeting Date: 9/8/2026
TITLE: MEASURE Q ORDINANCE REVENUE FUND DISCUSSION
DEPARTMENT: COMMUNITY DEVELOPMENT DEPARTMENT/FINANCE DEPARTMENT PRESENTED BY: NANCY SA, GRANT ADMINISTRATOR AND ANNA ACOSTA-REYES, FINANCE MANAGER CONTACT INFORMATION: NANCY SA, GRANT ADMINISTRATOR, (714) 754-5678 RECOMMENDATION:
Staff recommends the City Council conduct a Study Session to review the revenue set-aside provisions of the Measure Q ordinance and provide direction to staff.
BACKGROUND:
At the June 16, 2026, City Council meeting, staff presented a high‑level framework for a Measure Q First-Time Homebuyer (FTHB) Pilot Program based on revenues collected from the Cannabis Tax Measure in conformance with the Measure Q ordinance. Key program components were identified for Council review and input. The Council voted to receive and file the staff report and requested a Study Session to discuss the use of the funds for a first-time homebuyer program under the Measure Q ordinance and consider potential amendments. In addition, the Council requested an update on the Housing Trust Fund, previously established, and a discussion of the use of the funds.
On November 3, 2020, Costa Mesa voters approved the City of Costa Mesa Retail Cannabis Tax and Regulation Measure (Measure Q), authorizing cannabis retail storefronts and delivery businesses within the City. Following voter approval, on May 4, 2021, the City Council adopted a seven-percent cannabis retail tax and directed that one-half of one percent of Measure Q revenues be allocated to a First-Time Homebuyer (FTHB) Program and one-half of one percent of the revenues support implementation of the Cultural and Arts Master Plan. Funding for these programs began in Fiscal Year 2022-23.
May 4, 2021, Agenda Report and Attachments: https://www.costamesaca.gov/home/showpublisheddocument/47786/637557361622170000 Measure Q Funding History
Although voters approved Measure Q in November 2020, the City did not start recognizing revenues until FY 2022-23. As of June 30, 2025, the City has received over $8.5 million in revenue from Measure Q, of which approximately $600,000 has been recognized in each of the affected funds, the Cultural Arts Master Plan Fund 130 and First Time Homebuyer (FTHB) Fund 140. The projected FY 2026-27 revenue for FTHB from Measure Q is approximately $242,000, resulting in an approximate fund balance of $842,000.
First Time Homebuyer Program
A preliminary analysis conducted in 2024 determined that Measure Q revenues were insufficient at that time to support implementation of the FTHB Program. The dedicated fund has since grown to approximately $600,000, which staff deems viable to launch a program.
On June 16, 2026, staff presented City Council with a proposed FTHB pilot program. The City Council voted to receive and file the presentation, schedule a Study Session to discuss the Measure Q ordinance and consider potential amendments, and provide an update on the Housing Trust Fund, including how its funds are used.
June 16, 2026, Agenda Report: https://costamesa.legistar.com/LegislationDetail.aspx?ID=8069651&GUID=92E52F97-3FE9-406A-925F-866985CC8FD2 ANALYSIS:
An amendment to the Measure Q ordinance requires approval from at least five City Council Members. This study session requests City Council direction specifically on Title 9, Chapter 1, Article 5, Section 9-29.5(g), which establishes the set-aside provisions for the special revenue funds. Based on City Council feedback from the June 16, 2026 meeting, three ordinance amendment options are provided for consideration.
Measure Q Revenue Fund
The Cultural Arts Master Plan Fund (Fund 130) and First-Time Homebuyer Program Fund (Fund 140) were established to record the one-half of one percent of Measure Q revenues and expenditures. Since its inception, Fund 130 has been utilized to fund 1 FTE and various City arts initiatives, along with supplemental funds from the General Fund.
Option 1 – Maintain Measure Q set aside
Staff developed a high‑level framework for a FTHB Program and identified key program components for Council review at the June 16, 2026, City Council meeting. In preparing this framework, staff reviewed comparable programs in neighboring jurisdictions, analyzed current Costa Mesa home prices, and evaluated strategies to ensure the program aligns with local housing needs. The proposed program is intended to advance the City Council’s strategic goal to “Diversify, stabilize, and increase housing to reflect community needs.” June 16, 2026, Agenda Report: https://costamesa.legistar.com/LegislationDetail.aspx?ID=8069651&GUID=92E52F97-3FE9-406A-925F-866985CC8FD2 At that meeting, staff requested Council direction on eight core program elements and recommended implementing a pilot program, followed by a return to Council to evaluate its effectiveness and provide recommendations for future adjustments. Should Council decide to keep the Measure Q set aside for a FTHB Program, staff recommends that Council provide direction regarding the pilot program as previously presented. A summary of the eight core program elements and feedback received from City Council is included in Table 1.
Table 1. Summary of Proposed Pilot FTHB Program Core Elements Core Program Element
Requested City Council Direction
Grant Amount
Option 1: $25,000
Option 2: $30,000
Option 3: $35,000
Alternate loan structure
Eligible Uses of Grant Funds
Staff Recommendation: Approve eligible expenses
Eligible: down payment assistance, closing costs, interest rate buy downs, similar expenses related to the financing aspect of the home purchase Ineligible: costs related to home renovations, improvements, furniture or other household related items Household Eligibility
Staff Recommendation: Applicants eligible if they meet criteria Measure Q Requirements: current Costa Mesa resident, former resident raised in the City, or graduate of NMUSD FTHB: never owned a home in California or not owned a home in California within the past three years Mortgage preapproval (no all-cash purchases)
Income Limit
Option 1: 150% (approx. $207,900)
Option 2: 200% (approx. $277,200)
Option 3: 250% (approx. $346,500)
Option 4: No AMI restrictions
Purchase Price Limit in lieu of Income Limit
Cash Assets
Staff Recommendation: Remove this requirement
Eligible Housing Types
Staff Recommendation: Approve eligible and non-eligible housing types Eligible: Single-family detached home, townhomes, condominiums, manufactured homes Ineligible: Multi-unit properties, recreational vehicles Residency Requirements
Staff recommendation: occupy as primary residence for minimum of 5 years Application Review Process
Staff recommendation: 60-day application window, randomized lottery, 12 month to purchase home, maintain wait list The FTHB fund has an approximate fund balance of $600,000 for Fiscal Year ending 2025-26 that is available for this program should the funding be maintained. Projected revenue for FY2026-27 is estimated at $242,000, which increases the available funding for this program to approximately $842,000.
Option 2 – Allocate Measure Q tax revenue set aside to other programs City Council may amend the ordinance so that a percentage of the revenue is set aside for different programs. A supermajority vote of the City Council is required to amend the ordinance. At its June 16, 2026 meeting, the City Council raised suggestions including expanding funding for tenant based rental assistance, acquiring land to support affordable homeownership opportunities, supporting affordable housing development projects, or allocating funds to the City’s Housing Trust Fund.
Tenant Based Rental Assistance
The City partners with Families Forward to provide tenant based rental assistance to low-income families with minor children. The City allocates $200,000 annually in HOME Investment Partnerships (HOME) Program funds, supporting rent subsidies for approximately 12-to-15 households each year.
City Council may choose to expand the City’s existing partnership with Families Forward to increase the number of households served. Alternatively, the City may partner with another agency to assist a different population, such as low-income seniors.
Affordable Homeownership Opportunities
City Council may amend the ordinance to set aside a portion of the revenue to affordable homeownership opportunities. Potential strategies include, but are not limited to:
The City may purchase land or property to be managed by an organization specializing in affordable homeownership opportunities for low-income residents. However, the current anticipated annual revenue for the set aside is about $240,000, which is not sufficient to purchase property or land in the City.
The City may provide funding to an affordable housing developer specializing in for-sale units for low-income households to create new ownership opportunities in Costa Mesa. The funds may be used to supplement the project as gap financing or provide down payment assistance to future homeowners.
The City may offer subsidies for predevelopment activities, land acquisition, site preparation, or other costs to reduce expenses for developers constructing affordable ownership units.
Affordable Housing Development
City Council may choose to provide gap financing for affordable housing development through a Notice of Funding Availability or a Request for Proposals (RFP). The funding may be structured as a grant or loan and may be combined with other funding sources, such as HOME funds.
Housing Trust Fund
On April 2, 2024, City Council provided direction to establish the Housing Trust Fund (Fund 226) with the available funds of $2.5 million from the American Rescue Act Plan (ARPA) Funds. This direction was provided during the Council discussion and action on the Affordable Housing Ordinance. The Housing Trust Fund was created to address housing affordability within the City of Costa Mesa and assist in creating a pathway to achieving the long-term goal of housing affordability for different income levels, including a first-time home ownership program. The Housing Trust Fund has been utilized for tenant relocation from the Shalimar property and to rehabilitate the City’s low-income rental units on James/18th Street. The Housing Trust Fund has a current fund balance of approximately $2.16 million, of which $2.1 million has been committed to Jamboree Corporation for the Costa Mesa Senior housing project. The available fund balance in Fund 226 is approximately $60,000.
The Council may provide further direction on how future HTF dollars may be utilized to further define and prioritize use of the funds.
Option 3 – Allocate entire Measure Q revenue fund to the General Fund City Council may amend the ordinance to remove the revenue set aside so the entirety of the Measure Q revenue funds remains in the City’s General Fund. A supermajority vote of the City Council is required to amend the ordinance.
ALTERNATIVES:
City Council may provide alternative recommendations for updating the Measure Q ordinance.
FISCAL REVIEW:
The FTHB program is funded by Measure Q revenue and will not have an impact on the City’s General Fund. There is currently an available fund balance of approximately $600,000 for the program in the First Time Homebuyers’ Fund (Fund 140). Fund 140 receives approximately $242,000 in annual revenue from Measure Q. Further, the Housing Trust Fund (Fund 226) has an available fund balance of approximately $60,000 that could be utilized toward the FTHB program. The FTHB program will be administered in accordance with the availability of funds in Fund 140 and Fund 226.
LEGAL REVIEW:
The City Attorney’s Office has reviewed this agenda report as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item supports the following City Council Goals:
Strengthen the public’s safety and improve the quality of life.
Diversify, Stabilize and Increase Housing to Reflect Community Needs CONCLUSION:
Staff recommends the City Council conduct a Study Session to review the revenue set-aside provisions of the Measure Q ordinance and provide direction to staff.
Item #: 26-372 Meeting Date: 9/8/2026