Agenda Item No: L.2
AGENDA REPORT
DATE: May 6, 2025
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Introduction of City of Fairfield General Purpose, Transaction and Use Tax (Sales Tax) Rate Increase
Funding Source: $250,000; General Fund
Contact: Savita Chaudhary, (707) 428-7582
RECOMMENDED ACTION
Receive report, open discussion, and provide direction to staff.
STATEMENT OF ISSUE
As part of the City’s effort to meet the service needs of our community, maintain the City as a full-service city, and address millions of dollars in unfunded capital infrastructure needs and structural budget deficit, the City is considering a ballot measure to increase the Transaction and Use Tax (Sales Tax). Authorize the city manager to publish a Request for Proposals (RFP) for Voter Opinion Survey and Public Education services for an amount not to exceed $250,000.
DISCUSSION
Voters of the City of Fairfield approved Measure P in 2012, which enacted Ordinance No. 2012 - 20 and established a on e percent sales tax for five years. These revenues have allowed the City to recover from budget shortfalls resulting from the 2008 economic downturn. On February 19, 2013, the City Council adopted Resolution No. 2013 -31 to establish the Measure P Committee and to approve guidelines and duties for the Measure P Committee.
In 2016, voters again voted and confirmed an extension of the measure through March 31, 2033.
On October 17, 2017, the council adopted Ordinance 2017-235 to enact the sales tax extension and extend the terms of office for the Measure P Committee members. The Measure P 2033 sunset provision will result in a substantial loss of tax revenues in 2033 if not addressed.
Additionally, the City faces a structural deficit due to inflationary cost pr essures that have outpaced revenue increases since the end of the COVID-19 pandemic.
Fairfield is a full -service city, equipped with its own City -run police, fire, parks, recreation, community development, and public works, including water utility services. The health and safety
of all residents in the City is a top priority. The City of Fairfield faces a structural budget deficit that it is trying to solve; and the general fund pays for important City services such as police, fire, and paramedic services ; 911 emergency response; emergency street repairs and maintenance; neighborhood park and recreation services; and general municipal services to the public.
For the past two years, the council has made tough decisions to reduce expenditure, including the freezing of 24.5 full-time positions, reductions in discretionary expenditures, and the use of one-time monies to balance the general fund budget. In 2024, the council placed Measures L & M on the ballot to increase Transient Occupancy Taxes, as well as modernize and streamline the City’s Business License Tax structure. However, without further cuts to services or an increase in revenues, the City projects to continue operating in a defici t position with expenditures higher than revenue.
On January 24 -25, 2025, the c ouncil participated in a strategic planning session , and staff identified the structural budget deficit, with expenses continuing to outpace revenues. Staff identified the ongoing projected deficit and sought Council direction for the upcoming FY 25-27 biennial budget. The council requested a study session with a presentation to better understand what further cuts to services were possible and the impacts they would have on the community.
On March 11, 2025, the council held a study session , and staff presented what 5% across the board cuts to expenditures would look like. 5% would result in a further reduction of 18 positions, including 5 layoffs, reduced maintenance in parks, f ewer police for patrol services, and rotating brownouts to fire stations. Based on the impacts such cuts would have on residents, the council directed staff to bring back for consideration options related to a potential sales tax measure.
Any changes to Fairfield’s sales tax must be approved by local voters. The council may consider placing a revenue measure to adjust the sales tax rate in Fairfield on either the June or November 2026 ballots. If the council determines to pursue a sales tax measure, staff recommends issuing an RFP for consultant services to complete a voter opinion survey regarding the prospective measure, assistance with drafting ballot language, and assistance with public education services based on the results.
Sales Tax
In California, a general tax to be used for general governmental purposes requires a 50% plus one majority vote. A Special Tax to be used for a specified limited purpose requires a 66.67% supermajority vote and must delineate exactly how funds will be utilized.
California has a State -mandated minimum sales tax of 7.25 %. The Local Government Guide to California Sales, Use and Transaction Tax https://www.cdtfa.ca.gov/industry/local-jurisdictions- and-districts/ provides a detailed overview of the allocation of sales tax and ho w use tax is imposed in California. Counties, municipalities, and districts are allowed to increase the sales tax in their jurisdictions up to a total of 2%.
Assembly Bill AB 3259 increased the Solano County cap by .50%, increasing the cap to 9.75% and will remain in effect until January 1, 2029. https://alcl.assembly.ca.gov/system/files/2024-04/ab- 3259-wilson.pdf
Not all sales tax revenue goes to the City. California’ s base sales tax is 6%. The additional sales tax of 1.25% is called the Bradley-Burns tax, of which 1% is allocated to counties or incorporated cities to use at their discretion , and the remaining 0.25% is distributed to county local transportation funds (LTFs) to support transportation programs.
Many cities are facing similar budget deficits. At the November 2024 election, 4 of the 7 cities in Solano County increased their sales tax. The most recent increases, as well as the rate in all Solano County cities, are listed in Tables 1 and 2 below:
Table 1: Most recent sales tax increases in Solano County City Percent Increase New Rate - effective April
01, 2025
Old Rate
Benicia 0.5% 9.625% 9.125%
Dixon 1% 8.375% 7.375%
Rio Vista 1% 9.125% 8.125%
Suisun City 0.75% 9.125% 8.375%
City of Fairfield’s sales tax is lower than 5 of the 7 cities in Solano County, as described in Table 2 below:
Table 2: Sales Tax Rates in Nearby Cities https://www.cdtfa.ca.gov/formspubs/cdtfa95.pdf
Regional City Sales Tax Rates
Vacaville 8.125%
Dixon* (Increased by 1% Nov 2024) 8.375%
Fairfield Current 8.375%
Suisun City* (Increased by 0.75% Nov 2024) 9.125%
Rio Vista* (Increased by 1% Nov 2024) 9.125%
Vallejo 9.250%
Benicia* (Increased by 0.5% Nov 2024) 9.625%
Solano County CAP 9.75%
*Increase effective April 01, 2025
Pursuant to California Revenue and Taxation Code Section 7285.9, the City has the authority to levy a Transactions and Use (Sales) Tax for general purposes, subject to voter approval. Based on council direction, the City is considering presenting to voters either a General Sales Tax (requires 50%+1 simple majority approval) or a Special Sales Tax (requires 66.7% supermajority approval) at either the June or November 2026 election.
The law requires a general tax to be placed on a regularly scheduled general election. However, the council can place a general sales tax on the Statewide Primary Election Ballot. If a tax is approved at the June primary election, it will go into effect on January 1, 2027. If a tax is approved at the November general election, it will go into effect on April 1, 2027.
The Solano County Registrar of Voters has estimated the cost to administer the General Election at $5.00 per registered voter. Currently, the City of Fairfield has 65,728 registered voters, and the estimated cost of submitting a sales tax measure to the City’s electorate in November 2026, general election is $328,640. However, the City will be participating in the General Election for councilmembers, so the cost to ADD a measure is incremental and is estimated by the Registrar of Voters to be about $0.50 per registered voter, or an increase to the normal election services invoice of $32,864. Adding a measure to the City’s already required offices is an incremental only cost – mostly associated with printing and proofing the full -text of the measure and arguments for/against in the Voter Information Guide.
A ballot measure submitted in the next Primary Election (June 2026) is $7.00 per registered voter, or approximately $460,096. This cost is in addition to the cost for the general election estimated at $328,640.
The City may also hold a stand -alone special election but the estimated cost for the County to administer the election is $15.00 per registered voter or approximately $985,920. Staff does not recommend this approach given it is cost prohibitive.
The potential, locally enacted Sales Tax measure is projected to generate general fund revenue between approximately $12 million annually for a one-half cent increase to $24 million annually for a one cent increase. The projections are based on current revenue derived from the existing Measure P sales tax and are subject to change with changes to economic activity within the City.
The estimates of different percentage increases are defined in Table 3 below:
Table 3: Sales Tax Rate and Estimated Additional Revenue
Estimates of Additional Revenue
Percent
Increase
Projection
Projection
Projection
3%
Growth
3%
Growth
3%
Growth
3%
Growth
3%
Growth
3%
Growth
FY 24-25 FY 25-26 FY 26-27 FY 27-
28 FY 28-29 FY 29-30 FY 30-
31 FY 31-
32 FY 32-
33 Current
Measure
P Taxes
(1 cent)
$24.77 M $24.83 M $25.56 M $26.33
M
$27.12 M $27.93 M $28.77
M
$29.63
M
$30.52
M
0.25 (1/4
cent)
$6.19 M $6.21 M $6.39 M $6.58
M
$6.78 M $6.98 M $7.19 M $7.41 M $7.63 M
0.50 (1/2
cent)
$12.38 M $12.42 M $12.78 M $13.16
M
$13.56 M $13.97 M $14.38
M
$14.82
M
$15.26
M
0.75 (3/4
cent)
$18.57 M $18.63 M $19.17 M $19.75
M
$20.34 M $20.95 M $21.58
M
$22.22
M
$22.89
M
0.875
(7/8
cent)
$21.67 M $21.73 M $22.37 M $23.04
M
$23.73 M $24.44 M $25.17
M
$25.93
M
$26.71
M
1.00 (1cent)
$24.77 M $24.83 M $25.56 M $26.33
M
$27.12 M $27.93 M $28.77
M
$29.63
M
$30.52
M
Next Steps for Sales Tax
If the council gives direction to proceed with placing a potential sales tax revenue measure on a ballot in 2026, the next steps would be:
1. Staff will issue an RFP for consultant services for public outreach and polling services
2. Identify the services needed and the funding to provide those services
3. Survey a statistically valid sample of likely voters to objectively evaluate voter preferences about a local ballot measure
4. Staff will present the polling results to the council, and council will be presented to formally adopt the ballot language, respective resolutions, and ordinance amendments at the future council meetings
5. The council considers providing directions to City staff on whether to move forward with a ballot measure
6. To plac e a measure on a ballot, 2/3 of the council (5 members) are required to vote affirmatively for the sales tax resolution and ordinance. If a council member is absent from the meeting, 5 councilmembers are still required to vote affirmatively for the item to qualify for the ballot.
7. If moving forward with a ballot measure, the City provides public education that effectively communicates about the measure, including how the measure’s funds could be used and how accountability will be provided
8. Place a measure on the ballot and await election results
Direction from Council
1. General Vs. Special Tax
2. Identify how much percentage increase
a. 1/4 cent
b. 1/2 cent
c. 3/4 cent
d. 7/8 cent
e. 1 cent
3. Select Election Cycle
a. Primary Election - June 2026
b. General Election - November 2026
4. Measure P Sunset
a. Combine with Sales Tax Increase and Remove Sunset of Measure P b. Separate Sales Tax Increase and wait until an election before 2033 to remove the sunset of Measure P
5. Issue an RFP for consultant services for public outreach and polling services
FINANCIAL IMPACT
If council directs to proceed with a potential sales tax measure, then staff will issue an RFP to engage a consultant for polling and public outreach which is estimated to be in the amount of $250,000, to be funded by the General Fund.
This action is Categorically Exempt per CEQA Section 21080(b)(9);15300 , which applies to any project that has been determined not to have a significant effect on the environment and exempt from this division.
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
N/A
ALTERNATIVE ACTION
The council may choose to move forward with the release of the RFP for consulting services and wait to determine the desired amount of increase, and which ballot to place the measure on, until after polling identifies voter preference; or
The council may forgo placing a revenue measure on the ballot. If such direction is given, then all work to develop a sales tax measure and/or place the increase on the ballot would be suspended, and no further action is necessary.
COORDINATED WITH
City Attorney’s Office, City Manager’s Office, and Finance Department
STAFF CONTACT
Savita Chaudhary, Assistant City Manager
(707) 428-7582
[email protected]
ATTACHMENTS
N/A