Study Session:
General Sales T ax Increase
Measure
February 10, 2026
PURPOSE OF TONIGHT’S STUDY SESSION
Why we’re here:
• Share the City’s long-term financial
outlook
• Explain why a sales tax increase is being
studied
• Discuss options
• Hear from the community about
priorities
Important to note:
• No vote tonight
• No final decision has been made
OVERVIEW
• The City is entering a period of long-
term structural budget deficits if we
are going to maintain current levels of
safety services and provide for needed
infrastructure improvements.
• Costs are rising faster than revenues:
• Public safety contracts
• Infrastructure and capital needs
• Over $50 million in unfunded capital
projects
• The General Fund remains balanced
through FY 2026–27
• Deficits begin in FY 2027–28 and grow
rapidly
• A voter-approved sales tax measure could:
• Eliminate operating deficits
• Fund critical safety and infrastructure
needs
• Secure long-term financial stability
WHAT IS A STRUCTURAL DEFICIT?
• A structural deficit occurs when:
• Ongoing expenses grow faster than ongoing revenue
• Even with responsible budgeting:
• Costs continue to rise annually
• Revenues do not keep pace
This Photo by Unknown Author is licensed under CC BY-NC-ND
LONG TERM FISCAL OUTLOOK
• From Fiscal Y ear 2027-28
through 2033-34 the projected
cumulative deficit exceeds
$11.7 million
• Does not include any additional
public safety needs or unfunded
infrastructure projects.
Fiscal Year Amount
2026–27 +$6,960
2027–28 –$469,389
2028–29 –$795,692
2029–30 –$1,161,443
2030–31 –$1,572,460
2031–32 –$2,034,232
2032–33 –$2,552,097
2033–34 –$3,131,641
PUBLIC SAFETY PRESSURES
Fire Services (Contracted):
• 5-year contract total: $46.4 million
• Annual increases: 4.5–5%
• Additional pressures:
• $2.2M–$2.5M annual paramedic subsidy
• Equipment and vehicle costs
• Replace Fire Station #1
• Evaluate fire personnel and equipment needs
(e.g., squad vehicle and ladder truck)
Police Services (Contracted):
• FY 2026–27 projected budget: $16.37 million
• Ongoing needs:
• Additional officers needed
• Traffic enforcement needs
• Buildout of station to accommodate growth
• Community growth
• Only 3 detectives citywide
• Annual cost increases: 5–6%
• Additional $800K+ annually for operations and
facilities
INFRASTRUCTURE PRESSURES
Adopted 5-Year Capital Improvement Program (CIP)
includes an overall estimated expenditure of $224.9
million for 40 projects.
A few key projects include SR-210 at 5th Street
Interchange, Base Line & Orange St. Bridge
Replacements, Bledsoe Creek Outlet Repair, and
Highland Redlands Regional Connector.
Pavement Management Program – $32 million to
maintain City’s Pavement Condition Index of 71 thru
FY 2032/2033. The deferred maintenance is $94.3
million. The City is responsible for 159.1 miles of
roadway. The cost to repave one mile of roadway is
about $750,000 per mile.
Without funding, the City may be forced
to:
• Delay critical infrastructure
• Increase long-term repair costs
• Miss opportunities for economic
development
WHY CONSIDER A SALES TAX INCREASE?
• Sales tax is:
• Broad-based
• Flexible
• Voter-approved
• Does not affect property taxes
• Captures revenue from:
• Visitors
• Shoppers
• Commuters
• Regional customers
SHARED COST WITH
NON-RESIDENTS
A significant portion
of sales tax is paid by:
Residents of surrounding
communities
Visitors shopping or dining
in the City
Non-residents:
Use roads and
infrastructure
Rely on public safety
services while here
Sales tax helps spread the cost more
fairly
SALES TAX MEASURE
OPTIONS TO CONSIDER
ASKING HIGHLAND VOTERS TO CONSIDER A 1% SALES TAX INCREASE
MEASURE
SALES TAX MEASURE OPTIONS
ESTIMATED ANNUAL REVENUE IMPACT ON STRUCTURAL DEFICIT
• 0.5% Sales T ax
• Reduces FY 2033–34 deficit to ~$310K
• Extends solvency
• Limited capacity for capital investment
• 1.0% Sales T ax
• Eliminates deficits
• Builds $2.5M+ surplus by FY 2033–34
• Supports:
• Increased Public safety staffing
• Infrastructure improvements and repairs
• Fleet replacement
LOCAL SALES
TAX
COMPARISON
City Rate
Colton 8.75%
Fontana 8.75%
Highland 7.75%
Los Angeles 9.75%
Montclair 9.00%
Redlands 8.75%
San Bernardino 8.75%
Yucaipa 8.75%
7.75%
6.00%
1.00%
0.75%
BREAKDOWN OF CURRENT AND
PROPOSED SALES TAX
Highland Sales T ax Rate
California State Sales T ax
City of Highland Tax
San Bernardino County
(Measure I) Tax
8.75%
6.00%
2.00%
0.75%
AN 8.75% TAX MEANS
• An additional One Penny per $1 Spent
or
• An additional 10¢ for every $10 spent on
Qualifying Purchases*
• In line with other communities
* Groceries, prescription medications, and
essential items are generally exempt.
COMMON
SALES TAX
EXEMPT
ITEMS
• Groceries
• Medicine
• Medical
• Dental
• Real Estate
• Rent
• Education
• Utilities
• Labor-Personal Services
Essential Purchases Are Not Affected
REVENUE RAISED BY THE SALES TAX MEASURE
Invested directly in Public Safety and Infrastructure
to benefit residents and businesses, ensuring our
community stays safe, accessible, and well-
maintained as it grows.
ACCOUNTABILITY
& OVERSIGHT • If placed on the ballot:
• By law, funds remain local, state/county
cannot take the money
• Annual public reporting (via ACFR)
• City Council oversight
• Regular budget review
• Community transparency
BOTTOM LINE
WITHOUT NEW REVENUE
The City may be forced to:
• Delay or cancel infrastructure projects
• Reduce public safety staffing
• Defer purchase of public safety and Public
Works equipment and maintenance
• Risk staff turnover and service reductions
WITH A SALES TAX 1% MEASURE
The City can:
• Maintain reliable public safety services
• Invest in critical infrastructure
• Protect long-term financial health
• Plan responsibly for the future
TIMELINE
City Council does not have the authority
to enact a new tax, only the voters can
approve a new local tax.
T o do so, City Council must first vote to place
the measure on the ballot which requires a
2/3 vote or at least 4 affirmative votes by City
Council.
PUBLIC
INPUT &
DISCUSSION
We want to hear from you:
• What services matter most to you?
• What investments should be
prioritized?
• What concerns do you have?