CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
8/5/2026
1 SUBJECT:
Resolution of the City Council of the City of Pacifica Calling and Giving Notice for Holding a General Municipal Election on Tuesday, November 3, 2026, for Submission to the Qualified Voters of the City a Ballot Measure Regarding a 1% (1 Cent) Transactions and Use (Sales) Tax for General City Revenue Purposes and Requesting San Mateo County to Consolidate the City’s General Municipal Election with the November 3, 2026 Statewide General Election and to Provide Election Services.
RECOMMENDED ACTION:
Move to adopt a Resolution of the City Council of the City of Pacifica Calling and Giving Notice for Holding a General Municipal Election on Tuesday, November 3, 2026, for Submission to the Qualified Voters of the City a Ballot Measure Regarding a 1% (1 Cent) Transactions and Use (Sales) Tax for General City Revenue Purposes and Requesting San Mateo County to Consolidate the City’s General Municipal Election with the November 3, 2026 Statewide General Election and to Provide Election Services.
A Transactions and Use Tax is a General Tax that requires a 2/3 majority vote of the City Council (4 out of 5 Councilmembers) to be placed on the ballot and a simple majority vote (50% + 1) of the voters to pass. Tonight's action by the City Council, if adopted, would place the proposed revenue measure before the voters of the City of Pacifica for their consideration.
STAFF CONTACT:
Sean Charpentier, City Manager
(650) 738-7409
[email protected]
Yulia Carter, Assistant City Manager
(650) 738-7301
[email protected]
BACKGROUND:
Over the past year, the City Council has engaged in a comprehensive review of the City's longterm financial outlook and strategies to ensure Pacifica's long-term fiscal sustainability.
Concurrently, the City conducted extensive community outreach and engagement with residents, local businesses and community members on Pacifica’s fiscal sustainability and City service needs and priorities.
The City is facing an ongoing structural deficit in excess of $3.5 million a year. As explained further in the report below, there are several tough decisions the City has already made extensive cuts and any further cuts will affect the City services residents rely on. Due to these stark realities, the City conducted an interactive conversation around the budget process this year- The Pacifica Discussion 2026 - to hear community perspectives and concerns on the Pacifica City Council 2
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future of Pacifica and the services it provides.
Through the Pacifica Discussion, nearly 1,000 residents gave their feedback on City service needs and funding priorities and identified community funding priorities such as maintaining emergency medical response times, preventing the elimination of firefighter positions, maintaining police services, funding emergency response services, maintaining storm drains to prevent flooding and protecting Pacifica’s long-term financial stability.
Residents also expressed the importance of prioritizing paving streets in the worst conditions.
Despite the City’s best efforts, Pacifica still has among the worst-rated roads in the entire Bay Area, with only 28% of the City’s streets rated as at least “good” and 27% rated as “failed” to “very poor.” Pacifica has a backlog of $84 million in needed street and road repairs and maintenance needs. Pacifica needs an additional local funding source of those repairs will become even more expensive, pushing the backlog up to $123 million in five years.
With public safety on the top of resident’s priority list, fire and 911 emergency response services were most prominent amongst the feedback received. Pacifica’s current fire stations fire stations have no space for firefighters returning from calls to decontaminate and store personal protection equipment, which increases risk of exposure to carcinogens. The proposed Pacifica City Services Measure could fund the facilities that can reduce firefighters risk of exposure to hazardous materials.
Currently, the City cannot continue to fund these services, during two Fiscal Sustainability Study Sessions held in November 2025, the City Council reviewed the City's long-term financial forecast, which identified a growing structural imbalance between ongoing revenues and expenditures. The study sessions focused on preserving essential public services while maintaining the City's long-term financial stability and explored a comprehensive fiscal sustainability framework built around five interconnected "puzzle pieces", recognizing that no single strategy could resolve the City’s long-term fiscal challenges on its own.
1. Revenue Strategies - strengthening and diversifying ongoing revenue sources;
2. Organizational Investments - maintaining organizational capacity and attracting and retaining a competent and high-performing staff;
3. Economic Development - expanding the City's economic base and growing local revenues;
4. Housing Development - recognizing housing as an economic driver that supports workforce retention and long-term fiscal health; and
5. Community Partnerships - leveraging grants, regional partnerships, and outside funding to supplement local resources.
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It is important to recognize that achieving long-term fiscal sustainability would require pursuing all five puzzle pieces concurrently, rather than relying on any single strategy or revenue source.
Since those study sessions, the City has actively pursued each of these strategies. During development of the FY 2026-27 Budget, every department conducted a comprehensive review of its services using a structured framework that evaluated programs within three broad categories:
• Mandated and Public Health & Safety Services - federally, state, or legally required services, as well as services directly tied to protecting life, property, and public safety. • Core and Essential Services - critical services necessary to maintain basic City operations and community functioning, but not specifically required by law. • Discretionary Services and Community Enhancements - programs and services that enrich quality of life, strengthen community identity, and enhance Pacifica's vibrancy, but which may be more susceptible to modification when financial resources are constrained.
This framework enabled departments to evaluate not only potential expenditure reductions, but also opportunities to improve operational efficiency, reorganize services, pursue alternative service delivery models, and better align available resources with the City's highest priorities.
As a result of those efforts, the City Council adopted approximately $2.8 million in expenditure reductions, operational savings, and budget balancing measures as part of the FY 2026-27 Budget. These actions included staffing reductions, vacancy freezes, organizational restructuring, operational efficiencies, service level adjustments, expenditure deferrals, and other cost-saving measures. Collectively, these actions allowed the City to adopt a balanced operating budget while minimizing impacts to legally mandated and core public services wherever possible.
While these actions balanced the FY 2026-27 Budget, many of the adopted solutions were designed to address the City's immediate fiscal challenge rather than permanently resolve its underlying structural deficit. Several relied on one-time savings, expenditure deferrals, temporary operational adjustments, or delaying investments that will need to be revisited in future budget cycles if the structural imbalance persists.
As a result, absent additional long-term structural solutions, the City will face increasingly difficult budget decisions in future years.
The budget process also required the City Council to consider reductions to a number of discretionary services that generated significant public interest and community concern, including the proposed elimination of the City's aquatics program and senior transportation services. While funding was ultimately identified to continue the aquatics program during FY 2026-27, that decision does not eliminate the City's underlying structural fiscal challenge.
If the City's structural deficit continues, many of these same discretionary services, along with additional community programs, may once again need to be evaluated as part of future budget balancing efforts.
Throughout both Fiscal Sustainability Study Sessions and the FY 2026-27 Budget process, the City Council acknowledged that continued reliance on expenditure reductions alone would likely result in progressively deeper service reductions, diminished organizational capacity, deferred maintenance and infrastructure investment, and reduced ability to respond to community priorities. While expenditure management remains an essential component of the City's long- Pacifica City Council 4
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term fiscal sustainability strategy, evaluating revenue diversification opportunities is also part of a balanced and comprehensive approach to achieving long-term fiscal sustainability.
Among the revenue options discussed during the Fiscal Sustainability Study Sessions that occurred in November 2025 were modernization of the Utility Users Tax and Business License Tax, a parcel tax, and a local Transactions and Use Tax (sales tax). Pacifica’s current combined sales and use tax rate is 9.85 percent, consisting of the statewide base sales and use tax, countywide transactions and use taxes, and the City’s existing one-half cent Transactions and Use Tax approved by voters in 2022 (Measure Y). Following those discussions, the City continued its community engagement efforts through the Pacifica Discussion initiative, budget development study session, community surveys, and other public outreach to foster an informed community dialogue regarding the City's long-term fiscal outlook, community priorities, and potential funding options. The results of these efforts, together with the City's fiscal analysis, informed the recommendation presented in this report.
The purpose of this report is to consider whether to place before the voters a general one-cent Transactions and Use Tax measure on the November 3, 2026 General Municipal Election ballot.
If approved, the proposed measure would provide Pacifica voters the opportunity to determine whether to authorize an additional locally controlled revenue source to support essential City services and address the City's long-term fiscal sustainability challenges.
DISCUSSION:
Projected Structural Budget Shortfall
In April 2026, the Finance Department provided an updated 10 Year Long Term Financial Forecast of the City of Pacifica General Fund. This forecast showed that General Fund expenditures will continue to outpace recurring revenues absent additional corrective action and a structural deficit in the 2026-27 and following fiscal years in excess of $3.8 Million per year (see Attachment 1). This imbalance is driven by a combination of factors, including increasing personnel costs, inflation, pension obligations, aging infrastructure needs, and limited growth in the existing revenue sources, and ongoing uncertainty regarding the State’s Vehicle License Fee (VLF) in-lieu funding.
Although the FY 2026-27 Budget was balanced through a combination of expenditure reductions, operational savings, and other budget balancing measures, the Long-Term Financial Forecast indicates that additional structural solutions will be necessary to maintain long-term fiscal sustainability. As a result, the City Council has continued evaluating revenue diversification opportunities alongside ongoing expenditure management as part of a comprehensive fiscal sustainability strategy.
Local Revenue Measures on the November 2026 Ballot in San Mateo County Pacifica is not alone in evaluating local revenue options to address long-term fiscal challenges.
Several cities throughout San Mateo County are placing local revenue measures before their voters at the upcoming November 2026 General Election.
Two cities are considering Transactions and Use Tax for the November 3, 2026 ballot:
• City of San Carlos voters will be considering a ½ cent Transactions and Use Tax ($6 Million per year in estimated revenue),
• City of San Mateo voters will be considering a ¼ cent increase in the City’s Transactions and Use Tax ($7 Million per year in estimated revenue).
Other City revenue measures that appear on the November 3, 2026 ballot include:
• City of Brisbane - Business License Tax measure ($1 Million per year in estimated Pacifica City Council 5
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revenue),
• City of Burlingame - Transient Occupancy (Hotel) Tax measure ($5.7 Million per year in estimated revenue),
• City of East Palo Alto - $125 Million Infrastructure Bond Measure ($8.9 Million per year in estimated revenue),
• Town of Portola Valley - Charter City Property Transfer Tax measure ($ 2 Million per year in estimated revenue).
These measures demonstrate that many local jurisdictions throughout San Mateo County are evaluating a variety of revenue strategies to address increasing service demands, infrastructure needs, and long-term fiscal sustainability.
Placing a General Locally Controlled Revenue Measure on the Ballot A Local Transactions and Use Tax is a general tax that would require a 2/3 majority vote of the City Council (4 out of 5 Councilmembers) to be placed on the ballot and to allow Pacifica voters to decide a simple majority vote (50% + 1) of the voters to pass.
By law, a General Tax may only be placed on the ballot when there is a City Council election, except in cases of emergency declared by a unanimous vote of the City Council. California Constitution Article XIII C Section 2(b) governs this requirement, which restricts the placement of such a measure during such election years. For Pacifica, after the November 3, 2026 General Election, the next opportunity to place a General Tax on the ballot would be November 2028.
Proposed State Legislation (SB762) and Implementation Considerations State law currently limits the combined rate of all local Transactions and Use Taxes imposed within any county to a maximum of 2 percent. Because Pacifica has reached that statutory limit through existing countywide and local Transactions and Use Taxes, the City cannot impose an additional Transactions and Use Tax under current law.
Proposed state legislation, Senate Bill 762 (SB 762), authored by Senator Arreguin, would authorize the City of Pacifica and several other California jurisdictions to exceed the existing statutory limit. If enacted, SB 762 would provide the legal authority necessary for Pacifica voters to consider a one-cent Transactions and Use Tax estimated to generate approximately $5 million annually for the City's General Fund. The Bill is currently awaiting the Governor’s approval to be signed into law upon the Legislature’s return from recess.
Election and Legislative Timing
The timing of SB 762 presents unique implementation considerations. State election law requires local agencies to submit ballot measures to the San Mateo County Elections Office by August 7, 2026, while the Governor has until September 30, 2026, to sign or veto legislation passed during the current legislative session. Historically, the Governor has signed legislation similar to SB 762, including a similar bill which was recently signed this year. If the measure is placed on the ballot and subsequently approved by the voters, implementation of the tax would remain contingent upon SB 762 becoming law.
Implementation Considerations
If the SB 762 approved by both the State Assembly, the State Senate and the Governor, and the 1% (1cent) Transactions and Use Tax is approved by the voters, the City would be required to enter into an agreement with the California Department of Tax and Fee Administration (CDTFA) to administer and collect the tax. Under state law and CDTFA implementation requirements, the tax could become operative no earlier than the first calendar quarter beginning at least 110 days after all required actions have been completed. The operative date will depend on the timing of those actions, including execution of the required agreement with Pacifica City Council 6
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the CDTFA.
If SB 762 is not enacted, the City would not have the legal authority to impose or collect the additional Transactions and Use Tax authorized by the proposed ordinance. In that event, any voter-approved measure could not be implemented unless future legislation provides the necessary authority.
Community Input
Consistent with the City's commitment to transparency and public engagement, the City has undertaken extensive community outreach regarding its long-term fiscal sustainability challenges, service priorities, and potential funding strategies. In addition to two Fiscal Sustainability Study Sessions and multiple FY 2026-27 Budget Study Sessions, the City conducted community surveys, FlashVote polling, presentations to community stakeholder groups, electronic outreach through Connect With Pacifica, and other City communication channels. Additionally, the City launched the Pacifica Discussion 2026 initiative to provide residents with ongoing opportunities to learn about the City's long-term financial challenges, explore potential solutions, and share feedback on community priorities and funding options.
Again, residents have consistently identified community priorities such as maintaining public safety services, maintaining 911 police, fire and emergency medical response times, attracting and retaining experienced medical responders, preventing further deterioration of streets and roads by paving those in the worst conditions and qualifying for Pacifica’s fair share of matching funds from state and federal governments.
The City appreciates the many community members who have participated and shared their perspectives throughout this process. Community input has been gathered through the November 2025 Fiscal Sustainability Survey, the June 2026 Budget Priorities Survey (FlashVote), public study sessions, stakeholder presentations, Connect With Pacifica communications, the Pacifica Discussion 2026 initiative, and other outreach efforts. This feedback has informed the City's ongoing evaluation of service priorities, long-term fiscal sustainability strategies, and potential funding options. The City remains committed to keeping the community informed and engaged as these discussions continue.
Proposed Pacifica One Cent Transactions and Use Tax
The attached resolution (Attachment 2) would place the proposed Transaction and Use Tax ordinance (Attachment 3) before Pacifica voters at the November 3, 2026 General Municipal Election. If adopted by the City Council, the following ballot question would be submitted to Pacifica voters:
Pacifica City Services Measure. To protect Pacifica’s long-term financial stability; fund police, fire, 911 emergency response; prioritize paving streets in the worst conditions; keep parks, beaches and public spaces safe and maintained; and for general government use, shall the City of Pacifica’s measure establishing a 1% (1¢) transactions and use (sales) tax, generating approximately $5,000,000 annually until ended by voters, with public disclosure and local control of funds, and independent annual audits, be adopted?
If adopted by voters, the proposed ordinance would have the following key features:
1. It would impose a transactions and use tax of 1% (one cent) in accordance with applicable provisions of state law (Part 1.6 of Division 2 of the Revenue and Pacifica City Council 7
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Taxations Code).
2. In accordance with state law, the City of Pacifica would be required to enter into a contract with the California Department of Tax and Fee Administration (CDTFA) to collect and administer the tax.
3. Under the ordinance, the tax would begin being collected at the beginning of the first quarter that is at least 110 days after certification of the election results and satisfaction of all applicable state law and CDTFA administrative requirements. The operative date will depend on the timing of those actions, including execution of the required agreement with CDTFA.
4. The ordinance would deposit all tax proceeds into the City's General Fund.
Revenues would be subject to the same annual independent audit requirements as other General Fund revenues, with the annual audit including an accounting of Transactions and Use Tax revenues that would be presented to the City Council and made available for public review.
As a general tax, revenues generated by the proposed Transactions and Use Tax would be available for any lawful municipal purpose, as determined through the City's annual budget process and subject to City Council appropriation.
ALTERNATIVE ACTION:
If the proposed 1% (one cent) Transactions and Use Tax revenue measure is not placed on the November 2026 General Election ballot by the City Council and approved by the voters to close the upcoming gap in revenues compared to projected expenses, the City will continue to face a projected structural deficit. City Manager will be tasked to submit recommendations for additional reductions to municipal services, staffing, and capital investments starting in the 2027-28 fiscal year. This would further reduce the City’s organizational capacity, service levels and operations.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
This item advances the Vision 2025 & Beyond program and furthers the City Council’s all Strategic Goals and the City’s efforts towards Fiscal Sustainability.
FISCAL IMPACT:
If the City Council moves forward with a Transactions and Use Tax Ordinance for the November 3, 2026 ballot and the revenue measure is approved by the voters, the proposed 1% (one cent) transactions and use tax will generate approximately $5 million in additional annual revenue, subject to enactment of SB762 and implementation by CDTFA. This revenue will address the City's projected General Fund deficit as projected in the Long-Term Financial Forecast shown in Attachment 1.
ORIGINATED BY:
City Manager's Office
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ATTACHMENT LIST:
Attachment 1 - Long Range Financial Forecast (PDF)
Attachment 2 - Pacifica TUT Resolution (DOCX)
Attachment 3 - Pacifica TUT Ordinance (DOC)