City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Community Services
Meeting Date: June 8, 2026
Report #:2603-6081
TITLE
Adopt an Ordinance and Resolution Calling an Election and Placing a ½ Cent (0.5%) Transactions and Use Tax Measure on the November 3, 2026 Ballot; and a Resolution Adopting Advisory Spending Guidelines for the Use of the Proceeds if the Measure Passes to Support Improving the Cubberley Community Center; CEQA Status - Not a Project.
RECOMMENDATION
1. As directed by the City Council on May 18, 2026, staff recommend the City Council adopt an ordinance and a companion resolution to place a ½ cent (0.5%) transactions and use tax measure on the November 3, 2026 ballot (Attachments A and B). The ordinance designates the members of the Cubberley Ad Hoc Committee (Councilmembers Burt, Lythcott-Haims, and Reckdahl) to author the argument in support of the measure. (2/3 vote required).
2. The Cubberley Ad Hoc Committee recommends the City Council adopt a resolution approving advisory spending guidelines in support of improving the Cubberley Community Center if the measure passes. (Attachment C, to be published in late packet on June 4, 2026).
EXECUTIVE SUMMARY
As directed by the City Council, the attached ordinance formally places a 0.5% transactions and use tax (commonly known as a sales tax) measure on the November 3, 2026 ballot. State law requires a 2/3 vote by the City Council to place this measure on the ballot and a simple majority of voters to pass in November.1 The ordinance sets the exact language of the ballot question and designates City Council members to author the argument in support of the measure. If passed, the revenue from the tax will go to the City’s general fund to be appropriated. A 1 Revenue and Taxation Code section 7285.9.
companion resolution makes required requests for the election to be consolidated with the statewide election and to request the County’s services to conduct the election.3 Within the state cap, the City has capacity for a ¼ cent (0.25%) voter approved local sales tax; staff is working on legislation that would increase the local sales tax cap by a ½ cent.
In addition, the Cubberley Ad Hoc Committee recommends the adoption of a resolution approving advisory spending guidelines in support of improving Cubberley Community Center with the new revenue if the measure passes.
BACKGROUND
The City of Palo Alto (City) is advancing a plan to redevelop a 15-acre portion of Cubberley, building on previous community engagement and re-engaging residents to reimagine and prioritize community uses of the campus. The City and the Palo Alto Unified School District (PAUSD) have a memorandum of understanding that would enable the City to purchase seven acres to support a reimagined community center and fund school improvements. The City currently owns eight acres at Cubberley; acquiring an additional seven acres would create an opportunity to update the ageing facility for the benefit of the community. Funding the land purchase and site improvements could be made possible through different funding sources including a ballot measure, nonprofit partnerships, philanthropy, grants, and development fees.
There has been extensive foundational work completed to support the advancement of the Cubberley Project, including several actions by the City Council. Attachment D shares a summary of actions to date and the history of the Cubberley site.
ANALYSIS
On May 18, 2026, the City Council directed staff to pursue a ballot measure for a ½ cent (0.5%) transactions and use tax (commonly known as a sales tax) in the November 2026 election.
Within the state cap, the City current has capacity for a ¼ cent (0.25%) voter approved local sales tax. The City would need to obtain authorization from the State before implementing the ½ cent increase. The City and its legislative consultants, Towsend Public Affairs, are preparing legislation that would increase the local sales tax cap by ½ cent.
Placement of a measure on the ballot requires Council action to adopt an ordinance and a companion resolution calling the election and specifying the ballot question. If approved by voters, the resulting revenue would accrue to the City’s General Fund and would be available to support general City services. This includes land acquisition and renovations at the Cubberley 3 An ordinance and a companion resolution to call the election for this ballot measure comes because of disparate state law requirements. State law specifies that certain election matters shall be approved by ordinance, and others can only be approved by resolution.
site as appropriated by the City Council. The Santa Clara County Registrar of Voters (ROV) requires that measures be submitted no later than August 7, 2026. Key provisions include:
Summary of the Measure: If approved by a simple majority of voters, the ballot measure would create a ½ cent (0.5%) transactions and use tax (commonly known as a sales tax).
Revenue generated by this increment will be deposited in the City’s General Fund and be appropriated by the City Council.
Ballot Question: The exact ballot question is listed in the ordinance. The ballot question is informed by the four polls conducted by the City from September 2025 through March 2026 and refined by the Cubberley Ad Hoc Committee. Ballot Arguments: The Cubberley Ad Hoc Committee members are designated to provide the official ballot argument in favor of the measure. This argument will be published in the County’s voter guide. If formal opposition is submitted, the Ad Hoc Committee will also be responsible for authoring a rebuttal. Alternatively, a majority of the authors of the argument in favor may choose a new slate of authors to submit a rebuttal argument. The deadlines for the argument in favor of the measure, the argument against, and the rebuttal are established in this ordinance in coordination with the County’s deadlines.
Election Consolidation: The City requests and permits the County to consolidate the election for this ballot measure with all the other races occurring on November 3, 2026, including the election of three City Councilmembers, as well as other regional, state, and federal races.
Ordinance Implementing the Measure: The ordinance implementing the ½ cent (0.5%) tax is included as an attachment to the ordinance calling the election. The implementing ordinance is written to ensure that this tax is assessed and collected uniformly with the state sales tax. The California Department of Tax and Fee Administration will collect the amount on the City’s behalf and deposit the revenue with the City. The implementing ordinance will be published in the official voter guide for voter transparency. If approved, the ordinance will be codified into the Palo Alto Municipal Code.
The Cubberley Ad Hoc has prepared a Resolution of Advisory Spending Guidelines that the City Council may may choose to adopt in parallel with the placement of the tax measure on the November 2026 ballot (Attachment C). While the revenue from the measure will flow to the City’s general fund to be appropriated, this resolution states the City Council’s intention of using the new revenue for improving Cubberley through the land acquisition from PAUSD and capital improvements. This attachment will be released late packet on June 4, 2026.
The City Council has successfully honored similar statements setting advisory spending guidelines with respect to the change in the Transient Occupancy Tax rate (TOT, or hotel tax) and with the establishment of the Business Tax. For TOT, all proceeds from a rate change approved in 2014 and another in 2018 were intended and used for investment and completion of the City Council 2014 approved Infrastructure Plan. TOT receipts have funded major projects such as the new Public Safety Building, Bike & Pedestrian Plan, and the new parking garage in the California Avenue district. Regarding the Business Tax, proceeds were intended and used for transportation and safe train crossings, housing affordability and services for the unhoused, and public safety.5
FISCAL/RESOURCE IMPACT
The revenue generated by a ½ cent sales tax measure contained in the attached Ordinance is estimated to generate approximately $13-$15 million annually. This estimate can be impacted by a variety of factors, including composition of the local economy, economic cycles, one-time or other factors (i.e. sales volume, consumer behavior) The Santa Clara County Registrar of Voters (ROV) estimates that placing a measure on the November 2026 election ballot will cost $100,293. Funding for this expense will be provided by the Cubberley Community Center Redevelopment CIP Project (CB-26000).
STAKEHOLDER ENGAGEMENT
In parallel with the development of the Cubberley Conceptual Master Plan process, staff conducted four community polls between April 2025 and March 2026 to gauge community priorities and voter appetite for a potential ballot measure to support land acquisition and implementation costs associated with the Cubberley project. Polling results informed development of the proposed ballot question and funding strategy.
Additional stakeholder engagement related to the proposed ballot measure and broader Cubberley planning effort included discussions with the City Council Cubberley Ad Hoc Committee, public City Council meetings, and presentations to the Parks and Recreation Commission, Planning and Transportation Commission, and Architectural Review Board. These discussions provided opportunities for public input, refinement of project priorities, and feedback on funding considerations associated with the long-term vision for the Cubberley campus.
ENVIRONMENTAL REVIEW
Adoption these pieces of legislation is not a project under CEQA because it involves the creation of government funding mechanisms or other government fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA regulation 15378(b)(4). 5 See Resolution 10068, “Adopting Advisory Spending Guidelines for Proceeds of a Business Tax to be Submitted to the Voters for Approval November 2022,” approved August 22, 2022, at https://www.paloalto.gov/files/assets/public/v/1/city-clerk/election-info/2022/measure-k/reso-10068.pdf
ATTACHMENTS
Attachment A: Ordinance Calling an Election for November 3, 2026 for Submittal to the Qualified Electors of the City a Measure to Impose a Transactions and Use Tax at a Rate of 0.5% Attachment B: Companion Resolution Requesting Election Consolidation and Related Election Services
Attachment C: Resolution Adopting Advisory Spending Guidelines for Proceeds of a Transactions and Use Tax to be Submitted to the Voters for Approval in November 2026 (To be released late packet on June 4, 2026)
Attachment D: Summary of Actions to Date and the History of the Cubberley site APPROVED BY:
Kristen O'Kane, Community Services Director