CITY COUNCIL STAFF REPORT
Meeting Date: September 14, 2026
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: DISCUSSION ON CITY OF PLEASANT HILL REVENUE OPTIONS
SYNOPSIS
On June 15, 2026, the City Council Adopted the Biennial Budget for Fiscal Year 2026/2027 through 2027/2028. The City Council understood that an adopted budget was required before the beginning of the new fiscal year but also acknowledged that the budget deficits are not sustainable, which was also reflected in the City Manager’s Summary in the Adopted 1. The City Council, as recommended by the Budget Committee, directed staff to bring back options to address the budget deficits. Staff has prepared various revenue options for the City Council’s consideration and direction. This information was provided to the Budget Committee on August 13, 2026.
DISCUSSION
The Adopted Biennial Budget for Fiscal Year 2026/2027 through 2027/2028 (FY 26/27 & FY 27/28) assumes maintaining service and programs at current levels. The adopted budget incorporates moderate increases for revenues and expenditures based on our consultants, service providers, and consistent with the Updated Long Term Financial Plan FY24/25 through FY28/29.
This could result in budget deficits of $4.1 million in FY 26/27 and $4.7 million in FY27/28, and the budget forecast shows the General Fund declining below $10 million by the end of the adopted biennial budget and turning negative by FY 29/30. Staff will continue to review existing funding and expenditure reduction options, but based on the projected budgeted deficits, and in the absence of a new revenue source, reducing the budget deficit would most likely require City Council to consider significant service reductions.
1 Biennial Budget Fiscal Years 2026/2027 – 2027/2028 – Pages ii-vi Over the last 10 years, City revenues have grown 4.4% on average. The City Council and staff have managed costs within their control over the last decade with an average increase in expenditures of 4.3%. However, the costs that continue to rise significantly are CalPERS Unfunded Actuarial Liability (UAL) and insurance premiums, which are both costs beyond City control other than authorizing their payments. The CalPERS UAL and insurance premium payments have an annual average growth of 26% and 27%, respectively, over the last decade.
EXPENDITURES
The Adopted Biennial Budget incorporated costs reductions that occurred during the budget process from reducing preliminary appropriations to maintaining frozen positions throughout the City, as described below:
Changes from Preliminary Biennial Budget – $294K Reduction:
a. Reduced $155 thousand – reduction for CORE Homeless Program b. Reduced $100 thousand – reduced the transfer for vehicle replacement from $200 thousand annually to $100 thousand per year for both fiscal years c. Reduced $47 thousand – adjusted maintenance staff allocations to other eligible funds d. Reduced $15 thousand – reduced IT services for building software no longer needed e. Increased $23 thousand – MPA increased the insurance premiums for general liability and workers compensation
Frozen or Modified Positions – $1.1M Reduction:
Frozen2:
Police Department:
a. Police Officer - $174K
b. Community Service Officer - $122K
Planning Division:
c. Associate Planner - $147K
Public Works Department:
d. City Engineer - $225K
e. Maintenance Supervisor - $189K
f. Maintenance Worker II - $121K
g. Maintenance Worker I - $92K
Modified Positions:
h. City Treasurer – voters elected to make this position appointed and duties have been added to Finance Division - $6K
i. Senior Civil Engineer position was adjusted to Associate Engineer - $15K to $30K
2 Biennial Budget Fiscal Years 2026/2027 – 2027/2028 – Pages 165-169 Staffing Level
In comparison to the Biennial Budget for FY 12/13 - FY13/14, authorized budgeted positions have been reduced in almost every department/division:
City Staff FTE
FY26/27
% FTE
FY26/27
FTE
FY12/13
City Council 5.13 4.1% 5.33
City Manager 5.82 4.6% 5.57
City Attorney 0.20 0.4% 0.60
IT Division 2.10 1.7% 1.50
Finance Division 5.80 4.6% 9.0
HR Division 2.70 2.2% 5.90
Building Division 5.00 4.0% 4.25
Planning Division 6.65 5.3% 8.75
PW – Maintenance Division 18.57 14.8% 21.25
PW – Engineering Division 7.50 6.0% 10.25
Police Department 61.60 49.1% 69.00
Other Funding - Not General
Fund
3.95 3.2%
Total 125.5 100% 141.40
REVENUE OPTIONS
The following is a summary of the various types of revenue options that the City Council may wish to consider.
Sales Tax/Transaction Use Tax
The City can increase the sales tax collected for purchases made within its jurisdiction. Local governments (cities and counties) are permitted to levy additional sales and use taxes with the combined rate not exceeding 2%. A general sales tax would require a majority approval by voters, whereas a special sales tax (only be used for a specific purpose) would require two-thirds voter approval. In 2016, Measure K successfully passed with 67.09% of the voters agreeing to impose a general ½-cent sales tax for a period of 20 years. The City’s current sales tax rate is 9.25%, which would allow for the assessment of up to an additional ½-cent sales tax on purchases made within Pleasant Hill. Increasing the sales tax from ½ cent to a full cent could provide approximately $5.5 million in additional annual revenue, if approved by the voters.
Property Tax Options
In general, property taxes are imposed on real property (land and permanently attached improvements) and tangible personal property (moveable property) located within the state. The California property tax is ad valorem meaning it is based on the value of property rather than on a fixed amount or benefit to the property or persons.
Proposition 13 limits the real property tax rate to 1% of a property’s assessed value, plus rates previously imposed to fund indebtedness approved by the voters. The City can levy additional property taxes assuming passage by the voters and below are a couple of examples:
a. Parcel Tax
A Parcel tax requires two-thirds voter approval and is not an ad valorem property tax. A parcel tax is a particular type of excise that is based on either a flat per-parcel rate or a rate that varies depending on use, size, and/or number of units on each parcel. A parcel tax measure is generally put before the voters to support various city services and may be levied for general purposes or restricted to a particular purpose. The amount collected will vary depending on the parcel tax rate on use and size. For example, a parcel tax of $100 per parcel across approximately 10,790 eligible parcels (excluding exempt parcels. such as schools, libraries, etc.) in Pleasant Hill would generate approximately $1,079,000 in revenue per year.
b. Real Property Transfer Tax/Documentary Transfer Tax
The standard property tax transfer rate of $1.10 per $1,000 of property value is levied when properties are sold in California. Payment of these taxes is typically negotiated between buyer and the seller, and the revenue is equally divided between the City and the County.
Only charter cities can increase this rate via ballot measure. Because the City of Pleasant Hill is a general law city, any proposal to increase the property tax transfer rate first requires that the City become a charter city, which action requires approval by two-thirds of voters.
The amount collected, as approved by a majority vote of the electorate, will vary depending upon the rate and volume of property sales in a given year.
For example, based on data provided by the City’s property tax consultant, HdL, a transfer tax for single-family homes sales of 308 homes 34$1,0005 of value would generate $3,984,658 in revenue per annum. Again, the transfer tax option requires two actions by the electorate: first, to approve becoming a Charter City (a 2/3 vote), and then to amend the real property transfer tax rate (a majority vote).
Transient Occupancy Tax (TOT)
The City currently has seven hotels (Hyatt House, Sonesta Select, Residence Inn by Marriott, Hilton Homewood Suites, Extended Stay America, Sun Valley Inn, and Pleasant Hill Inn). These hotels collect and remit 14% of receipts based on a transient occupancy tax (TOT) rate of 10% (City Council Ordinance No. 139 in 1965) and a tourism improvement district fee of 4% (City Council Resolution No. 07-22), which Visit Pleasant Hill, the non-profit entity legally separate from the City, uses to attract visitors to stay and experience Pleasant Hill. a. Increase TOT
The City could increase the TOT rate, similar to sales tax, either as a general purpose tax requiring majority approval by voters, or as a special purpose tax (used only for a specific purpose) requiring two-thirds voter approval. An increase of 1% in TOT would generate approximately $200,000 in tax revenue, based on current activity. b. TOT on Vacation Home Rentals
Regarding vacation home rentals (e.g., Airbnb, VRBO, etc.), the Municipal Code presently allows these rentals within two commercial zones (RB and PAO). The City Council could amend the Code to allow them within other zones (e.g., single- and multi-family residential districts), which would allow the City to apply the TOT and TID rates to these rental properties. The City does not have an estimate on revenue, as the number of active vacation home rentals within Pleasant Hill is currently unknown.
3 The figure (308) is the five-year average of single family home sales in Pleasant Hill between 2021- 2025
5 In Contra Costa County, El Cerrito has a transfer rate of $12 per $1,000; Richmond fluctuates based on sales price, but the median is $12.50 per $1,000
Revenue Summary Options:
Option Tax Assumption Vote
Requirement
Estimated Revenue
Sales Tax 0.5% Majority or twothirds, depending
on use
$5.5 million
Property Tax -
Parcel Tax
$100 Two-thirds $1.1 million
Property Tax -
Real Property
Transfer Tax
$12 per $1,000 of
Assessed Value and Sale
of 308 homes
Two-thirds plus a
majority vote to
become Charter
City
$3.9 million
Transient
Occupancy Tax
1.0% Majority or twothirds, depending
on use
$0.2 million
Transient
Occupancy Tax -
vacation rental
homes
Current TOT rate of 10% City Council
approval
Presently unknown
In conclusion, consistent with the City Manager’s message, the FY 26/27 - FY 27/28 Biennial Budget maintains current service levels, attempts to mitigate the impact of rising costs, and makes targeted investments responsive to community priorities and Council goals. The City continues to provide excellent services and programs that this budget supports. The City will manage costs responsibly and within the resources available, but it is essential to find solutions that secure sustainable financial stability in the near and long term.
Budget Committee:
On August 13, 2026, the Budget Committee heard this presentation as an informational item and advised City staff to bring it forward for City Council consideration and discussion.
FISCAL IMPACT
Not applicable - this is an informational staff report only.
PUBLIC CONTACT
Public Contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
This is an informational item for the City Council’s consideration and discussion; staff is seeking direction, if any.
Prepared by: Erick Cheung, Chief Financial Officer
Approved by: Ethan Bindernagel, City Manager