1 Item 3.4 Potential Ballot Measure
Increasing Transient Occupancy Tax
February 10, 2026
Lee Wilcox, Assistant City Manager, City Manager’s Office Jim Shannon, Director, City Manager’s Budget Office
Rosalynn Hughey, Deputy City Manager, City Manager’s Office • WHY THE PROPOSED INCREASE?
• San José has struggled to reconcile its relatively low levels of revenue per capita with the day-to-day service level demands of a major city • The City Manager’s Budget Office is preliminarily projecting a General Fund shortfall in FY 2026-2027 ranging from $55 million to $65 million, and shortfalls in future years
• City Council has provided direction over the last two fiscal years to explore options for generating additional revenue to support essential city services
• Goals include improving the long-term health of the General Fund to maintain service levels for essential city services
Transient Occupancy Tax Proposed Measure
2 “To fund essential city services including police and fire emergency response; address homeless encampments impacting parks, neighborhoods, and waterways; remove trash, illegal dumping, and graffiti; and maintain trails, playgrounds, recreational facilities, and park restrooms, shall an ordinance be adopted increasing the general fund transient occupancy (hotel) tax from 4% to 6%, generating approximately $10 million annually, and paid by hotel/motel guests, until repealed by voters?” Transient Occupancy Tax Proposed Measure
3 Transient Occupancy Tax Proposed Measure
4 TOT Current Structure Proposal
Chapter 4.72 = 6% for Convention and Visitors
Bureau, cultural grants, arts programming admin,
convention center & cultural facilities operations
Chapter 4.72 = remains 6%
Chapter 4.74 = 4% for general purposes Chapter 4.74 = increases to 6% (2% increase) Total TOT = 10% Total TOT = 12%
Other Current Structure Proposal
Chapter 14.32 = 4% for Convention Center
Facilities District Chapter 14.32 = remains 4%
Hotel Business Improvement District = fixed rate
by zone
Hotel Business Improvement District = remains
fixed rate by zone
Current Total
Effective Rate:
14.5 - 15.1%
Proposed Total
Effective Rate:
16.5 - 17.1%
Transient Occupancy Tax Peer Benchmarking
5 City TOT Rate (largest to
smallest) Effective Rate*
Palo Alto 15.5% -
Anaheim 15% 17%
Los Angeles 14% 16%
Milpitas 14% -
Oakland 14% 16%
San Francisco 14% 17.5%
San Diego 13.75% 15.75%
Long Beach 13% 16%
Riverside 13% -
Sunnyvale 12.5% -
Bakersfield 12% -
Campbell 12% -
Cupertino 12% -
Fresno 12% -
Sacramento 12% 16.45%
Santa Clara 11.5% 17.5%
Morgan Hill 11% -
Santa Ana 11% -
Chula Vista 10% -
Fremont 10% -
Mountain View 10% -
San José 10% 14.5% to 15.1%
Santa Clarita 10% 12%
Gilroy 9% 11%
Irvine 8% 10%
Stockton 8% -
San José’s TOT is lower
than its peers
* Effective tax rate considers other
revenue mechanisms, such as
infrastructure districts and Tourism
Business Improvement Districts
• February 10th (today): City Council will consider action to place a TOT measure on the June 2, 2026 Primary Ballot and authorize all actions necessary to conduct the election in coordination with the Santa Clara County Registrar of Voters • March 6th: County deadline to deliver Proposed Measure • March 10th: Ballot Arguments due to Registrar
• March 17th: City Attorney’s Impartial Analysis and Rebuttals due to the Registrar • June 2nd: Primary election
• October 1st: Should voters approve the Ballot Measure, the general purpose tax increase goes into effect
Process
6 7
Item 3.4 Potential Ballot Measure
Increasing Transient Occupancy Tax
February 10, 2026
Lee Wilcox, Assistant City Manager, City Manager’s Office Jim Shannon, Director, City Manager’s Budget Office
Rosalynn Hughey, Deputy City Manager, City Manager’s Office