CITY OF SAN MATEO
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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 22 Section Name: NEW BUSINESS Account Number: 10-1311 File ID: 26-11487 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: City Manager's Office
MEETING DATE: July 20, 2026
SUBJECT:
November 3, 2026 Election – Consideration of Placing a ¼-Cent Transactions and Use (Sales) Tax Measure on the Ballot – Ordinance Introduction
RECOMMENDATION:
Adopt a Resolution ordering and calling for an election to be consolidated with the General Municipal Election to be held on November 3, 2026, and submitting to the voters a measure to increase the Transactions and Use (sales) tax by an additional ¼-cent, appropriating $158,000 for related election costs, and authorizing two members of the City Council to submit arguments; and introduce an ordinance establishing San Mateo Municipal Code Chapter 3.51 (Supplemental Transactions and Use Tax). (Approval requires at least four votes of the five-member City Council.) BACKGROUND:
The City of San Mateo is committed to maintaining a high quality of life and essential municipal services that support the health, safety, and welfare of the community. Recent community surveys found that residents are highly satisfied with San Mateo’s quality of life and support continued investment in essential City services and infrastructure.
Despite ongoing efforts to manage expenditures, improve cost recovery, pursue grant funding, support economic development, and identify other revenue enhancement opportunities, the City continues to face long-term financial challenges as the cost of providing essential services has outpaced revenue growth. In addition, the City has more than $350 million in unfunded capital improvement and infrastructure needs, including streets, sidewalks, parks, public facilities, stormwater infrastructure, and other critical public assets.
Fiscal Outlook
At the April 20, 2026, City Council meeting, staff provided a preview of the Fiscal Year 2026-27 budget which estimated a $16 million deficit for the General Fund, the City’s primary operating fund providing essential services such as public safety, transportation, library and parks and recreation services. At that same meeting, City staff provided an update to the General Fund 10-year forecast and presented four different scenarios highlighting various threats to the City’s top revenue sources. Even under the most optimistic revenue assumptions, the forecast projected ongoing structural General Fund deficits of approximately $5-7 million annually, assuming some personnel savings and fewer General Fund contributions to capital.
At the June 1, 2026, City Council meeting, staff presented the recommended budget for Fiscal Year 2026-27, which included projected expenditures exceeding projected revenues by $17 million. The proposed budget also identified strategies to improve the City’s long-term fiscal outlook, including expenditure controls, cost recovery, economic development, grant funding, and evaluation of potential revenue enhancement options. Staff also identified that
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maintaining the City’s fiscal stability would likely require a combination of expenditure management and additional revenues. One of the revenue enhancement options identified during the budget process was a local Transactions and Use (sales) tax measure.
On June 15, 2026, the City Council adopted the Fiscal Year 2026-27 budget. The adopted budget included the planned use of the Budget Stabilization Reserve to maintain core services and continue investing in critical infrastructure. While the City’s reserves provide flexibility to address near-term fiscal challenges, they are not intended to serve as a long-term solution and provide the City time to thoughtfully evaluate and implement strategies to strengthen its financial position.
Ballot Measure Development Process
City staff began evaluating potential ballot measure options with the Revenue Measure Ad Hoc Committee on August 6, 2025, followed by a City Council study session on August 18, 2025. At the study session, the City Council agreed to further evaluate a ¼-cent Transactions and Use (sales) Tax measure to address the City’s structural deficit and a General Obligation Bond to address infrastructure needs. To better understand community sentiment regarding both potential measures, the City conducted a statistically valid survey in November 2025.
The November 2025 survey was administered to a stratified and clustered random sample of 1,012 registered voters in the City of San Mateo who are likely to participate in the November 2026 election. Of those surveyed, 506 respondents answered questions regarding the proposed sales tax measure, and the other 506 respondents answered questions regarding the General Obligation Bond. The survey followed a mixed-method design that employed multiple recruiting methods (email, text, and telephone) and multiple data collection methods (telephone and online). The survey provided statistically reliable results, with a margin of error due to sampling of +/- 4.3% at the 95% confidence level.
At the January 7, 2026, Revenue Measure Ad Hoc Committee meeting, and the January 12, 2026, City Council meeting, City staff and True North Research presented the results of the Baseline Revenue Measure Survey, which found 56% support for a potential ¼-cent Transactions and Use (sales) Tax measure and 54% support for a potential General Obligation Bond.
While both measures received majority support, the General Obligation Bond did not meet the two-thirds voter approval threshold required for passage. Based on the survey results, the Ad Hoc Committee recommended, and the City Council supported, continuing community education and outreach regarding the potential sales tax measure while pausing further education and outreach related to the General Obligation Bond.
Following several months of community education and outreach, True North Research conducted a follow-up survey between May 11 and May 15, 2026, to assess voter sentiment regarding the potential sales tax measure. The survey was administered to 689 registered voters in the City of San Mateo who are likely to participate in the November 2026 election. True North Research employed the same methodology from the first survey and had a margin of error due to sampling of +/- 3.7% at the 95% confidence level.
On June 15, 2026, staff and True North Research presented the survey results to City Council. The Initial Ballot Test results found 58% of likely November 2026 voters surveyed in support, with 25% indicating they would definitely support the measure. Approximately 33% of respondents opposed the measure, and 9% were unsure or unwilling to state their position. The Council also received a presentation from the City’s elections consultant, Team CivX, regarding the ballot measure process and next steps. After discussion, the Council expressed support for placing the proposed measure on the November 2026 ballot. At the same June 15, 2026 meeting, the Council adopted Resolution No. 60 ordering and calling for an election to be consolidated with the General Municipal Election to be held on November 3, 2026.
Community Engagement and Outreach
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Between February and July 2026, staff conducted a comprehensive community education and outreach effort regarding the City’s priorities, fiscal outlook and long-term funding needs, and consideration of a potential sales tax measure.
Staff contacted more than 50 stakeholder and community groups, including neighborhood groups, homeowners associations, business groups, SAMCEDA, SAMCAR, San Mateo Area Chamber of Commerce, DSMA, non-profits, developers, individual community leaders and more, to offer informational presentations. Staff conducted more than 30 presentations and question-and-answer sessions, providing factual information and opportunities for community members to ask questions and share feedback.
City Council members, the City Manager, and Police Chief hosted five City Council District specific community meetings throughout the City in the month of June and finished with a Chamber facilitated business specific community meeting in July to provide public safety updates, City updates and a fiscal outlook presentation with a question and answer session.
In addition to community meetings, the City sent out three informational mailers to over 31,000 San Mateo households, in April, June, and early July. The first mailer included a comment card inviting residents to share their thoughts.
Throughout the outreach effort, the City also maintained a dedicated webpage with background information and frequently asked questions and shared educational content through social media leading up to the July 20, 2026 City Council meeting.
Overall, thousands of residents, businesses, and community stakeholders were contacted and engaged with City staff during the outreach process. Over four hundred attended meetings. Feedback reflected a range of perspectives, including support for the potential measure, minimal opposition to the measure, and comments on other City priorities such as land use, future development, housing, infrastructure, and transportation.
Transactions and Use Tax (sales tax) Information
A Transactions and Use Tax, commonly referred to as a local sales tax, is an additional tax added to the existing sales tax rate that applies to most retail goods delivered within a jurisdiction. It does not apply to groceries or prescription medications.
The total sales tax rate in San Mateo is 9.625%, which is made up of California’s 7.25% statewide base sales tax and voter approved countywide and local district taxes. The current rate includes the following voter-approved measures:
In November 2015, San Mateo voters approved Measure S, a sales tax, which extended Measure L, a ¼-cent sales tax.
In November 2016, San Mateo County voters approved Measure K, extending the County’s ½-cent sales tax In November 2020, San Mateo voters also approved Measure RR, a separate ¼-cent regional sales tax dedicated to Caltrain operations.
State law establishes a maximum allowable Transactions and Use Tax rate that cities may impose. The proposed ¼-cent increase represents the maximum additional local sales tax the City is authorized to place before voters under current state law.
A ¼-cent sales tax increase would result in approximately $7 million in estimated revenue annually. For the consumer, this increase equates to an additional 25 cents on every $100 spent on taxable purchases. Independent annual audits and public reporting would be required to ensure funds are used as intended, and an independent resident oversight committee would review transparency and accountability. Under the proposed ordinance, this would be the same as the Measure S Oversight Committee established by San Mateo Municipal Code section 3.50.160.
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In order to pass, this measure requires a simple majority (50% plus 1) voter approval, and the proceeds can be used to fund any City-specific general municipal services, such as:
keeping local streets, sidewalks, parks, infrastructure, and community facilities safe, clean, and well-maintained fixing potholes
providing fire protection, paramedics, crime prevention, and 9-1-1 emergency response improving traffic safety and traffic management
As shown in the graphic below, San Mateo is at the 9.625% sales tax rate, with many other cities in the County at the higher 9.875% rate.
Council Action:
Per the City Council’s direction at its June 15, 2026, meeting, staff recommends adoption of the proposed Resolution (Attachment 1) placing the ¼-cent Transactions and Use (sales) tax measure on the November 2026 ballot with the following ballot question:
To provide funding for San Mateo city services, such as keeping local streets, sidewalks, parks, infrastructure, and community facilities safe, clean, and well-maintained, fixing potholes, providing fire protection, paramedic, crime prevention, and 9-1-1 emergency response, and improvements to traffic safety/traffic management, shall the City of San Mateo’s ordinance establishing a one-quarter cent sales tax be adopted, providing 7 million dollars annually for general government use until ended by voters, with independent audits and all funds locally-controlled? In accordance with state law, the foregoing ballot question is not more than 75 words, as the phrases “San Mateo” and “City of San Mateo” each count as one word.
Under state law, submitting the measure to the voters must be approved by a two-thirds’ vote of the City Council. Rev. & Tax §7285.9, Govt. §53724(a). With a five-member Council, this means that four votes are required to place the proposed
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measure on the ballot. If approved by a majority of San Mateo voters, the accompanying Ordinance (Attachment 1, Exhibit A) would amend the San Mateo Municipal Code by adding Chapter 3.51 (Supplemental Transactions and Use Tax), establishing an additional ¼-cent Transactions and Use (sales) tax.
Adoption of the proposed Resolution would submit the ballot measure to the San Mateo County Elections Office for placement on the November 2026 ballot. The Resolution also directs the City Attorney to prepare an impartial analysis of the measure as required by state law, authorizes the City Council to designate two Council Members to prepare and file the ballot argument in favor of the measure, and authorizes the City Clerk to take all actions necessary to conduct the election in accordance with applicable law. Staff would conclude the community outreach effort for the proposed measure. Neutral and factual Information about the measure and the election would continue to be available on the City’s website, and staff would respond to public inquiries as appropriate, consistent with applicable law.
The City Clerk must submit the certified Resolution to the San Mateo County Elections Office no later than August 7, 2026.
Because there are no additional regular City Council meetings scheduled before that deadline, the City Council must take action at this meeting if it wishes to place the measure on the November 2026 ballot.
BUDGET IMPACT:
If the City Council adopts the Resolution placing the Transactions and Use (Sales) Tax measure on the November 3, 2026 ballot and the measure is subsequently approved by the voters, the proposed ¼-cent additional tax is estimated to generate approximately $7 million in annual General Fund revenue, which would be retained locally for City of San Mateo general municipal services.
The City Clerk’s Office Fiscal Year 2026-27 operating budget already includes funding for the standard costs associated with the November 3, 2026, General Municipal Election, including the election of City Council members, translation, and noticing requirements.
The County of San Mateo Elections Division has estimated the additional cost of placing a citywide measure on the ballot at approximately $158,000, based on the number of registered voters. The proposed Resolution includes a supplemental budget appropriation of $158,000 from the General Fund unassigned fund balance to the City Clerk’s Office Fiscal Year 2026-27 operating budget to cover these additional election costs.
ENVIRONMENTAL DETERMINATION:
This item is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
STRATEGIC PLAN ALIGNMENT
This agenda report supports the Organizational Health and Good Governance initiative.
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 - Proposed Ballot Measure Resolution
Exhibit A – Proposed Ballot Measure Ordinance
STAFF CONTACT
Zachary Reda, Senior Management Analyst
[email protected]
(650) 435-0823