Revenue Enhancement
July 14, 2026
Finance Department
City Manager's Office
Scott Wagner, Chief Financial Officer
Misti D. Wood, Communications &
Intergovernmental Relations Officer
City Council Study Session
July 14, 2026 Revenue Enhancement
1 Introduction
This presentation will cover:
• Budget challenges and solutions
• Existing revenue
• Community feedback
• City successes
• Proposed revenue enhancement
July 14, 2026 Revenue Enhancement
2 General Fund Structural Deficit
• The General Fund remains in a structural deficit despite major i
nterventions over 3 fiscal years.
• The General Fund is the City’s largest fund and houses core services in
cluding Police, Fire, Public Works, Planning and Economic Development, City Manager’s Office, City Attorney’s Office, Finance, Parks, Recreation, and Human Resources.
• The current use of reserves is unsustainable.
General Fund vs. Other Funds
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3 July 14, 2026 Revenue Enhancement
4 Corrective Actions Taken
• Actions have been taken to address the structural deficit over the last 3 f
iscal years, including:
• Reduction of staff: 82 FTEs eliminated
• Shored up Reserves: Allocated $10.2 million from projects to Reserves • Increased revenue: Voter-appr oved Business License and Transient Occupancy Taxes adding approximately $4 million annually in revenue. • Increased cost recovery: Increased fees for recreation, permits, and credit c
ards
• Pension reform: Restructured $482 million of unfunded pension liability t
o pay off debt quicker and save $28 million over the next 5 years • Gained efficiency through consolidation of 2 departments (Rec & Parks, CI
RO)
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5 Corrective Actions Taken
• Actions have been taken to address the structural deficit over the last 3 f
iscal years, including: (continued)
• Line by line review of department budgets with Finance Subcommittee • Engaged with independent outside review
• Financial forecasting accurate, strictly objective, and follows best practices • Independent Department Review
• Review by City Manager Budget Working Group
• No audit findings received during Annual Comprehensive Financial Report • Government Finance Officer’s Association
• Certificate of Achievement for Excellence in Financial Reporting • Distinguished Budget Presentation Award
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6 Voters approved Measures EE for
general business taxes and FF for
TOT reform, bringing in an
additional combined $3.7 million to
the General Fund
Nov. 2024
Mid-year budget cuts resulted in $4
million in ongoing costs including
19.0 FTEs and $9.2 million on one-
time funding
Jan. 2025
Adoption of FY 2025-26 Annual
budget included an additional
reduction of $11.8 million, including
34.0 FTEs
June 2025
City council approved restructuring
CalPERS unfunded liability payments,
resulting in $28 million in cost
avoidance over the next 5 years
June 2026
Adoption of the FY 2026-27 annual
budget included and additional
reduction of $9.9 million including
29.0 FTEs
June 2026
Corrective Actions Taken
7 General Fund Deficit FY 26-27
Revenues
Transfers In
Total Revenues & TI
Expenditures
Transfers Out
Total Expenditures & TO
Surplus (Deficit) ($10.0)
$240.7
($7.8)
$244.0
258.5
($23.3)
2.6 $245.1
250.1
9.4 $259.5
($14.4)
9.6 $268.1
FY 30-31
$242.1
2.6 9.5
FY 26-27
$224.7
8.2 $232.9
231.3
$231.3
2.6 $236.1
2.6 $238.8
242.1
9.2 $251.3
($12.5)
$234.0
234.3
9.6 $242.4
$244.8
FY 27-28 FY 29-30FY 28-29
• Sales Tax Measure Q
e
xpires March 2031
(
One quarter
revenue lost shown.
Total annual revenue
is ~$23.5 million)
July 14, 2026 Revenue Enhancement
General Fund Reserves
Spend Down
FY2025 FY2026 F Y2027 FY2028 FY2029 FY2030
6/30/2025 Final Reserves $79,582,000
FY 26/27 Budget Deficit ($7,800,000)
6/30/2026 Projected Reserves $71,782,000
FY 27/28 Budget Deficit ($10,000,000)
6/30/2027 Projected Reserves $61,782,000
FY 28/29 Budget Deficit ($12,500,000)
6/30/2028 Projected Reserves $49,282,000
FY 29/30 Budget Deficit ($14,400,000)
6/30/2029 Projected Reserves $34,882,000
FY 29/30 Budget Deficit ($23,300,000)
6/30/2029 Projected Reserves $11,582,000
* C
ouncil Mandated Reserve was $39.2M in FY2025, expected to be $44.9M on June 30, 2027 Upcoming Budget Adoptions
Revenue EnhancementJuly 14, 2026
8 June 2026: Two-Year Budget
Strategy
City Manager’s Proposed Budget
• Through a multi- pronged approach, the City Manager’s proposed budget for FY 2026-27 c
ontained almost $9M in deficit reduction solutions as part of a two-year process • Year 1 (FY 2026- 27):
• Strategic Reserve Usage, adjusted staffing as grant funded programs expire, Vacancy M
anagement, Innovative Financing, Targeted cost recovery improvements • Year 2 (FY 2027- 28):
• Structural deficit of ($10. 0M) on 7/1/2027 remains. Increased revenue or additional cuts will be needed to address deficit that is still growing.
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9 Year 2 (FY 2027-28)
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10 • FY 2027-2 8 represents the 4 th year of potential continued cuts • Cuts will impact Police and Fire Departments significantly more than prior actions alo
ng with more visible quality of life services to the community • Police and Fire Departments are two-thi rds of the General Fund’s budget • T he General Fund is 77% salaries and benefits costs, requiring elimination of additional positions to balance the budget at the following potential levels:
• 42 FTE elimination projected in FY 2027-28
• 92 FTE elimination projected by FY 2030-31
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11 General Fund Historical Staffing
Year 2 Public Safety Impacts
(FY 2027-28)
Police
• Elimination or consolidation of some Police s pecial units • Impacts to Gangs, Narcotics, Traffic, Downtown Enforcement and Special Enforcement te
ams
• As of 7/1/2027 proposed 11.0 FTE reduction; equivalent of $3.1M • As of 7/1/2030 proposed 24.0 FTE reduction; equivalent of $7.1M • These reductions will have significant impacts to police response times to emergency c
alls for service.
• Elimination of some specialty teams will greatly impact our ability to recruit and r
etain police officers in a highly competitive hiring environment.
Revenue EnhancementJuly 14, 2026
12 Year 2 Public Safety Impacts
(FY 2027-28)
Police
• The loss of some specialty teams and minimum staffing levels in patrol will c
reate an environment where police officers are only responding to crimes and d
o not have the ability to thoroughly investigate the offenses and bring justice to victims of violent crimes.
• This inability to properly investigate crimes leads to increases in violent crimes a
nd visible blight across the city.
• The impacts of eliminating these police positions will have measurable impacts o
f the safety of our community.
• Police Officer community engagement opportunities will be severely limited due t
o fewer officers available to respond to calls for service.
July 14, 2026 Revenue Enhancement
13 Year 2 Public Safety Impacts
(FY 2027-28)
Fire
• Fire Station Closure(s)
• Impacts to call response times, particularly emergency medical services, and core fire suppression readiness
• Reduction of wildfire prevention and wildfire response capabilities • Reduction of special operations capability (technical rescue, water rescue, etc.) • Resources available will be below Measure O (PSAP) implementation levels, circa 2007
• Call volume increase of ~66% in this time frame
Revenue EnhancementJuly 14, 2026
14 Year 2 Public Safety Impacts
(FY 2027-28)
Fire
• Impact on recruitment and retention of employees due to uncertainty of future
• Other options will be explored to reduce service delivery impact • Any reduction of this magnitude will have negative operational c
onsequences.
• As of 7/1/2027 proposed 8.0 FTE reduction the equivalent of $2.5M Equivalent to the loss of an Engine company
• As of 7/1/2030 proposed 18.0 FTE reduction the equivalent of $5.8M Equivalent to the loss of both an Engine and a Truck companies July 14, 2026
15 Revenue Enhancement
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16 Budget Challenges
• Like many California cities, the City's generalf und departments (e.g. Police, Fire, Transportation & Public Works, and Recreation &
P
arks) are experiencing increasing and uncontrollable costs to deliver core se
rvices.
• Santa Rosa is more dependent on sales taxes than similar agencies due to unc
hangeable structural issues
• City only retains 11.7% of Property Taxes while neighboring agencies retain up to 2 0% due to Proposition 13
• Sales Tax Collections were $2.1 m illion less in FY 2025 than three years earlier
• The City does not retain all sales tax from online sales and loses revenue to the w
arehouse fulfillment location
• Changes in consumer behavior towards non- taxable transactions and online sales is f
orecasted to continue
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17 Current Tax Revenue
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18 Sales Tax
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19 What are Taxable Sales?
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20 Prioritizing Financial Stability
On February 19, 2025, the City Council adopted strategic priorities. The first priority is:
Achieve and Maintain Fiscal Sustainability and Budgeting Excellence • Adopt budget best practice policies
• Align budgeting strategies with City priorities
• Enhance revenue diversification
• Reduce debt dependency and strengthen credit ratings
• Improve financial transparency and public engagement
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21 Economic Development
The City is proactively working to attract, support, and retain businesses. Recent efforts include:
• Identified $1 billion in retail leakage to guide business recruitment and investment. • Engaged 50+ national companies and commercial real estate professionals to advance business a
ttraction.
• Completed target industry, retail, office, grocery, and market opportunity studies to strengthen r
ecruitment strategies.
• Launched the Business Concierge Program to improve the customer experience for businesses a
nd entrepreneurs.
• Expanded technical assistance, procurement training, startup resources, and entrepreneur s
upport.
• Increased support for small, local, and socially and economically disadvantaged businesses t
hrough targeted outreach and partnerships.
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22 Community Engagement
The City is conducting significant community engagement to understand our community's priorities and help address the budget crisis:
• City Manager's Budget Working Group (formed August 2025) • Sounding board and resource
• January resident survey
• Let's Talk, Santa Rosa community engagement initiative • Nearly 2,400 survey responses
• 14 meetings and presentations complete, more scheduled • June resident survey
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23 January 2026 Survey
Top Priorities
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24 Let's Talk, Santa Rosa
Survey Ranking Results
Keeping public places,
including recreation centers,
and infrastructure such as
sidewalks, medians and
landscaping safe, and clean
Maintaining 911
emergency medical and
fire response services
Maintaining 911 police
response times/police
response to violent crimes
Maintaining fire
protection
services/wildfire
prevention and
preparedness programs
Preventing streets from
deteriorating – fixing streets
and repairing potholes
July 14, 2026 Revenue Enhancement
25Let's Talk, Santa Rosa
Key Themes in Open-Ended Feedback
In addition to ranking, respondents provided the following open-ended feedback about city issues:
• 35% of respondents mentioned p ublic safety and transportation, often citing traffic law concerns like speeding or pedestrian safety. • 15% of comments included m aintenance, with 44% on street repair and 25% on parks/public spaces.
• Homelessness w as the second most frequent topic mentioned.
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26 June 2026 Survey
Top Priorities
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27 Community Feedback
Conclusions
• Lived experience and perspective shapes p riorities. • Everyone wants to feel safe. Safety looks and feels different to each p
erson.
• It's difficult for our community to rank core services. All core services are im
portant.
• Our community wants c ore services maintained.
• Our community wants the City's financial stability maintained.
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28 Budget Limitations and
Community Priorities
• It is difficult to meet community expectations with the current budget situ
ation, which will continue to worsen.
• The City may need to eliminate 42 positions in FY 2027-2028 and 92 positions by FY 2030-2031. Impacts to core services in FY 2027-2028 include:
• Fire station closure(s)
• Elimination of police violent crimes teams
• Reduced maintenance of streets, parks, and streetlights • Elimination of recreation programs
• Without additional revenue, the City will not be able to meet our c
ommunity's expectations.
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29 Revenue Enhancement
The City has considered every option to increase revenue. Options evaluated include:
• Cost Recovery – enhanced within market tolerance
• Fee Increases – completed annually
• Property Tax – cannot be changed
• Business License Tax – increased by voters in 2024
• Transient Occupancy Tax– in creased by voters in 2024 • Utility Users Tax modernization – efforts have not been successful • Sales Ta x – without action will be substantially reduced in March 2031 with expiration of Measure Q
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30 Potential Sales Tax
• Re-a uthorize Measure Q at a 1 cent level until repealed by voters • 100% would stay in Santa Rosa; would not depend on county-w ide allocation
• Majority would come from b rick and mortar sales transactions; remainder from online sales
• Estimated to generate $47 million annually, resulting in an additional $
23.5 million annually
• A g eneral purpose sales tax would allow the City to fill critical funding gaps without legal restriction
• A simple majority would be required to pass (over 50%) July 14, 2026 Revenue Enhancement
31June 2026 Survey
Over Half See Need for More Revenue
4.9% Margin of Error
53% of respondents believe the City has a great need or some need for additional funding. 35% believe the City has a little need or no real need. 12%, shown in grey, are undecided.
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32 June 2026 Survey
Potential Ballot Measure Viability
55% of respondents indicated support for a measure, increasing to 62% when including those leaning towards yes.
4.9% Margin of Error
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33 Impact
• A voter-a pproved re -authorization of Measure Q at a 1 cent level would allow the City to maintain core services.
• Key community feedback is maintaining fire/medical services, m
aintaining police response, especially response to violent crimes, and fixing streets and potholes.
• Some additional revenue would be directed towards maintaining in
frastructure without a current funding source.
• Revenue enhancement will ensure we are able to maintain Fire and P
olice service levels.
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34 Impact
Santa Rosa is seeing growth and successes that need continued civic investment to maintain momentum. Recent examples include:
• Rebuilt Fire Station 5 in Fountaingrove.
• Created the Special Enforcement Team to reduce and respond to v
iolent crime.
• About $150 million in capital improvement projects are in construction o
r have been completed within the last 12 months.
• Decreased homelessness by 16% (518 p eople) since 2022.
Recommendation
The City Manager's Office presents this study session to provide the Council with information on enhancing the City's revenue and requests the Council provide direction to staff about whether to return with ballot measure language for Council consideration.
July 14, 2026 Revenue Enhancement
35 Questions and Feedback