City Council Staff Report Page 1 of 4 October 28, 2025
Agenda Item No. 5.3
DATE: October 28, 2025
TO: Honorable Mayor and Members of the City Council
FROM: Joan Malloy, City Manager
SUBJECT: Receive a Report on the Recommendations from the Revenue Review Ad Hoc Subcommittee and Provide Policy Direction
EXECUTIVE SUMMARY
In September 2025, the City Council formed the Revenue Review Ad Hoc Subcommittee (the “Subcommittee”) to review revenue streams to the City, with an interest in updating the Citywide Landscape and Lighting Assessment District No. 3 (“LLAD No. 3”) and considering an extension and possible amendment of the Utility Users Tax (“UUT”). The Subcommittee also considered a tax on vacant properties to discourage the idle use of property, increasing the Cannabis Tax, and reestablishing a Public Safety Parcel Tax.
The Subcommittee has concluded its initial evaluation and is seeking City Council concurrence on the recommendations and approach for the next steps.
STRATEGIC PLAN ALIGNMENT
Goal A. Financial Stability and Sustainability - Foster fiscal health through disciplined long-term planning, cost control, heightened efficiency, increased revenue, and cost recovery.
Strategy 9. Pursue the placement of a voter-approved revenue measure on a ballot to address the funding gap between revenues and expenditures for fundamental public safety and other city services.
BACKGROUND
On September 9, 2025, the City Council received a report that provided an overview of the legal process to modify or increase the assessment for the LLAD No. 3 and a highlevel overview of other potential revenue options. The City’s General Fund has consistently subsidized the costs for maintaining the improvements in LLAD No. 3, as the assessments in LLAD No. 3 have not increased since 1996 and have not kept up with inflation and increased costs.
Agenda Item No. 5.3
City Council Staff Report Page 2 of 4 October 28, 2025
After receiving the report, staff recommended that the City Council consider forming a Revenue Review Ad Hoc Subcommittee consisting of two Council Members to review revenue options and return with a recommendation for Council consideration. The City Council voted to form the Subcommittee, and Mayor Singh appointed himself and Councilmember Nishihira to the Subcommittee (Resolution No. 2025-128) to consider several revenue options that could help support general maintenance of the landscape and lighting, and other service needs of the community.
On October 7, 2025, the Subcommittee met to review several revenue options, including submitting to property owners the question of whether to increase the assessment in LLAD No. 3 pursuant to the procedures outlined in Proposition 218; renewing and possibly amending the UUT; a tax on vacant properties; increasing the tax on cannabis sales; and a Public Safety Parcel Tax.
DISCUSSION
The Subcommittee concluded that the UUT is the priority revenue measure that should be evaluated for viability for voter consideration for renewal on the November 2026 ballot due to its December 31, 2028, expiration date. The UUT generates approximately $6.6 million annually, which is directly supported through the General Fund for public safety (police and fire) services, street and park maintenance, recreational programming, and the City's general operations. To lose this funding would require cutbacks to services. Waiting until the election cycle of November 2028, approximately one month from the expiration date, would create a great deal of budgetary and staffing uncertainty.
After reviewing the timeline to amend the LLAD No. 3, the Subcommittee concluded that it could be pursued at any time and is not tied to a November election cycle. The Subcommittee determined that an amendment to the LLAD No. 3 would be best considered for 2027 so it would not interfere with the City Council’s evaluation of the UUT. The timing of LLAD No. 3 will realistically take up to ten months to perform the necessary outreach and education, prepare and revise the assessments (Engineer's Report), and have the City Council take all actions necessary to update LLAD No. 3.
While there was interest in a tax on vacant properties, it was recognized that more data and research are needed. The purpose of a tax on vacant properties is to prompt property owners to develop their properties and to discourage property owners from leaving buildings or units vacant. This research aims to evaluate whether the tax should be applied to commercial/industrial properties only or also include vacant residential properties. It will assess the number of vacant properties that the tax would impact, consider the administration of the measure to track and tax vacant properties, and determine the revenue potential from the measure. Additionally, targeting another election season would allow time for legal certainty, as there is current litigation related to San Francisco’s “empty homes” measure.
The Subcommittee reviewed the Cannabis Ordinance, Section 3.24.050(D)(3). It concluded that the retail tax could be increased from four percent to six percent as soon as possible since it is not tied to an election cycle and only needs City Council approval. This would raise approximately $200,000 of additional General Fund revenue. The City Council may want to consider providing advance notice to current Agenda Item No. 5.3
City Council Staff Report Page 3 of 4 October 28, 2025
cannabis operators regarding its intent to consider any tax increase, allowing operators to provide input and prepare for any forthcoming increase.
The Subcommittee also explored a Public Safety Parcel Tax (PSPT); however, as a special tax with funds earmarked for public safety services, the measure would require two-thirds (66.7%) voter approval, which is a high threshold. In March 2020, a renewal measure for the existing PSPT was defeated by voters (62.5% Yes), and polling conducted in 2023-24 showed that achieving two-thirds support would be difficult. The Subcommittee concluded that a PSPT should not be pursued at this time.
The City Council previously adopted Resolution No. 2025-128 authorizing the Subcommittee to work with staff and the City’s consultants to prepare an analysis and recommendations related to LLAD No. 3 and other potential revenue options identified in the September 9, 2025 staff report.
The Subcommittee recommends that the City Council:
1) Pursue the UUT placement for the November 2026 ballot. a) Seek Council authority for the Subcommittee to work with the consultants to prepare a UUT survey, set the parameters in the survey to consider possible increases, and test the timeframe for the renewal.
b) Consider any other program modifications (such as additional utilities that could include water and/or sewer).
2) Target 2027 to amend the LLAD No. 3.
3) Increase the Cannabis Tax as soon as possible.
4) Prepare a framework for the necessary research on taxing vacant properties and pursue this effort independently for future consideration, especially considering the ongoing litigation against San Francisco’s tax. This analysis was not included in the Biennial Budget; therefore, a budget amendment may be needed. 5) Do not pursue a PSPT at this time.
FISCAL IMPACT
There is no fiscal impact to the General Fund based upon the Subcommittee’s recommendations, as contracts have been executed with the consultant team to evaluate possible revenue options, survey voters’ opinions, and conduct community outreach that would be associated with one measure.
If the City Council wishes to pursue both the UUT and other measures simultaneously, updated proposals and budget adjustments would be necessary.
RECOMMENDATION
Staff recommend that the City Council consider the Subcommittee’s recommendations and provide feedback on the following next steps:
Agenda Item No. 5.3
City Council Staff Report Page 4 of 4 October 28, 2025
1) The Subcommittee will work with staff and the City’s consultant team to continue exploring placement of the UUT on the November 2026 ballot, including preparing and implementing a community survey to determine voter interest in a UUT measure in early 2026, with results being reported to the City Council by March 2026. 2) Consider an amendment to the LLAD in 2027.
3) Increase the Cannabis Tax as soon as possible with any outreach that the City Council deems appropriate.
4) Prepare a framework for the necessary research on a potential tax on vacant properties that may be considered for a future election cycle.
Prepared by: Joan Malloy, City Manager
Submitted by: Joan Malloy, City Manager