City Council Agenda Report
Meeting Date: March 3, 2026
From: Genoveva Rocha, City Clerk
Department: City Clerk
Submitted by: Genoveva Rocha, City Clerk
Subject
Potential Local Sales Tax for Placement on a Special Election to be held June 2, 2026 Recommendation
A. Receive and file a presentation on a potential local 1/4 cent (1/4%) sales tax; B. Take no action on a local sales tax measure and oppose County legislative efforts; OR C. Adopt Resolution No. 2026-008 Declaring a fiscal emergency pursuant to Article XIII C of the Constitution of the State of California; calling and giving notice of the holding of a Special Municipal Election to be held on Tuesday, June 2, 2026, for the purpose of submitting to the qualified voters of a proposed ordinance levying a local transaction and use tax (sales tax) to the voters at said election;
D. Adopt Resolution No. 2026-009 Requesting the Board of Supervisors of the County of Los Angeles consolidate the Special Municipal Election with the Statewide Direct Primary Election to be held on Tuesday, June 2, 2026, pursuant to Elections Code section 10403; and E. Direct the City Clerk to transmit a copy of the measure to the City Attorney for preparation of the impartial analysis;
F. Adopt Resolution No. 2026-010 Providing for the filing of primary and rebuttal arguments and setting rules for filing of written arguments regarding a City measure to be submitted at the June 2, 2026, Special Municipal Election; and
G. If desired, determine the authors of arguments and rebuttals.
Background
On February 17, 2026, the City Council received an update on the proposed Los Angeles County Half-Cent Sales Tax Ballot Measure, set for the June 2, 2026 Statewide Direct Primary Election, and its impact on Vernon. The measure asks voters to increase the County sales tax by half a cent to offset federal funding cuts to public health services. If approved, the tax is expected to generate about $1 billion annually for five years. The ballot measure also seeks a legislative exemption from the current 2% statutory cap on county/local sales taxes, preserving a quarter percent in sales-tax capacity.
In Vernon, the cumulative sales tax rate is 10.50 %, which consists of the statewide sales tax rate of 7.25 % and county/local taxes totaling 3.25 %. Although California Revenue and Taxation Code Section 7251.1 sets the maximum county/local transactions and use tax—or statutory cap—at two percent (2%), several countywide sales tax measures have been authorized through special legislation exempting them from that cap.
There was discussion regarding the effectiveness of the County measures and the fairness of local returns compared to total tax resources generated within individual jurisdictions. Given concerns regarding the effectiveness of the County measures and the oncoming sunset on the City’s Utility Users Tax (UUT) and Public Safety Parcel Tax, it was discussed that it would be prudent for the City to preserve local control over tax revenues by pursuing its own one quarter cent (¼ %) sales tax measure, rather than relying on future countywide programs that may provide only limited local return or benefit.
The City Council discussed options and directed staff to table the discussion and provide additional financial impact details and the necessary resolutions and ordinances for a potential Special Election on a local sales tax to be discussed and considered at the March 3, 2026, Regular City Council meeting.
Subsequently, a similar update was provided to the Vernon Business and Industry Commission at a Special Meeting on February 19, 2026. Commissioners discussed their concerns and understanding of keeping local tax dollars in Vernon, as well as the City's messaging plan should the ballot measure move forward. They inquired about the sales tax breakdown across different types of businesses, including wholesale and retail, and also discussed potential uses of the new revenue including financial incentives for existing local businesses. Additionally, the Commissioners inquired about the cost of placing the proposed ballot measure on the City's next General Municipal Election in April 2027.
City Council Action
At the March 3, 2026 Meeting, Council may decide to take no action on a local sales tax measure and oppose County legislative efforts or move forward with a local sales tax measure.
Assembly Bill 1768 (AB 1768)
Introduced on February 9, 2026, AB 1768 would authorize the County of Los Angeles to impose a transactions and use tax (local sales tax) at a rate of up to 0.5% for general and special purposes, subject to voter approval, and would authorize said tax to exceed the 2% statutory cap on local sales tax referenced above. On February 23, 2026, the bill was referred to the Committee on Legislative Government and the Committee on Revenue and Taxation for further consideration. Council may direct staff to oppose AB 1768.
Should the City Council decide to move forward by submitting an ordinance levying a local transaction and use tax (sales tax) to the voters, the following resolutions would need to be adopted:
• Resolution No. 2026-008 – Calling a Special Municipal Election on June 2, 2026, Declaring a Fiscal Emergency, and Calling for the Placement of a Sales Tax Measure on the Ballot (must be adopted by a unanimous vote of the City Council) • Resolution No. 2026-009 – Requesting County Services
• Resolution No. 2026-010 – Providing for the filing of written arguments and rebuttals Resolution No. 2026-008 - Calling a Special Municipal Election, Declaring a Fiscal Emergency, and Calling for the Placement of a Sales Tax Measure on the Ballot California Constitution Article XIII C, section 2 (b) requires that any proposed general tax be approved by a majority of the voters at a regularly scheduled general municipal election for the City Council, “except in cases of emergency declared by a unanimous vote of the governing body.” Because the City’s next General Municipal Election is not until April 2027, to move forward with a local sales tax ballot measure, the City Council would have to declare a fiscal emergency and call a Special Municipal Election. Resolution No. 2026-008 calls and gives notice of holding a Special Municipal Election on Tuesday, June 2, 2026, to coincide with the Statewide Direct Primary Election, declares a fiscal emergency, and calls for the placement of a Sales Tax Measure on the Ballot. Adoption of Resolution No. 2026-008 requires a unanimous vote of the City Council.
Declaration of a Fiscal Emergency
The declaration of a Fiscal Emergency constitutes a Material Event under applicable continuing disclosure requirements. Full disclosure would be necessary to ensure transparency and to provide investors with comprehensive context regarding the circumstances and rationale for the action. At this time, staff does not anticipate a direct impact on the City’s credit ratings. However, the disclosure may prompt the rating agencies to review the City’s ratings as part of their ongoing surveillance process.
The City’s Five-Year General Fund Forecast demonstrates that while current operating conditions remain stable, the City faces a significant and foreseeable structural fiscal deficit beginning in FY 2028-29 due to the scheduled expiration of two major recurring revenue sources.
In FY 2025-26, operating revenues and operating expenditures are each projected at approximately $80.9 million, reflecting a balanced operating budget at baseline service levels.
The FY 2025-26 budget also includes additional planned capital expenditures of approximately $15.6 million, partially funded by approximately $11.1 million in grant revenues. In order to support the capital expenditures while maintaining overall fiscal balance, the budget incorporates assumed vacancy savings of 5% and maintenance and operations (M&O) savings of 10%, consistent with the City’s historical operational trends.
While projected deficits in FY2026-27 and FY2027-28 are largely attributable to planned capital expenditures and do not reflect an ongoing structural operating deficit, the City’s fiscal outlook materially deteriorates beginning in FY 2028-29. As noted above, the UUT and the Public Safety Parcel Tax are both scheduled to expire in that fiscal year and collectively generate approximately $16.3 million annually, representing approximately 17% to 18% of General Fund Revenues. Upon expiration of these revenue sources, projected General Fund operating revenues decline to approximately $68.5 million. Operating expenditures in FY 2028-29 are forecasted at approximately $89.4 million, resulting in a recurring structural operating deficit of approximately $20.9 million annually. In addition, the FY 2028-29 budget includes additional planned capital expenditures of approximately $18.8 million, partially funded by approximately $8.1 million in grant revenues. However, the projected structural operating deficit of $20.9 million is independent of capital spending and reflects an ongoing deficit between recurring revenues and recurring expenditures. Historically, the City relied in part on substantial transfers from its utility funds to bridge General Fund’s fiscal gap. However, the City has discontinued this practice in recognition of legal constraints and sound fiscal policy considerations. This level of recurring deficit represents 30% of projected operating revenues and substantially exceeds the City’s historical ability to address fiscal gaps through vacancy management, operational efficiencies, or incremental expenditure reductions without significant service impacts.
Absent corrective action, recurring operating deficits of this magnitude would rapidly deplete General Fund reserves and necessitate substantial reductions in essential services, including public safety support in part by the expiring Public Safety Parcel Tax. Because the expiration of these revenue measures is scheduled and foreseeable, and because the resulting deficit is structural and ongoing in nature, staff finds that the City faces a projected fiscal emergency beginning in FY 2028-29 and recommends that the City Council declare a fiscal emergency at this time in order to initiate timely revenue stabilization and long-term financial planning measures necessary to safeguard fiscal sustainability and protect essential services.
Resolution No. 2026-009 - Requesting County Services
Resolution No. 2026-009 requests that the Los Angeles County Board of Supervisors authorize the Los Angeles County Registrar-Recorder/County Clerk to consolidate the 2026 Special Municipal Election with the Statewide Direct Primary Election. Consolidating with the Primary Election would reduce confusion among voters if two elections were held on the same day and registered voters received separate ballots for the city and county elections.
The Registrar-Recorder/County Clerk would be responsible for the election, including distributing election materials, receiving ballots, and completing the canvass. The RegistrarRecorder/County Clerk has thirty days from the date of the election to declare the results.
Resolution No. 2026-010 - Written Arguments and Rebuttals The California Elections Code Sections 9282 and 9285 provides regulations for written arguments and rebuttals, including deadlines for submission. Arguments are due no later than Monday March 16, 2026, and rebuttals must be submitted by Tuesday, March 24, 2026.
Arguments and rebuttals must be submitted during normal posted business hours. Resolution No. 2026-010 provides for the filing of direct and rebuttal arguments and sets the rules for the filing of written arguments regarding a City Measure to be submitted at the June 2, 2026 Special Municipal Election.
The City Council, authorized members of the City Council, citizen associations and private citizens may submit arguments for or against the proposed Measure. Only one ballot argument for and one ballot argument against each measure and rebuttals to each may be printed in the sample ballot. The Elections Code gives preference to the arguments submitted by the City Council, as a body, or by Council Members authorized to submit arguments by the City Council if they have been authorized by the Council. The City Council should decide whether it will submit initial primary arguments and if required, rebuttal arguments. If individual members are to be designated, the City Council should make those designations at this meeting (typically, two members are authorized to write the argument on behalf of the whole Council.
Impartial Analysis
In addition, the City Council also needs to direct the City Clerk to transmit a copy of the measure to the City Attorney for preparation of the impartial analysis. The California Elections Code Section 9280 provides for the City Attorney to prepare an impartial analysis showing the effect of the measure. The impartial analysis is due on Monday, March 16, 2026.
Fiscal Impact
If the measure is approved by the voters, the local sales tax is estimated to generate approximately $1.5 million annually for the General Fund.
The cost estimate for the Special Municipal Election is $10,500. The estimate provided above is an estimate of election costs based on historical costs for comparable elections. The actual cost may be higher or lower than the estimate provided due to changes in any election factors and unanticipated increases in labor and/or operations costs/ The final invoice with actual costs will be provided by the Los Angeles County Registrar-Recorder/County Clerk approximately 90 days after the election. Sufficient funds are available in the General Fund, City Clerk, Department, Election Account No. 011-010-125-529300 for the current fiscal year.
Attachments
1. Resolution No. 2026-008 – Calling for the Placement of a Ballot Measure
2. Resolution No. 2026-009 – Requesting Consolidation of a Special Municipal Election
3. Resolution No. 2026-010 – Setting Argument and Rebuttal Rules and Deadlines