CITY COUNCIL REGULAR MEETING AGENDA PACKET

Page 6 of 8 million, and the cumulative deficit over an eight-year period is projected to exceed $180 million • Key assumptions include 3.5% in annual property tax growth and 2% for sales tax, and labor cost increase is projected to grow by 3.3% • Cost reduction strategies implemented in the current fiscal year include freezing some positions, delaying purchases of equipment and vehicles (fire engine, Public Works vehicles, etc.), limiting costs associated with contract and professional services and other operating costs. Departments are not allowed to start new services/programs • Fee studies are in progress to increase cost recovery where appropriate. Sales Tax • With a small ½ cent sales tax increase, the City is expected to generate $10 million in annual revenue to support essential city services and programs • The City’s current sales tax rate is 10.25%, but only 1% comes into the City directly to support services and programs. The remainder goes to the state, the county, and other taxing agencies such as BART • Prescription medicine and devices and groceries are exempt from sales tax. Rent, mortgage payments, utilities, and other items such as goods transmitted electronically (music, books, movies, computer software, etc.) are also exempt from sales tax • The City’s sales tax consultant confirmed that years of sales tax data tied to local transactions and use taxes across California demonstrates there is no exodus by local residents making shopping, dining or buying decisions in neighboring jurisdictions that have lower tax rates. Reallocation of Capital Project Funds to Critical Life and Safety Projects • The City Council authorized the deferrals/defunding of capital projects including key projects such as the Century House and skatepark. • Funds have been reallocated to life and safety projects through the FY 2024/25 Mid- Term Budget Update that was approved by the City Council on May 21, 2024. May 21, 2024 Workshop and Council Meeting Contingency Menu of Potential Service Reductions if New Revenue Is Not Realized If the ½ cent sales tax is not viable or not approved by the voters on November 4, 2004, service cuts will be implemented including the following potential areas subject to City Council approval and community input: • Parks, Trees, and Landscape Maintenance • Streets and Facilities Maintenance • Library Services • Community Programming, Youth and Senior Programs, and Special Events • Plan Checking and Traffic Management Programs • Sustainability Programming/Services • Funding to Community Programs Page 312 of 428