To: Board of Supervisors
From: Monica Nino, County Administrator & Tom Geiger, County Counsel
Report Title: ORDINANCE ESTABLISHING A 0.625% GENERAL RETAIL TRANSACTIONS (SALES) AND USE TAX IN CONTRA COSTA COUNTY FOR A PERIOD OF FIVE (5) YEARS
☐Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
INTRODUCE Ordinance No. 2026-05 authorizing the levy of a 0.625% General Retail Transactions (Sales) and Use Tax in Contra Costa County, WAIVE reading and FIX March 3, 2026 for adoption of the ordinance and a resolution calling an election for June 2, 2026, and submitting the general sales tax measure to the voters.
FISCAL IMPACT:
If successful, the additional 0.625% Transactions and Use Tax would generate approximately $150 million to support general operations of the County for a period of five (5) years.
The cost to place the measure on the ballot is approximately $1.2 million for election costs, including printing of ballots and related translation of proposed ordinance, analysis and other text into multiple languages.
BACKGROUND:
On January 20, 2026, the Board of Supervisors directed staff to assemble a draft ordinance authorizing a countywide transactions and use tax (TUT) in the amount of 0.625% to be listed on the June 2026 ballot and return at the February 10, 2026 meeting to introduce the draft ordinance and set a date for adoption. This is following receipt of reports from the County Administrator’s Office on November 18, 2025 and the Health and Employment & Human Services departments on December 16, 2025 on the negative impacts to the County from the passage of House Resolution (H.R.) 1 and the fiscal year 2025/26 state budget.
County Budgetary Pressures
The passage of H.R. 1 represents a fundamental shift in the relationship between the federal, state and local governments for health and social service programming. In Contra Costa County, this means significant revenue reductions for Medi-Cal (California’s version of Medicaid) and CalFresh (California’s version of the federal Supplemental Nutrition Assistance Program (SNAP)). These impacts are further exacerbated by certain budgetary actions taken by the California Legislature in the fiscal year 2025/26 budget.
For Medi-Cal, the County projects that annual revenue losses to increase annually to $307 million by fiscal year 2028/29. This is due to two primary drivers, 1) $159 million from Medi-Cal disenrollment due to changing eligibility criteria, and 2) $148 million from loss of supplemental state and federal healthcare funding. It is important to note that the $307 million figure represents an ongoing, structural budget deficit in the Hospital Enterprise Fund (EF1) that will need to be closed to maintain a structurally balanced budget in future years.
It is additionally noteworthy that the above structural deficit projections do not include the increased costs from negotiations with the County’s labor unions, which are currently in progress, nor does it include an estimated $170 million, one-time capital cost requirement to retrofit portions of the County Hospital for earthquake safety.
Sales & Use Taxes in California
In California, sales and use taxes are structured to allow for a base state tax of 7.25% with an additional 2% of capacity being available in each county for transactions and use tax districts, making the maximum sales and use tax up to 9.25% in each county within the State. Any additional sales and use taxes beyond that figure require special legislation. Below is a table showing how the base state sales and use tax rate is broken out along with the additional 2% cap for local TUTs:
It is important to note that although the 7.25% base state tax is remitted to the state, several of the increments illustrated above are subsequently allocated to local governments, including the County. For example, the “Public Safety Augmentation Fund” increment of 0.50% is more commonly known as “Proposition 172” funding specifically passes through the state to counties for the augmentation of public safety funding.
The local “Transactions and Use Tax (TUT) District” increment of 2% is a maximum figure, per county, but the local taxes levied within this increment are not necessarily required to be countywide taxes. For example, within a given county, and subject to voter approval, the county may levy a tax countywide, beginning in 2003 a city may levy a tax within the city limits or a regional authority, such as a transportation authority, may levy a tax within the boundaries of that authority. But, cumulatively, the total TUTs levied within each county may not exceed 2%.
Sales & Use Taxes in Contra Costa County
In Contra Costa County, the local TUT increment limit has a history dating back to 1970, when a 0.5% sales tax was levied to support the issuance of sales tax revenue bonds to support the construction of the Bay Area Rapid Transit (BART) district system. Subsequently, the Contra Costa Transportation Authority (CCTA) began levying an additional 0.5% TUT in 1989 following passage of Measure A on the November 8, 1988 general election ballot. The CCTA tax was initially passed for a 20 year period, but was later renewed by passage of Measure J on the November 2004 ballot. For a period of over 50 years, the BART and CCTA sales taxes were the only two such taxes levied countywide leaving 1% of the 2% cap for cities or the County to access.
Senate Bill 1349 (Glazer) and a Countywide Transactions & Use Tax (Measure X)
In 2019, the County commenced a process to explore submission of a new, countywide 0.5% sales tax to support general County operations, including healthcare, social services and public safety. With 1% of the 2% local cap subsumed by BART and CCTA and because the County has a disproportionately large number of incorporated cities with already existing sales taxes of their own, it was immediately apparent that any decision to submit a proposed sales tax to the voters for consideration was conditional on legislation being passed to allow for an exception to the 2% cap.
Additionally, at the time the cities of Concord and San Pablo were exploring passage of sales taxes at some point in 2020 and CCTA was pursuing an additional 0.5% on the March 2020 ballot (ultimately the CCTA measure was not successful). For these reasons, the Board directed the County Administrator’s Office to work with the cities to seek a legislative path for the County, its cities and CCTA to pursue their respective sales tax measures for consideration by the voters and maintain a level of available increment for other cities to pursue future taxes if needed.
On April 8, 2020, Senator Steve Glazer introduced amendments to SB 1349 including language jointly proposed by the County, in collaboration with the cities, CCTA and labor partners with a solution for all jurisdictions to pursue their respective taxes as described above. Throughout the spring and summer of 2020, the COVID-19 pandemic escalated leading to several closures of the Legislature resulting in the bill moving slowly through the legislative process. For this reason, on August 4, 2020 the Board passed Resolution No. 2020/210 placing the 0.5% countywide sales tax measure on the November 2020 general election ballot, prior to the passage of the bill, due to the requirement that ballot measures be submitted to the Registrar of Voters 88 days prior to an election (commonly referred to as the “E-88” deadline). This measure later became what we know today as “Measure X”.
Ultimately, SB 1349 was passed by the Legislature on August 31, 2020 and signed into law by Governor Newsom on September 30, 2020. The final version of SB 1349 changed the approach to sales taxes within Contra Costa County in two primary ways:
1. Removed the legacy BART 0.5% sales tax from the 2% cap; and
2. Prospectively removed any successful CCTA 0.5% sales tax from the 2% cap
This approach resulted in a successful, multi-jurisdictional policy achievement for Contra Costa County. Following adoption of SB 1349 and due to this approach changing the sales tax base within the County, the following taxes were subsequently approved by voters with the following effective dates (i.e. the date that the tax began to be levied following the election):
For additional context, below is a table showing the current and proposed sales and use tax levels within the city and unincorporated jurisdictions of the County assuming the County’s proposed 0.625% transactions and use tax is successful:
Note that the above table does not take into account the possibility of an additional 0.5% transactions and use tax countywide being proposed by BART for the November 2026 ballot. In addition, the above chart illustrates the need for additional legislation as 15 of the County’s 19 cities would be above the current cap. The County is seeking legislation based on the Board’s January 20th direction. One unique aspect of a June election cycle is that the final day for bills to be passed in the Legislature is August 31st following the election. For measures placed on a November election ballot, the Governor’s signing deadline of September 30th occurs well before the election itself.
Conclusion and Next Steps
Today’s action is follow-up to the Board’s request to draft a new transactions and use tax ordinance seeking an additional 0.625% TUT countywide. Specifically, the Board is introducing the ordinance, waiving the full reading of the ordinance and setting March 3, 2026 for adoption of the ordinance.
The ordinance establishes a general tax enacted for general governmental purposes. All of the proceeds from the tax imposed by the ordinance will be placed in the County’s general fund and used for purposes consistent with general fund expenditures of the County.
The ordinance establishing the general sales tax would go into effect if adopted by a majority of the voters voting on the measure and if legislation that would exempt the tax from the sales tax cap under Revenue and Taxation Code section 7251.1 becomes law. The earliest the tax would be collected would be October 1, 2026.
On March 3, 2026, the Board will also be asked to adopt a resolution formally calling for an election, including related ballot language, for submission to the Registrar of Voters for the June 2026 Primary election ballot. Should the measure be passed by the voters, the resulting tax would be collected for a five (5) year period commencing from the date of collection.
CONSEQUENCE OF NEGATIVE ACTION:
The Board will not have introduced the ordinance establishing the 0.625% transactions and use tax nor set a date for final adoption. Since the ordinance must be adopted at a regularly scheduled meeting, the Board must adopt the ordinance on March 3, 2026, which is the final Board meeting prior to the statutory deadline with the Registrar of Voters to submit measures for the June 2026 elections ballot.