Pasadena Council Weighs New Taxes for November Ballot

Facing a widening structural deficit, the Pasadena City Council on Monday, July 13, 2026, will weigh whether to put new tax measures on the November ballot.

The options — five of them — could raise anywhere from $5 million to $30 million a year, according to the Department of Finance. City staff report the General Fund has now been balanced with one-time money for three years running.

No tax gets adopted Monday. Agenda Item 16 asks only for direction: which measure or measures to develop for the Nov. 3 general municipal election, so legal and ballot documents can be drafted in time. Whatever the Council advances would still have to pass at the polls.

The clock is tight. Los Angeles County must have all election documents by Aug. 7 for a measure to make the November ballot.

Why the city says it needs the money

The report — submitted by Director of Finance Karin Schnaider, approved by Interim City Manager Matthew E. Hawkesworth — ties the request to a “widening structural deficit,” a gap in which spending growth “consistently outpaces revenue growth” and, without changes, “will continue to expand.”

The Council adopted its most recent General Fund budget on June 15. Like the two before it, city staff pointed out, that budget was balanced with one-time revenues and reserves.

The report never names a dollar figure for the needed shortfall. The budget record shows fiscal 2027 with General Fund revenue of about $379.7 million against roughly $383.4 million in spending — a gap of about $3.8 million — which Schnaider said the city closed with $5 million in one-time funds.

The “widening structural deficit” language traces to Hawkesworth’s May 4 budget transmittal letter, which the July 13 report repeats nearly word for word. The budget’s five-year forecast projects revenue rising 3 to 4 percent a year while expenditures climb 4 to 6 percent.

The city is not in the red on paper — it adopts a balanced budget every year and carries strong bond ratings.

The report lists five Council priorities the city says it can’t currently completely fund. Four lean almost entirely on the General Fund: modernizing fire department facilities and expanding fire prevention; improving roadways and pedestrian and bicycle safety; investing in year-round shelter and transitional housing; and executing the city’s Economic Development Strategic Plan. The fifth — a carbon-free future — would run mostly through the municipal utility, Pasadena Water and Power.

Five options, from $5 million to $30 million

Staff laid out five revenue tools, each with its own estimate and its own path to the ballot. Under state law, a general tax — spendable on any city purpose — needs a simple majority, 50 percent plus one. A special tax, tied to a defined purpose, needs a two-thirds supermajority.

Transaction and Use Tax. A quarter-cent sales tax would raise about $11 million a year and use up the city’s last increment of available local sales-tax capacity. Pasadena’s compounded rate is 10.5 percent now and rises to 11 percent this fall under the county’s Measure ER — an increase that happens regardless of any Council action — and 13 other L.A. County cities already carry a higher rate. Assembly Bill 1768 let the county exceed the usual 2 percent local cap for its June 2026 half-cent measure while preserving this quarter-cent for local use. Staff say the measure would closely mirror the process used for Measure I, the three-quarter-cent tax voters approved in November 2018.

Parcel Tax. The biggest option. At $0.24 per developed square foot, it would raise roughly $30 million a year for fire services and street resurfacing. A lower $0.17 rate would raise about $20 million for the fire plan alone — fire services, station repairs, year-round brush clearance — without the street work. The report puts the $0.24 rate at about $240 per 1,000 square feet of developed space; on a median 1,600-square-foot home, roughly $384 a year. Residential properties would carry about 67 percent of the burden, non-residential about 33 percent, reflecting the city’s 77.4 million residential and 38.9 million non-residential square feet. Staff recommend building in an inflation adjustment. As a special tax, it needs two-thirds approval. Voters last renewed the Library Special Parcel Tax — about $2.8 million a year — in 2022; that levy carries a 15-year sunset and comes up again before 2038.

Real Property Transfer Tax. A local transfer tax could generate as much as $26 million a year at an accumulated 1.5 percent rate — but the report is notably wary. Staff call the source “volatile,” prone to big year-over-year swings and hard to forecast, and warn that transfer taxes have drawn “organized opposition” statewide. The report cites the tiered “mansion tax” structures passed by initiative in Los Angeles and Santa Monica as precedents. Whatever rate the city sets, the county keeps the 0.11 percent share it now splits with the city — and stands to gain about $1 million.

Tax on Parking Occupancy. Modeled on the city’s 12.11 percent hotel tax, a 10 percent parking tax would raise about $5 million a year. Staff call it a new structure that would take more time to draft. Comparable cities run the gamut: Los Angeles 10 percent, Burbank 12, Santa Monica 18, San Francisco 25.

Business Tax. Adopted in 1966 as a base fee plus a per-employee charge, Pasadena’s business tax generates $7.7 million a year. Modernizing it toward a gross-receipts model — as other California cities have — could add an estimated $10 million to $15 million annually, but staff stress it would require substantial outreach to the business community, a signal it’s unlikely to be ready for November.

What staff recommend

Of the five, city staff flag three with the most revenue potential — the sales tax, the transfer tax and the parcel tax — and steer the Council toward two.

For flexible general revenue, city staff recommend the quarter-cent sales tax: stable, familiar to voters, unlikely to draw significant organized opposition. For dedicated money, they recommend the parcel tax for fire services and infrastructure, noting parcel taxes “often receive strong community support when tied to valued services.”

The transfer tax, despite its second-largest price tag, comes with the most reservations: volatile revenue, likely opposition from outside interests, and possible “unintended effects” in the residential and commercial real estate markets.

Separately, the report flags a parallel effort that skips the ballot.

In fiscal year 2027, the Finance Dept. reportedly plans a cost-recovery review to align city fees with the actual cost of service. Staff point to Fire Inspection and Paramedic Services fees set well below the true cost of delivery, and cite San Francisco’s regulatory fees on ride-hailing and commercial delivery companies as a model for updating charges without a vote.

What happens next

If the Council gives direction Monday, staff will return July 27 or Aug. 3 with final resolutions and ballot language, ahead of the Aug. 7 county filing deadline. A separate supplemental voter information pamphlet would be prepared for any related city measures. Any measure that clears the Council goes to voters Nov. 3.