Title
Staff Report, Resolution and Ordinance for City Council Consideration and Possible Action to Seek Voter Authorization to Repeal and Replace Title 2, Chapter 2 of the San Leandro Municipal Code to Amend the Current Business License Tax Ordinance
Staffreport
RECOMMENDATION
It is recommended that the City Council either:
By majority vote, adopt the proposed resolution as written, to place the business license tax modernization measure on the November 3, 2026 election ballot, and designate author(s) for ballot measure argument and rebuttal argument;
or
Direct staff to continue additional fiscal analysis with the goal of bringing forward proposed business license tax modification as part of the November 2028 election (i.e. the next regular election that is eligible for consideration of such a measure, in the absence of a City Council declaration of a fiscal emergency)
Note: Without 4 affirmative votes for any action, staff will cease all further efforts associated with the above.
Background and Analysis
The City Council has discussed numerous strategies to address the City’s long-term fiscal challenges along with new methods of funding the City’s infrastructure needs. These strategies have included efforts to reduce City expenditures, alternative service-delivery options, and ways of generating new revenue. Along these lines, the City has already executed many long-term cost saving measures, including:
• Adoption of labor contracts that require employees to contribute their maximum share towards employee pension costs;
• Implementing additional pension tiers that provide reduced pension benefits to more recently-hired employees;
• Creation of the “PULL Plan” (Prioritization of Unfunded Liability Liquidation) to proactively set aside funds towards the costs of the City’s long-term unfunded liabilities, including legacy pension and other post-employment benefits obligations (OPEB).
• Closing an $11.6 million structural deficit through ongoing budget reductions and minor revenue enhancements across the upcoming three fiscal years (FY 2027-2029)
To more comprehensively address the City’s long-term fiscal stability and infrastructure funding challenges, the City Council also expressed a desire in various public forums to explore ways of generating new revenue.
In line with the above, as well as direction provided by the City Council at the December 15, 2026 and February 17, 2026 City Council meetings, the City contracted with Godbe Research to conduct a scientific feasibility survey to gauge potential support for three potential revenue measures that could appear on the upcoming November 2026 ballot, and provided a related quantitative assessment. That scientific survey was conducted in March 2026 and tested the viability of a Business License Tax Modernization, a Parcel Tax, and a Vacant Property Tax.
At the April 6, 2026 City Council meeting, the results of the scientific survey were publicly presented. Out of the three taxes that were surveyed, only the business license tax modernization was determined to be viable based on the level of anticipated public support that sufficiently exceeded the pertinent legally required voter threshold, as shown below.
Summary of scientific survey results, presented at April 6, 2026 Council meeting
(“Final Test” among likely November 2026 Voters):
• Parcel Tax
55.9% support (66.7% required for passage)
• Business License Tax Modernization
64.7% support (50%+1 required for passage)
• Vacancy Tax
61% (66.7% required for passage)
The scientific survey results also highlighted the following City service areas as receiving the highest level of support among the public if new City funding could be derived from a tax measure (listed in order of prioritization across all survey respondents):
• Repairing potholes and rehabilitating City streets;
• Maintaining public safety infrastructure to ensure rapid emergency response;
• Repairing and maintaining critical public safety infrastructure to ensure rapid; emergency medical and fire response;
• Providing updated lifesaving fire and police equipment;
• Maintaining parking infrastructure and youth services;
• Maintaining emergency and disaster preparedness programs;
• Maintaining neighborhood police patrols; and
• Enhancing senior and youth programs;
Per Council direction at the April 6, 2026 Council meeting, City staff also subsequently distributed both electronic and mailed community surveys to a broad cross-section of business owners and community residents. As of the date of writing of this staff report, 997 survey responses were received. Among those responses, 50.4% supported the City's Business License Tax Proposal and 47.1% had questions or concerns. More details on this survey work are provided in Attachment D.
Changes Made to the Proposed Tax Model based on City Council, Business Owner, and Community feedback
At the June 8, 2026 City Council special meeting, staff presented an overview of a draft business license tax modification proposal that was largely modeled after the City of Union City’s existing business license tax structure. That presentation included an overview of a variety of potential issues and concerns identified with the initial draft tax modification model, which was informed by feedback and concerns expressed by local business owners. In particular, the initial tax model demonstrated that some business owners could face significant annualized tax increases, which in some cases exceeded several hundred percent. At the conclusion of the meeting, the City Council directed City staff to work with its tax consultant to modify the proposed tax model to mitigate the identified issues and to incorporate City Council feedback.
The following summarizes the changes that have been made to the tax model and incorporated into the attached draft ordinance:
• Property rental and mobile home parks tax rates would remain unchanged.
• Warehouses tax rates have been increased to $4.50 per thousand dollars in gross receipts.
• The tax model incorporates a 25% discount rate for any business with annual gross receipts greater than $50 million.
• Public Utilities have been re-classified to have the same rate as manufacturers, per the requirements of California law.
Incorporation of the above-referenced changes results in an estimated total annual revenue of $9.4 million, which is slightly greater than the $8.997 million in total revenue derived under the former tax model presented at the June 8, 2026 Council meeting. For broader context, the City’s current tax structure is expected to generate approximately $6.657 million in the current fiscal year. In other words, if adopted by voters, the revised tax model could generate a net increase of approximately $2.74 million annually.
Overview of Draft Ordinance
As directed by the City Council, the City Attorney’s Office prepared the attached proposed Resolution and Ordinance for placement of a ballot measure amending the BLT (the “BLT Ballot Measure”). The proposed general tax requires a majority vote of the City Council to vote in favor of placement on an upcoming election ballot (San Leandro Municipal Code Section 1-1-305). Below is a summary of the provisions of the BLT Ballot Measure.
Business License Tax (BLT)
The BLT Ballot Measure would repeal and replace in its entirety San Leandro Municipal Code Title 2, Chapter 2 with a new San Leandro Municipal Code Chapter 2.
The significant updates to the BLT in the BLT Ballot Measure would consist of:
• Shifting business categories (with the exception of rental housing providers and mobile home parks) to a gross receipts tax structure;
• Simplifying and consolidating business license categories;
• Advancing with a differential rate model across these categories, with specific tax rates set at the following:
o Contractors - 0.002
o General/Retail - 0.00043
o Industrial - 0.00045
o Professional - 0.0025;
o Property rental - no change
o Service - 0.002
o Warehouses - 0.0045
o Mobile Home Park - no change
o Exempt - no change
• Providing an implementation date effective April 1, 2027, with no penalties imposed unless a business remains delinquent after October 1, 2027 (six-month grace period).
The business types that fall into each category are included in the Ordinance, as shown in attachment C.
In addition to the revisions identified above, the BLT Ballot Measure contains procedural updates to modernize the City’s processes and procedures that have become outdated since the BLT was last updated.
Proposed Ballot Question:
Should the City Council decide to place the measure on the November 3, 2026 ballot, the following draft ballot language is recommended to be used in the upcoming election. It has been reviewed and is recommended by the City’s consultants, is approved by the City Attorney, and meets the specific legal and technical requirements under State law. Staff therefore recommend that no changes be made to the proposed ballot language. The City Council may authorize the Mayor or a subcommittee of the City Council to file an argument in favor of the measure and a rebuttal to an argument filed against it and to work with an independent campaign committee or other third-parties on the preparation of the argument and rebuttal.
“San Leandro Essential Services Protection Measure. To protect essential City services such as 9-1-1 emergency response; street/ pothole repair; crime/ gun violence prevention; fire protection/ paramedics; neighborhood police patrols, and reducing blight/ keeping neighborhoods clean, shall the measure be adopted amending San Leandro’s business license ordinance, lowering many small businesses' taxes, with rates up to 0.45% of gross receipts (as described in the ordinance) until ended by voters, raising $9,401,000 annually, with public spending disclosure/ independent audits?”
YES NO
Fiscal Impacts
If approved by voters, staff estimate that the proposed revenue measure would generate approximately $2.74 million annually in net additional new General Fund revenue above and beyond the existing funding that is already derived by the existing business license tax model.
Budget Authority for Revenue Measure:
Sufficient funds are included in the FY 2027 Adopted Budget to off-set the anticipated costs of the November 2026 General Municipal election.
Attachments:
• A - Draft Resolution (Ordering Measure to Election)
• B - Ordinance (Business License)
• C - Exhibit A (Business License Tax Exhibit)
• D - Presentation
PREPARED BY: Eric Engelbart, Deputy City Manager, City Manager’s Office