Vallejo considers new transfer tax measure to tackle $28M deficit

VALLEJO - With less than two months left before the city of Vallejo finalizes its budget for the coming fiscal year, the Vallejo City Council is eyeing a potential tax revenue measure for the November ballot to address a more than $28 million deficit.

City staff presented multiple options for the Vallejo City Council in a special meeting Tuesday night to address the estimated $28.5 million for the 2026-27 fiscal year, including raising property transfer taxes. 

Assistant City Manager Nalungo Conley said the deficit has developed due to multiple factors, such as a 9% decline in both the transient occupancy tax and in the utility user tax –- as people use less gas and electricity – despite other gains like a 8% increase in franchise taxes amid hikes on fuel, garbage and other costs. 

The council indicated in February that staff must come up with more ways to cut costs, and in the following months the deficit projection grew by nearly $9 million. A majority of councilmembers also rejected several suggested mid-year budget adjustments in March.

To address this year’s funding gap, city staff suggested updating the city’s property transfer tax rate. The city’s current rate, which applies once to property sales, is $3.30 per $1,000 of property value, which brings the city about $2.47 million in annual revenue, Conley said.

The council could choose one of several options to present to voters to upgrade that tax and collect more revenue. Conley presented several models with different costs to homebuyers and rates of revenue growth. 

For example, in one “moderate increase model” a buyer purchasing a property for about $500,000 would pay $7-$10 per $1,000 in value - with a $3,500 to $5,000 price tag. 

With a tiered increase model of $5, the buyer might pay $2,500, which could bring the city up to $7 million more per year. 

At the highest rate, or $15 per $1,000 in value, Conley said buyers might be taxed $7,500, bringing the city at least $10 million more per year.

But Conley said that the revenue from choosing one of these updated models would take time to grow. 

The tax would need to be approved by a majority of voters in November and would kick in next January. Therefore the revenue during 2026-27 would only be boosted by several months of gains from the new tax model before the city can enjoy a full year of improved revenue starting in 2027-28.

“It does add on to the cost of a home, but the city of Vallejo has some of the cheapest housing prices in the county, and Solano County has some of the cheapest housing prices in the region,” Conley said. 

According to Zillow, Vallejo home values average around $521,000, compared to about $577,000 across Solano County and nearly $790,000 in nearby Contra Costa County.

City staff also suggested other potential revenue increase options, such as more aggressively pursuing revenue from code enforcement fees for buildings not up to standard. Mayor Andrea Sorce approved of this strategy, and added she thought the property transfer tax update could be done while keeping the city competitive. 

Councilmember Alexander Matias said he wants to follow Benicia and Fairfield’s examples of pursuing a business license tax update to capture more revenue from retailers. He suggested that staff explore how the city could present a similar opportunity on the ballot to Vallejo residents.

Resident Rebecca Trumper said during public comment the city ought to start with “priority-based budgeting,” which she said means considering the community’s most pressing needs and services while using the known revenue available. She said the community’s priorities appear to be strongly focused on improving economic development opportunities, as well as improving public safety and increasing affordable housing options.

Resident Anne Carr said the city should consider selling some assets it holds, such as schools it purchased from the school district. She suggested selling 400 Mare Island Way, rather than using it as collateral for the city’s former bankruptcy loan.

Councilmember Helen-Marie “Cookie” Gordon asked about that property’s status. City Attorney Veronica Nebb said that during the city’s 2011 bankruptcy the building was purchased and later pledged as collateral, and cannot be sold as it is encumbered. To unencumber it would endanger the “very favorable interest rate,” Nebb said, and require a costly refinancing process.

Conley agreed, saying that “Selling 400 Mare Island Way will not generate enough revenue.”

Conley said staff will bring these and other suggested fiscal strategies back for consideration in an upcoming meeting. 

The Measure P Oversight Committee, which oversees funds collected through a 2022 sales tax measure, will meet next week to discuss numerous funding requests, including spending about $500,000 on pilot projects “targeting economic development,” according to the meeting agenda. Measure P funds are projected to total $24 million for the 2026-27 fiscal year, Conley said.

Councilmember Tonia Lediju said she wants staff to weigh whether Measure P funds are the right choice to use on certain city services and projects which will require more funds in coming years.

“It’s no different than looking at a grant and ([asking], when that grant ends, how will services continue in the community?” Lediju said. “I want staff to consider, are these ongoing expenses and where should they really lie in our budget?”

This year’s deficit debate also takes place as the city just hired Harry Black as interim city manager. Black formerly served as Stockton’s city manager and brings fiscal management experience from his posts as chief financial officer for the cities of Baltimore, Maryland and Richmond, Virginia. He will review the city’s revenue growth recommendations within the coming weeks, according to the city.