San Mateo County Board of Supervisors considers sales tax increase for local funding

The board’s decision will not inflict an increase, but would allow future legislation to be placed on ballots for voter approval by an ordinance or citizens’ initiative. 

The resolution was proposed as “an insurance policy for some future time if need to consider an increase,” Speier said in a message. 

If the resolution passes next week, the county would then be authorized to anticipate future needs, but still require a vote of the people. The possibility of adding the increase to ballots will only be allowed within the next five years. 

“The legislative proposal is intended to help address affordability challenges for all San Mateo County residents, particularly at a time where potential funding reductions may cause severe disruptions in the provision of county services,” the staff report said. 

While the county needs funding to provide essential services to the residents most in need, increasing taxes also impacts their wallets. 

Supervisor Ray Mueller said he would not be supportive of raising the sales tax limit due to increasing costs of living and general affordability concerns of residents. 

“While I understand completely my colleagues wanting to have the discussion, and I respect them and their motivation, personally I have concerns about raising the tax limit, especially at a time when we haven’t seen the full impact of inflation from energy increases from the war in Iran,” Mueller said. 

Under the proposed legislation, some areas of San Mateo County could see a combined sales tax rate as high as 10%, “which may amplify affordability concerns,” according to a legislative analysis report included with the board meeting’s staff report.

In California, sales taxes include a base state tax of 7.25% and an optional 2% cap for each county, meaning sales tax cannot exceed 9.25%. Anything above must be authorized by special legislation. 

In San Mateo County, the total sales tax is currently at 9.375%, which already exceeds the cap due to Measure K, a half-cent countywide sales tax in effect until 2043. The proposed increase could be another quarter-cent or half-cent. 

Currently, Measure K tax adds 10 cents to a $20 taxable purchase, which largely excludes prescription drugs and most groceries. The half-cent tax was initially approved in 2012 and extended by voters in 2016 through Measure K. In Fiscal Year 2024-25, Measure K generated nearly $115 million for the county. 

Currently, multiple counties tax at the cap rate, including San Mateo and Alameda, Los Angeles, Santa Cruz and Sonoma, according to the legislative analysis report. 

In recent years, numerous counties around the Bay Area have increased their maximum allowed tax rate or are thinking of doing so primarily in response to the fiscal challenges of implementing H.R. 1, the legislative analysis report said.

Congress’ passage of what was known as the One Big Beautiful Bill imposes more requirements and significantly reduces funding for key programs for low-income households, such as Medicaid and the Supplemental Nutrition Assistance Program. 

The county will be inundated with more work without adequate federal funding, the legislative analysis report said. The Human Services Agency anticipates spending $2 million over budget on overtime alone in the current fiscal year, and continuing the overspend into the next. 

Assuming San Mateo County Health continues caring for the existing patient population, the department could incur significant financial losses, totaling $44.6 million in the next two fiscal years, the legislative analysis report said. 

These costs also come as San Mateo County grapples with losing a previously guaranteed source of revenue from the state through the vehicle license fee shortfall refunds. 

The county is estimated to see a $125 million shortfall in VLF refunds, assuming no allocation remains included in the governor’s May budget. 

Less than a month ago, the Board of Supervisors approved ceasing discretionary allocations from Measure K in coming years to help backfill the gaps in state funding. The board’s consideration of increasing sales tax revenue would be made with the same need in mind.

The Board of Supervisors will consider the item at its meeting Tuesday, April 7.