South San Francisco adopts budget with deficit

Numerous cities throughout the county are also facing deficits in light of rising costs and slow sales tax growth.

“We are not alone in the county. A lot of the cities within San Mateo County also face a deficit because there was the rising personnel costs — more than there was revenue growth — and persistent economic uncertainty,” Chang said.

Other cities, such as Belmont and San Mateo, have recently adopted their budgets with general fund deficit projections as well.

Many county jurisdictions, including South City, opted not to include another funding source in their budgets over its uncertainty. The complicated revenue stream is related to vehicle license fees paid by residents, which are directed to the state and then subsequently reimbursed to cities, typically by the following fiscal year. But the payback process is not straightforward, and given the state’s widening shortfall, uncertainty lingered over whether it would actually pay back cities.

While it seems like cities like South San Francisco may receive the reimbursement this year, Chang said it will most likely receive only a portion of what it is owed.

“The state budget includes the funding for the property tax-in-lieu-of-VLF,” Chang said. “However, it appears that the city will only receive two-thirds, not 100%, of the shortfall, so for South San Francisco, that equates to approximately $3.3 million.”

If received, that would drop the deficit to about $8.7 million, Chang said.

To address a structural deficit, councilmembers contemplated several ballot measure options to go before voters in the 2026 election that could narrow the structural deficit during a council meeting June 11.

Councilmembers favored a parcel tax over most other options, such as a sales tax, with the fee structure not on assessed value but on land use and size. To attain the $14 million revenue goal for the ballot measure, staff estimated an average single-family residence could pay around $300 while a larger commercial space could pay up to $5,000 annually.

The 2025-26 fiscal year begins July 1.