Projections show the city will continue to face shortfalls in the coming years. To address the issue, the city is betting on continued and potentially new taxes to bring in more revenue, Navazio said.

The budget assumes that Measure K on the June 2 ballot will pass. The measure is a parcel tax renewal that generates about $1.2 million annually for library services.

Measure K would set the rate at $74.18 starting on July 1, extending it for nine years. The multifamily property rate would be $74.18 plus $12.54 per dwelling. The tax would increase by up to 3% per year based on a cost-of-living index.

The measure requires a two-thirds majority to pass. If it fails, there are a few backup plans, Navazio said.

First, the city could freeze vacant positions and reduce temporary staffing, among other cuts expected to save $600,000. Second, the city is exploring other taxes that could be on the November ballot.

One option under consideration is an increase to the property transfer tax rate. The rate is set at $2 for every $1,000 in transaction value, or 0.2%. The proposed measure would increase the rate to 1%, generating an additional $6 million in revenue.

Another option is exploring a public safety tax that would impose a $0.0725 tax per square foot of building. That would generate an estimated $3.1 million.

The city plans to begin polling in early June, in time for a City Council discussion on the next steps at its June 15 meeting. The final budget will be presented for adoption at the same meeting, Navazio said.

Vice Mayor Rachel Kertz said the proposed budget is “creative, optimistic and fragile. It feels fragile.”

Kertz said she appreciated that staff looked beyond the upcoming year in their financial projections.

“I think it’s hugely important,” Kertz said. “The more we do looking forward would be great.”

Councilmember Eli Hill said he disagrees with Kertz’s assessment.

“There are scenarios that are fragile, but I actually believe that the contemplation of the various mitigations provide a transparent mechanism to continue to scenario-plan,” he said.

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