Report Prepared by: Scott McBride, City Manager, Craig Cornwell, City Attorney, Venus Rodriguez Finance Officer
Title
SUBJECT: Adoption of a Resolution Calling a November 3, 2026, General Municipal Election for the Purpose of Placing a Measure on the Ballot Known as the City of Merced Vital Services Protection Measure Establishing a 1¢ Sales Tax, Until Ended by Voters, and Requesting the County Board of Supervisors to Consolidate the City's Election with the Statewide General Election Being Held on the Same Date
REPORT IN BRIEF
Considers adopting a Resolution Calling a November 3, 2026, General Municipal Election for the purpose of placing a measure on the ballot known as the City of Merced Vital Services Protection measure establishing a 1¢ sales tax, until ended by voters, and requesting the County Board of Supervisors to consolidate the City's election with the Statewide General Election being held on the same date.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving Resolution 2026-52, a Resolution of the City Council of the City of Merced, California, Approving an Ordinance and Ordering that a Measure be Submitted to the Voters of the City at the General Municipal Election to be held on November 3, 2026, to Consider a Local 1¢ (1%) General Transactions and Use Tax to be Administered by the California Department of Tax and Fee Administration; and,
B. Approving the form and ballot question; and,
C. Directing the City Manager/City Clerk and the City Attorney’s Office to prepare and execute documents appropriate to carry out the tasks necessary for the General Municipal Election and to take actions related thereto.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, subject to other than recommended by staff (identify specific findings and/or conditions amended to be addressed in the motion); or,
3. Deny.
AUTHORITY
Charter of the City of Merced, Sections 400 and 1000; and,
California Elections Code Section 10403.
CITY COUNCIL PRIORITIES
Consideration of a Proposed Ballot Measure on the November 2026 General Election is consistent with the following adopted 2026/27 Goals and Priorities - Fiscal Sustainability, Public Safety and Quality of Life, Infrastructure and Transportation, Economic Development, Parks and Community Services, Governance and Engagement.
DISCUSSION
Legal Analysis
There are two types of sales taxes: general and special taxes. The proceeds of a general tax are available for all governmental purposes, while the proceeds of a special tax are restricted for specified purposes. The City’s proposed 1% (1¢ - one cent per dollar) sales tax measure is a general tax measure. The approval of a general tax measure requires a two-thirds vote of the City Council to place this sales tax measure on the ballot, and a majority vote of the voters voting on the ballot measure at the November 3, 2026, election.
The statewide sales tax rate is 7.25%. State law imposes a 2% cap on the combined sales tax rate for a county and a city within that county, so the total sales tax rate in the City (including State, County, and City sales taxes) may not exceed 9.25%. Currently, the total sales tax rate in the City is 8.25%, which includes the 7.25% statewide sales tax, a 0.50% County sales tax (Measure V), and a 0.50% City special sales tax (Measure C). There is up to 1% - 1¢ remaining for the City or County to use within the 9.25% cap for sales tax rates. This 1% - 1¢ may be used by the City, the County, or shared between the City and County. However, if the City’s proposed 1% - 1¢ sales tax measure is placed on the ballot and approved by the voters, then the City will reach the 9.25% sales tax rate cap.
Purpose and Need
The City of Merced (City) has reached a critical point were maintaining current service levels and addressing anticipated future demands will require a sustainable, locally controlled funding source. This conclusion is based upon financial budgetary analysis and feedback from a two-year phased engagement of Merced citizens, including a statistically valid survey of Merced citizens likely to patriciate in a November 2026 election. Therefore, staff is recommending the City Council place a proposed general 1% -1¢ local sales tax on the ballot for Merced voters to consider. This recommendation is based on extensive analysis, community engagement, and long-term financial planning.
Fiscal Recovery Plan and Implementation Actions
As part of the City Council’s Goals and Priorities for 2024-25 several actions were identified to help relieve pressure on the City’s General Fund. This fund is the primary source for public safety - Police and Fire. It also provides funding to support Parks and Recreation.
General Fund Reserve Policy Update - Use of Reserves
Each of the last two fiscal years the city had to initiate one time use of reserve funds to ensure the General Fund revenues and expenditures were in balance. In the 2024/25 year $500,000 was used and for 2025/26 the number increased to $1.3 million. These numbers would have been higher without council policy direction to lower the General Fund Reserve or annual set aside from 35% to 30%.
Establishment of Council Ad Hoc Subcommittee
The City Council established an Ad Hoc Subcommittee for the purpose of engaging in community outreach to determine community priorities and a statistically valid survey to test the possibility of an additional measure to help generate revenue to support the General Fund. An initial survey conducted in November - December 2025 demonstrated potential support of a general measure at a 1% 1¢ rate. On the same survey, two separate special measures for public safety and parks were also tested. These tests did not demonstrate significant voter interest. Both were less than 50% well below a 66% rate necessary for their adoption.
City Wide CFD Update
An assessment of the city-wide community facilities district was completed, and the council held a study session to provide feedback and direction. Updates are underway so that new development projects will fall into an updated district that charges assessments based on current costs for services.
Development Services Fee Update
The Council provided direction to initiate an update of the fees charged for development services to ensure a fair share of costs were paid directly by those using the services. The goal was to ensure General Fund dollars were not necessary to supplement these areas. The new fees have taken effect July 1, 2026.
Parks and Community Services Fee Update
Parks and Community Services receives a direct General Fund contribution each year to provide services to residents. In 2026 fees for service were updated which will help offset - reduce General Fund contributions.
Property Disposition
The sale or disposition of real property is not an ongoing opportunity, but two properties have been targeted. Those include the Transpo Center and Bell Station - Downtown Post Office. These transactions will provide one-time funding and also limit ongoing maintenance costs.
Merced Airport
For several years the operations of the Merced Airport has required a General Fund Subsidy. The selection of a new essential air service provider which is expanding flights sizes will potentially help reduce or eliminate the subsidy required to maintain airport operations.
Business License Update
The city is currently reviewing the business license sections of the municipal code and modernizing language. Additionally, an audit is being performed to ensure local businesses are paying appropriate fees to the city.
Transient Occupancy Tax Review
The city council was asked to consider forming a tourism business improvement district (TBID). Through public discussion the council reviewed current rates but chose to limit increases on hotels - motels. Instead, operators chose to impose their own increase to use for marketing and related actives to attract visitors to the city.
Maintenance District Updates
In 2025 a review of maintenance district rates was initiated for those that were not covering costs or at risk of not covering costs. Through a Proposition 218 process 7 of 11 districts chose to increase assessments to ensure adequate funding is there for services. This helped alleviate future needs to supplement with General Fund revenues.
Departmental Controls
City departments have reduced expenditures for training, overtime, and materials. These reductions provide some relief but over 72% of the General Fund is for personnel related costs. Annual increases in health coverage, retirement, and long-term liabilities far exceed savings from departmental reductions.
Many of these recently employed fiscal recovery actions and management tools are, however, one-time solutions, such as lowering the general fund reserve policy. These actions are not sustainable long-term. The long-range financial forecast provided in both February 2025 and 2026 projects structural general fund deficits in future years. Attached are five-year General Fund Forecasts for 2026 - 2030 and 2027 - 2031. These projections assume costs at a current rate and do not include additional service enhancements, costs for additional positions, cost-of-living adjustments, or future growth - capital needs.
The city may continue to use General Fund reserves to balance the operating budget annually, but this is only viable for approximately 4 more fiscal years. These projections take into consideration the discontinuation of annual set asides that are calculated off year end surplus.
On Going Support for Public Safety Needs
Over nearly two decades, the City has grown by more than 20,500 people - from approximately 80,500 to over 98,000 residents. During this time the city has adopted policies requiring the use of Community Facilities Districts (CFD’s) so that new development contributes directly towards both public safety and other general services. These assessments collect $8.7 million annually of which $1.4 million is allocated to Fire and $2.8 million is for Police. This funding allows for the retention of 15.73 full time Police and Fire positions. During this same time calls for services have increased but staffing levels for the public safety has had a net decrease. Sworn officers in the police department went from 111 full time positions in 2008 to the current 98. Firefighter positions increased from 64 to the current 88. However, 24 of those positions are grant funded through an expiring SAFER award.
During this time period the City also sought out new funding sources. Examples include Measure Y a tax on commercial cannabis activities. This funding source contributes approximately $1.2 annually and funding is used towards capital needs for police, fire, and parks - recreation. It does not include full-time personnel costs. Additionally, the city residents overwhelmingly supported Measure C, a current half cent special sales tax for public safety. This measure generates approximately $9 million annually and has helped to maintain current services and provide resources for some capital needs.
Loss of Federal Fire Services Funding
In March 2027, the City will face the loss of funding for 24 firefighter positions and incur an estimated annual funding gap of $3.6 million to maintain those positions. Funding is currently provided from the expiring federal SAFER grant. Retaining these positions is critical to maintaining citywide advanced life support services, preserving current emergency response times, and providing the staffing necessary to place Fire Station 56 into service. Fire department staffing levels directly affect the City’s ability to provide timely fire suppression, emergency medical response, and disaster response services. They also influence the City’s ISO Public Protection Classification, which can directly affect property insurance rates throughout the community. The expiration of SAFER funding is therefore not only a significant financial challenge, but also a critical public safety issue for which the City must prepare by securing replacement revenue, reducing services, or identifying other sustainable funding solutions.
The SAFER-funded positions have allowed the Merced Fire Department to modernize its deployment model, expand operational capacity, and improve emergency service delivery throughout the community. This staffing has supported the Department’s transition from basic life support (BLS) to advanced life support (ALS) engine companies at every fire station. It has also helped MFD remain more closely aligned with its response-time standard of 4 to 6 minutes, 90 percent of the time, by improving unit availability and reducing delays caused by resource constraints. The loss of SAFER staffing would reduce ALS coverage from all five existing fire stations to only two stations, significantly limiting the Department’s ability to provide timely ALS care throughout the city. SAFER funding also provides the personnel assigned to Squad 53, an economical two-person ALS response unit that addresses peak call demand, improves resource availability, and reduces response delays caused by limited emergency response capacity in North Merced. In addition, these positions have enabled MFD to provide automatic-aid coverage to approximately 10 square miles of northeast Merced. SAFER staffing has strengthened the Department’s effective firefighting force, allowing personnel to perform critical emergency tasks more efficiently and safely. The additional staffing has also created a more sustainable staffing model that supports firefighter health, wellness, morale, training, and professional development. Most importantly, SAFER staffing has provided the capacity to train and prepare future Engineers and Captains needed to staff Station 56 when it is anticipated to open in fall 2028; without these positions, the Department would not have an adequate number of trained and qualified personnel to support the new station while maintaining existing service levels.
Police Services
The City’s police officers are also experiencing increased demand for services. While the City’s population has grown, the sworn police staffing has remained essentially unchanged. The officer-to-population ratio has declined from 1 officer for every 726 residents in 2009 to 1 officer for every 875 residents today. To achieve the 2009 staffing ratio, the city would require approximately 22 additional sworn officers today. The additional cost to add these positions would be approximately $3.7 million annually. This does not include equipment or vehicles which are necessary to support these positions.
The Merced Police Department has been conducting continuous data collection to track statistics related to calls for service, crime reduction, and citizen satisfaction. In 2025 MPD saw overall reductions in Use of Force incidents by 10% a reduction in Traffic collisions by 25%, a reduction in Robbery by 25% reductions in all Burglaries by 31% and a reduction in Auto theft of 38%, all the while seeing an increase in calls to the 911 center of 10.5% (Police and Fire) and an overall increase in police service calls of 7.7%.
To keep up with the pace of our growth in Merced the police department has prioritized efficiency as the model to continue to move our agency forward. The department has made investments in technology to help reduce crime and improve traffic safety. Some of those improvements include Red Light Camera technology at 16 and R St. Building in house blue light safety cameras to be deployed in strategic areas throughout the city as well as utilizing next gen 911 systems to allow for better connections to our community during emergencies.
Efficiency and technological advancements have been helpful but are also limited. The department has seen large increases in the work volume including a 121% increase in traffic ticket issuance. To address community needs and priorities assignment of officers to special community projects such as the DART team, Downtown Partnerships Officer, Code Enforcement, School Resources Officers, and Gang Enforcement have been made. Each of these units assists with keeping a strong connection with our community and playing a vital role to keep crime rates low.
A large focus for our team moving forward to help preserve quality of life and health and safety issues is the continued investments in our Code Enforcement Team and the Gang Unit. These units continue to see large increases in demands. In 2025 the Code Enforcement Team received 1,948 complaints resulting in investigations. Halfway through the 2026 year we have already received nearly 1,500 complaints and are on pace for 3,000 investigations by years end. This is an almost 54% increase in calls for service. Additionally, this increased pace does not consider implementation of the new Repeat Housing Code Violators program that is now active. There will continue to be a significant need to maintain resources to support these areas which are community priorities.
Other needs
Beyond public safety, there are other needs which help maintain the City’s quality of life. The City faces a growing demand for responding to homelessness issues including encampment cleanup, park maintenance, addressing aging facilities, neighborhood improvements, recreation opportunities, better roads and lighting, sidewalks, creek maintenance and repairs as well as other infrastructure investments. Each of these demands competes for the same limited General Fund dollars.
Long Term Capital Investments
The city currently addresses long term capital needs in most non enterprise funds through a “pay as you go” or “pay as we can afford approach.” For example, the city eliminated a computer replacement program in 2008. Now equipment is replaced only as it fails or can no longer be supported. This same approach is used for vehicle replacements in the Police Department and Fire apparatus needs. Unfortunately, this deferral is common for large capital expenditures and for capital investments in facilities.
Police Department
The City’s Police Department main headquarters were constructed in 1959 and expanded in 1981. The age and condition represent significant costs to maintain and address failing systems such as the boilers and HVAC units. This facility also does not meet accessibility requirements. Replacing this existing facility has been estimated in the $50 to $60 million range. These costs do not address other satellite facilities - sub stations, training facilities, and costs for maintain or expanding the radio, and dispatch including Computer Assisted Dispatch System (CAD). Some costs for these needs may be attributable to new development which pays developer impact fees to mitigate their fair share. Unfortunately, the significant bulk of these costs are an existing deficiency. The City previously polled the community to determine if a parcel tax to support bond issuance was feasible, but the polling data demonstrated a lack of support to proceed. The City has tried unsuccessfully to leverage grants or “earmarks” to address the station needs.
Fire Department
The City’s existing fire stations range in age from 20 to nearly 70 years and present significant facility and operational challenges. Stations 52 and 53 are approximately 50 years old and have never undergone comprehensive renovations, while Station 54 was constructed in 1959 and is nearly 70 years old. Station 51 is approximately 30 years old, and Station 55, the City’s newest fire station, is approximately 20 years old. In addition to their age and deteriorating infrastructure, only two of the City’s five fire stations are currently configured to appropriately accommodate female firefighters.
The City is currently in the planning process to add a new fire station and emergency operations center (EOC) - Station 56. Completion of this project is anticipated in late 2028. To construct this facility there is a mix of funding including developer impact fees, state grants, and potentially a HUD 108 loan. In total the costs are expected to be $14 million. To move this project forward will nearly deplete all the collected developer impact fees.
The City has acknowledged the need to move Station 54 to align better with new growth patterns and to eliminate overlapping service areas, specifically with Station 51 located on 16th St. Station 54 is also one of the oldest in operation and has significant costs to maintain and upgrade the longer it remains in operation. To collect adequate funding from new development to advance this project will likely take 15 to 20 years without a significant funding injection from other currently unknown sources. By that time the need for the next Station 57 will become a significant reality.
The department currently has three fire engines and one ladder truck due for replacement, with three of those apparatus having been in service for more than 25 years. In addition to replacing the existing fleet, a fourth engine will be needed to place Station 56 into service. Replacing the three engines and one ladder truck, while also purchasing the additional engine for Station 56, would require an estimated 42 to 48 months for delivery and cost approximately $8.5 million at current prices. By the time the replacement apparatus would be delivered, some of the existing units will exceed 30 years in service. Unfortunately, the City does not currently have the financial capacity to initiate these replacements or acquire the additional engine needed for Station 56.
Roads & Potholes
Road conditions continue to be one of the highest community priorities. The city receives approximately $8 million per year for roadway and related improvements. Funding comes from Measure V, Local Transportation Fund (LTF), Regional Surface Transportation Program (RSTP), Measure C, and State gas tax. These funds help cover street light costs, staffing that perform maintenance including traffic signals, signage, crack sealing, storm drainage, and striping - painting. Other one-time larger capital improvements are completed as funding becomes available. Unfortunately costs for major improvements continue to increase dramatically.
The City is currently updating the pavement condition index report to help guide investment priorities. The most recent assessment indicated an annual need that is more than double the current revenue received for ongoing maintenance. These estimates do not include costs for significant renovation projects which are now necessary to many of the city’s failing roadways. Major work this past year on Yosemite Ave. were in excess of $7 million. Planning for Highway 59 bridge replacement now exceeds $14 million. Maintaining our circulation system is critical for public safety response, business, and the overall quality of life for our city.
Parks and Recreation Facilities
The City has approximately 30 acres of dedicated park space that is undeveloped. This represents an existing deficiency of approximately $30 million, the costs are $1 million an acre to improve these spaces. New development has been paying impact fees which will help address future parks but not existing deficiencies. Another example is replacement of turf playing fields at McNamara Park. Costs exceed $1.2 million and presently there are no city funds programmed or available to address this existing need. These costs do not include adding additional community or youth facilities or expanding sports complexes. Nor do these address future Merced Zoo needs. The city currently uses grant funds and community investments to help improve and add new amenities to these spaces. These sources are highly competitive and not a sustainable long-term approach.
Public Works - Corporation Yard
The renovation and expansion of the Corporation Yard is another upcoming capital need. Although Enterprise Funds (Water, Refuse, and Wastewater) may contribute funding towards this project other non-enterprise funds also have a cost share. Those include areas such as parks, facilities, Police and Fire, and other departments. There are currently no long-term funding mechanisms in place to pay for non-Enterprise Fund departments to pay a pro rata share of these costs. The yard and more specifically a fleet maintenance area is essential to address ongoing service needs for both Police vehicles and Fire apparatus.
Creek Maintenance
The City does not have a dedicated funding source for creek maintenance or repairs. The City is actively planning and designing construction projects to address damage to Bear Creek that occurred during the 2023 floods. Funding for this work is all state and federal grants. The Bear Creek project estimate is $13 million leaving approximately a $5 million funding gap. These funds are necessary to address immediate safety improvements. This does not address annual maintenance needs.
Current sales tax rate - proposed rate
A full 1% measure, or 1¢ per dollar, would yield approximately $18 million annually. The resolution presented proposes 1% or 1¢ sales tax rate. The council may amend the proposed resolution to set a lower rate such as .5% or .75%. Those changes could potentially result in annual revenues of either $9 million or $13.5 million. Polling sought feedback on two different rates, .5% (1/2¢) and 1% (1¢), there was no discernable difference in responses.
It should be noted that the City of Merced currently has one of the lowest sales tax rates among other cities in Merced County. At 8.25%, Merced’s sales tax rate is lower than Atwater, Livingston, and Los Banos - each are 8.75%. Both Dos Palos and Gustine have the same rate as Merced.
As proposed, the term of the measure is until ended by voters, based in part on ongoing City service needs and the preferences shown by Merced residents in the statistically valid survey. The Council does have discretion to modify this sunset by adding a different sunset date prior to placement.
The measure as written would be subject to oversight by the City’s Tax Transparency Commission and require independent annual audits. Funds would be legally prohibited from being taken by the State or Federal Governments.
At the discretion of the City Council, a general measure can cover annual operating and capital needs. Funding could also be allocated for the repayment of debt or bonds. This flexibility allows current and future issues to be addressed including some of the highlighted Roads, Police, Fire, Parks, Creek, and other facility needs.
Community Feedback
Staff’s engagement, including an ongoing community survey, and the feedback received from statistically valid surveys of Merced voters has provided valuable feedback confirming which services our residents value most. Top resident priorities gathered from survey feedback include:
• Quickly responding quickly to neighborhood fires
• Retaining firefighters
• Preventing gang activity in the City
• Protecting and maintaining 911 police response times,
• Maintaining Merced’s local quality of life
• Fixing roads and potholes
• Retaining qualified police officers
• Maintaining the City’s ability to respond to a natural disaster or medical disaster.
• Providing Police and Fire Stations to match the community’s need
• Maintain neighborhood policing
• Keeping city parks safe and clean
• Protecting Merced’s vital services
The survey also found that approximately three out of every four voters believe the City has a need for additional funding to maintain the level of services residents expect.
In addition to community outreach and education, two statistically valid surveys, one in November-December 2025, and another in July 2026, were conducted to test the viability of a potential measure. The 2025 survey polling addressed three potential measure types including a general and two special measures. The two special measures tested included one for public safety and the other for parks and recreation. The two special measures polled below 50% far below the 66% or 2/3 supermajority. The general question was more favorable with support as high as near 60% for a simple majority (50%+1) requirement measure.
Placing this proposal on the ballot allows our citizens to directly decide if there will be adequate fiscal resources available to address the vital priority services upon which they depend. Without additional local funding sources, the ability to address basic needs for police, fire, road maintenance, parks - recreation and other services will likely continue to outpace the financial resources. The City has maintained essential services despite increasing financial pressures with a variety of one-time solutions and deferred maintenance - investment. Without additional revenues, fiscal realities will ultimately result in a reduction of services for our citizens. Allowing the voters to consider a 1% - 1¢ local tax measure is a viable way to address these many priorities and challenges.
Next Steps
The following potential next steps are intended to demonstrate actions the City may undertake in support of continuing education on the City’s fiscal issues and filing requirements for a potential measure to be placed on the November 3, 2026, ballot. Attached is a Measure Calendar schedule prepared by the Merced County Registrar of Voters.
• Filing of local ordinance for measure placement on the November 3, 2026, General Election with Merced County Registrar of Voters
• On going community outreach on service and policy priorities with the community
• On going community education on the City’s fiscal issues
IMPACT ON CITY RESOURCES
The City will include a currently unknown cost for placement of the measure on the November 2026 ballot. The city has budgeted $100,000 for current costs necessary for three Council District elections which will be part of this primary election.
ATTACHMENTS
1. Five Year General Fund Forecast 2027- 2031
2. Merced County Registrar of Voters Calendar for General Election - November 3, 2026
3. Resolution 2026-52 with Exhibit A - Ordinance
4. Presentation