Oakland eyes another parcel tax increase to close budget gap

Oakland City Council’s Finance Committee on Tuesday discussed how to structure a proposed property tax increase that would help balance out a $265 million shortfall projected by the end of the fiscal year in June.

The discussion comes three months after the City Council passed a $4.36 billion two-year budget that cut vacant positions and tightened spending to address the deficit.

With voter trust on the line and services at risk, the city faces a high-stakes balancing act: raise new revenue without pushing residents and businesses out, or brace for deeper cuts ahead.

Parcel taxes are a predictable and stable source of revenue to maintain core services like housing, public safety and infrastructure. According to city staff estimates, Oakland could raise the needed $40 million by increasing the annual parcel tax on single-family homes from $1,101 to $1,325. Multi-family homes would increase from $842 to $995, and non-residential parcels from $1,031 to $1,255.

Some on the committee worried that voters might not support the tax.

Councilmember Zac Unger proposed a blending structure similar to Measure NN, a public safety measure passed last year that increased the parcel tax along with parking tax surcharges.

“If we can spread the cost across different sources, it might be easier for voters to support,” Unger said.

Councilmember Charlene Wang suggested mimicking San Francisco’s vacancy tax on unused commercial storefronts and proposed a utilities tax based on income or usage. City staff noted that income-based taxes are prohibited under California law.

Oakland Budget Administrator Bradley Johnson told the committee the city is working with a polling firm to gauge support for a possible tax measure on the June ballot. Given the Measure NN increase that taxpayers started paying this year, a resident urged the committee during public comments to give serious thought to the impact an additional tax increase might have on residents.

No good options

Other tax options come with bigger political and economic risks, Johnson said. For example, raising the hotel tax from 11% to 27% could raise $40 million but would make Oakland’s rate among the highest in the country, which would hurt tourism and hotels.

City officials also considered raising the real estate transfer tax or business license fees, but those sources are either too volatile or would generate too little. Meanwhile, state law limits Oakland’s ability to raise the sales tax or alter property tax rates, which are capped under Proposition 13, which limits property reassessments.

The committee directed staff to return on Oct. 28 with a more detailed report on tax options, voter viability and legal feasibility.

“The urgency is real, but so is the need for clarity,” Wang said. “We have to ensure any measure is fair, effective, and legally sound.”

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