San Diego Confronts Significant Budget Shortfall as Mayor Attributes Issue to Unsuccessful Sales Tax Initiative

SAN DIEGO—On Wednesday, Mayor Todd Gloria declared a hiring freeze, introduced limitations on non-essential expenditures, and initiated a review of the city’s leases and contracts as San Diego confronts a $258 million shortfall in the upcoming fiscal year.

Having recently secured another four years in office, Gloria referenced the voters’ disapproval of a proposed increase in sales tax during the previous month’s election.

Measure E, labeled the San Diego Transaction and Use Tax, aimed to elevate the transaction tax in the city by 1 percent, raising the total sales tax to 8.75 percent. The existing rate of 7.75 percent ranks San Diego as tied for the fourth lowest among the state’s 482 municipalities and is lower than nine of the county’s 18 cities, per data from the California Department of Tax and Fee Administration.

“Measure E would have provided budgetary stability for the city for years to come and would have enabled us to enhance our recent achievements in infrastructure investment,” Gloria remarked. “Without these extra funds, the budgetary process for the next year will face challenges, yet we will view this as an opportunity to rethink the city’s operations, concentrating on essential services: road repairs, critical infrastructure maintenance, housing development, homelessness solutions, and ensuring the safety of San Diegans.”

The additional funds, estimated at $400 million from Measure E, would have addressed numerous city requirements, including infrastructure initiatives, essential services, and overall city operations—funds that city officials assert are crucial for maintaining San Diego.

The measure ultimately failed by a margin of less than 4,000 votes, or just 0.8 percent of the total ballots cast. A similar half-cent sales tax proposal at the county level—Measure G—also did not pass, falling short by approximately 3,000 votes, or 0.9 percent.

As a result, Gloria stated that only essential positions would be filled moving forward. The city will suspend overtime, halt spending on travel and training, and pause the ongoing Civic Center redevelopment process. Officials will also consider ways to monetize city properties, including Golden Hall, as part of cost-saving measures.

“The Five-Year Financial Outlook indicates that anticipated revenues will not meet the city’s requirements. The message is clear: we need to reduce expenses, and some reductions will be substantial—very substantial,” remarked City Council President Pro-Tem Joe LaCava. “I urge my council colleagues to proactively engage in efforts to ensure the safety of all San Diegans, support our most vulnerable populations, attend to under-resourced neighborhoods, and promote a thriving local economy.”

The budgetary process will kick off in a week during the Council Budget Committee meeting scheduled for Dec. 11.

Last year, when confronted with a $170 million deficit due to the decline in federal and state funding related to COVID-19, Gloria reduced expenditures for services such as libraries and parks and recreation. However, public backlash necessitated adjustments, leading to the use of one-time funding sources and strategic cost-cutting as a temporary solution.

This time, he noted, those options are no longer viable.

“As we work to address the fiscal challenges ahead, it’s vital for the council to collaborate closely with the Mayor’s Office, the Independent Budget Analyst, and the public to create a balanced budget that optimally utilizes our limited resources while continuing to reflect the needs of all communities,” stated Councilman Kent Lee, chair of the council’s Budget and Government Efficiency Committee.

In its Fiscal Year 2025-2029 Five-Year Capital Infrastructure Planning Outlook, the city recognized essential infrastructure maintenance and construction requirements amounting to $9.25 billion over the next five fiscal years, excluding costs related to maintaining public safety services, including police, fire, and emergency services.