Before Raising Berkeley's Sugar-Sweetened Beverage Tax: Questions Worth Askin

 Berkeley pioneered the nation's first sugar-sweetened beverage tax. More than a decade later, voters are being asked to increase it from one cent to two cents per ounce. Before making that decision, residents deserve clear information about the expected benefits, costs, and how the additional revenue will be used.

A 52-ounce bottle of Trader Joe's Fresh Squeezed Lemonade like the one pictured above would be taxed $1.04 under Berkeley's proposed 2-cent-per-ounce sugar-sweetened beverage tax—up from the current 52-cent tax.

Berkeley voters will soon decide whether to replace the City's existing 1-cent-per-ounce sugar-sweetened beverage tax with a new 2-cent-per-ounce special tax.

Unlike the current tax, which is deposited into the City's General Fund, the proposed measure would create a special tax, meaning the revenue would be legally dedicated to specific purposes identified in the measure rather than available for general City operations. According to the initiative, the increase is expected to generate approximately $2.2 million annually to support nutrition education, healthy food access, school gardens, drinking water access, diabetes prevention, oral health, and other public health initiatives.

The goals of the measure are worthy and deserve serious consideration. Reducing diabetes, obesity, and other diet-related illnesses is an objective most Berkeley residents support. But good intentions alone are not automatically a reason to increase a tax.

The bottle pictured above illustrates what the proposed increase would mean in practical terms. Today, Berkeley's tax on this 52-ounce bottle is 52 cents. Under the proposed measure, it would increase to $1.04. Before asking consumers to pay more, the City should explain why the increase is necessary and what additional public health benefits Berkeley residents can reasonably expect.

Since Berkeley adopted the nation's first sugar-sweetened beverage tax in 2014, researchers have found that these taxes can reduce purchases of sugary drinks and may improve long-term health outcomes. Supporters of the measure suggest that increasing the tax from one cent to two cents per ounce will further reduce consumption of sugary beverages, help combat diabetes and obesity. Those are worthwhile goals.

Reducing sugar consumption is an important public health goal, and the proposed measure would generate approximately $2.2 million in new annual revenue to support that effort. The question for voters is whether increasing Berkeley's sugar-sweetened beverage tax is the best and most accountable way to achieve those goals, whether the additional revenue will be spent effectively and efficiently, and how success will be measured and reported over time.

If the current tax is working, what evidence shows that increasing it will produce substantially greater health benefits? How much additional reduction in sugary drink consumption is expected? How will those results be measured and reported to the public? These are reasonable questions for voters to ask before approving a tax increase.

As with any tax increase, voters deserve to understand not only the intended benefits, but also how those benefits will be measured and reported over time.

According to city records, approximately $484,190 is allocated over two years for administration—including Finance Department costs, Public Health staffing, grant management, oversight, and reporting. That represents about 21% of the program budget, meaning that more than one out of every five dollars is spent administering the program rather than directly supporting public health initiatives. The City's allocation report is available here: Berkeley City Council FY2026–FY2027 Sugar-Sweetened Beverage Tax Allocation Report

Administrative oversight is important, but taxpayers deserve to know whether that level of overhead is appropriate. Every dollar devoted to administration is one less dollar available for nutrition education, healthy food access, school gardens, and other direct public health programs. The City should explain why this level of administrative spending is necessary, how it contributes to better health outcomes, and whether more of the revenue could be directed to programs that directly benefit the community.

Berkeley has long been a leader in public policy innovation. It should continue to lead by demonstrating that innovation and accountability can go hand in hand.

Ultimately, this discussion is about more than a single tax measure. Whenever government asks voters to approve additional taxes—even for worthwhile purposes—it should clearly explain what the money will accomplish, how success will be measured, and how the public will know whether those promises were kept. That's the transparency and accountability Berkeley residents should expect from every tax measure.

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Understanding The Berkeley Bank Tax (Berkeley’s Public Bank Ordinance): What Voters Should Know

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Berkeley voters are being asked to approve a new bank tax on homes and businesses. The full text of the measure is here. The tax is intended to "capitalize and support” a new bank authorized to make loans throughout the East Bay and Alameda County.

The tax raises important policy questions that deserve careful consideration. This report summarizes bank tax features and issues voters may wish to consider.

A New Tax on Every Berkeley Home and Business

The measure establishes a new annual parcel tax on every square foot of residential and commercial property in Berkeley. Commercial tax rates are 33% higher than residential. The tax is intended to cover the bank’s start up costs. A study commissioned by the City of Berkeley suggests $40 million in taxpayer funding is needed to launch the new bank.

No Guaranteed Berkeley Benefit

Berkeley taxpayers are being asked to provide 100% of the bank’s operating capital, but there is no guaranteed minimum return or allocation for Berkeley. The managers intend to fund projects anywhere in the East Bay including Oakland, Richmond and Emeryville. At a time when Berkeley is facing a $30 M deficit, an important policy question is whether residents and businesses should be asked to finance projects on behalf of other cities that are not contributing.

Unprecedented Mandatory Annual Tax Increases

The starting tax rate is $0.06 per square foot on homes and $0.09 per square foot on businesses. For a 1,600 square foot home, the starting price would be $100 per year that will increase rapidly because the measure imposes automatic annual tax increases regardless of need or impact on residents or businesses.

 

“Annually in May, the City Council shall increase the previous year’s rate by up to the greater of the cost of living in the immediate San Francisco Bay Area or per capita personal income growth in the state” (Section 7.03.020 B.)

 

Every past and current Berkeley parcel tax measure gives City Council the discretion to make inflationary adjustments. Mandating this increase based on the greatest inflationary measure is unprecedented. During inflationary periods, the increase could exceed 10%. Increases would be automatic throughout the life of the measure even if there was no need for additional funding.

The Bank Does Not Yet Exist (And May Never Exist)

Voters are being asked to approve funding for a public bank that has not been authorized to operate. Banking is one of the most heavily regulated industries in the United States, requiring institutions to meet stringent capital, liquidity, risk management, and regulatory compliance standards designed to protect depositors and maintain financial stability. It is unclear if authorization will be obtained.

If the Bank does not secure authorization to conduct business by or before June 30, 2033, the special fund may be used to offer loans which support affordable housing, green energy/infrastructure, and/or small businesses until such authorization has been secured, consistent with this Chapter. (7.03.010 F.)

The ordinance allows until June 30, 2033 for the bank to obtain regulatory approval.  The tax begins immediately, but the bank may never exist.

Redundant with Existing Financing Programs

The bank intends to finance three principal activities:

• Housing,

• Infrastructure,

• Small businesses

California already operates several public financing programs serving these purposes, including:

• The California Capital Programs and Climate Financing Authority (CPCFA)

• The California Infrastructure and Economic Development Bank (IBank)

• Community Development Financial Institutions (Cal IIP)

• Municipal bond financing program

Local credit unions and regional banks provide additional financing for housing and businesses. Berkeley residents are already paying for multiple bond measures to support affordable housing and infrastructure. The Federal Small Business Administration also maintains a loan program from small to large and can be used for most business purposes, including long-term fixed assets and operating capital. 

A central policy question is why pay for a speculative entity for services existing public and private financing programs already deliver.

Significant Financial Assumptions

The 2024 review by HR&A Advisors commissioned by the City of Berkeley concluded that the proposed business model resembles a plausible de novo bank but emphasized that its success depends upon several major assumptions.

Among them:

• approximately $40 million in initial capitalization,

• substantial additional deposits,

• participation by multiple local governments,

• significant funding from foundations, unions, and other private sources.

HR&A noted that many of these commitments have not been secured and recommended that participating governments establish clear funding milestones before committing public money. Under this measure, Berkeley homes and businesses are the only source of revenue; no other local government is required to pay. However, the funds can be spent in Oakland, Richmond and other cities throughout the East Bay.

High Risk Lending Practices

The ordinance authorizes lending to eligible businesses the bank’s management believes "can grow and thrive with loan support" – a subjective standard not typically used to evaluate lending decisions.

Its definition of eligible businesses includes:

• Startups,

• Businesses too small to obtain adequate support from traditional banks,

• Businesses requiring early-stage financing,

• Businesses that the bank's management believes "can grow and thrive with loan support."

These loans are risky. Nationally, roughly half of all startups fail within five years. The Bay Area’s costly environment makes the failure rate even higher. There is a high probability that a many of these high risk loans will default creating additional pressure on the bank’s finances and potentially requiring greater taxpayer subsidies.

Voter Considerations

If approved, Berkeley homes and businesses would be required to:

• Pay a new parcel tax.

• Accept automatic annual tax increases tied to inflation or income growth.

• Capitalize a public bank that has not yet been authorized to operate, and may never will.

• Support lending in cities across the East Bay area without any guaranteed minimum for Berkeley.

• Assume the risk associated with launching a new regional lending institution.

• Be on the hook for additional tax subsidies should the bank’s finances deteriorate

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As Berkeley Considers New Taxes, Affordability Matters More Than Ever

Over the coming months, WOM Berkeley will analyze the November 2026 ballot measures and other issues affecting our city. As Berkeley enters election season, one question should guide the discussion: Can residents and businesses afford more taxes and borrowing right now?

The Financial Fallout of War and Uncertainty

Recent economic uncertainty, rising energy costs, and persistent inflation are already putting pressure on household budgets. A recent New York Times article quoted an economist with the Organization for Economic Cooperation and Development, who warned that, in the worst-case scenario, global economic growth could fall to 2.1% this year, about half the average rate of the past 25 years. He added that “households and firms will face a very dire situation.” 

Economists may disagree about the scale of the impact, but concern is mounting about slower growth, higher gas and food prices, and shortages of oil and critical commodities. Berkeley residents are already paying more for fuel, food, travel, and other necessities. As expenses keep rising, residents and businesses are making difficult choices, and as reported in Berkeleyside, some are even leaving Berkeley.

City Readiness 

Yet the City Council appears unprepared for the challenges ahead and may not fully appreciate the financial strain residents already face. At a recent budget meeting on the proposed November 2026 ballot measures and the city’s $30 million structural deficit, the city manager cited inflation tied to the Iran war and rising oil prices, saying, “We’re anticipating more Iran war- and oil price-related increases.” 

He did not explain what those added costs could mean for residents or for the city’s budget (would it increase the structural deficit?), and no councilmembers pressed for specifics. That lack of explanation was both disappointing and concerning because based on the most recent finance report, the city is ailing.

Reduced Purchasing Power for Residents

If the city anticipates higher inflation, why is City Council planning for a 5% increase in the sales tax and approximately $600 million in borrowing ($300 million General Obligation Bond)? Further, councilmembers have endorsed a Public Bank Parcel Tax, Arts Parcel Tax, and Sugar-Sweetened Beverage Tax.  

Collectively, these measures could drain thousands of dollars of purchasing power from the average household. Council hopes the proposed sales tax increase will generate roughly $9 million annually, but sales tax revenues can be volatile during periods of economic uncertainty. Because consumers encounter reduced discretionary spending, revenues may fall well short of projections while the city's structural deficit remains.

The proposed bond measure also deserves careful scrutiny. Higher interest rates and Berkeley's lower credit rating compared with a decade ago mean taxpayers are likely to pay more to borrow the same amount of money. Rising construction costs could further reduce the purchasing power of bond proceeds.

Does City Council Grasp the Challenges

The key question is whether city leaders fully understand the affordability pressures Berkeley residents already face? Raising an important question: Is this the right time to place multiple tax and borrowing measures before voters?

Berkeley's fiscal challenges are real, but structural deficits require structural solutions. Before asking residents to approve multiple new taxes and borrowing measures, city leaders should take meaningful steps to address the structural drivers of our ongoing and increasing budget deficits.

As voters evaluate the November ballot, affordability and sustainable fiscal management should remain at the center of the conversation.

A Structural Deficit Demands Structural Solutions: The Discussion City Council Never Had

On May 19, Berkeley City Council met to discuss the city's structural budget deficit and potential revenue measures to address it. Throughout the meeting, city staff reiterated a fundamental reality: Berkeley's structural deficit is driven by rising personnel, pension, and healthcare costs that have grown faster than recurring revenues.

But that is only part of the story.

Between FY2016 and FY2026, Berkeley's revenues grew from approximately $376 million to $765 million—more than doubling over the decade. During that same period, revenues grew at an average annual rate of 7.4%, while expenditures grew at 7.7% annually.

Despite this extraordinary revenue growth, Berkeley continues to face a persistent structural deficit. The city also carries substantial long-term obligations, including approximately $700 million in unfunded pension and retiree healthcare liabilities.

The implication is difficult to ignore: Berkeley's fiscal challenges are not simply the result of inadequate revenue growth. Even during a decade of rapidly expanding revenues, the city was unable to keep pace with its long-term financial commitments.

This outcome was predictable. For years, we have been warning that expenditures growing faster than revenues are producing structural imbalances that compound over time.

More concerning is the possibility that Berkeley is approaching a fiscal critical juncture—one in which one or many factors could significantly worsen the city's financial position.

Potential triggering events include:

• A slowdown in new development. New construction is one of the few mechanisms that permanently expands Berkeley's property tax base. Recent city analyses indicate that major development projects generate net positive General Fund impacts, meaning a slowdown could reduce future revenue growth.

• A stock market downturn. California's fiscal model depends heavily on financial markets. Capital gains taxes generate a significant share of state revenues, while CalPERS investment returns help fund public employee pensions. A major market decline could simultaneously reduce public revenues and increase Berkeley’s $695 million unfunded pension liabilities.

• Persistent inflation. Inflation raises the cost of salaries, healthcare, pensions, and infrastructure while potentially weakening financial markets. The result can be widening budget deficits and higher employer pension contributions.

Given these risks, one might expect a robust discussion of structural reforms designed to address the underlying drivers of the deficit.

Instead, the conversation largely focused on service reductions, revenue measures—most notably a proposed sales tax increase—and the impacts of potential budget cuts.

Notably absent was any meaningful discussion of pension costs, retiree healthcare obligations, employee benefit structures, or other long-term cost drivers that contribute to the city's structural imbalance.

The measures currently under consideration may help Berkeley navigate the next budget cycle. However, they do little to address the underlying forces that continue to generate recurring deficits.

A structural deficit ultimately demands structural solutions. The question Berkeley residents should be asking is whether city leaders are prepared to have that conversation before circumstances force it upon them.

Will The Berkeley Ferry Plan Strain Regional Transit Funding?

The City of Berkeley is proposing to replace the closed Berkeley Pier with a new 1,080-foot pier, a 400-foot breakwater, and associated ferry boarding infrastructure. The project also includes plans for up to 450 new parking spaces. Proposed ferry service would connect the site to the San Francisco Ferry Building, with potential future service to Larkspur. Current preliminary cost estimates range from $103 million to $122 million, although some public comments have noted the potential for much higher costs as site remediation and construction advance.

4/10 update: We received the following information from a reader:

The EIR does not include the costs of ferry acquisition I obtained them through a Public Records Act request. Ferry cost are very high, $38 million in 2021 and Berkeley is proposing a new electric fleet with unknown costs. Adding these capital costs brings the initial project cost to approximately $170 million.  The next round of estimates will certainly be higher.

The City has released a Draft Environmental Impact Report (EIR) for public review, and is inviting comments.

WOM Berkeley has evaluated the document with particular attention to the project’s impact on the region’s broader public transportation system. A well-functioning transit network is essential to supporting economic vitality, reducing greenhouse gas emissions, alleviating congestion, and improving overall quality of life.

At the same time, the regional transit system is facing significant fiscal challenges. Recent developments include:

• A $590 million emergency loan to sustain ongoing transit operations

• Bay Area Rapid Transit projecting a $350–$400 million structural deficit, with the possibility of substantial service reductions

• AC Transit projecting a $74 million deficit in fiscal year 2026–27

Within this context, key considerations for the proposed Berkeley ferry include the project’s capital costs, its anticipated operating subsidies, and its potential effects on ridership and revenue across existing transit providers, including BART, AC Transit, and established ferry services. These factors are important in evaluating how the project fits within broader regional transportation priorities and funding constraints. Such an assessment is missing from the Draft EIR, and should be addressed in the final document.

Detailed comments on the Draft EIR are available here: WOM EIR Comments – Berkeley Ferry Project.

If you share our concerns, please communicate them to city officials by April 28, 2026. All the information is here.

Liza McNulty, PE, Project Manager  
Parks, Recreation & Waterfront Department  
2180 Milvia Street, 3rd Floor  
Berkeley, CA 94704  
Email: lmcnulty@berkeleyca.gov

A reader provided the following info-graphic; it is intended ot point out there is a much less expensive alternative to the $122 million peir.