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.
