San Pablo eyes new funding sources as officials brace for budget shortfalls
SAN PABLO — The casino in San Pablo has been a financial lifeline for the city’s budget for years, buoying it through national economic crashes and a global pandemic, but city officials are looking to diversify revenue streams as casino revenue plateaus and a new Vallejo competitor emerges.
Owned and operated by Lytton Band of Pomo Indians since 2005, revenue collected from the San Pablo Lytton Casino contributes to about 58% of San Pablo’s $54.4 million general fund budget. That money has largely been a boon for the city, with revenue rising an average of 5.6% annually over the last 10 years, according to the San Pablo city budget overview.
But the city saw an unexpected shortfall in casino revenue in fiscal year 2023-24 and the revenue stream growth is expected to fall to about 0.6% annually over the next 10 years, according to city projections.
“That’s something we didn’t anticipate,” said San Pablo City Manager Matt Rodriguez during a council meeting March 3.
A new $700 million casino resort in Vallejo could also compete with the San Pablo Lytton Casino, complicating matters even further with the city.
The federal government in January approved a request by the Scotts Valley Band of Pomo Indians to add 160 acres into a trust, enabling the tribe to build homes, a tribal administration building and 400,000-square-foot casino resort within Vallejo city limits.
Once built right off from where Highway 80 and Highway 37 meet, the new casino resort will sit about 16 miles away from the San Pablo Lytton Casino.
Representatives with the casino or the Lytton Rancheria Tribe did not immediately respond to requests for comment. Rodriguez and Mayor Arturo Cruz also did not immediately respond to a request for comment regarding the potential budget impacts of the new Vallejo casino.
Meanwhile, San Pablo is bracing for a $40 million general fund operating deficit over the next 10 years, about $8.7 million of which is projected to occur between fiscal year 2025-27, according to the city’s Long-Range Financial Forecast Plan.
With that sobering economic prediction in mind, the city is starting to more deeply consider and poll the community on five possible revenue streams. Whichever seems most promising could go before voters in either the June or November elections of 2026.
An annual survey of 301 residents by the firm Strategy Research Institute found that about 73% of respondents agreed the city needs to find new revenue sources to fund services, including top priorities like road maintenance and improvements, programming for youths and seniors and public safety.
Support for specific measures wasn’t as strong. Of the five options polled, only two appeared potentially viable. At the top of the list is establishing a new half-cent sales tax which would raise about $2 million annually. About 63% of respondents backed that proposal with another 7% undecided.
“Half a cent is on the table as long as you make it perfectly clear to your constituents why you’re asking for that and how that money is going to be used. And it has to coincide with their core values,” said Strategy Research Institute CEO Dr. G. Gary Manross during the council’s March 3 meeting.
Councilmembers gave Rodriguez the go ahead to further explore the feasibility of the half-cent tax measure along with the four other ideas: an increase to the city’s Landscape and Lighting District Property Assessment tax, which could bring in about $1.5 million in additional funding annually if approved by a majority of property owners; a 2% utility user tax increase that could raise an additional $872,000 annually; establishing a property transfer tax of 12% per $1,000 of sale value, which would raise about $3 million annually but would require San Pablo to become a charter city; and a storm drainage fee that could raise about $250,000 annually.
Of those ideas, 49% would support the 2% increase to the utility user tax, 41% would likely favor the storm drainage fee, about 40% said they would back the Landscape and Lighting District Property Assessment tax increase and 32.5% would approve becoming a charter city.
Each polling survey costs about $25,000 to $35,000 to conduct, Rodriguez said, but combining the questions into a single survey will help the city see an “economy of scale,” he added.
“We have some time yet before we bring back the results and then bring forward a policy decision for the council to formally consider,” Rodriguez said.