San Diego City Council unanimously adopts updated FY2026 budget priorities amid $258 million shortfall

The San Diego City Council voted unanimously on Feb. 10 to adopt the Independent Budget Analyst's (IBA) updated FY2026 budget priorities resolution and directed the IBA to deliver the adopted priorities and council members' updated memoranda to the mayor for consideration in the upcoming budget.

Charles Modica, the IBA, opened the presentation by thanking council offices and framing the work around what he described as a "daunting budget shortfall that's facing the city for FY26." IBA staff said memos submitted Jan. 10 were summarized in IBA report 25-05 and reviewed by the budget committee Feb. 5.

Noah Fleischman, an IBA analyst, reviewed key revenue mechanics of the transient occupancy tax (TOT), noting the citywide TOT rate is 10.5 percent and explaining the municipal-code splits the rate so that 5.5 percent (about 52.4% of TOT revenue) goes to the general fund, 4 percent (about 38.1%) to special promotional programs, and 1 percent (about 9.5%) to council discretionary uses. He said several council members support using portions of TOT currently earmarked for promotional programs and discretionary uses to fund core city services to offset general fund costs.

The IBA highlighted a projected structural revenue shortfall of roughly $258,000,000 for FY2026 in the city's most recent five-year outlook, and summarized revenue and mitigation ideas contained in report 25-05. Recommended revenue options discussed included parking-meter rate increases (some already enacted), a refuse collection fee (the IBA said it could potentially recover up to approximately $78,000,000 in FY2026), pursuing Measure C TOT revenue if pending litigation resolves in the city's favor, more aggressive pursuit of federal and state grants, and targeted local fees (cannabis business tax increases, parking citations, beach/regional park parking fees, admissions fees for city-run events, and vacancy taxes or fees on vacant commercial properties).

Council Member Henry Foster, chair of the budget committee, moved to accept IBA report 25-05 and direct the IBA to deliver the adopted priorities to the mayor; Council Member Elo Rivera seconded the motion. Foster and Rivera both emphasized prioritizing residents, youth access ("SD Access for All"), and protecting services for vulnerable communities. After brief remarks from several council members emphasizing equity, public safety and the need to explore revenue options before broad cuts, the clerk called the roll and the council passed the motion unanimously.

The adopted updated priorities will be part of materials the mayor considers in preparing the FY2026 proposed budget; the council will continue budget deliberations during the upcoming months, with the mayor's proposed budget expected in April.

The council adjourned and scheduled its next regular meeting for Feb. 11 at 10 a.m.