Santa Clara County city pushes for higher sales tax

Campbell officials are asking residents to boost the city’s sales tax to the highest rate in Santa Clara County this November to provide revenue they say is necessary to maintain its quality of life.

The Campbell City Council unanimously voted last week to place a 1/2-cent sales tax increase on the ballot, which could raise the tax from 9.375% to 9.875% and generate roughly $7 million in revenue annually. The tax needs just above 50% of the vote to pass. If approved, the city will have the highest sales tax among county municipalities, followed by San Jose and Milpitas at 9.375%. About 60% of voters surveyed by the city said they would vote for the increase. The measure is expected to cost the city $133,000 to place on the ballot.

Money from the tax increase would be used to help stabilize the city through anticipated deficits and fund the upkeep of community amenities such as public parks, in addition to addressing aging infrastructure and public safety. The city identified roughly $42.4 million in deferred maintenance projects that would be helpful to undertake in the next five years.

Vice Mayor Sergio Lopez said the city needs the extra funds to maintain Campbell’s quality of life.

“My hope is that people will see the value that they’ll be getting out of this, a shared cost and responsibility, but shared benefits as well for our entire community,” he told San José Spotlight.

The decision to place a sales tax increase on the ballot comes after Campbell faced a roughly $4 million shortfall for fiscal year 2024-25 largely caused by factors outside the city’s control, including a roughly $600,000 annual loss in sales tax revenue and a $1.25 million pension yearly cost increase.

The city implemented a vacancy hiring freeze and used some of its remaining American Rescue Plan funding to balance the budget, but anticipates multimillion-dollar deficits ranging from about $1.9 million to $3.9 million in future years up to 2031, according to its seven-year financial forecast.

Campbell also saw a hike during an election season when the city placed a 1/4-cent sales tax increase on the ballot in 2008. About 70.5% of voters approved the increase, according to election data.

Not everyone supports the potential increase.

Amber Hatzke, owner of downtown Campbell clothing store Pink Carnation, said she wants the city to consult the local business community more about decisions that affect them. She said she’s not thrilled about the possibility of a tax increase, but said she could support it if the funds prioritized boosting business in the city.

She added the city has budget shortfalls because of businesses shuttering.

“I understand why they might want to put that in place, but I think about how hard it is being a small business owner already,” Hatzke told San José Spotlight. “You can see the difference in foot traffic or how much people are spending (with) the economy — it’s kind of a lot. So it’s a little discouraging.”

Campbell recently implemented an economic development plan to keep local businesses in the city and encourage new ones to open.

City Manager Brian Loventhal said he understands business concerns, but the city isn’t seeing customers leaving Campbell to shop at other municipalities because sales tax rates are lower. Other cities in neighboring San Mateo County already have a 9.875% sales tax or higher.

“It’s more about that partnership to continue to make the community viable with all the things we wanna do, not just supporting businesses alone,” he told San José Spotlight. “It’s balancing that and the quality of life.”

Other West Valley cities have decided to forgo an increase this election cycle, including Los Gatos and Cupertino.

Barry Shilman, a 47-year resident of Campbell and president of the Downtown Campbell Neighborhood Association, said he will vote for the measure because he sees value in updating aging infrastructure, such as City Hall, and funding traffic safety efforts.

The measure would also help the city bulk up its housing efforts.

“I think it’s time for some upgrades to the city, take care of some old problems and bring them up to date,” Shilman told San José Spotlight. “You have to pay for that stuff, so I’m willing to pay a little more.”