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HomeMy WebLinkAboutStaff Report 2606-6510CITY OF PALO ALTO CITY COUNCIL Special Meeting Monday, October 05, 2026 Council Chambers & Hybrid 5:30 PM     Agenda Item     11.Consideration of City Council Positions on State and Local Measures Presented to Palo Alto Voters on the November 3, 2026 Ballot; CEQA status – not a project Public Comment, Staff Presentation City Council Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: City Clerk Meeting Date: October 5, 2026 Report #:2606-6510 TITLE Consideration of City Council Positions on State and Local Measures Presented to Palo Alto Voters on the November 3, 2026 Ballot; CEQA status – not a project RECOMMENDATION Staff recommends the City Council review and discuss the November 3, 2026 state and local ballot measures and consider adoption of positions as relevant to the City of Palo Alto or desired by the City Council. Staff recommends that City Council consider taking the following suggested positions based on the Legislative Guidelines and previous City Council action: Proposition 1 – Support Proposition 37 – Support Proposition 43 – Oppose Public Transit Revenue Measure District (Measure RTM) – City Council already supported City of Palo Alto Measure J – Support BACKGROUND The City Council regularly considers taking positions in an election year on ballot measures presented to Palo Alto voters. This item is intended to inform Palo Alto voters about the upcoming election and provides the City Council the opportunity to hear from residents, discuss, and take positions on measures if desired. The Secretary of State has qualified 14 statewide measures for the November 3, 2026 election. Townsend Public Affairs, the City’s legislative consultant, has summarized the statewide measures in Attachment A. Additional information, including impartial analyses and arguments, may be found in the Secretary of State’s Official Voter Information Guide.1 Additionally, there are two (2) local measures that will be on Palo Alto voters’ ballots. Additional information, including 1 California General Election November 3, 2026 Official Voter Information Guide: https://voterguide.sos.ca.gov/propositions/ impartial analyses and arguments, may be found at the Santa Clara County Registrar of Voters3 and City4 webpages. ANALYSIS 5 and previous City Council action. Staff only suggested positions where the Legislative Guidelines clearly apply. Title Summary Suggestion and Relevant Guideline Legislative Statue Authorizes $11.25 billion in state general obligation bonds for housing affordability programs, including for California veterans, and to finance housing development projects seeking federal tax credits. Allocates funds: o $5.1 billion to build and rehabilitate multifamily rental housing; o $2.1 billion to acquire, rehabilitate, or preserve affordable housing units, and provide supportive housing for those experiencing homelessness; o $1.25 billion for state-funded mortgages for California veterans; o $1.1 billion for homeownership and downpayment assistance; o $1 billion for farmworker, tribal, and student housing; o $500 million for housing infrastructure; and o $200 million to support local housing programs. Guideline: 3 Santa Clara County Registrar of Voters List of Local Measures: https://vote.santaclaracounty.gov/list-local- measures-4 4 City of Palo Alto Municipal Elections: https://www.paloalto.gov/Departments/City-Clerk/Municipal-Elections 5 City of Palo Alto’s 2026 Federal and State Legislative Guidelines: https://www.paloalto.gov/files/assets/public/v/2/city-manager/legislation/2026-legislative-guidelines.pdf Title Summary Suggestion and Relevant Guideline Proposition 2: Increases the State’s Rainy Day Fund. Legislative Constitutional Amendment Increases California’s Rainy Day Fund, approved by voters in 2014, to provide funding for education, health care, public safety, and other essential services during economic downturns. Doubles the budget reserve cap from 10% to 20% of General Fund revenues, requiring savings until Fund’s balance equals 20% of General Fund. Requires additional savings in years when tax revenues are high. Increases budget reserves available for education, state debts, and pension obligations. None. Proposition 3: Provides Permanent Funding for Schools and Health Care by Extending Existing Tax on High Incomes. Initiative Constitutional Amendment Makes permanent the existing 2012 voter-approved tax rates for high-income Californians, currently set to expire in 2031. Rates apply to income over about $371,000 for single filers, $742,000 for joint filers, and $505,000 for heads of household (2025 levels; adjusted annually for inflation). Allocates tax revenues 89% to K–12 schools, 11% to community colleges. Allows local school boards to decide how revenues are spent; bars use for administrative costs. Increases General Fund revenues available for health care, budget reserves, and other programs. None. Proposition 4: Repeals Prohibition Against Public Funding of Election Campaigns. Legislative Statute Current law prohibits state and local governments from using public funds for election campaigns except in charter cities and counties. This measure repeals that prohibition and allows state and local governments to establish public campaign financing programs for candidates who agree to specified spending limits and meet eligibility criteria. Prohibits public funding programs from using funds earmarked for education, transportation, or public safety. Prohibits candidates from using public funds for legal defense costs, fines, or repayment of personal loans to campaigns. Triples maximum fine for campaign contributions by foreign entities. None. Title Summary Suggestion and Relevant Guideline Proposition 5: Changes Recall Election Process For Statewide Officers. Legislative Constitutional Amendment Under current law, voters decide at the same election whether (1) to recall a state officer, and (2) who will replace that officer if recalled. Under this measure: o if the Governor is recalled, the Lieutenant Governor becomes Governor for the remainder of the term or until a successor is elected; o for all other recalled officers, the office will remain vacant until filled by a subsequent special election or appointment as specified in existing law; and o a recalled officer may be a candidate in a special election to fill the office. None. Proposition 37: Creates Loan Program For Middle-Income Buyers of Qualified New Homes. Initiative Statute Authorizes up to $25 billion in bonds to offer eligible buyers fixed-rate mortgages for up to 17% of the purchase price of a “qualified new home” (new construction or first sale of converted nonresidential property, priced below about $1 million–$1.5 million, depending on county, adjusted annually). Borrowers must be California residents for one year, occupy the home, earn less than twice the area’s median income, and pay at least 3% down. Requires that bonds be repaid by homeowners’ mortgage payments, not the State. Support. Guideline: “Promotes the development and enhancement of safe and affordable housing and accessible housing within the City for all economic segments of the population” Proposition 38: Authorizes Bonds For Immunology Medical Research. Initiative Statute. Authorizes $8.4 billion in state general obligation bonds for immunology and immunotherapy research (technologies that use body’s immune system to treat disease), with half dedicated to cancer, heart disease, and Alzheimer’s disease. Allocates funds equally between (1) a single University of California-affiliated nonprofit medical research institute, and (2) research grants for public or nonprofit universities and institutions. Requires funding recipients to sell technology and drugs derived from research in California for 20% below national average price. Appropriates money from General Fund to repay bonds; General Fund receives 10% of licensing royalties until bonds are repaid. None. Title Summary Suggestion and Relevant Guideline Proposition 39: Prohibits Citizens From Voting Unless They Present Government- Issued Identification. Initiative Constitutional Amendment Prohibits voting by mail unless voter designates a government- issued identification number for their voter registration. Invalidates mail ballots if envelope does not include last four digits of a government-issued identification number matching the number designated in the voter’s registration (e.g., if voter designates Social Security number for registration, but provides driver’s license number on envelope, their ballot would not count). Prohibits voting in person without presenting government- issued identification. Requires elections officials to annually report percentage of each county’s voters whose citizenship status they have verified. None. Proposition 40: Imposes One-Time Tax on Certain Taxpayers. Initiative Constitutional Amendment and Statute Imposes one-time tax of up to 5% on certain taxpayers with covered assets valued over $1 billion; covered assets include businesses, securities, art, collectibles, and intellectual property, but exclude real property and some pensions and retirement accounts. Allocates 90% of these tax revenues for health care, 10% for food assistance or education-related programs; prohibits using revenues to replace existing funding for these purposes. Exempts such tax revenues from constitutional requirements for school funding, budget reserves, and state spending limit. None. Proposition 41: Prohibits New State Taxes That Exclude Revenues From State Spending Limit. Requires Audits For New State Special Taxes. Initiative Constitutional Amendment Prohibits any new state taxes that exclude their revenues from the state spending limit approved by voters in 1979. For statewide special taxes, requires (1) a pre-election audit of programs that would receive funding from a voter-proposed special tax, and (2) recurring audits of programs funded by special taxes enacted after January 1, 2026. It states that other voter-approved measures appearing on the same ballot are void if they conflict with this measure and this measure receives more affirmative votes. None. Title Summary Suggestion and Relevant Guideline Proposition 42: Prohibits New State Personal Property Taxes and Certain Retroactive State Taxes. Initiative Constitutional Amendment Prohibits new state taxes on personal property, including business interests, intellectual property, and financial assets (including assets in retirement and investment accounts). Prohibits new state taxes that apply retroactively based on the taxpayer’s conduct, activities, or a status that occurred before the new tax’s effective date. Applies to new taxes that are enacted or take effect on or after January 1, 2026. States that other voter-approved measures appearing on the same ballot are void if they conflict with this measure and this measure receives more affirmative votes. None. Proposition 43: Limits Voters’ Ability To Raise Revenues For Local Government Services. Legislative Constitutional Amendment Currently, local governments must obtain two-thirds voter approval to impose, extend, or increase special taxes (taxes dedicated to a specific purpose) that they place on the ballot. However, this two-thirds vote requirement does not currently apply to special taxes put on ballot by voter signature gathering. This measure would limit voters’ ability to pass voter-proposed local special taxes by raising the percentage of votes needed to approve such ballot measures from a simple majority (over 50%) to a new two-thirds threshold. Applies to voter-proposed ballot measures approved after January 1, 2027. Oppose. Guideline: “Supports the lowering or maintaining of voter thresholds for local revenue measures” Proposition 44: Requires Community Health Clinics Spend 90% Of Revenue On Program Services. Initiative Statute Imposes penalties on nonprofit Federally Qualified Health Centers (community clinics providing primary care to medically underserved areas and populations) that spend less than 90% of revenue on “program services” advancing their charitable purpose, including but not limited to patient services. Department of Public Health may waive spending requirements in exceptional circumstances. Authorizes Attorney General to publish guidance defining qualifying expenditures. Monetary penalties may be refunded if centers become compliant within five years. Authorizes criminal charges for false reports or artificially increasing spending ratio. None. Title Summary Suggestion and Relevant Guideline Proposition 45: Modifies Environmental Review for Certain Projects. Initiative Statute Amends California Environmental Quality Act (CEQA) to expedite environmental review for specified project categories (including most housing, transportation, water, health, wildfire mitigation, educational facility, internet access, and clean energy projects). For these types of projects, this measure: o Sets deadlines for public agencies to complete environmental review and take required actions. o Allows expedited review of environmental impacts, limiting public agencies’ current obligation to consider a range of feasible project alternatives to reduce environmental impacts. o Establishes deadlines for filing and resolving lawsuits challenging project approvals; limits evidence courts may consider and relief courts can order. None. Local Measures Title Summary Suggested Position Public Transit Revenue Measure District (Measure RTM) – Connect Bay Area Transit Initiative To prevent major service cuts to BART and other transit, avoid increased traffic, and reduce pollution by: Preserving BART, Caltrain, VTA, SamTrans, AC Transit, Muni, other transit for everyone, including workers, students, seniors, persons with disabilities; Supporting transit safety, cleanliness, affordability, reliability; Repairing targeted roads/potholes; Requiring financial transparency, oversight, accountability; shall the measure enacting a 0.5% (Alameda, Contra Costa, San Mateo, Santa Clara counties) and 1% (San Francisco) sales tax for 14 years generating approximately $980,000,000 annually, be adopted? Support Prior City Council Action: The City Council endorsed this measure on March 2, 20269. 9 City Council, March 2, 2026; Agenda Item #4; SR# 2601-5865 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=86659&dbid=0&repo=PaloAlto&searchid=4ac36678 -93df-47e6-8ba6-05de931a117d Title Summary Suggested Position City of Palo Alto – Measure J – Transactions and Use Tax City of Palo Alto Community Safety/Services Measure. To provide general city services including repairing Cubberley Community Center for current safety, earthquake, accessibility standards; upgrading deteriorating electrical systems, wiring, plumbing; acquiring outdoor space/sites; maintaining streets, safe, clean downtown/commercial cores; preparing for natural disasters; repairing deteriorating community spaces, libraries, shall City of Palo Alto’s measure enacting a 0.5% (1/2¢) sales tax, providing approximately $15,600,000 annually until ended by voters, with published financial audits, all funds used locally, be adopted? Support. Prior City Council Action: Cubberley acquisition and renovation funding is a 2026 City Council Priority11 and City Council voted to place the measure on the ballot.12 FISCAL/RESOURCE IMPACT There is no financial impact associated with adopting support or oppose positions on ballot measures. The City Council annually budgets for legislative advocacy services, and these efforts are led by staff in the City Manager and City Clerk’s Office with stakeholder support across departments. STAKEHOLDER ENGAGEMENT Staff from multiple departments are involved in the City’s legislative advocacy process. Staff meet regularly with the City’s legislative consultants to review pending state activity, including legislation, grant opportunities, and ballot measures with potential impacts to the City. Departments reviewed this list of ballot measures and propositions. ENVIRONMENTAL REVIEW The City’s legislative advocacy activities are not a project under section 15378(b)(5) of the California Environmental Quality Act Guidelines (administrative activities that will not result in direct or indirect physical change in the environment). ATTACHMENTS Attachment A: TPA Ballot Initiatives Memo APPROVED BY: Mahealani Ah Yun, City Clerk Ed Shikada, City Manager 11 City Council January 24, 2026 Action Minutes: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=85782&dbid=0&repo=PaloAlto 12 City Council. June 8, 2026; Agenda Item #14; SR# 2603-6081 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=887096&dbid=0&repo=PaloAlto CALIFORNIA ADVOCACY • FEDERAL ADVOCACY • GRANT WRITING Sacramento • Washington, D.C. Northern California• Central California• Southern California MEMORANDUM From Townsend Public Affairs Date: July 17, 2026 Subject: November Ballot Update: Statewide Initiatives EXECUTIVE SUMMARY California's November 3, 2026 statewide ballot was finalized on June 25, 2026, marking the constitutional deadline for citizen initiatives to qualify for the November election and the final opportunity for proponents to withdraw qualified measures through negotiated agreements. The weeks leading up to the deadline were defined by extensive negotiations among the Governor's Office, Legislative Leadership, initiative proponents, business organizations, labor groups, taxpayer advocates, and local government stakeholders, resulting in significant changes to the measures voters will consider this November. For local agencies, the most consequential outcome was the negotiated withdrawal of the proposed Taxpayer Protection Act (Initiative 1983). In its place, the Legislature approved ACA 22, which appears on the November ballot as Proposition 43. If approved by voters, the measure would amend the California Constitution to require all local special taxes, including those proposed through the citizen initiative process, to receive two-thirds voter approval. As part of the same agreement, the Legislature approved ACA 21, removing ACA 13 from the ballot. While the agreement eliminated provisions affecting charter city real estate transfer taxes and the retroactive invalidation of certain existing local taxes, Proposition 43 preserves one of the initiative's central policy objectives and could significantly affect future local and regional revenue measures. Additional negotiations also reshaped the ballot. Competing healthcare initiatives were withdrawn pursuant to an agreement between healthcare stakeholders and the California Labor Federation, while competing rideshare liability initiatives were removed following a settlement between Uber and the Consumer Attorneys of California. Meanwhile, a broader debate over statewide taxation remains on the ballot through competing measures addressing a one-time tax on ultra-high-net- worth individuals, restrictions on future wealth taxes, and new accountability requirements for statewide special taxes. As a result of these negotiations, California voters will consider 14 statewide measures in November, consisting of five legislative measures and nine citizen initiatives. The ballot includes measures affecting affordable housing, state finances, local taxation, election administration, campaign finance, environmental review, healthcare, and constitutional governance. Page 2 This memorandum provides an overview of the final statewide ballot, summarizes the negotiations that shaped its composition, and highlights the measures with the greatest potential implications for California local governments. QUALIFIED STATEWIDE BALLOT MEASURES PROPOSITION 1: Veterans and Affordable Housing Bond Act of 2026 Proposition 1 was placed on the ballot by the Legislature through SB 417 and would authorize the State to issue $11.25 billion in general obligation bonds for affordable housing and veterans’ housing programs. Of the total bond authorization, $10 billion would support affordable housing programs, while $1.25 billion would support the CalVet Home Loan Program. The affordable housing funding would be administered through existing and expanded state housing programs and would support activities such as the development, rehabilitation, preservation, and acquisition of affordable rental and ownership housing. The measure is intended to provide a substantial new infusion of state housing resources at a time when many existing housing programs are oversubscribed or nearing exhaustion. Funding could support housing for lower-income households, people experiencing homelessness, farmworkers, veterans, and other populations facing barriers to obtaining stable housing. The specific timing and allocation of bond funding would depend on subsequent state budget appropriations, program guidelines, and implementation decisions by state housing agencies. Even if the measure is approved, the entire $11.25 billion would not be available immediately. Bond funding would likely be appropriated over several fiscal years. Because the bonds would be repaid from the State General Fund, the measure would also create long-term state debt-service obligations. PROPOSITION 2: Save for California’s Future Act Proposition 2 was placed on the ballot by the Legislature through ACA 20 and would amend the California Constitution to modify the State’s budget reserve requirements. The measure would increase the constitutional limit on the State’s Budget Stabilization Account, commonly referred to as the Rainy-Day Fund, from 10 percent to 20 percent of annual General Fund revenues. The objective is to allow the State to retain a larger reserve during periods of revenue growth so that additional resources are available during recessions, revenue downturns, emergencies, or future budget deficits. California’s revenue structure is particularly sensitive to changes in personal income, capital gains, and the financial markets. As a result, state revenues can increase rapidly during strong economic periods and decline substantially during downturns. Increasing the reserve limit is intended to reduce the need for abrupt program reductions, borrowing, payment deferrals, or other budget-balancing actions when revenues fall. The measure would not raise taxes or immediately require the State to deposit the full amount permitted under the higher reserve limit. Rather, it would increase the amount the State is constitutionally permitted to retain and would operate within the State’s broader reserve and budget framework. Page 3 PROPOSITION 3: Permanent Funding for Schools and Health Care Through the Existing Tax on High Incomes Proposition 3 is an initiative constitutional amendment that would make permanent the higher personal income tax rates originally approved by voters in 2012. The existing tax applies to higher-income taxpayers and is currently scheduled to expire in 2031. The income thresholds are adjusted annually for inflation. Based on the thresholds included in the official ballot summary, the rates apply to taxable income above approximately $360,000 for single filers, $490,000 for heads of household, and $721,000 for joint filers, using 2024 income levels. Proposition 3 would remove the 2031 expiration date and continue the tax rates indefinitely. Revenue attributable to the measure would be allocated 89 percent to kindergarten through grade 12 schools and 11 percent to community colleges. Local school boards would retain authority to determine how their allocated funding is spent, and the measure would prohibit the funds from being used for administrative costs. The Legislative Analyst and Director of Finance estimate that the measure would maintain between $5 billion and $15 billion annually in state revenue, measured in today’s dollars, that would otherwise end after 2031. The amount collected in any year would fluctuate significantly because high-income tax collections are affected by wages, business income, capital gains, and financial market conditions. Although the measure is presented primarily as an education funding proposal, continuing the tax could also affect the broader State General Fund. Maintaining these revenues could reduce pressure on other state-funded programs, including health care, housing, homelessness, transportation, and local assistance. Conversely, opponents may argue that permanently extending the tax could affect taxpayer behavior, business decisions, or the State’s dependence on volatile high-income tax revenue. PROPOSITION 4: California Fair Elections Act of 2026 Proposition 4 was placed on the ballot through SB 42 and would amend the Political Reform Act to permit state and local governments to establish public campaign financing programs. Existing provisions of the Political Reform Act generally prohibit public officers from spending public funds, and candidates from accepting public funds, for the purpose of seeking elective office. Proposition 4 would remove that statewide prohibition and allow the State and local jurisdictions to establish public financing systems if they choose to do so. The measure would not automatically create a statewide public financing program, provide funding for candidates, or require a city or county to establish such a program. Instead, it would give state and local governments the legal authority to develop programs through which qualifying candidates could receive public campaign funds, subject to locally or legislatively established eligibility requirements, contribution limits, expenditure rules, disclosure requirements, and enforcement provisions. Page 4 Potential public financing models could include matching small-dollar contributions, providing campaign grants, or issuing democracy vouchers or similar forms of public support. The precise structure would be determined separately by each participating jurisdiction. For cities and counties, the principal effect would be the restoration of local discretion. A jurisdiction interested in public campaign financing would still need to adopt a program, identify a lawful funding source, establish administrative and enforcement procedures, and comply with applicable election laws. Supporters contend that public financing can reduce candidates’ reliance on large donors and encourage a broader range of individuals to seek office. Opponents may question whether public funds should be used for political campaigns or whether such programs provide sufficient public benefit. SB 42 was enacted subject to voter approval because it amends provisions of the voter- approved Political Reform Act. PROPOSITION 5: Recall of State Officers Proposition 5 was placed on the ballot by the Legislature through SCA 1 and would change the process used to replace a statewide elected officer who is removed through a recall election. Under California’s current recall system, voters are generally asked two questions on the same ballot. The first asks whether the officer should be recalled. The second asks which replacement candidate should serve if the recall is successful. A replacement candidate can win with a plurality of votes, even if that candidate receives fewer votes than the number of voters who opposed recalling the incumbent. Proposition 5 would eliminate the replacement-candidate portion of a recall election for state officers. If voters approve a recall, the office would become vacant and would be filled under the succession or vacancy procedures that otherwise apply to that office. For example, if a Governor were recalled, the Lieutenant Governor would succeed to the office. Vacancies in other statewide or legislative offices would be filled in accordance with the applicable constitutional or statutory process. The measure is intended to simplify recall elections and address concerns that an official who was elected by a statewide majority could be replaced by a candidate receiving only a relatively small plurality. It would not eliminate the public’s power to recall state officers, alter the signature requirements for qualifying a recall, or apply to recalls of local officials unless otherwise provided by law. PROPOSITION 37: Middle-Income Homebuyer Loan Program Proposition 37 is an initiative statute that would authorize up to $25 billion in bonds to establish a home loan program for qualifying middle-income buyers purchasing newly constructed homes or certain converted properties. The program would provide eligible buyers with a fixed-rate mortgage covering up to 17 percent of the purchase price of a qualified home. The assistance would be available for newly constructed homes or the first sale of qualifying properties converted from non-residential use. Page 5 To qualify, an applicant would generally have to be a California resident for at least one year, intend to occupy the property as a primary residence, have household income below 200 percent of area median income, and provide a down payment of at least 3 percent. Eligible home prices would be capped at approximately $1 million to $1.5 million, depending on the county, with the limits adjusted annually. Because housing costs vary considerably across California, the applicable maximum would be determined geographically. The measure states that the bonds would be repaid through mortgage payments made by participating homeowners rather than through the State General Fund. Accordingly, the official fiscal estimate identifies no direct state or local government costs. However, the ultimate financial performance of the program would depend on loan repayments, interest rates, defaults, administrative costs, and housing market conditions. The measure would not directly require cities to approve new housing developments or change local land-use standards. Its primary effect would be to expand financing assistance for eligible buyers and potentially stimulate the production and purchase of qualifying homes. PROPOSITION 38: Bonds for Immunology and Immunotherapy Research Proposition 38 is an initiative statute that would authorize $8.4 billion in state general obligation bonds for immunology and immunotherapy research. The bond proceeds would be divided equally between two purposes. Half would be allocated to a University of California-affiliated nonprofit medical research institute selected by the California Department of Public Health. The other half would support a competitive grant program for public or nonprofit universities and research institutions. The measure would require that at least half of the research funding be directed toward cancer, heart disease, and Alzheimer’s disease. It would also impose conditions related to the pricing and availability of technologies and drugs developed using bond proceeds. Research recipients would be required to make resulting technologies and drugs available in California at prices at least 20 percent below the national average price. Unlike Proposition 37, these bonds would be repaid from the State General Fund. The Legislative Analyst and Director of Finance estimate that repayment would cost approximately $500 million annually for 25 years. The State could potentially recover some costs if funded research produces commercially successful discoveries, but such revenues are uncertain. The principal policy consideration is whether the State should incur long-term general obligation debt to finance medical research, particularly where the benefits and potential commercial returns cannot be predicted in advance. PROPOSITION 39: Voter Identification and Citizenship Verification Requirements Proposition 39 is an initiative constitutional amendment that would establish additional identification and citizenship verification requirements for California voters. Under current law, an individual registering to vote must declare under penalty of perjury that the individual is a United States citizen and provide identifying information such as a birthdate, driver’s license number, state identification number, or partial Social Security number. Page 6 Proposition 39 would additionally require voters appearing at a polling place to present government-issued identification. A person voting by mail would be required to provide the last four digits of a government-issued identification number. The State would be required to provide voter identification cards to eligible voters upon request. Elections officials would also be required to issue annual reports identifying the percentage of registered voters in each county whose citizenship has been verified. The measure would significantly affect county elections officials, who administer elections on behalf of the State. Counties would need to modify voting systems, ballot materials, voter education programs, poll-worker training, vote-by-mail procedures, provisional ballot processes, and citizenship verification systems. The Legislative Analyst and Director of Finance estimate one-time state and local costs in the tens of millions of dollars to prepare for implementation. Ongoing costs could range from tens of millions to the low hundreds of millions of dollars annually, depending on how the identification, reporting, outreach, and verification requirements are implemented. The measure could also result in litigation concerning voter access, implementation standards, acceptable forms of identification, provisional voting, and the State’s responsibility to provide identification at no cost. PROPOSITION 40: One-Time Tax on Certain Individuals and Trusts Proposition 40 is an initiative constitutional amendment and statute that would impose a one-time tax of up to 5 percent on individuals and trusts with covered assets exceeding $1 billion. Covered assets would include businesses, securities, investment holdings, artwork, collectibles, and intellectual property. Real property and certain pension and retirement accounts would be excluded. The measure would allocate 90 percent of the revenue to health care programs and 10 percent to food assistance or education-related programs. It would prohibit the State from using the new revenue to replace existing funding for those purposes, meaning the money would generally be required to supplement rather than supplant current appropriations. The measure would also exempt the new revenue from certain constitutional requirements, including the Proposition 98 school-funding guarantee, state budget reserve requirements, and the State Appropriations Limit. The Legislative Analyst and Department of Finance estimate that the tax could generate tens of billions of dollars over several years. However, they also estimate that the measure would likely result in an ongoing reduction in state personal income tax revenue of hundreds of millions of dollars or more annually. This could occur if affected taxpayers move, restructure assets, change residency, or otherwise reduce future taxable income in California. The measure does not impose a local tax or provide unrestricted revenue directly to local governments. Nevertheless, funding for health care, food assistance, and education could flow through county-administered or locally delivered programs. Page 7 The measure could also have broader state budget implications. If the tax produces substantial short-term revenue but reduces ongoing income tax collections, the State could experience both an immediate funding increase and longer-term revenue losses. Proposition 40 remained on the ballot despite efforts by state leaders and other organizations to negotiate its withdrawal before the June 25 deadline. PROPOSITION 41: Audits of Programs Funded by State Special Taxes and State Spending- Limit Requirements Proposition 41 is an initiative constitutional amendment concerning statewide special taxes, program audits, and the State Appropriations Limit. For a special tax proposed through the statewide initiative process, the measure would require an audit of the programs proposed to receive the tax revenue before the election. The audit would provide voters with information regarding the performance, administration, or financial condition of those programs before they decide whether to approve the tax. The measure would also require recurring audits of programs funded by state special taxes enacted after January 1, 2026. The audit findings would likely be included in or referenced through future voter information materials and public reports. In addition, Proposition 41 would prohibit the enactment of new state taxes that exclude their revenue from the existing voter-approved State Appropriations Limit. The restriction would apply to taxes enacted after January 1, 2026, including taxes appearing on the November 2026 ballot. This provision could directly interact with Proposition 40 because the billionaire wealth tax proposes to exempt its revenue from the State Appropriations Limit. The outcome and legal interaction of the two measures could depend on which receives more affirmative votes if both are approved and their provisions are determined to conflict. The official fiscal impact is unknown. Costs or savings would depend on the number of future special tax initiatives, the programs subject to audit, the extent of audit recommendations, and whether those recommendations produce operational savings. PROPOSITION 42: Prohibition on New State Personal Property Taxes and Certain Retroactive Taxes Proposition 42 is an initiative constitutional amendment that would restrict the State’s authority to impose certain future taxes. The measure would prohibit new state taxes on the ownership or control of personal property. The definition would encompass financial assets, investment accounts, retirement accounts, business interests, intellectual property, and other forms of personal property. The measure would also prohibit certain retroactive state taxes. A tax generally could not be applied to conduct, activities, ownership, transactions, or taxpayer status that occurred before the tax’s effective date, subject to limited exceptions. The restrictions would apply to taxes enacted or taking effect on or after January 1, 2026, including taxes appearing on the November 2026 ballot. Page 8 The measure appears designed in part to prevent the State from adopting wealth taxes or asset- based taxes similar to Proposition 40. If both Propositions 40 and 42 are approved, the measures could conflict because Proposition 40 would impose a tax based on covered assets, while Proposition 42 would prohibit new state taxes on the ownership or control of personal property. The legal effect could depend on constitutional rules governing conflicting ballot measures, including which measure receives more affirmative votes. The Legislative Analyst and Department of Finance identify the fiscal effect as the possibility that state tax revenues would be lower in the future. The measure would not necessarily reduce revenue collected under current taxes, but it would limit the Legislature’s and voters’ options for establishing certain new taxes later. The measure applies to state taxation and would not directly prohibit local property, sales, parcel, utility, or other local taxes. Its indirect significance for local agencies would arise if future state revenue limitations reduce the resources available for state-local programs or increase pressure on existing revenue sources. PROPOSITION 43: Local Taxes and the Two-Thirds Vote Requirement Proposition 43 was placed on the ballot through ACA 22 and would amend the California Constitution to require approval by two-thirds of voters for local special taxes, including special taxes proposed through the local initiative process. A special tax is a tax whose proceeds are dedicated to one or more specified purposes. Examples may include taxes dedicated to transportation, public safety, libraries, parks, housing, homelessness programs, emergency response, or other identified services. Local government-sponsored special taxes are already generally subject to a two-thirds voter- approval requirement. However, following the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland, appellate decisions concluded that certain constitutional procedural restrictions applying to local government-sponsored measures did not necessarily apply in the same manner to measures placed on the ballot through the citizens’ initiative power. That created a pathway under which some voter-sponsored special taxes could be approved by a simple majority. Proposition 43 would close that distinction by expressly applying the two-thirds vote requirement to special taxes proposed by the electorate through the initiative process. As a result, a citizen- sponsored special tax would be subject to the same voter-approval threshold as a special tax placed on the ballot by a city council, county board of supervisors, or other local governing body. Proposition 43 emerged from negotiations concerning the Howard Jarvis Taxpayers Association’s broader Taxpayer Protection Act. The original initiative would have imposed additional restrictions, including limitations involving real estate transfer taxes and retroactive invalidation of certain previously approved taxes. Under the negotiated agreement, HJTA withdrew that initiative after the Legislature placed ACA 22 on the ballot and removed ACA 13. For local governments, Proposition 43 is among the most significant measures on the 2026 ballot. Requiring two-thirds approval for all local special taxes would make voter-sponsored dedicated revenue measures more difficult to approve. The effect could be particularly significant for regional Page 9 measures, where reaching two-thirds approval across a large and politically diverse geography can be challenging. The measure would not raise taxes or invalidate all existing special taxes. Rather, it would establish the approval threshold that future local special tax measures must meet. Local agencies contemplating future revenue measures should evaluate how Proposition 43 could affect measure structure, timing, polling, coalition development, and whether revenue is proposed as a general or special tax. PROPOSITION 44: Community Health Clinic Spending Requirements Proposition 44 is an initiative statute that would require nonprofit Federally Qualified Health Centers to spend at least 90 percent of their revenue on program services advancing their charitable purposes. Federally Qualified Health Centers provide primary and preventive care in medically underserved communities and frequently serve patients who are uninsured, enrolled in Medi-Cal, or otherwise face difficulty accessing health care. Under Proposition 44, qualifying program expenditures could include patient care and other services that directly advance a clinic’s charitable mission. No more than 10 percent of revenue could generally be used for management, administration, overhead, and other non-program expenses. The California Department of Public Health would be authorized to waive the requirement in exceptional circumstances. The Attorney General could issue guidance defining which expenses qualify as program services and which are considered management or overhead. Clinics that fail to comply could face monetary penalties. Those penalties could be refunded if the clinic comes into compliance within five years. The measure would also authorize criminal penalties for false reporting or schemes intended to artificially inflate a clinic’s reported program- spending ratio. The Legislative Analyst and Department of Finance estimate that state enforcement costs could reach the low tens of millions of dollars annually. Much of that cost could be offset by fees and penalties imposed on affected entities. If clinics reduce administrative expenses to satisfy the 90 percent standard, the measure could direct more resources toward patient care. At the same time, clinics may argue that the limitation could constrain legitimate expenditures for compliance, technology, workforce administration, facilities, billing, quality assurance, and other functions necessary to operate health care organizations. PROPOSITION 45: Environmental Review for Certain Projects Proposition 45 is an initiative statute that would amend the California Environmental Quality Act to expedite environmental review and litigation for specified categories of projects. The measure would apply to many housing, transportation, water, health care, and clean-energy projects. For covered projects, it would establish deadlines for public agencies to complete environmental review and take required actions. Page 10 The measure would also limit the extent to which an agency must evaluate a range of feasible project alternatives. Under existing CEQA procedures, an environmental impact report generally evaluates alternatives that could avoid or substantially reduce a project’s significant environmental effects. Proposition 45 would narrow that obligation for covered projects in an effort to reduce the time and cost associated with environmental documentation. In addition, the measure would change judicial review of covered project approvals. It would establish deadlines for filing and resolving CEQA lawsuits and limit the evidence courts may consider and the remedies courts may order. For cities, counties, transit agencies, water districts, joint powers authorities, and other lead or responsible agencies, Proposition 45 could substantially alter environmental review procedures. Agencies would need to revise internal practices, consultant contracts, hearing schedules, document preparation timelines, and litigation strategies. The measure could accelerate the approval and construction of housing, transit, water infrastructure, renewable energy, and health care projects. It could also reduce administrative and legal costs over the long term by limiting the scope and duration of environmental review and litigation. However, the deadlines could create near-term staffing and implementation challenges. Agencies may need to complete complex reviews more quickly, coordinate with applicants and other responsible agencies under shorter timeframes, and ensure that abbreviated processes remain legally defensible. The Legislative Analyst and Department of Finance estimate state and local implementation costs in the tens of millions of dollars annually during the first several years. Over time, state and local governments would likely experience net savings from reduced administrative and legal workload, although the precise fiscal effects are uncertain. The effect on state courts could range from savings in the tens of millions of dollars to costs in the low tens of millions annually. Proposition 45 is likely to be particularly significant for local agencies with substantial housing, infrastructure, transportation, water, or clean-energy project portfolios. It could create faster project-delivery tools, but agencies would need detailed implementation guidance to understand which projects qualify and how the new review and litigation requirements interact with other environmental, land-use, coastal, endangered species, and permitting laws. NEGOTIATIONS AND WITHDRAWALS OF MEASURES California's November 3, 2026 statewide ballot was finalized on June 25, the constitutional deadline for citizen initiatives to qualify for the November election and the final day proponents could voluntarily withdraw qualified measures. In the days leading up to the deadline, negotiations among the Governor's Office, Legislative Leadership, initiative proponents, taxpayer advocates, labor organizations, business groups, healthcare interests, and local government stakeholders significantly reshaped the ballot. Ultimately, six qualified initiatives were withdrawn through negotiated agreements, while one additional initiative failed to qualify because county signature verification extended beyond the constitutional deadline. These negotiations reduced the number of statewide measures before Page 11 voters and, in several cases, replaced broad initiative proposals with narrower legislative compromises. Taxpayer Protection Act Agreement The most consequential agreement involved Initiative 1983, the Taxpayer Protection Act, sponsored by the Howard Jarvis Taxpayers Association. The initiative proposed sweeping changes to local taxation authority, including requiring a two-thirds vote for all local special taxes, restricting charter city real estate transfer taxes, and potentially invalidating certain existing voter- approved taxes through retroactive provisions. Following months of negotiations, Initiative 1983 was withdrawn after the Legislature approved ACA 22 (Proposition 43) and simultaneously removed ACA 13 from the ballot through ACA 21. Unlike the original initiative, Proposition 43 is limited to requiring a two-thirds vote for all local special taxes, including citizen-sponsored initiatives, and does not include the proposed restrictions on charter city transfer taxes or retroactive provisions affecting existing local taxes. For local governments, the agreement significantly reduced the immediate fiscal risk posed by the original initiative while preserving one of its central policy objectives. If approved, Proposition 43 would make future local and regional special tax measures more difficult to pass by requiring two-thirds voter approval regardless of how they qualify for the ballot. Healthcare and Rideshare Settlements Two additional negotiated settlements removed four qualified initiatives from the ballot. Healthcare stakeholders and the California Labor Federation agreed to withdraw competing initiatives involving healthcare executive compensation and healthcare union political spending. Similarly, Uber and the Consumer Attorneys of California reached a settlement that resulted in the withdrawal of competing initiatives concerning automobile liability, attorney fees, and rideshare passenger safety. While these measures had limited direct implications for local agencies, their withdrawal eliminated several costly statewide campaigns and narrowed the policy issues voters will consider in November. LOOKING AHEAD Although the statewide ballot is now finalized, implementation questions remain for many of the measures should they be approved by voters. Several propositions would require additional legislation, administrative rulemaking, or regulatory guidance before they could be fully implemented. Others, particularly those involving constitutional changes, taxation, and election administration, could generate litigation addressing statutory interpretation and implementation. Between now and the November election, campaign spending, endorsements, and public polling will continue to shape the political environment surrounding these measures. Proposition 43 is expected to generate substantial interest from local governments, taxpayer organizations, labor groups, business organizations, and regional coalitions because of its implications for future local Page 12 revenue measures. Likewise, housing, CEQA reform, voter identification requirements, and statewide taxation are expected to remain prominent topics throughout the campaign. Townsend Public Affairs will continue monitoring campaign developments, legislative implementation discussions, fiscal analyses, and administrative guidance as the election approaches. We will provide clients with updates regarding significant campaign developments, implementation considerations, and the practical implications of each measure. From:Cybele LoVuolo-Bhushan To:Council, City Subject:Prop. 4....Prop. 39 Date:Saturday, October 3, 2026 8:57:08 PM CAUTION: This email originated from outside of the organization. Be cautiousof opening attachments and clicking on links. Dear City Council members, According to the October 3, 2026 issue of the Daily Post, the City Council may take positions on upcoming ballot measures. If you choose to take official positions, I strongly encourage you to endorse the following: - YES on Prop. 4 (Public Campaign Financing): This measure ensures every vote counts by preventing wealthy donors from outspending and unfairly influencing elections. - NO on Prop. 39: Increased surveillance does not make our community safer and remains vulnerable to misuse. True public safety is built on health care, stable economic policy, and environmental sustainability, all of which foster genuine trust between residents and city leadership. Thank you for your time and consideration. Sincerely, Cybele nee Judith LoVuolo-Bhushan 3838 Mumford Pl, Palo Alto, CA 94306 415.429.9830 From:Shani Kleinhaus To:Council, City Cc:Shikada, Ed; amanda@scvbirdalliance.org Subject:Item 11: Please adopt a City position opposing Proposition 45 Date:Monday, October 5, 2026 9:49:31 AM CAUTION: This email originated from outside of the organization. Be cautiousof opening attachments and clicking on links. Dear Mayor Veenker and Councilmembers, For tonight’s Item 11, please adopt a City position opposing Proposition 45. I also ask each of you to personally endorse the No on Prop 45 campaign. Santa Clara County has already opposed the measure. Its September 25 recommended opposition from Intergovernmental Relations (IGR) explains: “Proposition 45 – Modifies environmental review for certain projects Recommendation: Oppose Proposition 45 would amend the California Environmental Quality Act (CEQA) and the Permit Streamlining Act by shortening the review process for housing, water systems, clean energy, medical facilities, some public safety infrastructure, broadband, education, and more. This measure would give local agencies, including both the lead agency and responsible agencies, 30 days to determine whether an application is complete, including environmental review and permitting. If a determination is not made in 30 days, the application is automatically deemed complete. Additionally, the initiative would shift environmental review and permitting timelines from calendar to business days as well as requiring a lead agency to issue permit decisions concurrently with environmental review. If passed, the measure would limit public comment periods for environmental impact reports to 45 days. While this measure is meant to reduce barriers for development, it creates difficult, if not impossible, deadlines for local agencies like the County. For these reasons, IGR recommends opposing Proposition 45.” Beyond these burdens on local government, Proposition 45 would weaken the California Environmental Quality Act by limiting consideration of less harmful alternatives and restricting court review and remedies. These safeguards help us protect public health, clean air and water, and wildlife habitat. Please take a few minutes to read the opinion piece I co-wrote with Alice Kaufman of Green Foothills in the Palo Alto Weekly, and please join the broad coalition of more than 450 organizations and public agencies opposing Proposition 45, including Santa Clara County. I also urge each of you to join the elected officials who have personally endorsed opposition. With ballots arriving this week, your leadership matters. Please oppose Proposition 45 as a City and add your individual endorsements to the campaign. Thank you, Shani Kleinhaus Shani Kleinhaus, Ph.D. resident and Environmental Advocate Santa Clara Valley Bird Alliance 650-868-2114 shani@scvbirdalliance.org October 5, 2026 www.paloalto.gov 2026 Ballot Measures Discussion and Positions Chantal Cotton Gaines, Deputy City ManagerChristine Prior, Assistant City ClerkCarly Shelby, Deputy Director, Townsend Public Affairs 1 •City Council regularly considers adopting positions on state and local ballot measures presented to Palo Alto voters in elections years •Intended to provide information for Palo Altans to consider when voting and offer opportunity for City Council discussion •Staff recommended positions are based on the City Council adopted 2026 Legislative Guidelines and previous City Council action BACKGROUND 2 •14 Statewide Measures •Negotiations reshaped the ballot: an additional 6 initiatives were withdrawn and 1 missed the signature-verification deadline 2026 STATEWIDE BALLOT MEASURES 3 2026 STATEWIDE BALLOT MEASURES Title Recommendation and Guideline Proposition 1: Authorizes Bonds for Housing Affordability Programs Support. Guideline: “Supports additional state and federal funding in support of affordable housing” Human Relations Commission recommended City Council support on 10/29/26. Proposition 37: Creates Loan Program For Middle- Income Buyers of Qualified New Homes Support. Guideline: “Promotes the development and enhancement of safe and affordable housing and accessible housing within the City for all economic segments of the population” Proposition 43: Limits Voters’ Ability To Raise Revenues For Local Government Services Oppose. Guideline: “Supports the lowering or maintaining of voter thresholds for local revenue measures 4 •1 regional measure •1 local municipal measure 2026 REGIONAL AND LOCAL MEASURES Title Previous Council Action Regional Transit Measure – Connect Bay Area Transit Initiative Support. The City Council endorsed this measure on March 2, 2026 Measure J – City of Palo Alto Community Safety/Services Support. Cubberley acquisition and renovation funding is a 2026 City Council Priority and City Council voted to place the measure on the ballot. 5 City Council review and discuss the November 3, 2026 state and local ballot measures and consider adoption of formal positions as relevant to the City of Palo Alto or desired by the City Council Recommendation