Yucaipa officials warn of bankruptcy as voters weigh sales tax increase
Yucaipa faces bankruptcy by 2028, city officials said, without immediate action — immediate action that could include increasing the local sales tax.
"Where we're at right now, you know, we have a lot more outgoing than incoming," Yucaipa City Councilmember Chris Venable said in a phone interview Wednesday, Sept. 25.
The City Council voted in June to put Measure S on the ballot for the Nov. 5 election . To pass, the measure requires approval from 50% of voters plus one additional vote in favor.
Under Measure S, all funds generated by the tax increase would stay in Yucaipa, out of reach from the state or other entities, according to city officials. The measure would add 1 cent to the sales tax, meaning the city would get 2 cents for every taxable $1 purchase.
If approved by voters, Measure S would generate nearly $6 million in sales tax revenue for the city each year, according to Yucaipa officials.
Venable said he's a citizen of Yucaipa and a penny added to the sales tax does not worry him.
"A lot of people are on fixed incomes, and it scares them more than anything," he said. "So they're like: 'Oh man, you know, it's going to cost me that much more money.' They don't understand it's not going to cost them at the grocery store. It's going to cost them on taxable goods."
Yucaipa's current sales tax rate is 7.75% — 6%, or 6 cents for every taxable dollar, goes to the state; 1%, or 1 cent, goes to the city; and 0.75%, or 0.75 cents, goes to the county.
The proposed 1 percentage-point increase on the tax would bring the total sales tax rate in Yucaipa to 8.75%, giving the city an additional 1 cent per taxable dollar.
The sales tax cap in Yucaipa is 9.25%. Should the county or other agencies pass additional local sales tax measures, those would apply toward the cap. If the cap is reached before Yucaipa adopts its own sales tax measure, it would be unable to pursue one for its services.
Yucaipa officials say they anticipate San Bernardino County will seek its own sales tax measure in 2026. In 1989, county voters approved a 0.5% sales tax increase under Measure I to fund transportation improvements.
"If we put the tax out there first, we get the full penny," Venable said. "But if the county does it, which they will, then we get a tenth of a tenth of that."
City Manager Chris Mann took to social media in early September to warn residents about Yucaipa's dire financial situation. In a video posted on the city's Instagram, Mann said the city has already taken action to cut costs.
Those actions include freezing and eliminating vacant jobs, pulling back on planned projects, focusing on cost recovery for community and development services and renegotiating key contracts, city spokesperson Joe Pradetto said in an email Sept. 18.
"This is a serious issue, and we're working to resolve it," Pradetto said. "But it takes educating the public about the available options and trade-offs."
Venable agreed the city has a lot of outreach ahead as the election approaches.
"You can't scare people, you know," he added. "If you educate people on what's going on ... 'Look, it's going to be a penny and a dollar and a dollar and a penny — so it's not much, and the city of Yucaipa is going to get that and use it for different things, like their roads, their infrastructure, everything they can.' And that education needs to get out there, instead of a scare tactic."
The city entered a structural deficit in 2019 that was 15 years in the making, according to city officials .
"Operating in a structural deficit reduces our reserve balances," officials said in a report to the public. "This means that as spending exceeds revenue, we must dip into reserves to cover the deficit."
Yucaipa's income in 2019 was about $42.8 million and it spent about $48.1 million, according to officials. In subsequent years, the city's income and expenses were out of balance two out of four years:
"Our revenues have trended up at a steady pace for the last decade, about 4%," officials added in the same report. "However, our costs have risen at a faster pace, about 8%."
Yucaipa forecasts revenues in 2024 totaling $31 million, according to a city document , and it estimates spending nearly $37 million.
Projects in Yucaipa in recent decades have included a new City Hall, Community Center, Fire Station 3, the Yucaipa Performing Arts Center and more.
"As these projects come online, the cost to staff and maintain them move to the general fund. Because the City runs lean, existing staff can't absorb new responsibilities," officials said in the public report. "This means the City has to hire more people or risk closing programs and facilities. As a result, we see more demand for general fund support."
Based on its financial analysis , city officials said, Yucaipa's anticipated ongoing expenditures will outpace its revenues. Reserves that have covered the deficit in recent years are expected to be depleted by 2028-29, officials said, which could mean municipal bankruptcy.
If voters reject Measure S, the city will explore cutting costs to avoid bankruptcy, officials say, including closing Fire Station 2 and eliminating its staff, reducing the Sheriff's Department contract for 26 personnel by five to seven deputies, closing the senior center, closing the Seventh Street pool, reducing Yucaipa Performing Arts Center programming, reducing Community Center programming, and cutting some community and development services.
Along with Measure S, Yucaipa has three City Council seats on the Nov. 5 ballot — in districts 3, 4 and 5.
In District 3, candidate Georgeann Hanna, currently a nonprofit executive director and previously the San Bernardino city clerk, faces business owner Lyle Vick and Judy Woolsey, a nonprofit CEO. The trio are competing to replace Councilmember Bobby Duncan, who is not running for re-election.
The District 4 candidates include current Mayor Justin Beaver, also a police detective, and his challengers Kristine Mohler, a business woman, and Gordon Renshaw, a painting contractor.
Councilmember Jon Thorpe is running unopposed in District 5.
