South Gate Asks Voters to Approve 8% Utility Tax as Local Tax Measures Surge Across Region

Residents across Southern California are facing higher prices for nearly everything, and many local governments are now asking them for more money. By LAist's count, more than 30 cities or districts in Los Angeles and Orange counties have tax measures on the Nov. 3 ballot.

Officials point to flat revenues that have not kept up with the cost of insurance, maintenance, infrastructure projects and employee pensions. Cities large and small are confronting multimillion-dollar deficits, and they say the alternative to new taxes could be deep cuts to basic services. The measures range from sales, hotel and business taxes to parcel and utility taxes, and span communities from Culver City to San Clemente. Some would extend or raise existing taxes, while others are new.

Much of the explanation traces back to Proposition 13, the 1978 measure that capped property taxes. Before it passed, cities and counties depended on property taxes for almost all of their revenue. Since then they have leaned more on other levies. Hotel and utility taxes barely existed before the mid-1970s, and sales taxes made up only a small share of revenue. Those taxes have grown but have struggled to replace lost property tax income.

Proposition 13 also changed how other taxes are approved. Special taxes, which are earmarked for a specific purpose, require two-thirds voter approval. A 1986 proposition set a simple majority for general taxes, which cities can spend as they choose. This year, Proposition 43 would raise the threshold for citizen-proposed local special taxes, which currently need only a simple majority, to two-thirds.

Other options are limited. State law caps the combined local and county sales tax rate, and many Southern California cities are at or near that limit. Sales tax revenue has also become less dependable amid a retail downturn and a shift toward services, most of which are not taxable in California. Kirk Stark, a UCLA professor of tax law and policy, said cities are increasingly turning to "ticky-tacky, peculiar taxes" because property, income and sales taxes are all restricted by state law.

In South Gate, voters will decide on Measure SG, an 8% utility users tax on bills for electricity, water, natural gas, cable and phone service. It is estimated to raise $10.4 million a year. The city faces a potential fiscal emergency and a $9.4 million deficit, and has already eliminated its crossing guard program and assigned fewer police officers per shift.

At a City Council meeting earlier this year, several residents opposed the measure. Some described the deficit as a product of possible financial mismanagement that should not be passed on to residents, while others said the added monthly costs would strain tight budgets. One homeowner of 13 years said utilities, home insurance and car insurance have all climbed, and that there must be a way to fix the problem without the tax. San Marino is the only other city in the two counties with a utility users tax on the ballot, seeking to extend its 5% tax, which expires March 31, 2027, and raise it to 6%.

Orange voters will consider Measure J, which would raise the hotel tax from 10% to 14% and add an estimated $3 million a year. Hotel taxes are often easier for voters to accept because visitors pay most of the cost. Orange is one of 10 cities in the two counties with a hotel tax increase or new hotel tax on the ballot. The city also has a 1-cent sales tax measure expected to bring in $37 million annually, as it projects a $27.6 million deficit it calls one of the largest financial challenges in its history.

In Diamond Bar, Measure Q would add a 1% local sales tax, expected to raise about $6 million a year and help address a projected $5 million annual deficit by 2030. The city says costs for services are rising faster than revenues, citing public safety expenses and $100 million in infrastructure and maintenance needs. Santa Ana is seeking a 1.5% sales tax extension, and Los Angeles has Measure FD, a sales tax increase for its fire department. Coleman, whose almanac LAist cited, said local governments weigh several options and pick what they think will be most palatable to their voters.