South Gate Proposes 8% Utility Fee Amid Regional Tax Surge

Voters in South Gate will decide on an 8 percent utility users tax on November 3.

The measure, known as Measure SG, would apply to bills for electricity, water, natural gas, cable, and phone service. City officials estimate the tax will generate $10.4 million annually. South Gate faces a projected $9.4 million deficit and a potential fiscal emergency. The city has already cut its crossing guard program and reduced the number of police officers assigned per shift.

South Gate is part of a wider wave of local tax measures across Southern California. More than 30 cities and districts in Los Angeles and Orange counties have tax proposals on the November ballot. These include new or raised sales, hotel, business, parcel, and utility taxes. The jurisdictions range from Culver City to San Clemente. Officials cite flat revenues that fail to cover rising insurance, maintenance, infrastructure, and pension costs. Many cities report multimillion dollar deficits and argue that new taxes are necessary to avoid deep cuts to basic services.

The financial strain traces back to Proposition 13, which capped property taxes in 1978. Before that measure, property tax provided nearly all local government revenue. Since then, cities have relied more on other levies. Hotel and utility taxes barely existed before the mid-1970s, and sales taxes made up a small share of income. These alternatives have grown but have struggled to replace lost property tax revenue. Proposition 13 also changed approval rules. Special taxes, which are earmarked for specific purposes, require two-thirds voter approval. A 1986 proposition set a simple majority for general taxes. Proposition 43 on this year's ballot would raise the threshold for citizen-proposed local special taxes from a simple majority to two-thirds.

State law limits the combined local and county sales tax rate, and many Southern California cities operate near that cap. Sales tax revenue has become less reliable due to a retail downturn and a shift toward services, which are often not taxable in California. Kirk Stark, a UCLA professor of tax law and policy, stated that cities are turning to specific, lesser-known taxes because property, income, and sales taxes are restricted by state law. In South Gate, residents voiced opposition at a City Council meeting earlier this year. Some blamed possible financial mismanagement for the deficit. Others noted that rising costs for utilities, home insurance, and car insurance strain tight budgets. One homeowner of 13 years said there must be a way to fix the problem without adding a new tax.

Other communities face similar choices. San Marino, the only other city in the two counties with a utility users tax on the ballot, seeks to extend its 5 percent tax and raise it to 6 percent. The current tax expires on March 31, 2027. Orange voters will consider Measure J, which would raise the hotel tax from 10 percent to 14 percent. This change would add an estimated $3 million annually. Hotel taxes are often easier for voters to accept because visitors bear most of the cost. Orange is one of 10 cities in the region 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. Orange projects a $27.6 million deficit, which it describes as one of the largest financial challenges in its history.

Diamond Bar proposes Measure Q, a 1 percent local sales tax expected to raise about $6 million per year. The city aims to address a projected $5 million annual deficit by 2030. Officials cite rising costs for services, public safety expenses, and $100 million in infrastructure and maintenance needs. Santa Ana is seeking a 1.5 percent sales tax extension, while Los Angeles has Measure FD, a sales tax increase for its fire department. Local governments weigh several options and select what they believe will be most acceptable to their voters.