South Gate Voters Face 8% Utility Tax to Close $9.4 Million Deficit

Voters in South Gate will decide on Measure SG on Nov. 3, a proposal to impose an 8% tax on utility bills. The measure targets electricity, water, natural gas, cable, and phone service. City officials estimate the tax will generate $10.4 million annually. This revenue aims to address a projected $9.4 million deficit and a potential fiscal emergency.

South Gate has already cut services to manage its budget. The city eliminated its crossing guard program and reduced the number of police officers per shift. Officials say these cuts were necessary because revenues have not kept pace with rising costs for insurance, maintenance, infrastructure, and employee pensions. They argue that without new tax revenue, cities must make deeper cuts to basic services.

South Gate is not alone in seeking new revenue. More than 30 cities and districts in Los Angeles and Orange counties have tax measures on the Nov. 3 ballot. The proposals range from sales and hotel taxes to parcel and utility levies. Some measures extend existing taxes, while others create new ones. Communities from Culver City to San Clemente are affected.

The reliance on diverse tax sources stems from Proposition 13, the 1978 measure that capped property taxes. Before that law, property taxes provided nearly all local revenue. Since then, cities have shifted to other levies. Hotel and utility taxes did not exist in significant numbers before the mid-1970s. Sales taxes also made up a small share of revenue. These sources have grown but have struggled to replace the lost property tax income.

State law limits other options. Combined local and county sales tax rates are capped, and many Southern California cities are near that limit. Sales tax revenue has become less reliable due to a retail downturn and a shift toward services, which are often untaxed. Kirk Stark, a UCLA professor of tax law and policy, said cities are turning to unique taxes because property, income, and sales taxes are restricted by state law.

Other cities face similar choices. San Marino is the only other city with a utility tax on the ballot, seeking to extend its 5% tax and raise it to 6%. The current tax expires in March 2027. In Orange, voters will consider a hotel tax increase from 10% to 14%, which would add $3 million annually. That city also proposes a 1-cent sales tax to help cover a $27.6 million deficit. Diamond Bar seeks a 1% sales tax to address a projected $5 million annual deficit by 2030.

Residents in South Gate expressed concerns at a City Council meeting earlier this year. Some opposed the measure, citing possible financial mismanagement. Others said the added monthly costs would strain tight budgets. One homeowner of 13 years noted that utilities, home insurance, and car insurance have all climbed. That resident argued there must be a way to fix the problem without a new tax.