Understanding the Budget and Utility Users Tax (UUT)

A fiscal emergency is declared when a city’s financial condition is deteriorating to a point that threatens its ability to maintain essential services. Currently, the City of South Gate is experiencing an ongoing budget deficit caused by rising costs and limited city revenue, which is projected to deplete city budget reserves and create long term structural imbalances. Declaring a fiscal emergency would enable the City to take certain legal steps, including placing a revenue measure on the ballot, so voters can decide how to address the situation directly.

South Gate operates with a lean budget and has already implemented cost-saving measures. However, several factors are contributing to a growing budget gap:

• Inflation driven cost increases for maintenance and utilities Steep increases for both general and health insurance

• A growing backlog of needed maintenance and repairs to streets, facilities, and equipment

• State mandates and retirement system obligations

Yes. The City has taken steps over the years to control costs, reduce staffing levels, consolidate services, and pursue revenue development opportunities. However, without identifying a new local revenue source, cuts to services may become unavoidable.

No. Declaring a fiscal emergency does not automatically create or implement a Utility Users Tax. A fiscal emergency simply gives the City Council the legal authority to consider placing a revenue measure such as a UUT on a future ballot. Even after such a declaration, the Council must still vote to place the measure before voters, and the City will continue gathering public input before any final decision is made. Ultimately, only South Gate voters can decide whether to adopt a UUT.

The City considered several alternatives, including a parcel tax, business license tax increase, and higher transient occupancy tax, but none would generate enough revenue to close the gap. A parcel tax would burden only property owners, a business license tax would yield limited funds and strain small businesses, and South Gate lacks enough hotels for a TOT increase to make a real impact.

After careful review, the City found that a Utility Users Tax is the most practical and equitable option, providing stable, locally controlled funding from a broad base of users.

The City has frozen hiring in any areas that could be impacted by a potential $9 million budget cut if new revenues are not identified. However, the City has more than 335 full-time positions dedicated to serving the community. These positions require a wide range of skill sets, including police officers, recreation staff, planners, engineers, budget analysts, water system operators, and grounds maintenance workers.

Even if the 32 positions proposed for layoff are eliminated, each City department has minimum staffing levels that must be maintained to continue providing essential services, even if the budget reduction occurs. For example, the Police Department currently has funding for 86 sworn officers. Under the proposed budget cut, that number would be reduced to 81. Since the department currently has only 75 officers, hiring will continue until the minimum level of 81 is reached.

Another example is the Code Enforcement Division. Six code officers are needed to adequately cover the entire city, but the City currently has only three. If the budget cut occurs, the minimum staffing level would be reduced from six to four. Because staffing is already below that level, the City will continue efforts to hire one additional officer at this time.

A third example is 911 dispatch. This is a demanding, 24-hour-a-day service that will not be reduced regardless of budget constraints. In the past six months, four dispatcher positions became vacant, and recruitment was conducted to fill all four positions in order to maintain uninterrupted emergency response services.

The Utility Users Tax (UUT) is a local tax collected by a city on certain utility services, such as electricity, gas, water, and telecommunications that are used by residents and businesses. The City of South Gate is one of the very few in Los Angeles County that does not currently have a UUT, putting us behind many of our neighboring cities. This tax provides locally controlled funding for the City of South Gate and supports essential services like public safety, street maintenance, and emergency response.

South Gate currently does not have a Utility Users Tax (UUT), making it one of the few cities in the County without this type of local funding. Nearby cities, however, do rely on a UUT to help fund essential services:

• Downey: 5% on electricity and gas, and 4.8% on telecommunications
• Bell: 10% on electricity, gas, water, telephone, and cable
• Bellflower: 5% on electricity, gas, water, telephone, and cable
• Lynwood: 9% on electricity, gas, water, telephone, and cable

If passed, a UUT in South Gate would reflect a similar structure and rate to those already in place in neighboring communities.

No. Declaring a fiscal emergency does not automatically create or implement a Utility Users Tax. A fiscal emergency simply gives the City Council the legal authority to consider placing a revenue measure such as a UUT on a future ballot. Even after such a declaration, the Council must still vote to place the measure before voters, and the City will continue gathering public input before any final decision is made. Ultimately, only South Gate voters can decide whether to adopt a UUT.

South Gate is facing growing budget challenges due to rising costs and maintenance needs. Like many cities in California, South Gate is experiencing structural budget pressures, costs for public safety, infrastructure maintenance, and community services are increasing faster than current revenue streams allow. The City’s General Fund, which pays for most day-to-day services, is under strain.

The UUT is a critical, locally controlled revenue stream that helps South Gate maintain services for our residents.

The Utility Users Tax would help South Gate invest in the services that keep our city safe, clean, and thriving:

• Maintain reliable 911 emergency response and police staffing levels
• Keep our school crossing guards at our schools
• Keep our recreation facilities open and available for youth sports
• Repair and maintain city streets, including pothole repairs
• Maintain senior and youth services

The UUT is paid by anyone who uses taxed utilities in South Gate, this includes both residents and businesses. The tax is included on utility bills and collected by service providers, who then remit it to the City.

The City is in the process of deciding how to offer exemptions to seniors who are on fixed incomes.

The City of South Gate is still reviewing the potential for a locally controlled revenue measure and is committed to gathering community feedback before making any decisions. Input is being collected through public board meetings and community outreach efforts to ensure residents have a voice in the process.

If the City Council determines that a fiscal emergency exists, that declaration would not automatically place the UUT on the ballot. Even then, the Council would need to take an additional vote before deciding whether to move forward with placing a measure on a future ballot. Ultimately, it will be the voters of South Gate who have the final say if the revenue measure is adopted.