Southgate warns of an $8M-$9M budget gap; council weighs utility users tax and cuts as residents plead to save youth programs

The Southgate City Council on Nov. 11 received a detailed presentation on the city's fiscal outlook that framed a looming structural deficit and outlined revenue and cut options as staff and council prepare two alternate budgets and possible ballot measures.

City Manager Rob Houston and Finance Director Louis told the council the FY2526#x2013;26 budget had been balanced using one-time reserves and ARPA dollars, but operating costs are rising faster than revenues. "Absent any changes in revenue, the deficit's projected to be between $8,000,000 and $9,400,000 in fiscal year 26-27," Finance Director Louis said, calling the problem "in the millions" against an $80 million general fund.

Why it matters: the general fund pays core services — the finance presentation showed policing consumes roughly 55.6 percent of general-fund spending, parks and recreation about 16.5 percent — so broad cuts would affect public safety, parks, recreation and front-line services. Staff said closing the gap would require either roughly $10 million in new annual revenue or deep, targeted reductions to operations and programs.

Options on the table: staff outlined a menu of possibilities. Shorter-term, staff can reassess a long-underfunded street-lighting and landscape assessment (now subsidized from the general fund), increase some service fees, and seek updated impact fees tied to new development. A utility users tax (UUT) was presented as a prominent option: staff estimated a UUT could generate roughly $1 million per percentage point and, depending on the rate chosen, could yield roughly $9 million to $13 million annually, but would require a public vote. The city manager said timing matters if the council seeks a June special election, because staff must prepare two complete budgets (one with and one without the new revenue) to avoid a July 1 funding gap.

Council and staff emphasized constraints. Louis said much of the citys capital spending comes from restricted grants (ARPA, Prop 68, Measure W) that cannot be used for ongoing operations; water and other enterprise funds likewise are restricted. Louis and the manager recommended community education and multiple outreach events, with a one-page English/Spanish summary and presentations to commissions and community groups.

Residents push back on cuts: more than a dozen public commenters pressed the council to preserve youth programs and public-safety staffing. "Please do not cut back on youth sports, and please do not cut back on public safety," Pablo Cifuentes told the council. AYSO coaches and parents described short-term fixes for fields but warned that program closures will move children and families to neighboring cities and reduce community benefits like after-school engagement and public-safety prevention. Several speakers asked staff to explain where large capital and grant dollars are recorded and to provide more transparent accounting of grant allocations.

Council response and next steps: council members discussed declaring a fiscal emergency to permit a June ballot measure, or waiting for November and accepting deeper near-term cuts. Finance Director Louis reported roughly $20 million in total reserves across buckets but said the budget-stabilization reserve is about $3.8 million and the emergency reserve about $13 million, leaving limited capacity to cover a multi-million-dollar gap without cuts. City Manager Rob recommended preparing two budgets — a "cut" budget to take effect July 1 if new revenue is not in place, and a "restoration" budget if voters approve a measure.

Votes at a glance: the council voted to receive and file the budget presentation (unanimous). The consent calendar (items 227) was approved with recorded recusals and several "no" votes on specified items; Vice Mayor Baron recused from item 4, Councilmember Hurtado recused from item 6 and both Hurtado and Councilmember Rios opposed the proposed change to advisory-committee size (item 2). Council reappointed Councilmember Avalos to the Greater Los Angeles County Vector Control Board (motion passed on roll call). The warrant register for 11/11/2025 (grand total $3,970,830.49) was approved. In closed session the council authorized a settlement in Karla Montezalco v. City of Southgate (vote reported 3-0 with two members not participating) and authorized defense positions on several other claims (reported 5-0).

What to watch: staff will return with a calendar of deadlines and a public-education plan; council must decide whether to declare a fiscal emergency and place a UUT on the June ballot (requires a fiscal-emergency vote and then a simple majority to call an off-November election) or wait for November. If a special election is not pursued or fails, staff warned that large cuts would likely begin July 1 and that program restorations can be slow and partial if a later ballot measure passes.