South Gate council hears $9.4M budget gap and debate over a 7% utility users tax; item continued to Jan. 27

City of South Gate officials told the council on Jan. 13 that the city faces a structural general-fund shortfall of roughly $9.4 million that must be resolved before the new fiscal year begins July 1.

City Manager Robert Houston said staff had developed two paths: find new revenue or cut services to balance the budget. "We are in a structural budget deficit...there is a projected gap between $8 and $9,400,000 this coming fiscal year," Administrative Services Director Louis Frosto told council. The city proposed a draft utility users tax (UUT) that would apply to utilities including electricity, natural gas, water, and telecom/video/internet. Staff presented a 7% draft rate and estimated that, at that level, the UUT could generate approximately $9 million annually.

Staff stressed that placing a UUT on the ballot would not itself levy a tax; council would ask voters whether to approve it. The city explained that the June 3, 2026 special election would be the fast timeline option if the council wanted voter direction before the July 1 budget year; ballot language and draft ordinances would be due in February to meet election scheduling.

City department heads then walked through potential cuts if new revenue is not approved. Chief Manny Lorena said a $3.4 million reduction to the police department could mean eliminating five sworn positions, removing community programs (crossing guards, neighborhood watch, school presentations), losing crime-lab capacity and critical camera systems, and likely lengthening emergency response times: "Crime will increase, and these effects will be felt across all operations of our police department," he said, adding that average response times could increase from about 3 minutes 59 seconds to five to six minutes.

Parks and Recreation Director Tina described a proposed $2.3 million parks reduction that could close the municipal pool for six months, eliminate the cultural arts division, cancel major events (Azalea Festival, Fourth of July carnival), reduce park ranger presence and turn off lighting seasonally — actions she said would affect tens of thousands of residents who use city facilities.

Public works, community development and administrative services directors outlined additional savings ideas including staff reductions, reallocation of positions to enterprise funds, and scaling back maintenance programs. Several staff warned that deferred maintenance and cuts to code enforcement would slow permitting, delay inspections and risk deterioration of newly constructed parks and capital projects.

The public comment period drew lengthy testimony. Business owners argued a UUT would be a regressive cost on small companies that rely on refrigeration or heavy utilities; other speakers accused the council of mismanagement and demanded detailed audits and Measure P oversight. Employees, unions, and many residents urged the council to put the UUT to a vote and to exempt low-income seniors; union and employee representatives warned that layoffs or cuts to benefits would cause significant harm.

Councilmembers asked for additional documents, including prior audit findings, Measure P oversight committee records and detailed reconciliations of the projected $9.4 million gap and the city's midyear projections. After deliberation, the council voted to continue the item for additional review and to return with requested materials at the Jan. 27, 2026 meeting.

Next steps: staff will provide the draft audit/financial reports and Measure P oversight materials requested by council and prepare draft ballot materials and an impact analysis on the proposed 7% UUT if the council directs staff to proceed.

Actions recorded at the meeting include unanimous closed-session votes to authorize defense of three pending lawsuits and council approval of the warrant registers for 12/23/2025 and 1/13/2026.