South Gate faces $9.4 million deficit; council orders more outreach on proposed 7% utility users tax
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Summary
City staff outlined a roughly $9.4 million structural shortfall and recommended considering a 7% utility‑users tax with low‑income senior exemptions; residents packed the meeting to both oppose and support a ballot measure. Council voted to return the ballot decision to Feb. 24 so staff can produce additional outreach and alternative scenarios.
City Manager Rob Houston told the City Council on Jan. 27 that South Gate faces a structural deficit of roughly $9.4 million that would require either deep service reductions or new local revenue.
"We have a 9 over $9,000,000 deficit," Houston said as staff described two paths: across‑the‑board cuts that would eliminate programs and dozens of positions, or asking voters to approve new revenue in June. Among revenue options, staff proposed a utility users tax (UUT) like those other cities use and suggested a 7 percent rate with an exemption for low‑income seniors as the model that would most closely close the gap without eliminating core services.
Staff presented examples showing neighboring cities' UUT configurations and estimated impact models. The city estimated an illustrative household impact at about $40 per month under the 7 percent scenario; staff stressed the tax would be general‑purpose and could not be legally earmarked for a single service unless a different (special) tax structure and threshold applied. The city manager said the council must decide whether to declare a fiscal emergency and put a general UUT measure on the ballot; if placed on the June ballot the city would run parallel budgets (with and without the revenue) and prepare for either outcome.
The agenda drew a long line of public commenters. Some residents urged the council to put the UUT on the ballot and "let the voters decide" while others said the proposal is regressive and criticized past spending and transparency; many asked for more time and Spanish‑language outreach before a final decision. Small‑business representatives asked for mitigation such as lower rates or exemptions for high‑energy manufacturing users.
Councilmembers pressed staff for additional data about grant reimbursements, which funds are restricted, and how vacancy/proration accounting affects the shortfall. Staff explained that most capital grants are legally restricted and reimbursed on a cost‑reimbursement basis; those grant projects also create ongoing maintenance obligations that can increase general‑fund costs over time.
After extended debate and direction to prepare alternatives and outreach materials (including language for senior exemptions and Spanish‑language forums), the council voted to bring the matter back on Feb. 24 with staff instructions to produce multiple options (including different UUT rates and non‑tax alternatives) and to run a community education campaign ahead of any ballot placement.
What’s next: Staff will prepare a one‑page bilingual summary, conduct targeted outreach to seniors and Spanish speakers, model alternative rate scenarios and revenue projections, and return to council Feb. 24 for a formal decision on ballot placement or for further direction.
