Southern Californians are feeling squeezed by the rising costs of, well, everything. And now their local governments are asking for more money, too.
By LAist’s count, more than 30 cities or districts in Los Angeles and Orange counties are asking residents to approve tax measures on Election Day, Nov. 3, citing stagnant revenues that haven’t kept pace with the rising costs of insurance, maintenance and infrastructure projects, and employee pensions. Big cities, suburbs and small towns are all facing multimillion-dollar budget deficits and asking residents to open their wallets — or potentially see deep cuts to basic city services.
The list of local measures on ballots from Culver City to San Clemente includes sales taxes, hotel taxes, business taxes, parcel taxes and utility taxes. Some ballot measures would extend or increase existing taxes while others are brand-new.
Much of the answer to why so many tax measures are on the ballot lies in Proposition 13, which capped property taxes in 1978.
Before Prop. 13, cities and counties relied on property taxes for nearly all of their revenue. In the decades since, they’ve increasingly turned to other types of taxes. Hotel and utility taxes, for example, were essentially nonexistent before the mid-1970s, and sales taxes represented a small sliver of revenue. Even as these taxes have grown, they’ve struggled to replace property tax revenue.
How Proposition 13 reshaped local taxes
- Before 1978, California municipalities could raise taxes without voter approval. But in addition to capping property taxes, Proposition 13 also changed the rules for other taxes. Section 4 of Proposition 13 states that any special taxes (which are taxes designated for a specific use) must be approved by two-thirds of voters. A later proposition passed in 1986 requires that general taxes be approved by a simple majority of voters. General taxes are general purpose funds that cities can allocate as they please.
- The rules could change again this year with Proposition 43, which would raise the share of votes needed to pass local special tax measures proposed by citizens to two-thirds. Currently, citizen-led special tax initiatives only need to win a simple majority.
Despite what the Nov. 3 ballot might suggest, sales tax measures are actually becoming less common, according to Michael Coleman, author of the
California Local Government Finance Almanac. “More and more governments have started to exhaust the capacity for that. There’s a limit in how much you can do both legally and in terms of the tolerance of voters,” Coleman said.
State law caps the maximum combined local and county sales tax rate, and many Southern California cities are already at or near that cap, Coleman said. And sales tax isn’t as reliable as it used to be, amid the broader retail downturn and shift to a service-based economy (most services aren’t taxable in California).
All of that means cities are increasingly turning to “ticky-tacky, peculiar taxes” to come up with revenue, according to Kirk Stark, a professor of tax law and policy at UCLA.
The “conventional tax instruments” — property, income and sales taxes — are all limited by state law, Stark said. “Local governments that are hoping to satisfy demand for any kind of public expenditure have to turn to other, less conventional sources of revenue.”
This year, cities are asking Southern Californians to say yes to a wide range of taxes. Below, we look at three examples in South Gate, Orange and Diamond Bar.
South Gate: A utility users tax
South Gate is asking voters to approve something less common: a utility users tax, or UUT for short. If Measure SG is approved, the 8% tax would be added to bills for utilities such as electricity, water, natural gas, cable and phone service. The tax would bring in an estimated $10.4 million per year.
The city is facing a potential fiscal emergency and a $9.4 million budget deficit. Earlier this year, South Gate began cutting back services, including eliminating its crossing guard program and assigning fewer police officers per shift.
At a City Council meeting on the tax measure earlier this year, several residents spoke against the measure, with some calling the deficit a result of potential financial mismanagement that shouldn’t be pushed onto residents. Others said the monthly costs would simply add a new burden to already tight budgets.
“Being a homeowner here for the past 13 years, I have seen my utilities go up as well as the cost of living, my insurance for my house, and my car insurance go up. I believe there’s got to be a way to fix this problem without the UUT measure,” one resident told the City Council.
“I’m extremely frustrated that you now want to do electricity, water, sewer, cable, cell phone, gas. ... That hurts us. You’re passing that on to us, and that is absolutely not acceptable,” said another.
The only other utility users tax on the ballot in Los Angeles or Orange counties this year is in San Marino, where residents will decide whether to extend the city’s existing 5% utility users tax, which is set to expire on March 31, 2027, and increase it to 6%. Last year, the tax provided almost $2.2 million in revenue. As of 2021, a total of 162 out of 540 California cities and counties had a utility users tax, according to Coleman’s California Local Government Finance Almanac.
Orange: Hotel and sales taxes could go up
Most people don’t book a hotel in their own city. That’s made hotel taxes an easier pill to swallow for voters, since the tax is mostly levied on visitors.
The city of Orange is asking voters to approve Measure J, which would raise the hotel tax from 10% to 14%. Orange is one of 10 cities across Los Angeles and Orange counties where voters will decide in November whether to increase or establish a local hotel tax, also known as a “transient occupancy tax.”
Orange residents will also vote on a 1-cent sales tax measure, as the city projects a $27.6 million deficit that it calls “one of the largest financial challenges in the city’s history.” The sales tax is expected to bring in $37 million annually, and the hotel tax would add $3 million.
Diamond Bar: A new 1-cent sales tax
Diamond Bar voters will decide on Measure Q, a 1% local sales tax that would add a penny per dollar to purchases of taxable items. The city estimates the tax will bring in an additional $6 million annually, which could help plug a projected budget deficit of $5 million a year by 2030.
“The city’s challenge is simple: costs for city services are going up faster than revenues,” states Diamond Bar’s fact sheet on the measure, which cites rising public safety costs and $100 million in infrastructure and maintenance needs.
Several other cities have local sales tax measures on the ballot, including Santa Ana’s 1.5% sales tax extension and Los Angeles’ sales tax increase for the Los Angeles Fire Department, Measure FD.
“There’s a variety because circumstances among these local governments vary. The types of economies among governments vary, the local conditions, even the preferences for what type of revenue measure or tax measure might work varies,” Coleman said. “A local government that’s looking at one of these is going to look at a number of different options and consider what might be most palatable to the voters in their community.”
What’s on your ballot?
Our LAist Voter Game Plan is here to help guide you through the Nov. 3 election with guides to races across Los Angeles and Orange counties — and that long list of state propositions — to help you cast a ballot that’s in line with your own personal beliefs and values.
But the one thing we don’t do? We don’t tell you how to vote. That part is left up to you.
You can find it all at LAist.com/Vote.
Further reading
