Agenda
City Council Study Session
October 14, 2025
Adjourned Meeting - City Hall Council Chamber - 4:00 PM 16400 Colorado Avenue Paramount, CA 90723 (562) 220-2000 www.paramountcity.gov
PUBLIC PARTICIPATION NOTICE
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CALL TO ORDER: Mayor Peggy Lemons
ROLL CALL OF
COUNCILMEMBERS:
Councilmember Isabel Aguayo
Councilmember Annette C. Delgadillo
Councilmember Vilma Cuellar Stallings
Vice Mayor Brenda Olmos
Mayor Peggy Lemons
Agenda October 14, 2025
Adjourned Meeting City Council Page 2
PUBLIC COMMENTS
OLD BUSINESS
1. RECEIVE AND
FILE
REPORT ON SHORT-TERM RENTALS
Recommended Action: Provide direction to staff for the
development of a short-term rental ordinance and receive and file.
NEW BUSINESS
2. REPORT REVENUE ENHANCEMENT MEASURES
Recommended Action: City Council review the revenue
enhancement options presented in this report, provide policy direction on which measures should be further analyzed, and identify a preferred course of action for moving forward.
ADJOURNMENT
To a meeting on October 14, 2025 at 6:00 p.m. in the Council Chamber at City Hall, 16400 Colorado Ave., Paramount, CA
Americans with Disabilities Act: In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk’s office at (562) 220-2225 at least 48 hours prior to the meeting to enable the City to make reasonable arrangements to ensure accessibility to this meeting.
Note: Physical hard copies of agenda items are on file in the City Clerk’s office and are available for public inspection during normal business hours. Materials related to an item on this Agenda submitted after distribution of the agenda packet are also available for public inspection during normal business hours in the City Clerk’s office. The office of the City Clerk is located at City Hall, 16400 Colorado Avenue, Paramount.
To: Honorable City Council
From: John Moreno, City Manager
By: John King, AICP, Planning and Building
Director
Date: October 14, 2025
SUBJECT: REPORT ON SHORT-TERM RENTALS
BACKGROUND
A short-term housing rental is the renting of a residential property for a period of less than 30 days. Websites such as Airbnb and Vrbo operate online platforms that facilitate the short-term housing rental process for property owners.
On September 9, 2025, the City Council reviewed an overview of short-term rentals as they relate to Paramount. Planning and Building Department staff described the history of the existing prohibition of short-term rentals in the City, provided a survey of surrounding cities indicating short-term rentals are commonly prohibited in the subregion, and detailed arguments in support of and in opposition to permitting limited or extensive short-term housing rentals.
The overview and options are included in the attached copy of the September 9, 2025 staff report for the short-term rental agenda item.
DISCUSSION
Adopting a more explicit prohibition of short-term rentals is the preferred option.
Alternatives include legalizing existing short-term rentals only, permitting short-term rentals with limits (such as distance, overall number in Paramount, or defined geographic area), and permitting short-term rentals with minimum limits.
During the City Council discussion on September 9, 2025, a property owner with an active Code Enforcement case regarding the unpermitted use of a single-family home for shortterm rentals provided public comment. The property owner, a three-year Airbnb host, explained that she is now in agreement that rentals over 30 days are preferred over shortterm rentals. Drawing on her experience as a short-term rental operator, the property owner pointed to the need for regular cleaning, disinfecting, monitoring; violations such as noisy parties, excessive drug and alcohol use (including marijuana and cocaine), and disruptions to neighbors; and unauthorized smoking and vaping.
Agenda Report October 14, 2025
REPORT ON SHORT-TERM RENTALS Page 2
At the conclusion of the September 9, 2025 discussion, the City Council requested a follow-up meeting to explore the primary recommendation and other options in more detail.
FISCAL IMPACT
None.
VISION, MISSION, VALUES, AND STRATEGIC OUTCOMES
The City’s Vision, Mission, and Values set the standard for the organization, establish priorities, uniformity, and guidelines; and provide the framework for policy decisionmaking. The Strategic Outcomes were implemented to provide a pathway to achieving the City’s Vision. This item aligns with Strategic Outcome No 1: Safe Community - Provide a safe place to live, work, and visit.
RECOMMENDED ACTION
Provide direction to staff for the development of a short-term rental ordinance and receive and file.
To: Honorable City Council
From: John Moreno, City Manager
By: John King, AICP, Planning and Building
Director
Leslie Corrales, Assistant Planner
Date: September 9, 2025
SUBJECT: REPORT ON SHORT-TERM RENTALS
BACKGROUND
A short-term housing rental is the renting of a residential property for a period of less than 30 consecutive days. A rental can encompass the entire house or a room of a home, which may be a single-family home, duplex, apartment, mobile home, accessory dwelling unit (ADU), and other housing types. With websites like Airbnb, Vrbo, and other services creating a relatively simple platform and process for property owners to rent on a shortterm basis, short-term rentals have been growing in popularity.
Short-term Rental Prohibition History
With the exception of ADUs and Junior Accessory Dwelling Units (JADUs), short-term rentals are not defined or expressly addressed in the Municipal Code. Because they are not expressly permitted, they are prohibited under the City’s Zoning Code (Title 17 of the Municipal Code).
In 2017, the City Council adopted Ordinance No. 1090/Zoning Ordinance Text Amendment No. 7, establishing new regulations for ADUs. As part of the ordinance, ADU rentals were specifically limited to terms longer than 30 days in compliance with State law.
In 2021, the City Council adopted Ordinance No. 1151/Zoning Ordinance Text Amendment No. 21, which extended the stated prohibition of short-term rentals in ADUs to also include Junior Accessory Dwelling Units (JADUs) to meet updated State law.
In addition to express prohibition of short-term rentals in ADUs and JADUs, the City Council has included similar prohibition language in regulations for housing developments in newly created PD-PS (Planned Development with Performance Standards) zones.
These projects include the 10-unit Jazmin at Orizaba, the four-unit development at the former Firehouse on Colorado Avenue, and the two-unit Habitat for Humanity project on Hunsaker Avenue.
Agenda Report September 9, 2025
REPORT ON SHORT-TERM RENTALS Page 2
City Council Direction
On April 8, 2025, the City Council reviewed the introduction to Ordinance No. 1198/Zoning Ordinance Text Amendment No. 28, which included minor amendments to a number of land use regulations. The draft ordinance included a provision expressly prohibiting shortterm rentals, or adding text declaratory of existing law. During the discussions on that date, the City Council requested a hold on such a prohibition, and the sections of the draft ordinance pertaining to short-term rentals were removed from the ordinance. On April 22, 2025, the City Council adopted Ordinance 1198 without references to minimum housing rental terms.
DISCUSSION
Survey
To help understand policies regarding short-term rentals in the Gateway Cities region, Planning Department staff surveyed neighboring cities. The following are the results.
City Allowed
in ADU?
Allowed
in main
homes?
Details Reasoning
Bellflower No No
Policy based – staff member mentioned
the city looking to prohibit them officially
but have not begun the process
Prohibited due to
community feedback due
to unpermitted operations
and number of complaints
Cerritos No No
By Code - short-term rentals, vacation
rentals, and home sharing activities are
not allowed citywide
City Council direction and
feedback
Downey No No
By Code: short-term rentals shall be
prohibited in the principal dwelling unit
or ADU.
Prohibited due to
community feedback and
City Council direction
Lakewood No No Rentals must be more than 30 days
Prohibited due to City
Council direction and
complaints of unpermitted
operations
Norwalk No No Policy - no short-term rentals allowed
Prohibited due to City
Council direction and
complaints
Pico
Rivera No No Policy - no short-term rentals allowed Information not available South
Gate No No Policy - no short-term rentals allowed Information not available Whittier No No Policy - no short-term rentals allowed
Prohibited due to
community feedback and
unpermitted operations
Agenda Report September 9, 2025
REPORT ON SHORT-TERM RENTALS Page 3
In summary, surrounding cities do not permit short-term housing rentals. All follow State law and prohibit short-term rentals in ADUs, and they extend the prohibition to all other housing types. Additionally, at present these cities do not anticipate changing their policies to adapt to upcoming major events such as FIFA World Cup 26 or the 2028 Olympic and Paralympic Games.
Other cities do, in fact, permit, regulate, and collect revenue from short-term rentals.
Typically, these cities are the location of or near regional attractions. Examples include Anaheim, Inglewood, Pasadena, and San Clemente.
Reasons for Prohibition
An underlying theme in support of prohibiting short-term rentals is related to the ongoing housing affordability and availability crisis. Each home removed from the housing market for vacation rentals is a contributor to the housing crisis. Taken as a whole, an entire subsect of housing available for travelers becomes unavailable for permanent residents who are searching, often with increased desperation, for a means to remain in Paramount. Preserving housing for long-term rental or sale would help address housing needs.
Jurisdictions cite a number of other reasons for prohibiting short-term rentals. In terms of complaints related to specific unpermitted short-term rentals and neighborhood preservation, noise is the most common source of complaints received by other cities.
Other concerns are vehicle parking, litter and trash, and exceeding permitted occupancy.
In Paramount, residents have contacted the City to report unpermitted construction, such as an owner dividing a single-family home into two homes, in order to accommodate a short-term rental.
Unpermitted Short-term Rentals in Paramount
A review of the two most popular short-term rental websites – Airbnb and Vrbo – indicates approximately 13 properties in Paramount currently listed for rent. Some properties are readily identifiable by specific address, and others with no clear exterior photos showing neighborhood context are almost impossible to identify. Setting aside two outliers, the average rate per one-night stay is $207.
Potential Revenue
Although there are no hotels in Paramount, Municipal Code Chapter 3.24 (Transient Occupancy Tax – TOT) regulates the taxation of hotels. The Code sets the tax at 10% of the amount charged by a hotel operator. This TOT could potentially extend to short-term rentals at the future direction of the City Council.
Agenda Report September 9, 2025
REPORT ON SHORT-TERM RENTALS Page 4
Using the current $207 average per night as a baseline amount and multiplied by the 13 apparent unsanctioned short-term rentals in Paramount, this totals $2,691.00 per night in short-term rental charges. If these operators maintain guests at an average of 200 nights per year (which is an optimistic estimate), this totals $538,200 over the year. A TOT at the current rate of 10% would bring in $53,820 per year as tax revenue if each location was “fully” rented 200 nights per year. To be more conservative and realistic, the existing short-term rentals under a legalized system would generate TOT ranging from $13,455 (slightly less than an average of two nights of rentals each week) to $53,820 for the year.
The consequence of establishing short-term rentals as a permitted use (or discretionary use – requiring approval by the Planning Commission with a public hearing and conditional use permit) would naturally be the expansion of interest and more permanent housing converted to short-term rentals. The abovementioned range of $13,455 to $53,820 in annual tax revenue to the City could easily grow to $53,820 to $215,280 if the number of short-term rentals quadruples.
However, it should be clear that removing more housing units from the Paramount permanent housing market in favor of short-term rentals would further stress the already strained status of local housing affordability. If the City wishes to invest more funding toward housing assistance programs in the future, the added revenue from short-term rentals would be minimized or even negated.
Pros and Cons
The following chart summarizes the arguments for and against legalizing short-term rentals.
Pros Cons
Extra income to owners Less permanent housing
Creates jobs/supports small business Noise
Incentivizes owners to upgrade homes Trash/litter
Additional revenue to City
New revenue would be directed to permitting,
enforcement, housing assistance (no
meaningful net gain)
Supports neighborhood investment Detracts from neighborhood stability and character
SB 346 is a bill under consideration that will help
cities track rentals
Difficult to track rentals; SB 346 untested and
challenges from industry are expected
Meets need for temporary housing during major
events
Exacerbates parking
Agenda Report September 9, 2025
REPORT ON SHORT-TERM RENTALS Page 5
Summary
Cities are at a crossroads with competing issues and events at hand, and it is difficult to find an issue more immediate and pressing than housing. With housing affordability (both rental and ownership) worsening, most cities located away from the beach and amusement parks have opted to maintain a prohibition against short-term rentals. In addition to taking steps to preserve permanent housing, cities wish to preserve the character of residential neighborhoods and ensure nuisances such as noise, litter, and parking are not exacerbated by problematic short-term guests.
All points in favor and against short-term rentals considered, on balance it appears the best option for the community-at-large is to continue the existing prohibition against shortterm rentals. To better clarify the prohibition, the preferred option is to adopt an ordinance specifically declaring the prohibition of short-term rentals in the City’s residential zones.
However, if the City Council wishes to take a different direction, staff will draft an ordinance accordingly based on the requested timing.
Options
The following are possible options:
• No change. Maintain the prohibition of short-term rentals across-the-board and adopt an ordinance more explicitly declaring the prohibition. • Legalize existing short-term rentals. Adopt an ordinance prohibiting new short-term rentals but consider legalizing and regulating unpermitted short-term rentals established before a set date (such as operating before 2024). • Permit short-term rentals with limits. Adopt an ordinance allowing short-term rentals, excluding ADUs and JADUs, with limitation.
o Limit by distance.
o Limit by overall number throughout the city.
o Limit number within a defined geographic area (such as districts or even within a given property or building).
• Permit short-term rentals with minimal limits. Adopt an ordinance allowing short-term rentals in any residence without limitation except for ADUs and JADUs.
The following are other considerations:
Conditional use permit option. While it is uncommon for cities to require a conditional use permit (CUP) for short-term rentals, this is also a possibility. In doing so, the City could require a minimum number of parking spaces and a clear process for suspending or revoking a CUP.
Agenda Report September 9, 2025
REPORT ON SHORT-TERM RENTALS Page 6
Interim ordinance. One potential option is to implement an interim ordinance for shortterm rentals when the events surrounding the Olympics are more imminent. Doing so would allow a regulatory framework for short-term rentals on a temporary basis. Proper findings substantiating an immediate threat to public health, safety, or welfare would be required.
FISCAL IMPACT
None.
VISION, MISSION, VALUES, AND STRATEGIC OUTCOMES
The City’s Vision, Mission, and Values set the standard for the organization, establish priorities, uniformity, and guidelines; and provide the framework for policy decisionmaking. Strategic Outcomes were implemented to provide a pathway to achieving the City’s Vision. This item aligns with Strategic Outcome No. 1: Safe Community – Provide a safe place to live, work, and visit.
RECOMMENDED ACTION
Provide direction to staff and receive and file.
To: Honorable City Council
From: John Moreno, City Manager
By: Lana Dich, Finance Director
Date: October 14, 2025
SUBJECT: REVENUE ENHANCEMENT MEASURES
BACKGROUND
Earlier this year, the City Council directed staff to develop a comprehensive revenue enhancement strategy to ensure long-term fiscal stability and support critical community services. Over the course of several weeks, staff reviewed potential options, conducted internal analysis, and engaged with Council Members through a 2-2-1 setting in September 2025 to receive preliminary direction and feedback.
Based on that guidance, staff have refined the strategy and are now presenting it to the City Council for consideration. The purpose of this report is to revisit the menu of revenue options, discuss their impacts, and obtain additional input before advancing any specific measures for formal action.
DISCUSSION
The City of Paramount has historically maintained balanced General Fund budgets.
However, while preparing the Fiscal Year (FY) 2025-26 budget, staff also developed a long-range financial forecast, which revealed a projected structural deficit if no corrective action is taken. This projected structural deficit was presented to the City Council at the FY 2025-2026 budget review. Expenditures are expected to outpace revenue growth over the next decade, resulting in an estimated General Fund shortfall of more than $5 million by FY 2034 (Table 1).
Over the past several fiscal years, the City has experienced significant growth in operating expenditures, driven by a combination of rising service delivery costs, inflationary pressures, and increasing reliance on contracted services to meet community needs. Key cost drivers include escalating public safety expenses, expanded maintenance and infrastructure demands, state-mandated regulatory requirements, and upward pressure on personnel-related costs such as pension contributions and healthcare (Table 2). In addition, contract services — which fund essential operations such as public safety support, street maintenance, landscaping, and custodial services — have increased substantially as the City continues to balance service expectations with limited in-house staffing capacity. This trend underscores the structural challenge facing the General Fund, where expenditure growth continues to outpace revenue increases.
Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 2
A structural deficit occurs when ongoing expenditures consistently exceed recurring revenues — a persistent imbalance rather than a temporary shortfall caused by economic fluctuations. Without corrective measures and new revenue streams, the City will eventually face difficult choices such as reducing services and programs or deferring maintenance and capital investments.
TABLE 1 - General Fund Revenues, Expenditures and Fund Balance Projections TABLE 2 – Major cost increase over 5 years
To address these challenges, staff evaluated a range of potential revenue sources. Based on preliminary analysis, the following four options represent the most viable paths forward, though some by themselves may only narrow the structural deficit rather than fully resolve it:
1) Parcel Tax
2) Quarter-Cent Sales Tax Increase
3) Cannabis Business Tax
4) Utility User’s Tax (UUT) Modernization and Cap Reduction/Removal Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 3
Each of these revenue options requires City Council action to place a measure on a ballot and subsequent approval by Paramount voters for implementation. When placing a tax measure on the ballot, the City Council must determine whether it will be presented as a general tax or a special tax:
• General Tax: Revenue may be used for any purpose. Requires a simple majority (50% + 1) voter approval.
• Special Tax: Revenue must be dedicated to a specific purpose (e.g., public safety, infrastructure). Requires a two-thirds (66.67%) voter approval.
Per state law, placing a tax measure on a ballot requires a two-thirds vote of the City Council (four out of five members). Additionally, a general tax must appear on a regularly scheduled election that includes City Council seats. The next such election is June 2026.
A special tax may be placed on a general or special election ballot, with the next general election scheduled for November 2026.
ANALYSIS
Parcel Tax
The City of Paramount derives approximately 6.7% of its General Fund revenue from property taxes. In California, the base property tax rate is 1.0% of a property’s assessed value. Of the 1% property tax levied on properties within the City, Paramount receives
6.7% or approximately $3.7 million, while the remaining 93.3% is allocated to other taxing entities, including Los Angeles County (23.1%), Paramount Unified School District (20.5%), Los Angeles County Fire Protection District (16.9%), the Educational Fund (20.4%), Los Angeles County Library (2.2%), Compton Community College District (2.2%), County Lighting Maintenance District (2.2%), and various other special districts.
Under Proposition 13, cities and counties are prohibited from increasing the base property tax rate above 1%, even with local voter approval, except in one specific circumstance:
to repay general obligation bonds for capital improvements that have been approved by a two-thirds majority of voters.
Voters may also authorize a parcel tax, which is defined as a “special tax” levied on a parcel or unit of real property. Unlike a property tax, a parcel tax is not based on assessed value but is typically calculated as a flat per-parcel amount or based on parcel size. Parcel taxes always require two-thirds voter approval and may be imposed for a variety of public purposes, such as public safety, infrastructure investment, or street maintenance. Based on preliminary analysis, a parcel tax structured by property square footage could generate approximately $4 million annually. The rate structure could incorporate differential rates for commercial, industrial, and vacant parcels, and the City may consider exempting residential parcels from the tax (Table 3).
A parcel tax offers several important advantages and considerations. Including a 2% annual escalator would help revenue keep pace with inflation, and parcel tax revenue provides a more stable and predictable funding source than sales tax, as it is not directly Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 4
tied to economic cycles and consumer spending habits. However, as with any tax measure, such a measure could encounter opposition from certain sectors of the community, and careful attention to equity is essential to avoid disproportionately impacting small property owners relative to large commercial or industrial property owners.
TABLE 3 – Projected Revenue from Parcel Tax Increase
If implemented, the additional revenue from a parcel tax would provide a stable funding source to help close the budget gap through FY 2034. Implementation of a parcel tax measure would also involve certain costs. A community survey designed to gauge voter support and refine ballot messaging is projected to cost approximately $35,000.
Consultant services for preparing ballot language, ensuring legal compliance, and supporting campaign strategy are estimated at $40,000. Additionally, County and City election costs for placing the measure on the ballot are expected to total about $15,000.
Quarter-Cent Sales Tax
The City of Paramount derives approximately 42% of its General Fund revenue from sales tax and from the Transactions and Use Tax (Measure Y). The City’s current sales tax rate as of April 1, 2025, is 10.50%. Of that total, the City receives 1% of the Bradley-Burns sales tax and 0.75% from Measure Y, which was approved by voters in 2020 The remaining portion of the sales tax is allocated to the State of California and Los Angeles County. In November 2024, Los Angeles County voters approved Measure A, which replaced Measure H (the Homelessness Prevention and Housing Measure set to expire in 2029). As part of this measure, the sales tax rate cap increased from 10.25% to
10.50%, thereby providing the City of Paramount with the option to increase its local sales tax rate by an additional quarter-cent.
A quarter-cent increase to the existing Transactions and Use Tax would generate more than $2 million annually in unrestricted general fund revenue for the City. These funds could be used to support essential municipal services such as public safety, infrastructure maintenance, and community programs. Revenue potential is directly tied to taxable sales levels, with recent projections from the California Department of Tax and Fee Administration (CDTFA) estimating annual revenue between $2.0 million and $2.38 million, depending on retail activity and broader economic conditions (Table 4). While sales tax is considered somewhat regressive because it is based on consumption, the tax burden is partially offset by contributions from visitors and non-residents who shop within the City.
FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Total Revenues 47,730,300$ 48,726,800$ 49,777,200$ 50,886,800$ 52,016,900$ 53,149,300$ 54,296,800$ 55,812,800$ Parcel Tax 4,000,000$ 4,080,000$ 4,161,600$ 4,244,832$ 4,329,729$ 4,416,323$ 4,504,650$ 4,594,743$ Total Expenditures 48,572,600$ 49,922,000$ 51,313,600$ 52,868,500$ 54,645,400$ 56,492,900$ 58,548,800$ 60,835,700$ Surplus (Deficit) 3,157,700$ 2,884,800$ 2,625,200$ 2,263,132$ 1,701,229$ 1,072,723$ 252,650$ (428,157)$ Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 5
However, it is important to note that the City is already heavily reliant on sales tax, which currently accounts for approximately 42% of total General Fund revenue. This dependence creates fiscal vulnerability, as sales tax revenues are inherently sensitive to changes in consumer spending, economic cycles, and market conditions. Paramount’s revenue base is also highly concentrated, with the top three sales tax producers collectively accounting for approximately 28% of total sales tax revenue. Significant changes in the operations, ownership, or market share of just a few key taxpayers could materially impact the City’s financial stability. For this reason, while a sales tax increase would help address the structural deficit in the near term, diversifying the City’s revenue base remains a critical long-term fiscal strategy.
TABLE 4– Projected Revenue from a ¼-Cent Sales Tax Increase If considered, the additional revenue from a quarter-cent increase would provide critical funding stability through FY 2030. At that time, the City would have the option to return to voters to seek an alternative tax measure or to reevaluate City programs and service levels based on updated fiscal conditions, community priorities, and long-term financial needs. Implementation would involve additional costs, including approximately $35,000 for a community survey to assess voter sentiment, $40,000 for consultant services to assist with ballot language and compliance, and about $15,000 in County and City election-related expenses.
Cannabis Business Tax
Staff reviewed cannabis-related tax opportunities as part of the City’s long-term revenue diversification strategy. Based on current market conditions and prevailing regulatory practices in the region, cannabis business operations could potentially generate between $250,000 and $1 million in annual revenue. Assuming an estimated revenue of approximately $500,000 per year for analysis purposes, cannabis taxation could modestly reduce the City’s structural deficit but would not close the budget gap on its own (Table 5).
Additionally, permitting and regulating cannabis-related uses would require significant amendments to the Paramount Municipal Code. Chapter 5.68 (Marijuana), which currently prohibits cannabis use, would need to be repealed, and new land use regulations added to Title 17 (Zoning) to establish a comprehensive permitting and regulatory framework. Policy decisions would be required regarding allowable uses, appropriate zoning districts, separation requirements from sensitive uses, operational standards, and limits on the number of businesses.
FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Total Revenues 47,730,300$ 48,726,800$ 49,777,200$ 50,886,800$ 52,016,900$ 53,149,300$ 54,296,800$ 55,812,800$ 1/4 Cent Sales Tax 2,000,000$ 2,040,000$ 2,080,800$ 2,122,416$ 2,164,864$ 2,203,662$ 2,243,244$ 2,319,430$ Total Expenditures 48,572,600$ 49,922,000$ 51,313,600$ 52,868,500$ 54,645,400$ 56,492,900$ 58,548,800$ 60,835,700$ Surplus (Deficit) 1,157,700$ 844,800$ 544,400$ 140,716$ (463,636)$ (1,139,938)$ (2,008,756)$ (2,703,470)$ Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 6
Permitting and land use regulations do not require voter approval — these actions are adopted by the City Council through the standard ordinance process. However, imposing a cannabis business tax, including one on cannabis activities such as retail, cultivation, or distribution, must be placed on the ballot by a two-thirds vote of the City Council and subsequently approved by voters.
TABLE 5 - Projected Revenue from Cannabis Business Tax Increase Revenue potential would depend on several key factors:
• The types of businesses permitted (e.g. retail, cultivation, distribution, or manufacturing).
• Local tax rates and competitiveness with surrounding cities • Market demand and the availability of suitable locations within the City. • Shifts in state regulations and consumer behavior.
While cannabis could contribute a meaningful revenue stream, it also carries volatility and policy considerations that the City Council would need to evaluate carefully. One avenue the City Council may consider is applying a voluntary Community Benefits Agreements (CBA) for cannabis business applicants wishing to conduct retail, manufacturing, distribution, or cultivation cannabis operations. As a means of giving back to the community where they conduct business, a cannabis business applicant may enter into a CBA with the City where they would have the option to provide funding directly to a nonprofit organization or pay the City directly whereby the City would in turn provide additional benefits to the community by either special events, programs, or essential services, such as Public Safety.
Implementation of a cannabis tax measure would involve additional costs, including expenses for a cannabis market and feasibility study to assess realistic revenue potential, evaluate the policy framework and regulatory requirements, and support community outreach, ballot preparation, and compliance activities. Staff estimate that these costs would range between $100,000 and $150,000.
Utility User’s Tax (UUT) – Modernization & Cap Reduction/Removal The City currently levies a 5.5% Utility Users’ Tax (UUT) on services such as electricity, gas, and communications. However, over time, shifts in technology, including the widespread use of wireless services, streaming platforms, and bundled communication plans, have reduced the effectiveness of the existing ordinance and limited revenue growth. Modernizing the UUT would update the ordinance to reflect current and emerging FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Total Revenues 47,730,300$ 48,726,800$ 49,777,200$ 50,886,800$ 52,016,900$ 53,149,300$ 54,296,800$ 55,812,800$ Cannabis Tax 500,000$ 510,000$ 520,200$ 530,604$ 541,216$ 552,040$ 563,081$ 574,343$ Total Expenditures 48,572,600$ 49,922,000$ 51,313,600$ 52,868,500$ 54,645,400$ 56,492,900$ 58,548,800$ 60,835,700$ Surplus (Deficit) (342,300)$ (685,200)$ (1,016,200)$ (1,451,096)$ (2,087,284)$ (2,791,560)$ (3,688,919)$ (4,448,557)$ Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 7
technologies, ensuring that new and evolving services are subject to the tax. Additionally, removing the existing $100,000 revenue cap would allow revenues to grow in line with actual consumption rather than remaining artificially constrained.
TABLE 6 - Projected Revenue from UUT-Modernization & Cap Reduction/Removal Increase
Based on current data, modernizing the UUT and removing the revenue cap could generate an additional $433,000 to $500,000 annually. While this would meaningfully reduce the City’s deficit, it would not be sufficient on its own to close the projected budget gap. Nonetheless, modernization offers several important benefits. It would enhance revenue stability by aligning collections with current utility usage patterns, promote fairness and equity by ensuring that all users contribute proportionally, and provide the potential for sustained revenue growth as technology and consumption patterns evolve.
Implementation of these changes would require voter approval.
Implementation of a UUT modernization measure would involve additional costs, including approximately $35,000 for a community survey to gauge voter support, $40,000 for consultant services related to ballot language, legal compliance, and public information, and about $15,000 in County and City election expenses.
Conclusion
The City of Paramount stands at an important fiscal juncture. Prudent financial management and disciplined budgeting have kept budgets balanced in past years, but long-term projections show the current revenue structure will not sustain service levels, infrastructure investment, or community priorities over the next decade.
Addressing the structural deficit will require strategic, long-term solutions — not temporary fixes — and thoughtful consideration of new, voter-approved revenue sources.
Each option outlined in this report carries unique advantages and trade-offs, and together they offer a path to diversify revenue, safeguard essential services, and strengthen the City’s fiscal foundation.
By planning proactively, the City Council can shape Paramount’s financial future before the deficit becomes a crisis. Through deliberate policy choices, clear communication with residents, and a commitment to fiscal resilience, the City can continue delivering highquality services, maintaining infrastructure, and preserving the quality-of-life residents and businesses expect.
FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Total Revenues 47,730,300$ 48,726,800$ 49,777,200$ 50,886,800$ 52,016,900$ 53,149,300$ 54,296,800$ 55,812,800$ UUT 433,500$ 442,170$ 451,013$ 460,034$ 469,234$ 478,619$ 488,191$ 497,955$ Total Expenditures 48,572,600$ 49,922,000$ 51,313,600$ 52,868,500$ 54,645,400$ 56,492,900$ 58,548,800$ 60,835,700$ Surplus (Deficit) (408,800)$ (753,030)$ (1,085,387)$ (1,521,666)$ (2,159,266)$ (2,864,981)$ (3,763,809)$ (4,524,945)$ Agenda Report October 14, 2025
REVENUE ENHANCEMENT MEASURES Page 8
FISCAL IMPACT
This report is presented for discussion as part of the study session and does not, in itself, create any immediate fiscal impact.
The projected structural deficit is the City’s most significant long-term fiscal challenge.
Taking action now can help avoid deeper financial consequences that could jeopardize services, programs, and capital projects. Diversifying the City’s revenue base will improve its ability to weather economic fluctuations, sustain service levels, and support future infrastructure needs.
State law prohibits the City Council from imposing new taxes unilaterally. Any new revenue measure must be placed on the ballot by a two-thirds vote of the Council and approved by voters — by a simple majority for general taxes or a two-thirds supermajority for special taxes.
VISION, MISSION, VALUES, AND STRATEGIC OUTCOMES
The City’s Vision, Mission, and Values set the standard for the organization, establish priorities, uniformity and guidelines; and provide the framework for policy decision making. The Strategic Outcomes were implemented to provide a pathway to achieving the City’s Vision. This item aligns with Strategic Outcome No 6: Efficient, Effective, and Fiscally Responsible - Deliver an efficient and effective City government in a fiscally responsible, transparent and collaborative manner.
RECOMMENDED ACTION
City Council review the revenue enhancement options presented in this report, provide policy direction on which measures should be further analyzed, and identify a preferred course of action for moving forward.