City Council Agenda Report
Meeting Date: October 21, 2025
From: Alice Hui, Director of Finance
Department: Finance
Submitted by: Alice Hui, Director of Finance
Subject
Potential Ballot Measure - Utility Users Tax
Recommendation
Receive and file a presentation on a potential Utility Users Tax ballot measure and provide input and direction to staff to continue analysis and development of the measure.
Background
The City’s existing 6% Utility Users Tax (UUT), passed by voters (Measure R) in 2018, is scheduled to sunset in 2028 unless renewed by the voters. The UUT generates approximately $14 million each year, which represents more than 15% of the City’s total revenues, making it the City’s second largest revenue source. This revenue source is a vital component of the City’s general fund and supports a wide range of essential services that keep the City functioning effectively, including public safety such as fire protection, paramedic, 9-1-1 emergency response, police and crime prevention, as well as the cleaning and maintenance of streets, sidewalks, infrastructure, and public facilities.
UUTs are taxes levied by local governments on the consumption of utility services, including electricity, gas, water, sewer, telecommunications, sanitation, and cable television. Currently, nearly 156 cities in California levy UUT, with rates typically ranging between 1% and 11%. The average rate in Los Angeles County is 6%. The City’s UUT applies to utility services used by commercial and industrial customers, including telephone, electricity, gas, water, fiber, cable, and video services, but excludes residential users.
The City’s UUT was first adopted by voters in 2013 (Measure M) at a 1% rate to stabilize financial conditions and support essential services. However, the revenue generated was not sufficient to fund the essential services provided by the City, forcing the City to rely on transfers from its utilities to bridge the gap. To ensure long-term fiscal stability, voters approved an increase to 6% in 2018 with a ten (10) year sunset clause.
Due to its unique industrial structure, the City does not benefit from the traditional levels of property or sales tax revenues that most municipalities rely on. Furthermore, this fiscal constraint is compounded by the way state and federal transportation funding is allocated. Road and street improvement dollars are typically allocated based on residential population, leaving cities like Vernon, despite its large industrial and business community, consistently underfunded. As a result, the UUT serves as one of the few reliable sources of revenue that the City can depend on to provide high-quality essential services.
Analysis
The City’s current general fund budget is $95 million, funding public safety – police & fire, health, public works, capital improvements, and other essential services. The $14 million in UUT revenue supports 15% of this budget. Without this revenue source, the City would face a significant fiscal gap and budget shortfall, making it difficult to provide vital services and programs for residents and businesses. This would necessitate reductions in core services, suspension of capital projects, or the pursuit of alternative revenue sources.
The table below illustrates an across-the-board reduction for each General Fund department.
Since the fire services are contracted with Los Angeles County and cannot be reduced, the remaining departments would be subject to a 20% reduction:
Department FY 2025-26 Budget Required Budget Cut
Public Safety - Fire 24,168,393 -
Public Safety - Police 16,955,498 (3,353,159)
Health 3,630,489 (717,974)
Public Works 15,624,925 (3,090,022)
General Government 18,972,722 (3,752,090)
Capital Outlay 15,608,405 (3,086,755)
Total 94,960,432 (14,000,000)
To provide perspective, the reduction required in the Police Department may equate to the elimination of up to 20 sworn officers, representing nearly half of the current force. Such a reduction would significantly impair the City’s ability to provide essential public safety services.
Similarly, reductions within the Health Department would adversely affect the timeliness and effectiveness of health regulations and inspections, thereby diminishing the City’s capacity to safeguard community health. The City is also responsible for maintaining 47 miles of streets and 88 miles of sewers and storm drains. Any reduction in Public Works staffing or resources would severely hinder the City’s ability to maintain critical infrastructure, including streets, traffic signals, sewer and storm drain systems, and graffiti abatement. Current revenue constraints have already resulted in deferred street maintenance; further reductions would exacerbate this situation and prove detrimental to overall infrastructure conditions. Additionally, the City’s sewer system is approaching the end of its useful life, creating an urgent need for capital replacement. Because the City does not assess sewer fees, funding for this replacement must come entirely from the General Fund, placing an even greater strain on limited resources.
Action Plan and Next Steps
Because the UUT is time-limited and requires voter renewal to remain in effect, placing the measure on the April 2026 ballot allows the City to proactively prepare for its 2028 sunset. This will provide sufficient time for community engagement to clearly communicate the importance of maintaining this critical revenue source. Early and comprehensive planning will be essential to meet legal requirements, maintain transparency with residents, and foster community trust.
To support this effort, staff issued a Request for Proposals (RFP) on March 24, 2025 for Ballot Measure Outreach & Consulting Services and Public Opinion Polling Services. The RFP sought a consultant with a strong background in local government revenue measures, including experience with Proposition 218 compliance, strategic communications, public opinion research, and stakeholder engagement. The City received four (4) proposals in response to the RFP which were reviewed by a staff panel and evaluated based on experience with similar measures, understanding of relevant legal frameworks, qualifications of assigned team members, demonstrated success in voter education, and cost-effectiveness. Team CivX was determined to be the most qualified and capable firm to meet the City’s needs. The firm has an extensive history of working with cities throughout California on similar revenue measures. It will also partner with True North Research for reliable revenue measure feasibility polling and analysis. Its team has demonstrated success in planning and executing legally compliant public education campaigns, conducting voter surveys to assess support and message effectiveness, and guiding jurisdictions through the complexities of ballot preparation and strategic timing.
Team CivX will assist the City to develop a ballot measure strategy, including message development and coordination with legal counsel. The consultant will also conduct voter opinion research to evaluate community understanding of the existing measure and to test potential ballot language. The results of the survey will be used to inform the City’s education and outreach strategy. Moreover, Team CivX will provide regular updates to staff and the City Council, manage project milestones, and coordinate closely with the City Attorney to ensure that all elements of the ballot measure process comply with state law.
If the City Council desires to submit the UUT renewal to the voters at the next General Election, the City Council must adopt a resolution placing the measure on the ballot. Staff plans to bring the general election resolution to the City Council on November 18, followed by the UUT ballot measure resolution on December 16, in order to provide sufficient time for analysis and surveys to be completed by the City’s ballot measure consultants.
Fiscal Impact
The UUT revenue has an approximately $14 million impact annually to the City’s General Fund.
The fiscal impact for the consultant agreement is not-to-exceed $97,350. Funds were not budgeted in the current fiscal year, however, funds will be included in the FY 2025-26 Mid-Year Budget Adjustment for Finance, Professional Services-Technical, Account No. 011-010-130- 529225.
Attachments
None.