Los Angeles voters may face a series of ballot measures aimed at increasing city revenue in the coming months. These potential tax increases come as the city addresses what has been described as budget pressures stemming from labor contracts and other fiscal challenges.
Proposed Tax Increases
The Mayor and City Council are preparing to place three measures on the June Primary Ballot, projected to generate approximately $200 million annually. These include increases to the Hotel Tax, aiming for $50 to $100 million in revenue, a $70 million Parking Occupancy Tax, and a $70 million Cannabis Parity Tax targeting unlicensed cannabis retailers.
Additional measures are under consideration for the November ballot, potentially raising between $300 and $400 million. These include a retail delivery fee, a tax on ride-sharing services like Uber and Lyft, a tax on major events with attendance exceeding 5,000, and a tax on vacant commercial and residential properties.
Union-Backed Measures
Unions are also pursuing ballot initiatives that would add two half-cent increases to the sales tax. If approved, these measures would benefit the Los Angeles Fire Department and the Department of Recreation and Parks, collectively adding around $900 million to city coffers and raising the total sales tax to 10¾%. The County Supervisors are also considering a separate half-cent sales tax increase to fund healthcare initiatives, potentially generating $1.2 billion.
Impact on DWP Ratepayers
A significant, but currently undiscussed, component of these revenue projections involves the Utility Tax paid by DWP Ratepayers. This tax is linked to the LA 100 Renewables Plan, which anticipates a quadrupling of electricity rates by 2035. Power revenues are expected to increase from $5.3 billion to $21 billion annually, and the associated Utility Tax is projected to rise from $530 million to over $2.1 billion.
Over the next decade, Ratepayers could contribute over $15 billion in taxes to the City, in addition to facing a $16 billion annual increase in power rates. Currently, Ratepayers fund 9% of the City’s $8.2 billion General Fund through the Utility Tax and Power Transfer Fee, totaling $225 million.
What Could Happen Next
If the proposed measures are placed on the ballot and approved by voters, the City could see a significant influx of revenue. However, the extent of this increase will depend on voter decisions. It is possible that some measures will pass while others fail, resulting in a varied financial outcome. The City Council and Mayor could also choose to modify or withdraw some of the proposed measures before they reach the ballot.
Frequently Asked Questions
What is the Cannabis Parity Tax?
The Cannabis Parity Tax is a proposed tax of $70 million on unlicensed pot shops.
How much could Ratepayers contribute to the City’s General Fund in 2035?
Ratepayers are projected to contribute $2.4 billion to the City’s General Fund in 2035, representing 20% of projected revenues.
What is the LA 100 Renewables Plan?
The LA 100 Renewables Plan is a plan that anticipates electricity rates will quadruple by 2035, increasing power revenues from $5.3 billion to $21 billion annually.
How will these proposed tax increases affect the long-term economic health of Los Angeles?
