Faced with a $45 million deficit over the next three years, Long Beach officials will begin discussion Tuesday about whether to pursue new taxes on power plant companies, property sellers, businesses or electricity users.

The budget shortfall is a result of federal funding for the pandemic drying up, and new requirements that the city phase out oil production by 2030.

Ideas to increase revenue in other ways — such as bolstering tourism and the space industry — won’t be enough to maintain current staffing and services, according to a staff memo to the City Council.

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City Manager Tom Modica on Tuesday will present decision-makers with a number of options to increase annual revenue by as much as $24 million:

Power plants

The Alamitos Energy Center owned by AES and the Haynes Generation Station owned by the Los Angeles Department of Water and Power are currently exempt from the city’s 5% utility users tax.

The language in the city’s municipal code that allows this exemption is 30 years old “and has not been revised despite dramatic changes in the utilities industry,” the memo says. When the language was adopted in 1994, the Alamitos center was owned by a public utility; now it is owned by a publicly-traded for-profit corporation.

Removing that exemption code could net up to $15 million in additional revenue, officials say.

Property sales 

Long Beach could also add a local “real property transfer tax” that would impact anyone who sells property in the city, whether it be commercial or residential.

Long Beach could pitch a tax to voters similar to that of Los Angeles’ Measure ULA, known as the “Mansion Tax,” which levied additional assessments on sales over $5 million, and even steeper fees on sales over $10 million.

Long Beach, however, doesn’t have many of those mega-real estate deals, so it would likely consider something like Pomona and Redondo Beach, which charge sellers a flat amount per $1,000 of total assessed value for each sale.

Modica proposed either a flat rate of $5.60 per $1,000 in property value, which would generate about $16 million annually; or a two-tiered system in which $3.30 per $1,000 in value would be charged for the first $1 million in value and $5.60 would be charged for sales over $1 million, which would generate $12 million annually.

In the flat rate scenario, a person selling a home for $900,000 would pay $5,040 in added taxes. In the second scenario, they would pay $2,970. Both of those would be in addition to county fees and taxes for recording sales.

Business licenses

Long Beach currently assesses a flat fee for business licenses, with the average business paying $321 a year.

Doubling that fee to $662 would generate $15 million a year for the city’s general fund, the memo says.

Officials, however, note that those increases have the potential to be passed on to customers.

Electricity fees 

Long Beach currently charges a 1.66% franchise fee for electric power that Edison pays to the city after assessing its customers.

Long Beach could generate up to $21.5 million in new annual revenue if it more than doubled that charge to 5%.

For Long Beach residents, that would mean an average increase of close to $30 per year, or $2.47 per month.

“As it is an average amount and based on usage, rate payers with low usage would pay less, and ratepayers with higher usage would pay more,” the memo said.

Homelessness funding 

Though not a local tax, the city would also stand to significantly gain from a countywide tax measure on the ballot this November to fund homelessness services. The new tax would repeal Measure H, a quarter-cent sales tax, and replace it with a half-cent sales tax for programs to help the unhoused.

Not only would Long Beach gain some of that revenue because it operates its own homeless programs, but it would also reap millions more revenue from its current Measure A sales tax.

Because the state has a 10.25% sales tax ceiling, Long Beach can currently only charge .5% sales tax through Measure A, which was intended for public safety and infrastructure. However, special state legislation passed in 2023 would exempt the new LA county tax measure from that ceiling and allow the sales tax to grow as high as 10.75%.

If that measure passes — more specifically, if Measure H is repealed — Long Beach would be able to charge 1% for Measure A, bringing in another $24 million in annual revenue.

Any potential new local taxes or fees that require voter approval would need to be placed on the ballot by August.

The City Council will discuss these ideas when it meets at 5 p.m. Tuesday in Civic Chambers, 411 W. Ocean Blvd. See the full agenda here.

Melissa Evans is the Chief Executive Officer of the Long Beach Post and Long Beach Business Journal. Reach her at [email protected], @melissaevansLBP or 562-512-6354.