City Council Reviews Alternative Revenue Sources, Directs Dual Budget Framework
Details
The Cerritos City Council on Monday, March 9, directed staff to conduct further evaluation of a potential 1% Transactions and Use Tax (TUT) that would support additional revenues and future water and sewer rate relief. The action followed a presentation by staff at the direction of the City Council on multiple alternative revenue sources. Among the alternative revenues evaluated at the meeting, a 1% TUT would generate substantially greater ongoing revenue than the others.
A TUT, commonly referred to as a local sales tax, applies to taxable retail transactions for some goods and services occurring within the City and to certain purchases allocated through the countywide use tax pool. Adoption would require voter approval. Estimates prepared by the City’s sales tax consultant, HdL Companies, projects that a 1% TUT would generate approximately $19 million annually for the City. More than half of the potential revenue from a TUT would be generated by non-residents.
The City Council also directed the staff development of a dual budget planning framework for the upcoming Fiscal Year 2026-2027 Budget. Under this approach, the City Council would consider adoption of a primary budget scenario that assumes approval and implementation of a voter-approved 1% TUT. At the same time, staff would prepare a contingent budget scenario that would take effect in the event such revenue is not approved.
“The Cerritos City Council recognizes that, absent meaningful changes, long-term financial pressures are expected to intensify. We have directed the City Manager to continue research on alternative revenue sources and look forward to engaging on a dual budget planning framework,” said Cerritos Mayor Frank Aurelio Yokoyama. “These efforts support our City’s strategic priorities and help to ensure fiscal transparency and sustainability.”
Should the City Council adopt a budget assuming additional ongoing revenue from a TUT, implementation would be contingent on voter approval at a future election. Projected levels of ongoing revenue could significantly strengthen the City’s financial outlook and help ensure the City can continue providing high quality public safety services, maintain roads, sidewalks, and parks, and preserve long-term financial stability. It could also help address previously deferred capital improvements and provide the City Council with greater flexibility when considering ways to offset the impacts of recently approved water and sewer rate increases.
If additional ongoing revenue is not approved, the contingent budget would require expenditure reductions and service level adjustments. This is based on current forecasts, which show City expenditures are projected to outpace revenues over time, resulting in recurring structural deficits.
The City Council has also authorized the City Manager to establish a Resident Budget Task Force to provide community input on the City's current budget situation and potential budget balancing strategies. Additionally, all community members are invited to participate in a series of budget meetings. Community budget workshops are planned for April 15 and 21, and the City Council will hold its two remaining budget study sessions on May 11 and June 8, respectively. A public hearing and budget adoption is scheduled for June 22, with the 2026-2027 Fiscal Year beginning on July 1.
“Public engagement is key as the City Council and staff engage in this important work to support Cerritos’ future,” said Mayor Yokoyama. “By attending an upcoming budget meeting, community members will learn about our current fiscal climate, financial forecasts, budget considerations, and have opportunities to share feedback.”
For More Information
More details from the March 9 meeting can be found in the budget agenda report and presentation. More details on the City’s budget process and community meeting dates are available at cerritos.gov/future.