Budget Update
About the City of Paramount’s Budget
The City of Paramount serves a mixed business and residential community of 53,000 residents and is a contract city that partners for numerous services to ensure efficient City services like public safety, law enforcement, park maintenance and trash hauling.
Fiscal Year 2025-26 Financial Overview
Total operating expenses for FY 2025-26 across all funds are projected to be $107.8 million, while all revenues are projected to be $102.4 million, resulting in a $5.8 million budget gap between expenses and revenues needed to run essential City services. The City’s long-term financial projections show that revenues will not keep up with expenses, particularly regarding capital investments in our streets, parks and other City facilities.
The rising costs to update and improve roads and infrastructure, protect the community from crime increases and comply with environmental mandates are contributing factors to the budget gap. Another contributing factor is the rising costs of inflation and the increasing demand for new services and programs.
Addressing Industrial and Commercial Area Investments
The City has managed the balanced evolution of the community from a commercial and industrial hub into a mixed residential and commercial/industrial environment. Commercial and industrial areas in the City provide solid jobs for our residents and create spaces for retailers to offer services to our residents. The City recognizes that small businesses and residents are part of a strong local economic strategy for the City that continues to yield benefits to the community. However, with an active industrial community comes increased wear and tear on our streets. As such, the smart financial decision is to move on to street maintenance early. Based on the City’s 2023 Pavement Management study”, there is a projected cost of $43M to address all arterial/collector streets citywide serving the commercial/industrial corridor. The cost of deferring maintenance increases with each passing year. For example, a street pavement project with a cost of $6.5 million in 2026 would increase by $810k, to $7.3M if deferred to 2028.
The City currently pays $11.7 million to the Sheriff’s Department to patrol all portions of the City, including commercial and industrial. The City would like to invest $500,000 in two dedicated private security patrol cars that would be assigned to patrolling only commercial and industrial businesses.
Because of the tax structure for cities in California, not all commercial and industrial businesses pay sales tax and generate tax revenues for the City. The primary source is through sales taxes on their products, but for many businesses, they either manufacture products not subject to sales tax, or the actual sale does not take place in Paramount. As a result, these entities are not paying for the total services and infrastructure they impact daily. Another common perception is that the City generates a lot of revenue from property taxes, but Paramount is a “Low Tax” City, meaning the City only gets 6.7% of property taxes paid. This is significantly lower than cities like Long Beach, where the city gets 21% of the property tax payments.
As an example of the disconnect between taxes generated and costs of services, one of the largest industrial business blocks in Paramount requires $28.7 million in street repairs due to heavy-duty wear and tear. One of the businesses in that block is a giant warehouse , which pays no sales tax and contributes $1.3 million in property tax, but the City only receives approximately $88,000, of the revenue to fund street maintenance.
To address these kinds of funding gaps so the City can continue to provide timely police service responses and road maintenance repairs, among other City services, City staff recommends that the City must proactively diversify and secure additional revenue streams.
Securing Additional Revenue Streams
City staff looked into different revenue streams that the City can strengthen to ensure there are new revenues to help offset rising expenses. The City has considered several options, such as an increased sales tax, expanding the utility user tax and adding a Cannabis tax, but all were deemed not viable.
One of the remaining options for the City is a property parcel tax that is placed only on commercial, industrial and vacant commercial/industrial properties (not residential homes and apartments). The City has modeled a potential property parcel tax based on the square footage of business property with rates that vary for vacant parcels, commercial parcels and industrial parcels. If the potential parcel tax is approved by voters, commercial properties would be charged 8¢ per square foot, industrial properties would be charged 11¢ per square foot and vacant commercial or industrial properties would be charged 13¢ per square foot.
Residential property owners and renters will not be taxed with this potential parcel tax. If the potential property tax is approved by voters, small property owners with smaller square footage will be taxed less than larger property owners.
Other cities in the surrounding area have taken similar steps to protect their infrastructure. For example, the City of Santa Fe Springs implemented a parcel tax two years ago to fund road and street improvements. That tax generates $6 million annually, with a 2% yearly increase scheduled for the next 25 years. The City of Vernon has also implemented a parcel tax on industrial, commercial and vacant land to fund City projects, health services and public safety. It also implements a warehouse-specific parcel tax. Between these two taxes, the City of Vernon is estimated to have brought in over $16 million last year.
If the potential property tax is approved by voters, the property parcel tax would generate up to $4 million in revenue that could be directly invested into roads and infrastructure, public safety, environmental care and business reinvestment.
The City plans to phase these rates over a three-year period:
- Year 1: 65% of the full rate
- Year 2: 80% of the full rate
- Year 3 and beyond: 100% of the full rate
Once the potential tax reaches 80% of the full rate in year 2, it would be subject to the built-in Consumer Price Index (CPI) cap of up to 3% to prevent runaway increases and requires an independent oversight committee to review expenditures and report annually.
To further showcase what a potential parcel tax would mean for the Paramount business community, small property owners would pay roughly $23 to $97 annually, while a large property owner, such as Ralph’s/Kroger Distribution Center, would pay around $103,000 annually. Overall, 80% of the affected property owners would pay $5,000 or less per year, and 90% would pay $10,000 or less.
Fundamentally, this focused potential parcel tax is intended to ensure that costs to the City created by Paramount commercial and industrial businesses are offset by taxes paid by those businesses.
Local Business Partnerships
The City of Paramount has a reputation for proactive engagement with its business community. The City is an active participant in the Paramount Chamber of Commerce and keeps an open door to businesses of all sizes to encourage their success in Paramount. Paramount actively supports and reinvests in the commercial sector through business-friendly programs:
Financial incentives: The City has in the past provided security rebates for cameras and alarm systems, marketing grants through the Paramount Boost Program, and currently provides Chamber of Commerce scholarships to help small businesses grow.
Advisory partnerships: Paramount connects businesses with no cost advising and workforce training through the Small Business Development Center, SELACO Workforce Development Board, and the LA County Department of Economic Opportunity.
If approved, the potential parcel tax would continue to fund City programs like these, and help provide resources for new ones like grants for ADA compliance, facade improvements and trash enclosure modifications to help small businesses meet state mandates or generally aid economic development in the City.