Utility taxes for residential and commercial users were doubled this week from 5% to 10% at a special session of the Compton City Council.
The tax hike, which passed on a 3-1 vote, takes effect immediately and is expected to generate $3.6 million in badly needed revenue for the city.
In a memo to the council, City Manager Howard Caldwell said that without an increase in the utility tax, he would have no alternative "but to recommend significant layoffs in order to remain financially solvent as a municipality."
The utility tax, Caldwell also said, is the only significant revenue source that will stabilize the General Fund, out of which most salaries are paid. Over the last two years, budget shortfalls have forced the layoff of more than 100 people largely because of increased costs and the failure of redevelopment projects to generate anticipated revenues.
In addition, the Legislature passed on new costs to the cities, Caldwell said after the vote. Lawmakers allowed counties, which desperately need money for social services, to begin charging cities for prisoners they put in the county jail and also to charge cities for collecting their property taxes. The jail fees alone, Caldwell said, could cost the city $150,000 this year.
The vote on the tax hike occurred at a special meeting of the council Monday afternoon, which was held immediately after a council workshop on the city's financial health.
However, the council had decided more than a week earlier to schedule the emergency vote on the utility tax in order to beat the vote Tuesday on Proposition 136. The proposed constitutional amendment, which was defeated, would have required city or county governments to get voter approval to raise any taxes.
Patricia A. Moore was the only member of the council to vote against the tax hike. She said the council has a responsibility to find other ways to generate revenue. Compton is in such poor financial health because city leaders in the past mismanaged redevelopment, she said after the council vote on the tax.
"We have spent millions of dollars redeveloping parts of the city but not seen any return on the money," Moore said. She cited as examples the transit center, which has failed to attract significant numbers of tenants; a hotel, which is not drawing enough business to generate revenue, and the auto plaza, which has only one dealership left.
"So who has to now help the city stay solvent? The taxpayers," she said.
Moore also said she was upset that the council had passed the tax at a special meeting designed to circumvent Proposition 136, which she said reflected legitimate concerns of the taxpayers.
Moore is one of three council members seeking to replace Mayor Walter R. Tucker, who died last month of cancer. A special mayoral election will be held in April. Her two mayoral rivals on the council, Bernice Woods and Maxcy D. Filer, voted for the tax hike.
"It's needed by the city and that's the only reason we enacted it," Filer said after the utility tax vote.
He said he did not worry about a probable voter backlash against him and the rest of the council because it voted on the utility tax the day before the statewide vote on Proposition 136.
"I'm thinking of the total city," Filer said. "I studied the issue. I don't look to the election to see how I'm going to vote."
In Lynwood, about 200 residents tried to squeeze into the tiny council chambers Tuesday to protest the city's passage of a 10% utility tax last week. Los Angeles County sheriff's deputies removed two people, and others demonstrated outside the building.
More than 10 residents spoke to the council, urging officials to rescind the tax. Council members scheduled a public hearing on the issue at 5:50 p.m. Monday in Bateman Hall, a large auditorium in the city's civic center. Some council members indicated they would be willing to reduce the tax percentage.
Times staff writer Lee Harris contributed to this story.