Alternative Revenue Sources
Without property taxes, Culver City would need to rely on other sources of general‐fund revenue. Key alternatives include local sales and use taxes, business/gross-receipts taxes, tourism-related levies (e.g. hotel taxes), utility and user fees, public–private partnerships, and novel approaches like land-value taxes or municipal enterprises. Each has tradeoffs and legal constraints under California law (e.g. Proposition 13’s 1% property-tax cap and Proposition 218’s voter-approval rules ).
Sales and Use Taxes
Local sales taxes (transactions and use taxes) are a primary revenue source. Culver City currently levies a 1.0% base sales tax plus voter-approved supplements (0.5% Measure Y and 0.5% Measure C) on all transactions within city limits. In FY2020‑21 these yielded about $22.9 million (≈18.6% of the general fund) . Additional sales-tax measures (requiring voter approval) could raise further funds. For example, many California cities have approved extra ¼¢–½¢ sales taxes. Because Culver’s commercial districts and tourist draws already generate strong sales, raising another local rate could yield on the order of millions of dollars annually.
Implementation: A new local sales tax must be put to the voters as a general-purpose or special tax (e.g. for streets or public safety). Proposition 218 requires majority (special tax) or two-thirds (general tax) voter approval. The city could target niche sales taxes too (e.g. local “Mansion Tax” on high-end real estate transactions), but these also require voter authorization and may face buyer backlash .
Pros and Cons: Sales taxes tap both resident and visitor spending (Culver’s studio-tourism and retail will help), and California allows up to 2% local tax in many areas. However, such taxes are regressive and sensitive to economic swings (COVID-19 lockdowns, for example, cut Culver’s consumer spending). They can also spur tax-shopping in adjacent cities. Under Prop 218, general sales taxes need 2/3 voter approval; special sales taxes (earmarked for specific services) need a simple majority .
Business License and Gross Receipts Taxes
Culver City already levies an annual business license (gross receipts) tax on all businesses. Reforming or expanding this can boost revenue. In November 2022 Culver proposed Measure BL: an updated gross-receipts tax structure (e.g. 0.13–0.35% of sales plus flat fees) to exempt small firms and raise roughly $10 million per year . Such taxes are allowed under CA law (subject to voter approval if intended as a general tax). Many cities rely on business taxes; for FY2020‑21 Culver collected about $15.9 million (≈12.9% of GF) from its business tax .
Implementation: The City Council can set flat business-licensing fees or a gross-receipts rate (often via ordinance or ballot measure for new taxes). Special business taxes on particular industries (e.g. the 4% oil-extraction tax in Measure BL or marijuana business taxes) are common. For example, Culver now levies a cannabis business tax (5% of gross receipts), which brought in about $1.7 million in FY2020‑21 . All new or higher business taxes must meet Prop 218: general business taxes require 2/3 voter approval, special taxes 50%.
Pros and Cons: Business taxes can target profitable enterprises (e.g. Culver’s media, tech, retail sectors). They diversify the tax base and can be structured progressively. But they are volatile (depend on the economy), and high rates may discourage new firms or encourage evasion. Complex gross‐receipts systems also impose administrative burden. Moreover, raising business taxes is politically sensitive and limited by voter approval (e.g. Measure BL passed only after years of study).
Tourism and Transient Taxes
Culver City’s lodging, events, and film industries attract visitors who can bear special taxes. The city’s Transient Occupancy Tax (TOT) on hotel rooms is 14% (one of the state’s highest), generating on the order of $7–12 million per year (pre-pandemic peak, see state data ). Major hotel markets like Anaheim or San Francisco levy similar 12–15% TOT rates. Other tourism-related levies include car rental taxes (e.g. 14% in Culver/LA County), parking fees, and special event taxes. Special districts or improvement areas (e.g. a downtown Business Improvement District) can also assess hotel or parking taxes.
Implementation: TOT and similar “sin taxes” can be set by council (usually a majority vote for special-use funds). For instance, voters authorized Culver’s TOT increase from 12% to 14% in 2012 . The city could consider adding a parking-impact fee or event admissions tax. Tourism district assessments (voter-approved by those districts) are another tool. However, TOT hikes are capped by state law at 15% and generally require voter approval if changed.
Pros and Cons: Taxes on lodging, recreation, or events largely fall on visitors, so residents see less burden. In tourist-heavy periods these are lucrative – for example, Hawaii’s tourism revenues allow it to keep property taxes very low . However, TOTs dropped sharply during COVID (Culver’s fell ~50% in 2020 ) showing vulnerability to travel trends. High rates can also deter tourism. And these revenues, unlike property tax, are often restricted to tourism or park-related spending (e.g. Proposition 26 requires TOT to fund “tourism” purposes). Special taxes (like a higher TOT or event tax) would need voter approval under Prop 218.
Utility, Service and Franchise Fees
Culver City already collects several consumption and franchise fees. Key among these is the Utility Users Tax (UUT) – a locally levied tax on electricity, gas, water, telephone and cable bills. Culver’s UUT rate is 11% (except 9% on prepaid wireless) and generated about $13.2 million in FY2020‑21 (≈10.7% of GF) . The city also imposes franchise fees (e.g. 5% of cable/telecom revenues ) and could levy municipal utility surcharges (Culver’s mainly SCE/SoCalGas territory yields a fixed in-lieu fee). Development impact fees (for parks, traffic, affordable housing) are also an option, as are higher fees for permits and licenses (e.g. building permits, parking tickets).
Implementation: UUT and franchise fees are council‐adopted, subject to Prop 218 (a fee used for general revenue is treated as a tax, requiring voter approval). Development fees can be set by ordinance (subject to stricter Prop 218 “nexus” tests if raised). Importantly, water and sewer service charges are excluded from the Prop 218 voter requirement if proportionate to service (but these only fund utilities, not general fund).
Pros and Cons: UUT and fees are relatively stable revenue sources. Utilities (power, telecom, gas) are inelastic needs so UUT revenues are less volatile than sales tax. Culver’s UUT has been gradually declining as landlines disappear , but still brings in double-digit millions. On the downside, consumer groups oppose UUT increases (seen as regressive). Also, Prop 218 forces public votes on any new or higher utility taxes. And existing UUT is already at 11%, a high level (most cities cap at 7–10%). Franchise fees are relatively fixed but provide only modest revenue (usually a few percent of utility revenues). Permits and fines (parking tickets, building permits) can be raised only so much – they also must remain roughly proportionate to cost under Prop 218 .
Public–Private Partnerships and Value Capture
Culver City could leverage public–private partnerships (P3s) and value-capture schemes to fund projects without touching property tax, although these often support capital rather than regular operations. For example, the city might offer a long-term lease or concession of city assets (parking garages, fiber networks, municipal bus system) to a private operator in exchange for upfront cash or revenue shares. Infrastructure P3s (e.g. privately-financed street/parking garages) are authorized under California law (Gov. Code §5956 et seq.) . Special financing districts (assessment districts or Community Facilities Districts) could charge new fees on development. Joint development agreements (sharing property development profits with a city) are another form of PPP.
Implementation: These arrangements typically require complex agreements. For example, a parking concession in another city might grant a private firm rights to collect meters in return for a lump-sum payment. Culver could explore selling air-rights or leasing city land for mixed-use development. However, most P3 flows go to project debt service rather than unrestricted general revenues. Value-capture (like tax-increment financing) was barred after California’s 2012 redevelopment dissolution, so new TIF zones are not allowed.
Pros and Cons: PPPs can unlock large one-time cash (benefiting capital budgets) and transfer risks to private partners. They also spur new development. But they rarely provide stable annual revenue for city services. They require careful structuring to avoid expensive long-term obligations. Legal constraints (state procurement laws, Proposition 208 payroll rules, California Environmental Quality Act, etc.) make P3s administratively heavy. In practice, PPPs are best suited for financing infrastructure (new fiber, buildings, parking), not for general-fund operations.
Land-Value Taxation
A true land-value tax (LVT) – taxing only the value of land (not buildings) – is theoretically efficient and could replace traditional property tax. In practice, it is very rare in the U.S. The only U.S. city to fully adopt LVT was Altoona, Pennsylvania (pop. ~46,000) . Between 2002 and 2011 Altoona phased in a tax on land up to 100% of assessed land value (while phasing out the tax on structures) . Result: about 72% of parcels saw lower taxes, while vacant/undevoted land taxed more, theoretically spurring development . (Land values in Altoona were one-seventh of total assessed value, so the city multiplied the tax rate by seven to keep revenue neutral .) Internationally, places like Hong Kong, Singapore, and Denmark use substantial land-value taxation .
Implementation: Converting to LVT would require state-authorized changes in assessment law. Under California’s Proposition 13, property taxes are capped at 1% of assessed value, and the base assessment cannot be reallocated between land and improvements without a constitutional amendment . In effect, implementing a higher tax on land than buildings would require voter approval to reclassify assessments (effectively a new tax), which is highly unlikely. Even without Prop 13, setting up separate land/improvement assessments would be administratively complex.
Pros and Cons: LVT is economically efficient (land supply is inelastic) and fair (taxes benefits of location). It strongly incentivizes development of vacant or underused land. However, the Altoona experience shows its benefits are unproven (local leaders could not point to clear development results) . In California’s legal environment, an LVT would face nearly insurmountable hurdles (voter resistance, legal reform), making it infeasible as a short-term solution for Culver.
Municipal Enterprises and Special Industry Levies
Another option is to expand city-owned businesses or special-sector taxes. For example, some cities operate utilities or airports that generate net profits. Culver City has a municipal bus system (Big Blue Bus), a fiber network for businesses (Culver Connect), parking garages, and utility franchise arrangements, but none large enough to fully replace property tax. However, the city could leverage these better: for instance, it could raise rates or charges for municipal services (charging the fiber network higher rents to telcos, or parking fees). Similarly, Culver could increase taxation on high-return industries: it already taxes cannabis and has proposed an oil-extraction tax .
Implementation: The city council can set rates for municipally-run services (subject to cost-recovery rules). Special levies (like Culver’s cannabis tax) are straightforward because state law explicitly permits cities to tax marijuana businesses. Severance taxes on oil or gas require voter approval but can be targeted at an inelastic base (if the resource is local).
Pros and Cons: Municipal enterprises that produce surplus (like an electric utility) can subsidize general services, but Culver lacks a large city-owned utility. In-lieu franchise fees and partial utility profits currently contribute only modestly. Expanding these may be politically easier than raising broad taxes, but yields are limited. Industry-specific taxes can raise millions (as with cannabis) but are volatile and must be carefully structured to avoid pushing businesses out (e.g. too-high cannabis taxes drive activity to neighboring cities).
California Legal Constraints
Any alternative must navigate California’s strict tax rules. Proposition 13 (1978) caps local property tax rates at 1% of assessed value and prohibits reassessment except on sale (and limits annual increases). It locks Culver’s property tax share to only ~10.25% of that 1% total , so property tax is inherently minimal (only ~3–5% of Culver’s general fund ). Meanwhile, Proposition 218 (1996) requires voter approval for nearly all new or increased local taxes or fees . This means any general-purpose sales tax, business tax, or tourism tax likely needs at least a majority (often two-thirds) of voters to pass. Moreover, fees must be proportional to service; otherwise they’re treated as taxes. A summary of allowed alternatives in Prop 218’s authors’ own words specifically highlights business license taxes, hotel taxes, and entertainment taxes as potential replacement revenues . Still, California’s tax toolbox is limited: no local income tax, and only special districts (fire, schools) can impose certain parcel taxes (Prop 13 mandated 2/3 votes for those). In short, most of the above alternatives require public votes and/or complex enabling state statutes, which constrains how far Culver can go without property tax.
Summary of Alternatives
| Source | Potential (Culver Example) | Pros | Cons/Challenges |
| Sales/Use Tax | 1¢ local tax ≈ $23 M/year (FY20/21) | Broad tax base; visitors pay; existing infrastructure to collect; can be earmarked. | Regressive; volatile with economy; voter‐approval required (2/3 for general tax); competition with adjacent cities. |
| Business License Tax | ~$15.9 M (12.9% GF) (caveat: Culver grew heavily) | Scales with local economy; target profitable firms; relatively under-taxed sectors (e.g. cannabis ~$1.7 M ). | Highly volatile; burdens small businesses; must meet voter thresholds; tax complexity. |
| Tourism/Transient Taxes | ~$7–12 M (pre-COVID) from 14% TOT | Falls on visitors (not locals); tapped into growing tourism industry (Sony, studio tours); state allows up to 15%. | Drops sharply in downturn; legally restricted to “tourism” uses; public vote needed for increases. |
| Utility/User Fees | ~$13.2 M (UUT, ~10.7% GF) | Stable base (people need power/water); relatively easy to levy (city ordinance); band-aid on utilities and telecoms. | Highly regressive; Prop 218 voter-approval required if for general purposes; already near practical cap (11%). |
| Public-Private Partnerships & Value-Capture | Up to tens of millions one-time (e.g. asset lease) | Can unlock large capital for infrastructure; shifts risk and financing costs to private partner. | Rarely generates recurring revenues; complex legal/negotiation process; Prop 13/218 limit new assessments. |
| Land-Value Tax | Potentially full replacement (Altoona example) | Economically efficient; incentivizes development; could fully replace prop tax if enacted. | Infeasible under Prop 13 without constitutional change; administrative overhaul; public unfamiliar with concept. |
| Municipal Enterprises/Other Taxes | Varies: Big Blue Bus, fiber, parking, cannabis (e.g. ~$1.7 M) | Captures profit from city-owned services or niche industries; limited impact on residents. | Yields generally small; sectors may be cyclical (cannabis), or require heavy capital (fiber); again subject to voter/prop rules if used broadly. |
Each alternative can help mitigate the loss of property tax revenue, but none is as stable or straightforward as property tax under normal circumstances. In practice, a diversified mix is needed. Culver City may rely more on sales tax and UUT (already large share) and expand targeted taxes (e.g. Measure BL’s business tax and the TOT) while carefully structuring any new fees to comply with state rules. However, Prop 13 and Prop 218 mean every new tax avenue will likely require voter support, and some options (like true land-value taxation) face near-insurmountable legal hurdles in California .
Sources: Culver City budget documents ; federal and academic studies of LVT ; Legislative Analyst and state reports on Prop 13/218 ; industry analyses of tourism and tax alternatives . (See linked citations for details.)