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Orange City Councilman Jon Dumitru speaks in the city chambers during a council meeting on July 22, 2025. Credit: JULIE LEOPO, Voice of OC<\/p>\nOrange voters will likely decide on another sales tax measure this year after residents rejected a smaller proposed tax increase in 2024.<\/p>\n
City leaders say a 1% tax measure is the only true lifeline for the historic town and they need more revenue to quell a structural deficit that was bubbling up for a while or they may face bankruptcy in a couple of years.<\/p>\n
Going into the next fiscal year, staff also say they will have to transfer $17 million from three different spending buckets, including the capital improvement fund, to balance the budget.<\/p>\n
Councilman Jon Dumitru said the transfer is a one-time patch but officials need to consider long term solutions or make severe cuts.<\/p>\n
\u201c\u200b\u200bWe\u2019re pulling roughly $17 million out of funds just to keep the lights on and we\u2019re continuing to defer millions in internal liabilities that we\u2019re going to have to pay at some point. We\u2019re going to have to catch up. This isn\u2019t a long term plan right now. It\u2019s exactly what has been done for decades, which is kicking the can,\u201d he said at the March 24 city council meeting.<\/p>\n
\u201cWe have to make some real tough choices. If we don\u2019t have a true, hard discussion of a path without new revenue then we need to be prepared for what services we\u2019re going to cut next and how soon and how fast the residents are going to feel it. I think we need to be honest that cost cutting alone is not going to solve this,\u201d Dumitru continued.<\/p>\n
Orange City Councilman Jon Dumitru speaks in the city chambers during a council meeting on July 22, 2025. Credit: JULIE LEOPO, Voice of OC<\/p>\n
Orange City Council members directed staff last week to come back with a 1% sales tax increase ballot measure after floating the idea of legalizing and taxing cannabis sales as well as a host of other tax measures to help dig the city out of a hole.<\/p>\n
City leaders say while a 1% tax increase won\u2019t create significant future surpluses, it is one of the only tax measure proposals out there that will keep them above water on its own in a town when residents shot down a 0.5% sales tax increase two years ago.<\/p>\n
Councilwoman Arianna Barrios said if they are going to ask voters to again consider a sales tax measure they have to be prudent with spending, publicly worrying that if the measure fails they\u2019d face municipal bankruptcy.<\/p>\n
\u201cI also want us to be thinking about contingencies if it fails again. Because if it fails again, my guess is we\u2019re going to be looking at fiscal bankruptcy,\u201d she said.<\/p>\n
\u201cIf we won\u2019t show the fiscal discipline that needs to be shown as we\u2019re moving through this crisis. Why should anyone trust us?\u201d<\/p>\n
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Councilwoman Kathy Tavoularis during the July 22, 2025, Orange City Council meeting. Credit: JULIE LEOPO, Voice of OC<\/p>\n
Councilwoman Kathy Tavoularis said they should not just focus solely on a sales tax and even the 1% measure\u00a0 \u2013 if passed \u2013 would only allow the city to just get by in the next couple of years and not allow them to make improvements or hire more staff.<\/p>\n
\u201cWe\u2019re asking for a sales tax to be mediocre,\u201d she said. \u201cIf we don\u2019t present a sales tax now, that is catastrophic but if we do present a sales tax now, that\u2019s not enough to get us to where we need to be as a city.\u201d<\/p>\n
Mayor Dan Slater and Councilwoman Ana Gutierrez raised concerns that they aren\u2019t able to retain employees or give staff substantial raises to be competitive with other cities, with Slater saying it is leading to exodus from city hall.<\/p>\n
\u201cWe continue to bleed quality, good employees from every department,\u201d Slater said. \u201cWith this budget, all we can consider is 2% and 3% raises, but we\u2019ve got to catch up. We\u2019re so far below median and that\u2019s why we\u2019re losing these quality employees and that\u2019s just not sustainable.\u201d<\/p>\n
A Structural Deficit<\/p>\n
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A family explores Orange City Hall on Sunday, March 6, 2022.<\/p>\n
City Manager Jarad Hildenbrand said the city\u2019s structural deficit is driven largely by nearly $18 million in debt service as well as other long term obligations and they\u2019re looking to stabilize it, but bringing in more revenue will be essential to maintain current public services in the future.<\/p>\n
\u201cWe are eliminating and freezing positions, fully funding known costs such as overtime and workers compensation, and deferring certain one time capital projects so we can focus limited resources on core operations and near term stability,\u201d Hildenbrand said at last week\u2019s meeting.<\/p>\n
\u201cIf we want to keep Orange, Orange, additional ongoing revenue will be necessary. Without it, future budgets will require more belt tightening and will involve further reductions to visible public services,\u201d he said.\u00a0<\/p>\n
According to a staff report, officials have been underfunding the workers\u2019 compensation fund to minimize impacts to the general fund with the hopes of replenishing the fund with future year-end surpluses but it now has a negative balance.\u00a0<\/p>\n
\u201cDue to ongoing General Fund constraints, negative balances in the Workers\u2019 Compensation, General Liability, and Employee Accrued Liability Funds totaling approximately $17.3 million will continue to be deferred,\u201d reads the staff report.<\/p>\n
Hildenbrand said the city eliminated 56 full time vacant positions in next year\u2019s budget, dropping full time staffing positions under 700 and will keep 50 vacant positions on the books.<\/p>\n
Staff are also transferring out about $9.6 million from the general fund to cover unfunded liability to CalPERS and vacation payouts.<\/p>\n
Staff say impacts and delays to public services are being felt across the board from vacancies and the $17 million transfer in will delay capital improvement projects, warning that if there is a drop in sales tax revenue they would only be able to hold on for six months.<\/p>\n
They also say they have exhausted cuts.<\/p>\n
\u201cAny other cut from here on out will be catastrophic. You\u2019re talking about closing down a fire station, you\u2019re talking about closing down the library, you\u2019re talking about contracting out our key services,\u201d said Trang Nguyen, the city\u2019s finance director.<\/p>\n
\u201cWe can\u2019t cut ourselves to prosperity,\u201d Hildenbrand said, adding that even the new fees adopted like paid parking in Old Towne Orange aren\u2019t going to make much of a difference.<\/p>\n
Orange County Cities Look to Voters to Bail Out Budget Woes<\/p>\n
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Old Town Orange. Credit: ROSHNEE MOORTHY, Voice of OC<\/p>\n
Orange officials are grappling with how to avoid municipal bankruptcy and correct a longtime structural deficit as leaders in other OC cities like Costa Mesa<\/a>, Fullerton<\/a> and Santa Ana are also expected to ask voters to bolster their municipal budgets through tax increases this year.<\/p>\n In the past couple years, cities across Orange County have struggled to balance their budgets as city spending outpaces revenues, leading officials to look at not only tax measures but parking enforcement and rates.<\/p>\n In Santa Ana, officials directed staff to prepare a tax measure ballot to keep Measure X \u2014 a sales tax measure approved in 2018 expected to start to sunset in three years and drop annual revenue by $30 million if not maintained by the voters.<\/p>\n In Fullerton, officials are expected to add tax measures to this year\u2019s ballot<\/a> amid a dire revelation that staff mistakenly accounted for over $10 million in reserves that was actually already allocated and that they may nearly deplete their reserve by next year.<\/p>\n Last summer, hired consultants warned Orange City Council members the city would be bankrupt in a couple of years if they don\u2019t make radical changes to their budgeting.<\/p>\n [Read: An End to The \u2018Orange Way\u2019: Scrambling to Prevent Municipal Bankruptcy<\/a>]<\/p>\n That blunt assessment came months after a 0.5% sales tax increase on the 2024 election ballot <\/a>that would have generated $20 million annually for a decade failed to get enough support.<\/p>\n Earlier this month, Orange City Council members debated asking voters to consider making the town a charter city and including tax increases in that proposal that Tavoularis previously said would bring in $10 million in revenue.<\/p>\n
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The Orange Circle fountain. Credit: NATALIE CARTWRIGHT, Voice of OC<\/p>\n