Taking an early look at the proposed budget for another fiscally challenging year, the Orange City Council is eyeing ballot initiatives to help alleviate shortfalls.
As part of that conversation, councilmembers renewed talks of a sales tax that could go before voters as early as November, but also discussed whether a city charter could help with revenue options. Councilmembers first put the question of a local sales tax to voters in 2024 when the council was urgently thinking of ways to slim down a $19.1 million annual deficit, which city staffers said at the time would have depleted Orange’s reserve funding by now if not for the city’s steep spending cuts since.
Looking at the next fiscal year, scant revenue gains against increasing costs “across all major expenditure categories” are again on the horizon for Orange, a recent staff report to councilmembers warned. For one thing, the city’s general fund faces an underlying structural deficit driven by debt, totaling $17.9 million for bonds to meet pension obligations and lease revenue bonds.
The budget that councilmembers took a look at recently, which city staffers put together with a zero-based approach meaning its built from scratch, not just adjusted from the previous year, hopes to alleviate that budget gap with proposed hiring freezes, cuts to city staff positions and internal service funds and deferring some $17.3 million in workers’ compensation, general liability and employee accrued liability funds.
By doing that, officials said next year’s budget, on paper, will not repeat the $2 million general fund shortfall the city faced last year. But councilmembers aren’t resting easy.
“With this budget, all we can consider is 2% to 3% raises, but we’ve got to catch up,” Mayor Dan Slater said. “We are so far below median, and that’s why we are losing these quality employees. And that’s not sustainable.”
The budget includes plans to slash about 45 full-time positions and freeze 10 positions, which would reduce the city’s workforce by 3% compared to last year.
“Getting a sales tax measure passed is my No. 1 goal this year,” Slater said. “I would hope that my colleagues would support moving forward with a 1% sales tax in November.”
The council previously asked voters to approve a half-cent local sales tax measure, with a 10-year shelf life, which at the time officials estimated would raise $20 million in city revenue a year. Voters narrowly rejected the idea in 2024.
Councilmembers discussed putting out a survey to gauge public interest in another ballot measure to create a local sales tax and whether the tax should have an expiration date. Slater said he is hoping for a sales tax with a lifespan of at least “10 years.”
Earlier this month, councilmembers launched an initial discussion about the prospect of the city adopting a charter, essentially a city constitution, and decided the idea is at least worth exploring. It would also be something ultimately decided by voters.
“I still think the best vehicle is to do the charter so we can add a couple more questions within the charter, get more done,” Councilmember Kathy Tavoularis said, adding that she’d like to see a utility and transient occupancy tax, or a tax on hotel stays, included in the charter.
Another budget study session is planned for April 14, during the city council’s next meeting.