Orange kicks the can on sales tax ballot measure amid budget crisis
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With budget woes barreling toward Orange like a wayward car headed for its famed Plaza water fountain, the City Council this week discussed a sales tax ballot measure as one way of slamming the breaks.
Last July, accounting consultants hired by Orange suggested a 1% sales tax increase as the principal means for Orange to avoid bankruptcy within a few years.
With roughly two and a half months left to put such a measure on the ballot, most members of the council conveyed a sense of urgency during Tuesday’s regular meeting while others wanted a broader range of revenue raising options to discuss.
“We all know what we need to do to help ourselves, but we also know that the sales tax [ballot measure] is not enough,” said Councilmember Ana Gutierrez. “Time is of the essence. I would have really liked to have had this discussion months ago. I don’t know why we waited so long.”
Orange’s proposal to temporarily shelve several infrastructure projects for the next fiscal year comes as City Council members push for a sales tax ballot measure to avoid a projected bankruptcy.
Councilmember Kathy Tavoularis sought to table the sales tax discussion before it even got started, citing its narrow scope. She had hoped to explore other options in addition to the measure, like becoming a charter city, raising hotel bed taxes and allowing legal retail cannabis in order to tax it.
“I was under the assumption that we were going to bring up all remedies at one time,” she said. “I’m not comfortable taking a position tonight if we’re not having everything else discussed.”
Mayor Dan Slater was in favor of initiating the conversation, even if the sales tax hike wasn’t put on the ballot that evening, as Orange’s financial future continues to look bleak.
The city is facing a $20-million operating deficit in the next fiscal year, which could be offset by a $17-million transfer of special revenue funds, including those allocated for much needed capital improvement projects.
Deputy City Manager Jack Morgan reported that a 1% sales tax would bring $37 million to Orange’s coffers. The tax would not be levied on purchases like groceries, medicine and medical services. Orange would keep 100% of the percentage increase, with none of the additional revenue going to the county.
“We’re facing real financial … challenges,” said Councilmember John Dumitru. “It’s not speculation, it’s not political, and it shouldn’t be at this point. It’s fact. Our costs are rising, infrastructure is aging and the demands on our public safety and our city services continue to grow.”
Dumitru added that if a sales tax ballot measure does not pass, Orange would have to consider further cuts, including to public safety, which accounts for about 70% of the city’s general fund.
To avoid that scenario, five out of seven members would have to vote to put the measure on the ballot. In an election year, Dumitru acknowledged that doing so could amount to “political suicide” for some of his council colleagues.
At least one councilmember did not favor a move toward a sales tax increase.
“I’ve spent some time really getting into an assessment of our budget over a decade in a more tangible, specific way,” said Councilmember Josh Gyllenhammer, whose seat is up for election in November. “Based off of what I’m currently seeing, I don’t believe we need a sales tax.”
Gyllenhammer also did not immediately support spending for a “road show” of city-led presentations and town hall events on Orange’s financial situation before a sales tax measure is placed on the ballot.
San Clemente officials want to clarify who can argue for and against a sales tax hike for beach erosion and wildfire protection projects before putting it on the ballot.
City staff indicated that education is key to avoiding the fate of Measure Z, a half-percent sales tax hike put on the ballot by council that Orange voters narrowly rejected in 2024.
A recent survey of 800 residents showed 58% support for a sales tax measure, slightly less than past polling for Measure Z, even as about 70% of respondents understand the city is in a precarious financial position.
Councilmember Arianna Barrios expressed her fear the city is behind the curve of its previous outreach effort two years ago.
“I’m just a little concerned that we haven’t left ourselves all the time that we need,” she said.
Despite a last ditch attempt by Gutierrez to expedite the process, his colleagues could not coordinate their schedules to call a special meeting and will have to wait until the May 12 council meeting to revisit the issue.
“I am ready to vote on this whenever my colleagues are,” Slater said. “I’m anxious to get this on the ballot, and once again, give the citizens of Orange the opportunity to decide what they want their city to look like.”
