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Orange officials haven’t come to a consensus on the tough choice of asking voters to consider increasing local sales tax to help bail their city out of a budget deficit that is millions of dollars deep.
It could result in even more cuts to public services as the deadline to get measures on the November ballot quickly approaches – cuts some council members are hesitant to make while grappling with an $8.7 million deficit.
Now, Orange City Council members are expected to again consider sales and hotel tax measures at a meeting this Friday at 4:30 p.m.
Councilwoman Arianna Barrios, who pushed to ask voters about increasing the sales tax, said officials should be ready to make more cuts if her colleagues can’t reach a consensus.
“Of course the first answer would be no sales tax, but that’s not a great answer right now given what we’re facing,” Barrios told her colleagues Tuesday night.
She later added, “If we cannot come to a conclusion on an initiative, then we have to put our money where our mouth is and make the cuts that are necessary to keep us fiscally solvent.”
Mayor Dan Slater first proposed a 0.5% sales tax increase for 12 years, but failed to gain any traction with his colleagues Tuesday night.
“All right, well, the voters put me here for a reason and I’m not running for anything else,” said Councilman Denis Bilodeau, who proposed a 0.5% sales tax measure projected to generate $20 million in revenue annually and sunset in 10 years.
It also failed.
Every single motion made after failed for a lack of support with Councilmembers Jon Dumitru, Kathy Tavoularis and John Gyllenhammer voting against every attempt to craft a sales tax measure.
The measure that nearly made it to the November ballot was a 0.5% sales tax that would end in 15 years.
Councilmembers Arianna Barrios, Ana Gutierrez, Slater and Bilodeau voted for it, but it ultimately failed because it needed five members to support it.
Tavoularis said she wished she had more time to consider budget cuts and new revenue.
“I do think I could have done a better job at cutting more and suggesting more cuts. The runway to this point has been short and I would like more time to go over some of those cuts. That’s probably not a luxury we have,” she said.
Barrios and Gutierrez were the only elected officials asking residents to explore a 0.75% or 1% sales tax increase that city staff projected would generate $30 million of $40 million annually respectively.
“A half cent doesn’t cut it, it still keeps us underwater,” Barrios said.
“Is the thought that we’re just going to cut more, we’re just going to hope and pray,” she said, adding “or are we going to get there and I just don’t think we have the time nor do I think that our public has the patience for us to diddle around on this.”
But Bilodeau and Slater refused to support any measure that had more than a 0.5% increase.
“I’ve always thought half a cent would be the appropriate rate to cover the deficit that we have and get our head above water,” Bilodeau said.
Public Safety Concerns
“We currently don’t have enough revenue to continue that project to provide high quality services to our residents, our businesses and our visitors,” said Augie Rocha, president of City of Orange Police Association, urging the council to put the measure on the ballot.
“One must not shy away from our responsibility to make the seemingly bold choices to serve the greater good.”
Along with presidents of both the fire and police union, residents showed up Tuesday to urge the council to put the measure on the November ballot to help address the deficit and prevent cuts to public safety services.
“I want our city to continue to be a city, which has strong public safety libraries, a local history center, parks, a senior center, recreation programs and community events,” said Reggie Mundekis, a local resident and longtime watchdog.
Currently, about 70% of the city’s general fund goes towards public safety – both the police and fire departments.
A couple of local car dealership owners came out against the measure, arguing that people avoid buying cars in cities with high sales taxes and that taxes on car sales are a big revenue generator for Orange.
“Cities have made similar pledges to raise sales tax rates for a limited time and they’ll correct their budget deficits during that time,” said John Sackrison, executive director of OC’s Automobile Dealer Association.
“From what we’ve witnessed quite the opposite happens. Once the additional revenue comes in it is spent in a similar manner that led them to the deficit in the first place.”
Since the sales tax rate on car sales depends on where the automobile is registered, some officials floated the idea of an outreach campaign to raise awareness on how it works.
According to a staff report, the Registrar of Voters estimates that it will cost $8,000 to put the measure on the Nov. 5, 2024 ballot.
Tuesday did not mark the first time city leaders have pushed off discussions on a potential sales tax measure in the face of an initially projected $19 million deficit – kicking a debate on the matter in May.
[Read: Can Orange Leaders Make The Hard Choices To Tame a Looming $19M Budget Deficit?]
Public Events Get Slashed, More Cuts Coming?
The efforts on a sales tax comes after city officials Tuesday decided to cut all the publicly hosted community events like Concerts in the Park after July 10 to save money.
“If we’re going to be serious about cuts, any event that is not picked up by a nonprofit to sponsor needs to end and that’s just the way it has to be,” said Dumitru who proposed the cuts.
He also floated the idea of contracting the county to run their libraries to save money.
Orange County Republican Party Chairman and former Orange Mayor Fred Whitaker urged council members to reconsider the sales tax measure, recounting the budget struggles in the fallout of the Great Recession.
“You don’t have to put this on the ballot. You have time, you can take the year like we took 2011 and work on your variable costs and you can take another year, like we did in 2012, to work on fixed costs,” he said during Tuesday’s public comment.
Friday’s expected discussion comes as city leaders shaved off $9.5 million from the spending deficit through a series of cuts and new revenue streams, including upping parking enforcement on residents – a move that is expected to generate up to $10 million over five years.
[Read: Orange Residents May Soon Vote on Effort to Raise Sales Tax to Keep City Budget Afloat]
The cuts include a series of hiring freezes and delaying critical maintenance projects, like roads and parks.
And more could be coming.
Officials also said that a budget ad-hoc committee would continue to look at where cuts could be made or more money brought in.
Looking For More Revenue Across OC
Officials in Orange aren’t the only ones looking at taxes to help address budget holes.
In Santa Ana, officials are researching a cigarette litter abatement tax and the impact it could have after staff warned earlier this year that city’s revenue will drop by $30 million in 2029 with the expected decrease in Measure X, a 1.5% sales tax increase approved in 2018.
[Read: Santa Ana Leaders Warn Looming Sales Tax Cliff Could Tear Up Public Services]
In Fullerton, city leaders are considering hiking hotel taxes after facing years of budget turmoil and projecting a $9.4 million budget deficit in next year’s general fund.
[Read: New Taxes? Increasing Revenue in Orange County Amid Budget Shortfalls]
Orange is looking at other ways to get more revenue, like implementing an over-enrollment penalty on Chapman University, as well as a fee charged for use of police and fire services on campus.
Dumitru is also suggesting the city look into a policy discussion on tax sharing to help entice filmmakers to produce movies in their city and generate more revenue.
“I say we lift the skirt a tad and show our knee,” he said. “And tell them to come here.”
Hosam Elattar is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at helattar@voiceofoc.org or on Twitter @ElattarHosam.
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