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As the start of a new fiscal year quickly approaches in July, city officials across Orange County are looking at ways to bring in new revenue and make spending cuts to keep critical municipal services afloat.
It comes as a handful of cities in the county face multi-million dollar budget shortfalls this year they say are largely driven by a lack of new money coming in.
[Read: Heading Off a Fiscal Cliff: How Are OC Cities Planning For Budget Shortfalls?]
Here’s a look at how officials in some OC cities are planning to help address that problem by bringing in more money through potential new taxes.
Patching a $19 Million Budget Deficit in Orange
Facing a $19 million budget deficit, officials in Orange are moving to bring forth a ballot measure for November asking residents if they want to raise the local sales tax.
[Read: City of Orange Marches Closer to Sales Tax Increase to Patch Bleeding Budget]
Orange City Council members are expected to continue discussing the sales tax measure at their Tuesday meeting.
Officials there are also slashing millions in spending for next year – cutting funding for the police department’s crossing guard program, deep cleaning sidewalks and putting a hiring freeze on the fire department and city hall.
Beyond cuts and a sales tax increase, officials are also looking at other ways to bring in more revenue.
This includes potential new city charges to be determined through a fee study and upping parking enforcement citations on residents.
Officials are also looking at implementing new fees on Chapman University including implementing an over enrollment penalty on the university as well as a life safety fee charged for use of police and fire services on campus.
[Read: Can Orange Leaders Make The Hard Choices To Tame a Looming $19M Budget Deficit?]
After the cuts and new revenue proposals, city staff estimate Orange is still wrestling an $8 million budget gap.
Is a Cigarette Litter Tax Coming to Santa Ana?
In the heart of the county – Santa Ana – city officials have been ringing alarm bells this year that 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]
To help address the expected revenue loss, Santa Ana City Councilmembers Johnathan Hernandez and Ben Vazquez are asking staff to look into creating a cigarette litter removal abatement tax to potentially be put on a ballot for voter consideration.
Hernandez said the tax could generate money so that services like parks, libraries and police don’t suffer as well as help keep city streets clean and help address secondhand smoke.
“This is about ensuring that we are preparing for the sunset of Measure X by creating an additional fee that can help the city balance our budget,” he said at Tuesday’s city council meeting.
Not all officials are in favor of the proposed tax.
City Councilman Phil Bacerra said that while he lost both his parents to smoking and has no sympathy for the habit, he also doesn’t support trying to address the expected revenue decrease by taxing residents.
“If that’s the path we’re going to go down, what other activities are we getting to tax going forward? Again, our residents already today, right now have the highest sales tax in all of Orange County,” he said.
Currently, Santa Ana’s sales tax is 9.25%, higher than the 7.25% in cities without additional sales taxes.
Bacerra said more research should be done on the cigarette tax proposal.
Officials ultimately directed staff to conduct research on such a tax and the impacts it could have and bring it back to the city council members for consideration.
The same night officials moved forward with looking into the cigarette tax, officials narrowly approved a new three and half year contract with the police union that will cost taxpayers over $27 million despite three council members questioning if the city can afford it.
[Read: Santa Ana Police Get $27M Raise Amid Looming Revenue Cliff]
They also approved the budget for next year.
Beyond the potential cigarette abatement tax, Bacerra is pushing for the creation of an observation deck on the city’s iconic water tower to help bring in new revenue.
Will Fullerton Raise Hotel Taxes?
Fullerton city leaders are considering hiking hotel taxes after facing years of budget turmoil, having to make cuts to essential services while needing cash for street repairs, public safety and other critical city needs.
It’s an issue city officials have long faced.
Now, city staff are projecting a $9.4 million budget deficit in next year’s general fund.
And it could get worse.
At the June 4 meeting, Senior Budget Analyst Cinndy Barrios said the spending deficit is expected to exceed $20 million in the next three years.
Fullerton City Council members weighed in earlier this month on adding a ballot measure for a 2% raise to the city’s transient occupancy tax, also known as a bed tax or hotel tax.
This would increase Fullerton’s bed tax to 12%, increasing annual revenue by $600,000, according to a staff report.
But some council members voiced doubt that raising hotel taxes will be enough for the city of Fullerton to reverse its budget crisis.
City Councilwoman Shana Charles and Councilman Ahmad Zahra hinted at the idea of presenting a sales tax measure for voters as a long-term solution to address shortfalls – something that was shot down by voters back in 2020.
At the June 4 meeting, Charles said a sales tax increase of half percent “would give us $15 million a year, which gives us a lot of room to have a budget that supports a city that we all want to live in.”
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.
Hugo Rios is a Voice of OC intern. Contact him at hugo.toni.rios@gmail.com or on Twitter @hugoriosss
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