City officials said Orange is facing an annual deficit of $19.1 million that could deplete the city’s reserve funding in less than two years.
City leaders are calling this moment a crisis and are debating how to bridge the wide gap between revenue and spending with just over a month to go before the start of the next fiscal year.
On Tuesday, the City Council reviewed a slate of cost-cutting ideas from a budget ad hoc committee that could save Orange $12.9 million next year, but would cut an array of community services and reduce the headcount in public safety and library services.
Most councilmembers adamantly opposed the idea of cutting any police officers or firefighters.
Most also initially signaled they would reject many of the cost-cutting measures altogether, but as the conversation about how to navigate the city out of dire straits drifted past 11 p.m., the majority of the councilmembers seemed to reluctantly accept that they need to authorize urgent and significant budget cuts.
In spite of Councilmember John Gyllenhammer calling for an immediate hiring freeze, the seven-member body struggled to come to an agreement Tuesday. Moving forward, they said they will continue to meet with and provide direction to staffers on proposed budget cuts.
Holding up a three-page list of cost-saving ideas, including shutting down two fire stations and losing 20 sworn police officer positions through attrition and a hiring freeze, Councilmember Denis Bilodeau said, “This list is not what we’re proposing to cut. This is a horror show.”
But even he conceded that as much as he dislikes the situation, some things will have to go to keep Orange afloat.
“I don’t support any of these cuts, but we’re going to have to cut something,” Bilodeau said.
As drastic as all of those measures seemed to everyone, Councilmember Arianna Barrios pointed out: “If we did all of this, all of these horrible things, it’s only $12 million.”
Going forward, she will replace Bilodeau on the budget committee for a fresh perspective. Only three members of council can serve on the closed-door committee at any time due to the Brown Act, California’s open meetings law. Mayor Dan Slater and Gyllenhammer are the other two committee members.
‘Keep Orange Orange’
More than two dozen Orange residents, including several members of the Orange police and fire departments, pleaded with the council, some even tearing up, against cuts to public safety or special events such as the annual Christmas tree lighting ceremony that they said constitute the fabric of home.
“We are a unique place,” said Mike Short, a longtime Orange educator, choir director and engaged community member who for decades has led musical performances at the tree lighting ceremony. “Let’s make sure we stay that wonderful place called Orange.”
Eugene Fields, an Orange resident, simply asked the council to make decisions that “keep Orange Orange.”
Another resident, Brandy Romero, pointed out that Orange already has fewer patrol officers per capita relative to many California cities. Others argued that cutting fire stations in east Orange so near to where there have been several wildland blazes in the past decade would hurt property values and up home insurance rates. Many, including lifelong Orange resident Lisa Ackerman Baldwin, argued for a sales tax.
“As a lifelong resident, I am in favor of a sales tax increase to balance our budget, rather than a draconian measure of slash and burn,” she said.
No one was happy to hear the city manager’s glum prognosis: “Quite frankly, at the end of the day, there’s going to need to be reductions or we hold vacancies,” said Tom Kisela.
Gyllenhammer, who appeared to be the councilmember most hawkish to make cuts, unsuccessfully pushed for an imminent citywide hiring freeze.
“Just to be clear, we’re not going to get anywhere near where we need to be if we don’t address public safety,” he said.
The majority of the council shot down the idea and seemed more likely to entertain a future hiring freeze only on positions outside of public safety.
‘Rocks not sand’
The budget ad hoc committee also brought forward for discussion controversial measures to add $8.8 million in revenue, including the sale of the Taft Library property for $2.7 million — a proposal that most of the City Council said they would not entertain.
Throughout the somber hours-long conversation Tuesday night, all seven elected members on the dais acknowledged that the status quo is not the way forward. Left unchecked, the budget deficit is expected to grow to a $34 million annual shortfall by 2029, officials said.
Already, the city has asked all departments to propose budget and service reductions as well as potential revenue enhancements, according to a staff report. Gyllenhammer said some maintenance projects have been deferred for decades.
Slater proposed the city develop plans for a sales tax increase, potentially up to one cent, that could be put to voters in November. Gyllenhammer agreed that a sales tax will have to be part of the city’s climb out of this hole.
“The only revenue increase that will cover this (deficit) is a sales tax increase,” he said. “The only thing that will move the needle on the expense side is headcount.”
Still, he and others pointed out that a sales tax is not a silver bullet, in large part because any proposed sales tax carries a hefty political risk of failing at the ballot box. And, even if passed, it wouldn’t take effect for months while the city draws down its reserves to what city staffers called “catastrophic” levels.
“We have time between now and an election cycle. We have uncertainty in that election,” Gyllenhammer said. “So for us to hang everything we have on a sales tax … I think is going to leave us in a tougher position down the line.”
Other councilmembers called for additional approaches to raising sustainable revenue ranging from a transient occupancy tax to paid parking in Old Towne.
Tavoularis and Councilmember Jon Dumitru called on Chapman University to levy a public safety impact fee on its students that could raise up to $1.8 million per year to offset emergency services costs the city is already providing to the greater Chapman community.
Tavoularis also called on Orange’s major hospitals to pay for the tear-down or build-up of a fire station. Others called for stricter enforcement of Mills Act contracts, a program that provides property tax reductions to property owners who agree to preserve and rehabilitate their historic property. Bilodeau asked for a moratorium on new Mills Act contracts.
“We cannot forego that revenue,” he said, although it wasn’t immediately clear how much revenue that could generate.
Tavoularis compared Orange’s task ahead to moving “rocks not sand.” In other words, city officials have a lot of work to do and not so many easy solutions in front of them.
“We need to talk about big money here,” she said. “Cutting sand will get us nowhere, waste our time and circle the drain.”
“We cannot continue with this attitude of stepping over a dollar to pick up a dime,” Barrios added.
How did this happen?
Many residents and some newer members of the City Council expressed frustration, even bafflement, about how their town ended up in this predicament. One resident called for a forensic audit on all Cares Act money – one-time COVID relief funds received from the federal government – that some councilmembers said the city used to create new positions without having funding in place to sustain them.
“A lot of these things really hurt to read and it’s just difficult for our residents to understand how we got here,” said Councilmember Ana Gutierrez. “It’s difficult to understand why we have this revenue issue.”
Addressing residents, Tavoularis said, “I know you’re angry, and you should be angry and we’re angry, too. But tonight is about honest and hard discussions. Blame can be discussed at a later time.”
Gyllenhammer said the city has historically run a “very conservative revenue generation policy.” Yet, in addition to its budget deficit, the city also has a $281 million pension obligation bond to cover that could become a tremendous liability should the stock market flatten or the country enter a recession, he added.
Next steps
When asked by Barrios if the city is legally mandated to pass a budget by a certain date, staffers said that according to municipal code the city need not have a budget in place by the start of the fiscal year in July, and the council can pass an unbalanced budget. However, staffers advised against both of those options.
As the budget ad hoc committee continues to meet, Kisela will keep working with department heads to prioritize where they can save money or make cuts if need be.
The city will also continue a series of public meetings through June for residents to deliver input on what to do. The next will be 5:30 p.m. Thursday, May 16, at El Camino Park, 400 N. Main St. Other meetings planned are:
•Shaffer Park, 1930 N. Shaffer St., 5:30 p.m., June 5
•El Modena Library, 380 S. Hewes St., 5:30 p.m., June 13
•Grijalva Sports Center, 368 N. Prospect Ave., 5:30 p.m., WJune 19
More information regarding these meetings and the city’s plans can be found at cityoforange.org/our-city/protect-orange.
