A new report from the state placed Anaheim on a list of a dozen cities in California at high risk for financial distress after the city lost millions in projected tax revenue due to the pandemic over the past year. 

The report was prepared by the State Auditor’s Office, one of the chief independent agencies in charge of reviewing the state and municipal governments’ actions. 

Anaheim lost nearly $38 million in expected tax revenue due to the coronavirus, according to the auditor’s report. 

By comparison, Garden Grove, which took the second largest economic hit in Orange County, is down about $5.4 million. 

The losses placed Anaheim on a watch list from the auditor’s office based on the city’s overall financial health in the 2019-20 fiscal year, alongside Compton, West Covina, Montebello and others. No other Orange County city made that list.

According to the auditor’s website, Anaheim’s lack of general fund reserves and a slow, downward trend in the city’s tax revenue over the last few years could spell trouble down the road. 

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The State Auditor’s newest report released Tuesday specifically examined hotel, sales, business license and admission taxes for cities across California to see how tax revenue was impacted by the pandemic. 

It also examined how much cities received from the American Rescue Plan Act, the main source of federal funds going back to cities, and projected the cities’ economic growth coming out of the pandemic. 

To review the data, click here

Overall, most Orange County cities did not experience a net revenue downturn from the coronavirus in the last three fiscal years, according to the report, with only eight of the county’s 34 cities experiencing a net loss in revenue.

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In a statement to Voice of OC, Anaheim spokesman Mike Lyster said while the city appreciated the auditor’s report, officials were already working to address budget issues and that the upcoming developments in the city’s Platinum Triangle — the 820 acres that include Angel Stadium, the Honda Center and other businesses — would bring in money for the city

“We are in the early stages of economic recovery, and, longer term, have a bright outlook with billions in investment planned around our stadium,” Lyster said. “We emerge from the pandemic fiscal crisis with the same mindset of managing labor and operational costs and holding the line on spending.”

But the revenue generated per acre by the Platinum Triangle is not as high as smaller commercial areas throughout Orange County. In 2018, the area brought $5.1 million in tax revenue, down from $5.7 million in 2015. 

By comparison, Downtown Fullerton, which is just about 65 acres, brought in $2.1 million in sales tax for Fullerton in 2018, while the 74-acre Outlets at Orange generated $3.1 million for Orange that year. 

Anaheim generated $5.2 million from the Platinum Triangle in 2019, but data from Orange and Fullerton was not immediately available on Wednesday. 

The only other city in Orange County specifically cited by state auditors in their summary was Laguna Beach, one of 18 cities in the state that didn’t receive enough stimulus money to cover its losses. The American Rescue Plan Act gave the city $5.6 million to make up an $8.5 million gap. 

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But on the other side of the ledger, there were cities that suffered little to no losses, according to the report, yet still received millions in additional funding from the federal government. 

According to the state’s data, La Habra fared better than any other city in Orange County in the five tax sectors reviewed by the report, showing a net gain of over $760,000 since the 2019-20 fiscal year. The city also received nearly $16 million in relief funds. 

The cities of Laguna Niguel, Rancho Santa Margarita and Westminster all showed positive outcomes of over $200,000 apiece in those sectors as well, taking in $37 million of relief money between the three. 

Those towns all experienced little to no losses from the closure of hotels, which was the biggest loss sector for cities throughout Orange County. 

Going forward, each city in the county will have to figure out how it will spend relief funds to offset last year’s downturns, with an additional nearly $700 million headed to different cities that can choose how to spend that money within certain restrictions. 

Noah Biesiada is a Voice of OC Reporting Fellow. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.

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