Several cities across Orange County are slashing spending, dipping into their reserves and using one-time funding to patch up holes in their budgets – annual plans detailing how they’re going to spend taxpayer dollars on public services like police, libraries and parks.
Officials in many of those cities are warning of a bleak financial outlook that could threaten city programs and critical services like public safety if elected officials don’t find new ways to generate more revenue.
“We are looking under seat cushions and spending every nickel we can find but that is a concern to me,” said Anaheim City Councilwoman Natalie Meeks at a city council meeting last month.
“I would just encourage or ask that we track that very carefully and make sure that as Council or the city may incur additional expenses, we might have to look at where that money comes from and where the cuts might be.”
Last year, officials in a host of Orange County cities asked voters to consider paying more in sales taxes as they struggle to respond to forecasts that show city spending steadily outpacing revenues year after year.
Voters in Buena Park, La Habra and Seal Beach approved sales tax increase measures last November to help bring in more revenue into their general funds – the most flexible pool of money available to municipalities.
[Read: Here’s Where OC Voters Stand on Sales Tax Increases in 2024]
General funds pay for police officers, firefighters, after school programs, senior services, city hall employees, trash pick ups and a host of other vital public services.
Here’s a rundown of how some of OC’s biggest cities are handling their financial woes and are passing state mandated balanced budgets for the fiscal year.
Anaheim Quells $64 Million Gap; Hotel Tax Revenue Down
Officials in Anaheim – OC’s largest city and home to the Disneyland theme park and resort – are grappling with general fund spending outpacing revenues by $64 million.
Officials are using one-time revenue sources to address that gap, pulling over $33 million in funding from working capital bond proceeds, $10 million previously set aside to address debt obligations and over $20 million from the sale of a garage at the convention center.
Those bonds were issued in 2021 to help address the economic turmoil during the COVID-19 pandemic and have raised $138 million.
City Spokesman Mike Lyster said in a Tuesday email that the money from the bonds didn’t end up being needed at the time due to the city receiving federal COVID bailout dollars.
The gap comes as hotel tax revenues came in 11% less than expected, while expenses like labor costs and pension obligations are expected to increase 6%.
City Councilman Ryan Balius said the reliance on one-time funds to fill the $60 million budget gap is worrisome.
“One-time money is not sustainable,” he said at the June 17 City Council meeting, when the council adopted Anaheim’s $2.4 billion budget.
“I have learned that recurring expenses should be matched with recurring revenue. If we’re plugging budget gaps with temporary fixes, we may be facing a deeper structural issue that needs to be confronted head on,” Balius said.
Balius added that the one-time funds could have been used to help generate more recurring revenue and if they don’t bring in more recurring revenue they will have to make tough decisions on programs and services.
City manager Jim Vanderpool said at the meeting last month that the city is in a transitional period and expects to generate more revenues from developments like Disneyland Forward – the iconic theme park’s expansion and OC Vibe.
He also said more than $120 million in annual revenue would be freed up when the city pays off bonds from 1997 to construct the Mickey and Friends Parking lot that Disney leases for $1 a year in 2027.
Lyster said the bonds also helped fund infrastructure upgrades, freeway and road improvements and the expansion of the city’s convention center.
Its money that was highlighted in a city commissioned corruption reported release in 2023, with independent investigators alleging a plot by resort interests to keep the over $100 million out of the city’s discretionary pot of money – the general fund.
It’s a plan that investigators said Vanderpool was onboard with.
[Read: How Disneyland Resort Interests Planned to Withhold Tax Money from Anaheim’s Working Class]
Even with the expected revenue sources, Vanderpool said there could still be unforeseen challenges.
“We also continue to watch the budget process play out in Washington. While there are many unknowns, there is prospect of cuts to federally funded programs. All of this could impact any freed up revenue once the bonds are paid off,” he said at the June 17 council meeting.
Anaheim Mayor Ashleigh Aitken said the revenue freed up after the 1997 bonds are paid off is an opportunity to do something transformative for residents.
“I want to make sure that we don’t lose sight of what unique opportunity having those funds is to do something, whether it’s transportation, whether it’s economic development, housing, parks, that we’re really making sure that we keep it for the taxpayers,” she said.
Irvine is ‘Recession Ready’
Irvine is the largest city in the county with a structurally balanced general fund, hanging onto a narrow surplus largely funded by their property and sales taxes.
City staff are projecting that their budget will remain balanced through at least 2030, noting that their stable property tax base helps them maintain a more reliably balanced budget.
“We’re doing really quite well,” said Mayor Larry Agran at the council’s budget hearing on June 10. “We’re recession ready.”
Westminster Stays Afloat For Now
While Westminster leaders have struggled for years with shrinking revenue, passing multiple local sales tax initiatives to keep their budget afloat, they managed to balance their general fund this year with a nearly $250,000 cushion, according to budget records.
While they were originally set to save around $700,000, several departments requested additional staff including new full time parking enforcement officers and receptionists.
But city staff warn that the cushion is not expected to continue next year, with projections through 2031 showing at least a $1.2 million deficit a year every year over the next five fiscal years.
Most of that spending is going to support the city’s police and fire departments, according to budget records.
Huntington Beach Plugs Budget With Reserves
While Huntington beach leaders ultimately passed a budget with an over $1 million surplus, they did so by cutting over $3 million worth of programs and pulling another $9 million from reserves and one-time spending accounts.
Without the shift in funds, Surf City would’ve been around $4 million in the red.
It’s not the city’s first year with budget problems either, with city leaders voting to cut millions of dollars out of the budget last year and warning that next year won’t be any better.
[Read: Huntington Beach Uses Reserves to Close Budget Gap]
Huntington Beach Councilman Casey McKeon was one of the few in Orange County to acknowledge that while they balanced their budget this year, their future is still uncertain.
“We’ll be balanced this year, but as soon as we adopt this budget tonight, next year we’ll have a significantly large budget deficit,” McKeon said at the council’s June meeting.
Much of the cost comes from expanded spending on the police and fire departments with a sales and property tax base that hasn’t kept up, according to city staff’s budget analysis.
Orange Makes Multi-Million Dollar Cuts
In Orange, officials were able to adopt a balanced budget last month for the 2025-26 fiscal year by cutting tens of millions of dollars in spending
Their general fund is expected to bring in roughly $147 million in revenue with city leaders spending $149.6 million dollars – still leaving a roughly $2.6 million gap.
City officials are using one-time funds and cutting over $30 million dollars in spending to help fill the gap and pass a legally required balanced budget.
City leaders cut over $17 million from their general fund by freezing positions, eliminating positions, reducing part-time positions by 50%, reducing overtime funding by 40%, deferring vehicle replacement and reducing over $3 million in contributions to the IT Capital fund.
They also made about $14 million cuts to their capital improvement budget by deferring and discontinuing park improvements and other projects.
“Even after these budget reductions of $31.3 million the current uncertain economy and budget deficit continue to provide a challenge to the city’s long term fiscal sustainability and the level of services residents and businesses depend on,” said city budget manager Michelle Kresan at the June 24 meeting.
“Cost reduction measures used to balance the budget today will continue to have compounding effects in future years, if not addressed.”
To view a full list of the budget reductions, click here.
The tens of millions of dollars in cuts comes after city council members spent much of last summer grappling with what was initially projected to be a $19 million deficit threatening to wreak havoc on public services.
[Read: How’s Orange Going to Patch its Multi-Million Dollar Budget Gap?]
In an effort to quell the gap, city leaders also asked voters last year to consider approving Measure Z – a ballot measure that if approved would have raised the city’s sales tax from 7.75% to 8.25%.
Voters ended up rejecting the measure.
In an effort to bring in more revenue, Orange City Council members have also voted to implement paid parking in Orange Plaza and have contracted with two companies to enforce parking rules in Old Towne and around the city.
[Read: Another OC City Looks to Paid Parking to Help Plug Budget Holes]
Santa Ana Headed Off a Fiscal Cliff?
In Santa Ana, city leaders adopted a roughly $778 million overall budget as staff projects an estimated $30 million deficit in four years when Measure X, a 1.5% sales tax measure approved in 2018, starts to sunset in 2029.
[Read: Santa Ana Approves ‘Last Big Budget’ Ahead of Larger Deficits]
Their general fund is expected to bring in $413.79 million in revenue with city officials spending $424.23 million – using over $10 million in one time funds to supplement their expenditures.
City Spokesman Paul Eakins said the roughly $10.5 million gap is being plugged by money city officials saved over the years to fund one time expenditures this year.
“These funds represent the amount available above the City’s 18% reserve requirement of recurring revenues, in accordance with City policy,” Eakins wrote in an email.
“One-time funds are typically the result of prior-year savings, either from lower-than-expected spending or higher-than-anticipated revenues. These are one-time uses and funds, so this does not commit the City to any further spending in future fiscal years.”
Next year, the city’s budget is expected to have a $8.5 million gap in revenue and spending according to a staff report.
City officials warn that if left unchecked, the expected gap will continue to widen and could reach around $124 million by the 2034-35 fiscal year.
Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org or on Twitter @ElattarHosam.
Noah Biesiada is a Voice of OC reporter. Contact him at nbiesiada@voiceofoc.org.