Orange voters are likely going to be asked if they are willing to pay more in sales taxes and if visitors should pay more in taxes for staying at local hotels as budget cuts loom amid a projected $20 million deficit going into the summer.
A majority of elected officials in the historic town also publicly directed staff to further explore legalizing cannabis stores in a limited capacity and increasing and modernizing business license taxes in the city in the future.
Last month, city council members initially held off on moving forward with placing a one-cent tax increase on the November ballot as they keep struggling to quell a longtime structural deficit that, if not addressed, threatens to lead to deeper cuts to core city services.
[Read: Orange Holds Off on Sale Tax Measure Amid Looming Cuts to Public Safety]
Late Tuesday night, Orange City Council members voted 5-2 to direct staff to come back with a 1% sales tax ballot measure that, if approved, would expire in 10 years and would include a plan on how the additional revenue is spent.
If the tax increase passes, Mayor Dan Slater said officials should review whether they want to extend the measure after eight years and stressed there needs to be a plan, priorities and rules on how the money is spent as well as an oversight committee.
“If we can convince the taxpayers that we’re going to wisely spend this money and that these are the priorities, then I think that the citizens will say, ‘yes, that makes sense,’” he said.
Councilwoman Arianna Barrios questioned if 10 years was too short of a time but voted in favor of the direction after the city manager said they could continue to debate the measure’s length when it comes back.
“Everything we’ve seen so far said that the 10 year is not going to be near enough so I’m worried that we’re just spitting in the wind,” she said.
Councilman John Gyllenhammer and Councilman Dennis Bilodeau were the dissenting votes.
Bilodeau said voters already rejected a sales tax measure in 2024.
“We asked the voters this question and it was answered, and that was at a half a cent and I know in my council division it failed miserably, so I’m going to pass on this one,” he said.
Tuesday’s vote comes after the same elected leaders two years ago struggled to get consensus on a proposed sales tax increase before deciding in the 11th hour to place a 0.5% sales tax measure that ultimately failed.
If this year’s proposed measure is approved by voters, it is expected to bring in $37 million to city coffers.
The deadline to place measures on the ballot is July 14.
Sales Tax
Gyllenhammer said he doesn’t believe the city needs a sales tax increase while giving his own over 30 minute-long optimistic analysis of the city’s financial standing.
“We are not flush with cash but we have shown our cash and cash investments to have moved up over time,” said Gyllenhammer, who works as a regional director for Amazon.
“We have shown our operating budget – although we have voiced massive deficits – to actually end in small surpluses, at least the last budget cycle, and inside those we are repaying the debts.”
He also said there are still opportunities to pull back on spending before going to residents for money.
“Whenever we tax our residents we’re asking for their money. I do think we have work to do at the city to continue to demonstrate our resolve around spending other people’s money as efficiently as possible,” Gyllenhammer said.
“I would put the collective $37 million expense on our residents if I believed we needed that today. I do not believe we need that today.”
A couple of his colleagues questioned his analysis, with Barrios initially calling his presentation misleading, arguing in part it only went back 12-years and did not capture the impact of the 2008 recession.
She said his analysis of CalPERs returns didn’t go far back enough to show a long term trend.
“My problem is there is some specific information in here that is misleading and relative to the later question that is really important that we get right, because if we don’t address some of it now, we’re going to have a problem later,” she said, later adding parts of his analysis was valuable.
Last year, city hired consultants warned Orange would face bankruptcy in a couple years if they didn’t adopt a sales tax increase, cut 12% of their general fund and attract new businesses to the city.
At the time, Gyllenhammer disagreed with their assessment but consultants pushed back, arguing that even the city’s own finance department was raising alarms.
“At a certain point you either have to determine I’m going to believe my finance function, I’m going to believe an objective, outside CPA firm, or I’m going to hold to my own assumptions,” said Shawn Stewart, one of the consultants, during a meeting last year. “You’re welcome to do whatever you’d like to do.”
[Read: Orange On Track for Bankruptcy in Three Years Without ‘Radical’ Change]
During Tuesday’s meeting, City Manager Jarad Hilldenbrand said staff would analyze Gyllenhammer’s presentation and financial assumptions.
Councilwoman Kathy Tavoularis pointed out the city has about $400 million in various obligations they have to pay off and that she spends Saturday mornings picking up trash in her district because the city can’t afford to.
“When people are coming up to me and saying, you don’t have a problem, I’m having a little bit of a panic attack, because I can’t get anything done for years,” she said.
Tavoularis added while other cities in the county flourished, nothing has really improved in Orange.
“While Garden Grove – or when I was in high school they called it Garbage Grove – is now like the best part of the Anaheim Resort and has all this money, we are just the same little Orange and you have Kathy Tavoularis picking up trash and gloves and needles on Saturday mornings, just so her neighbors are happy,” she said.
Hotels, Cannabis and Other Measures
On Tuesday, city council members voted 6-1 to direct staff to bring back a ballot measure to increase the hotel tax from 10% to up to 15% and speak to local hoteliers to get their input.
Bilodeau was the lone dissenting vote and did not speak to his opposition.
According to a staff report, the city is expecting to generate $6.3 million in revenue by the end of June from their current hotel-bed tax and each additional 1% increase on the tax is expected to generate more than $600,000.
Raising the hotel tax to 15% would tie the city with Anaheim as having the highest hotel bed tax in Orange County and bring in an estimated roughly $3 million in revenue annually.
Officials also voted 5-2 to direct staff to come back with more information on legalizing cannabis.
Gyllenhammer and Bilodeau were the dissenting votes.
Slater said marijuana can help cancer patients and he rather see people smoke cannabis than take opioids.
“Quite frankly, I’d rather see him use it rather than alcohol, and I’d much rather be sitting in a car next to someone that may have smoked cannabis instead of had too much to drink. Not that either one are good, but at any rate, there is a lot of potential revenue here,” he said.
Council members also voted 6-1 Tuesday to begin the process of putting a measure on the November ballot that if approved would make Orange a charter city – an idea proposed by Tavoularis as part effort to help address their financial crisis.
[Read: Another Orange County City Eyes a Governing Charter]
Councilwoman Ana Gutierrez was the lone dissenting vote, questioning the benefit of such a move and arguing the charter measure would only confuse voters.
“I still don’t see the benefit,” she said. “If we were to have to put anything else on the ballot, this just muddles the water. There’s just too many things we’re going to be asking voters to vote on.”
Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org.
