Voters across a host of Orange County cities will decide in November whether they want to pay more in a variety of taxes as local elected officials across the region continue to struggle to keep their budgets afloat.
The measures are being greenlit and added to the ballot after a dim budget season this summer that saw city officials across the region struggle to balance their books in the face of multi-million dollar structural deficits, forcing officials to slash spending and look for new revenue.
[Read: How Rocky Are Orange County’s Municipal Budgets?]
It also comes after voters approved a handful of tax measures in different OC cities in 2024.
Last week, Costa Mesa City Council members became the latest to approve a tax increase ballot measure – one that officials say, if approved, would raise business license taxes for large businesses and not smaller ones.
At a meeting Wednesday, they voted 5-2 to ask voters if they want to revamp the tax for business licenses in the city – which hasn’t changed since 1985 – and significantly increase the maximum tax cap from $200 to $15,000 annually .
Mayor John Stephens said it was the responsible thing to do as staff warn they may face future budget deficits.
“Some of these very large businesses are paying really a disproportionately low amount of money,” he said at the meeting.
“We have been suppressing this business license fee for years and years and years and now it’s just time to right size it and no responsible business, no responsible city, no responsible fiscal entity has kept their prices the same for 41 years.”
Councilmembers Jeff Pettis and Mike Buley were the dissenting votes.
Pettis said he understands the importance of maintaining vital city services, but they haven’t considered making budget cuts before asking local business owners – and customers – to pay more.
“I’m not prepared to ask businesses and ultimately their customers to pay more until the city demonstrates that its prioritized core services and exhausted reasonable efficiencies,” he said at the meeting.
“It should be the last option, I should say, not the option used to preserve every existing program.”
It comes as city staff project Costa Mesa to face a nearly $2 million budget shortfall in the 2027-28 fiscal year that could grow to nearly $5 million by the 2029-30 fiscal year.
“We’re donkey on the edge right now with our money and we’re struggling to balance the budget every year. We should always look for ways to appropriately adjust our revenue and have people pay their fair share,” Stephens said.
Councilman Manuel Chavez said they had to make budget cuts this summer to help keep the city’s books balanced and they don’t want to be in similar situations as other cities
“It’s our job as stewards to ensure that we have adequate revenue so that the resources our community is accustomed to can still exist,” he said. “The cities that are caught flat-footed are the ones that are struggling right now with budget deficits. Let’s not put our city in that situation.”
Currently, the business license tax Costa Mesa collects from local entrepreneurs ranges between $0-$200 depending on the businesses annual gross revenue bringing in about $1 million in revenue annually.
If approved by voters, the most a business could be taxed would be capped at $15,000 for businesses making over $30 million in annual gross revenue. According to a staff report, 120 businesses fall in the category.
Businesses making between $1 million and $5 million would be taxed between $500-$2,500 while businesses making between $5 million and $30 million would be taxed between $2,500 to $15,000.
Staff says the increase could potentially bring in $5.6 million in annual revenue.
Councilwoman Andrea Marr successfully pushed for the proposal to allow future council members discretion on the tax rates depending on business types like restaurants.
Officials there were also floating the idea of raising hotel taxes but decided to back away from that proposal after staff said they faced pushback from local hoteliers.
Other Tax Measures in OC
That same week, Fullerton officials opted not to move forward with a special half-cent tax increase that would go towards fixing their broken roads despite struggling to get a handle on a collapsing budget.
[Read: Recall Efforts, A Failed Sales Tax Proposal, An Ongoing Deficit: Fullerton’s Wild Ride]
Instead, elected leaders opted to cut 35 vacant positions, reducing library services and reducing security at city facilities.
In Orange, city officials are asking voters if they want to increase their local sales tax by 1% after having to transfer millions of dollars from different pots to balance their budget – including their capital improvement budget, IT budget and EMT fund.
Officials there also placed a separate ballot measure that would raise the hotel tax from 10% to 14% for hotels with 11 rooms or more and another asking voters if they want the city to govern by charter – a move proponents say will help reduce their budget deficit.
Meanwhile, Santa Ana voters will decide if they want to retain Measure X – a 1.5% sales tax increase approved in 2018 – indefinitely and at the same rate – something officials say is needed if residents want to enjoy the same level of city services and programs.
Currently, the tax would drop down to 1% in a couple years before being completely eliminated in 2039.
San Clemente will also have a sales tax on the ballot this year — one that’s specifically meant to raise money to get more sand on the beach, to address coastal erosion, and to fund projects to prevent wildfires in town.
Meanwhile, Laguna Beach officials backed away from placing a hotel tax, business license tax or sales tax increase on the ballot this year after they struggled to get consensus on a measure.
Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org.
