City of Orange Faces Economic Changes in Potential Funding Crisis

When Orange’s new city manager starts work Monday he’ll be confronting a shortfall in revenue that consultants say could lead the city into bankruptcy.

“The city has to make a course correction,” Mayor Pro Tem Denis Bilodeau said. “We asked voters for a half-cent sales tax increase and it was defeated by 400 votes, so we have to make do with what we have, but there’s other options on the table.”

The city hired a consultant — Grant Thornton Advisors — that delivered a report last month on the city’s budget issues and potential solutions.

The consultant said the city is expected to have budget deficits through the next five years and beyond. The deficit could run as high as $45 million through 2031, the consultant said.

“I don’t know if we can cut our way out of this,” Bilodeau said.

City officials slashed summer programs such as activities in the parks, he said. The annual Third of July event was canceled, for instance.

“It’s a matter of priorities and the public has clearly stated they want public safety as priority one,” Bilodeau said.

City officials are eyeing an increase in the bed tax as it is one of the lowest in the county at 10%, he said. Anaheim, for instance, has a 17% rate, he added.

Fees for building and planning permits are too low, he said.

“We’re not recovering the cost so we’re going to have to look at that as well,” Bilodeau said.

Bilodeau said he was eager to get to work with the new city manager, Jarad Hildenbrand.

“We have a new city manager starting Monday and we’re looking forward to him leading us through this and figuring out a path forward,” Bilodeau said.

Another possible revenue source could be increased development, Bilodeau noted. There has been talk with Costco officials about opening a store in Orange, he added.

“I’ve met with them three times,” Bilodeau said. “They track their receipts from credit cards and they have a huge consumer base in Orange and all of that money is going to Yorba Linda, Tustin and Fullerton. It would be nice if that was kept in Orange.”

Bilodeau said residents should be aware how online shopping can shortchange the sales taxes the city recaptures due to a formula that can only be fixed by state lawmakers.

“Some cities do very well under that scheme and others don’t,” Bilodeau said. “The Legislature needs to address this problem.”

The city’s consultant reported that business owners complained that the city “has been very difficult to work with.” In some cases, they say, it can take six years to get something done in Orange that might take a year elsewhere, the consultant reported.

The consultant reported that the speed of a project depends on a “Good Old Boys Club” and who you know. Projects in the Old Towne area and the Orange Mall are prioritized, the business leaders said.

The city also mistakenly used $28 million in federal COVID-19 pandemic bailout funds to increase staffing instead of attempting to cover revenue losses, the consultant reported. That increased city spending by 15.3%, the consultant reported.

Bilodeau said that the city has about 75 job vacancies now.

“Going forward virtually all of those will be eliminated and that will do quite a bit to balance the budget,” Bilodeau said.

The consultant also recommended “leveraging” its “core assets” such as Chapman University, the fact it’s so close to Disneyland and the potential for a “dilapidated mall site.”

The consultant recommended more outreach to the public and business leaders with a uniform message that officials are prepared to make it easier to get things done and improve the city.

Ultimately, city officials will have to sell the public on a one-cent sales tax increase to bail itself out, the consultant said.