Orange officials want city staff to start planning a couple months before the election on what to do if the multiple tax increase measures they put on the November ballot fail after years of struggling to right the city’s longtime structural budget deficit. 

If voters approve both a 13-year 1% sales tax increase and 4% hotel tax increase in November, staff says the city will generate an additional $40 million in revenue they can use to stabilize the city’s financial future and grow Orange’s economy in a little more than a decade’s time span.

If the measures fail, city staff warn potential layoffs could be on the horizon for one of OC’s historic college towns as well as program and service reductions and an inability to fill public safety vacancies as they project a $27.6 million deficit next year.

“Following expiration of the City’s current labor agreements on June 30, 2027, additional personnel reductions, including potential layoffs, may also need to be evaluated,” reads the report.  

“Depending on the City’s financial position, public safety vacancies could remain unfilled, changes to Fire staffing or deployment could be required, and reductions in other departments could affect permitting, development review, infrastructure, parks, facilities, and other services.”

[Read: Is Municipal Bankruptcy on the Horizon if Orange’s Sales Tax Measure Fails?]

Councilman Jon Dumitru, with support from his colleagues, is calling for a future public discussion on what the municipal budget situation could look like if the tax measures fail – and what more can be cut. 

“This is a good blueprint if it passes but I really think that to have a complete picture, I think we need the corresponding conversation as well,” said Dumitru at the Sept. 8 council meeting when city staff laid out a preliminary framework of spending priorities if the tax measures are approved.

Orange City Councilman Jon Dumitru speaks in the city chambers during a council meeting on July 22, 2025. Credit: JULIE LEOPO, Voice of OC

The direction comes two years after voters rejected a 0.5% sales tax measure – heavily opposed by car dealership interests – in the wake of city hired consultants warning elected officials they could face municipal bankruptcy if they didn’t increase the municipal revenue stream.

This election cycle, Orange City Council members placed a 1% sales tax increase measure on the ballot that, if approved by voters, would last 13 years and bring in around $37 million annually. 

They also placed a separate measure that would raise the hotel tax from 10% to 14% for hotels with 11 rooms or more – expected to bring in $3 million annually.

[Read: Election 2026: OC Cities Ask for Tax Increases, Term Limits and More]

Voters are expected to weigh on the measures after officials had to eliminate and freeze $6 million in vacant positions and transfer $15 million from three different spending buckets to balance their budget this year – to help quell an over $20 million deficit. 

Mayor Dan Slater, who is running for reelection, said he was optimistic the measures would pass but agreed with his colleagues that the city should brace for all possibilities. 

“The voters of Orange are going to approve the sales tax measure. However, I’m sure that you have a contingency plan in the event that it will not, and I do agree that we need to get on that as soon as possible,” he said.

Slater and a majority of his colleagues voted to move forward with a rebate program for people who buy a car from one of five local dealerships. 

[Read: Orange Eyes a Car Purchase Rebate Program Ahead of Sales Tax Measure]

City officials had also previously stated they would come back at the start of next year to discuss with the city council their options if the measures failed this fall. 

Councilwoman Ana Gutierrez said they shouldn’t wait till 2027 to plan for that scenario.

“Waiting until January might be too far off. I think it would be very important to see that now,” she said at last Tuesday’s meeting.

Can a Sales Tax Increase Avert Municipal Bankruptcy?Orange Civic Center on Wednesday Oct. 5, 2022. Credit: NATALIE CARTWRIGHT, Voice of OC

At last week’s meeting, City Manager Jarad Hildenbrand said if the tax increases are approved the city would prioritize strengthening Orange’s finances by rebuilding reserves and paying down obligations and liabilities.

Their second priority, Hildenbrand said, would be to fund and invest in public safety including police staffing and retention, emergency medical response capacity and wildfire protection while their third priority would be street maintenance and aging public infrastructure. 

Hildenbrand said their final priority would be to grow the city’s economy and bring in new revenue by attracting and retaining new businesses. 

He added this framework of priorities would stabilize the city financial forecast once the 13-year 1% sales tax measure – dubbed Measure I – ends. 

“Financially, we should have stronger reserves, better-funded liability, and greater capacity to absorb a recession or an emergency. Public safety and city services should be supported by sustainable organizational capacity. Our streets, parks, facilities, and other public assets should be in better condition. Our local economy should be generating a stronger revenue base as Measure I expires,” Hildenbrand said. 

The city manager did not publicly speak on Tuesday to what would happen if the measures failed at the ballot box in November.

According to a staff report, if the measures fail elected officials may have to cut more vacant positions, reduce service levels and potentially employee layoffs. 

“Opportunities to replenish reserves, stabilize underfunded funds, reduce long-term liabilities, and accelerate infrastructure reinvestment would be limited. The City would also need to address its ongoing financial challenges within existing revenues,” reads the staff report. 

Councilwoman Arianna Barrios, who is running for mayor against Slater, said while the city has laid out what priorities to spend on if the tax measures are approved, officials still have not addressed the structural deficit. 

“If we are not telling and showing voters that we are not only committed to being fiscally sound, but also fiscally different going forward – at the end of 13 years, yes, we’ll have these lovely reserves sitting there but we will just spend them down again and 20 years from now, we’ll be right back here because we will not have fundamentally changed the way we do business.” she said. 

“Structurally, we have a lot of unsound practices that need to be fixed and addressed.”

Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org.