Orange city officials are warning that the historic town could face bankruptcy within two years if voters reject a proposed one-cent sales tax measure in November. The warning came as the City Council voted 6-1 to adopt the 2026-27 fiscal year budget, which includes eliminating and freezing $6 million in vacant positions and transferring $15 million from three different spending buckets to balance the books.
Councilwoman Arianna Barrios, who called for the budget to include language assuring residents the city would revisit spending if the tax measure fails, said this is the last budget where transfers can cover deficits. "Hope is not a strategy," Barrios said at Tuesday's council meeting.
"We want to show our residents, our businesses, and our voters that we are deadly serious about—we see the problem, and we are going to do something different."
City staff reported that before any transfers, the city faced a $4.4 million deficit, but now expects a $1.1 million surplus. City Manager Jarad Hilldenbrand said bankruptcy is not imminent but is "on the horizon," depending on the November vote.
Councilman John Gyllenhammer, the lone dissenting vote, argued the city is not nearing bankruptcy and that insolvency would require the council to actively choose not to cut spending. Councilman Denis Bilodeau echoed that sentiment, saying, "Throwing around the B word, I think, is a bit much.
The city is nowhere close to insolvency."
The budget vote follows months of deliberation on a sales tax measure and other revenue options, including a hotel tax increase. Last week, the council narrowly approved placing a one-cent sales tax measure on the November ballot that would last 13 years and generate about $37 million annually.
A similar measure failed in 2024. Officials are also deferring over $3 million in infrastructure projects.
The financial challenges in Orange mirror those in nearby Santa Ana and at the county level. Orange County CEO Michelle Aguirre told the Board of Supervisors that the county must cut 5% spending across all departments and use $75 million in one-time funds to balance its budget, warning that those funds won't be available next year.