Orange Approves Contingent Budget, Places 1% Sales Tax Hike on November Ballot

The Orange City Council has approved a new fiscal year budget balanced with borrowed funds, but its stability hinges entirely on a high-stakes tax measure set for the November ballot. In a series of recent meetings culminating in a budget vote around June 12, city leaders tethered the financial plan to the success of a 1% sales tax increase, stipulating that the city’s books will be reopened for review no later than January 2027 if voters reject the proposal.

The decision places the city’s financial future in the hands of its residents and local businesses. After considerable debate, the council voted 5-1 during a special meeting on June 3 to place the tax measure on the ballot. If passed, the 1% sales tax increase would last for 13 years and is projected to generate an estimated $37 million in additional revenue for the city’s general fund annually.

This move comes as Orange confronts a persistent structural deficit that has strained municipal services. The newly approved budget includes significant cuts, with plans to eliminate approximately 45 full-time positions and freeze another 10, reducing the city’s workforce by 3% compared to the previous year. Mayor Dan Slater has publicly stated that passing the sales tax measure is his top priority, citing the city's inability to offer competitive wages to retain quality employees.

“With this budget, all we can consider is 2% to 3% raises, but we’ve got to catch up,” Slater said in a March council meeting. “We are so far below median, and that’s why we are losing these quality employees. And that’s not sustainable.”

The path to placing the measure on the ballot was fraught with indecision. Councilmembers had struggled for weeks to agree on the specifics, particularly the duration of the tax, with proposals ranging from 10 years to an indefinite term. The final 13-year sunset clause was a compromise reached to secure the necessary supermajority vote. Councilman Denis Bilodeau cast the lone dissenting vote, while Councilman John Gyllenhammer, who had previously voiced opposition, was absent.

This is not the first time Orange has sought a sales tax to shore up its finances. In 2024, voters narrowly rejected Measure Z, a proposal for a 0.5% sales tax increase with a 10-year lifespan. That measure was estimated to raise between $19 million and $20 million per year. The city has been grappling with a projected $19.1 million annual deficit, and consultants hired by the city warned last year that Orange could face bankruptcy in a few years without what they termed “radical” changes, including new revenue streams and significant spending cuts.

For businesses operating within the City of Orange, the outcome of the November vote presents two distinct and challenging scenarios. Approval of the tax would increase the local sales tax rate, potentially impacting consumer purchasing habits and creating a competitive disadvantage with businesses in adjacent municipalities with lower tax rates. Companies will need to adjust their point-of-sale systems and financial reporting to comply with the new rate, adding an administrative burden.

However, the failure of the measure carries its own set of risks. The mandated reopening of the budget in early 2027 would create a period of profound fiscal uncertainty. Deeper cuts to city services, including public safety and infrastructure maintenance, could follow, potentially degrading the overall business environment and quality of life in the city.

This situation exemplifies the direct and often difficult link between municipal finance and the daily operations of small and mid-sized businesses. In our experience, business owners are often caught between opposing a direct tax increase that affects their bottom line and facing the indirect but potentially more damaging consequences of a fiscally distressed city government. The choice is rarely simple. A 1% sales tax is a tangible cost that must be managed, but so is the risk of deteriorating public services, which can impact employee retention and customer traffic. Businesses in Orange should be preparing for both possibilities now. This means modeling the financial impact of the higher tax rate while also stress-testing their plans against the potential for a more volatile local economy if the measure fails. Navigating this type of uncertainty is where strategic financial guidance becomes essential. For businesses looking to build resilience against these local economic shifts, the team at C&S Finance Group LLC can provide expert outsourced CFO services to help chart a course forward at csfinancegroup.com.

The focus now shifts from the city council chambers to the voters of Orange. The coming months will see the launch of campaigns both for and against the tax measure, with the city’s financial trajectory for the next decade hanging in the balance. The result of the November election will determine whether Orange secures a crucial new revenue stream or is forced back to the drawing board for another round of difficult budgetary decisions.