Early projections show Santa Ana officials staring down the barrel of an expected $19 million budget deficit this summer years before a sales tax measure increase is set to expire and strike a $30 million blow to city coffers.
Last week, Santa Ana city staff told elected leaders that while they initially expected a $8.5 million budget gap, they are now estimating a deficit more than double that if they don’t make any changes.
Councilwoman Jessie Lopez, who is running for state assembly, said the deficit will mean officials will have to cut a host of services, programs and other costs that matter to residents.
“I hope that our community understands how serious it is that we’re facing a $19 million structural deficit,” She said at the April 7 city council meeting. “We are having to think about serious things that we have to cut because the city cannot afford it.”
“We need to generate money, and we cannot only generate money off the backs of people that are working in the city,” Lopez said.
Santa Ana isn’t the only city facing a multi-million dollar deficit going into the next budget year.
Fullerton officials are facing a nearly $14 million deficit that could nearly wipe out their reserves if they don’t make cuts.
In Orange, staff also say they will have to transfer $17 million from three different spending buckets, including the capital improvement fund, to balance their budget next year.
Officials in both those college towns are expected to place tax measures on the ballot in November in response to their budget woes.
Santa Ana’s deficit, city staff say, will only widen in the coming years when Measure X, a 1.5% sales tax increase approved in 2018, starts to sunset in 2029 – dropping revenues by $30 million before it completely disappears in 2039.
As a result, a majority of city council members last month directed staff to prepare a tax measure ballot to cancel the sunset of Measure X and maintain it indefinitely after it brought in over $83 million this past fiscal year.
[Read: Will Santa Ana Revive Sales Tax Measure or Make Budget Cuts?]
The call for the measure to keep the sales tax increase alive comes after elected leaders said last year’s budget would be the last big spending plan they do for a while before they start tightening the belt.
Mayor Valerie Amezcua said the city is being proactive about Measure X sunsetting and the city should insist their partners like the local school districts, the county and OC Transportation Authority to support them and cover certain costs.
“If somebody comes into our city, whether it’s the county – whoever – there’s a cost to do business in our city, and we need to charge people appropriately, because our constituents deserve that. They deserve the best quality of life,” she said.
“They call themselves our partners, whether they’re businesses, developers, school districts, county, they call themselves our partners, but then they want us to foot the bill, and we don’t have the funding.”
Amezcua added they should be collecting money owed to them as well.
Amid the projected deficit, staff is now asking elected officials to consider potentially putting a host of programs and services on the chopping block like art programs, crossing guards, after school programs, senior services, police radios, political council member aides and more.
Amezcua said she would support keeping the crossing guards, but Santa Ana Unified School District should help pay for them.
“Santa Ana Unified has a responsibility. They are responsible for the children from the moment they leave their home until they get to school,” she said.
Two years ago, the Mayor also called on the OC Board of Supervisors to help cover the costs of the crossing guard.
Lopez said many of the things staff is labeling as “nice to have” but not mandatory will have a deep impact on families if cut and suggested officials cut their travel budget and cut some commissions, especially ones where the commissioners are not showing up for meetings.
“If these people that are being appointed are not going to take it seriously, then what is the purpose of having commissions that are only costing our city money and are not being productive,” she said.
Staff said the city is spending nearly $500,000 on commissions they are not mandated to have – including about $255,000 on their police oversight commission and $100,000 on their historical resources commission.
Staff is also proposing a 2.5% fee on credit card transactions – which received support from multiple council members. They are also looking at decreasing street sweeping and potentially bring the service in house to save money.
Councilman David Penaloza, who is also running for state assembly, said the city is in a terrible situation and needs to cut spending – something he said officials should have started doing after Measure X was approved by voters.
“I’m just happy to know that we’re taking proactive steps and measures to do that,” he said, adding they should look at eliminating the council aide positions and travel budget.
Penaloza said they need to bring in new revenues – something he said officials haven’t acted on.
“I would hope that we work in really beefing up our economic development department. I know we have one but it doesn’t seem like there’s much coming out of there,” he said.
“Because we’re talking about cutting pennies here and cutting pennies there, but no real conversation of how we are going to fill in that revenue without looking at a tax increase or raising water rates or depleting services on the street sweeping.”
Councilwoman Thai Viet Phan pushed back against cutting the council aides, saying that Penaloza didn’t have to have one if he didn’t want to.
“What I do know is that, as an attorney and with my full time job, I appreciate my chief of staff and my council aides for being able to attend events,” Phan said, adding they help respond to the needs of residents in her ward.
She also said she hopes if one of her colleagues ends up in the state assembly, they will help the city.
“It is great that by the end of this year, somebody up here is going to be at the State Assembly, and they can usher through a bill that will help fund large scale investments in the city of Santa Ana relating to infrastructure, such as state buildings, state parking lots, forcing counties and other agencies to pay and work with the City of Santa Ana,” she said.
Councilman Phil Bacerra said staff should look at hotel tax revenue, pointing to Anaheim’s hotel tax revenue.
“Now we don’t have a Disneyland, but we are the heart of Orange County. We are right in the middle. There’s no reason why we shouldn’t be the place where people stay,” Bacerra said at the April 7 meeting.
“I know when I travel, I don’t want to stay in a generic hotel area. I want to stay somewhere where there’s culture and vibrancy, and that’s Santa Ana, but we need to invest in our hotels.”
Penaloza said there is room for the hotel tax to grow and staff said that every percent increase in hotel tax would generate $900,000.
Amezcua said cuts will be made.
“I know some people will not be pleased, and some people up here will not get what they want, and some people in the community will not get what they want,” she said.
“But we have to tighten the belt.”
Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org.
