Orange warns of bankruptcy within 2 years if November tax measure fails

Orange city officials voted 6-1 Tuesday to adopt a budget slashing $6 million in vacant positions and warned that bankruptcy could arrive within two years if voters reject a proposed one-cent sales tax measure in November.

The vote underscores a structural deficit that Orange can no longer paper over with reserve transfers, placing the November ballot at the center of what officials say is a make-or-break moment for the city's long-term solvency — and a cautionary signal for cash-strapped municipalities across Orange County.

To close a $4.4 million pre-transfer deficit, the council approved moving $15 million across three spending buckets, producing a projected $1.1 million surplus after the transfers, according to Voice of OC. The city also deferred more than $3 million in infrastructure projects as part of the austerity package.

Councilman John Gyllenhammer, the lone dissenting vote, argued the transfers obscure the underlying problem. "We are not around the corner of bankruptcy. We're still looking at a four and a half million dollar deficit and we cannot spend like that. We will spend ourselves into a need for more revenue," Gyllenhammer said.

Councilwoman Arianna Barrios, who supported the budget, pushed back on any sense of complacency. "Hope is not a strategy," she said. Barrios added that the council must demonstrate resolve to residents: "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, we are not going to do things exactly the same way," she said at Tuesday's meeting.

City Manager Jarad Hilldenbrand said insolvency is not imminent but placed the stakes squarely on November. "We're not going off the fiscal cliff tonight, tomorrow, six months from now, but it's certainly on the horizon, right. We'll pay attention to what happens in November," Hilldenbrand said, according to Voice of OC.

Councilman Denis Bilodeau cautioned against the most alarming rhetoric. "Throwing around the B word, I think, is a bit much. The city is nowhere close to insolvency," Bilodeau said.

Orange County's own finances compound the regional picture. The county used $75 million in one-time funds to balance its current budget, ordered 5 percent spending cuts across departments and has eliminated more than 400 vacant positions since 2024, Voice of OC reported.

The proposed one-cent sales tax, if approved by voters, would remain in place for 13 years and generate roughly $37 million annually. A smaller sales tax measure failed in Orange in 2024, and city leaders say a second defeat would leave no fiscal tool left to prevent bankruptcy.