May 12, 2026
City Council Meeting
PowerPoint Presentations
CITY OF ORANGE
Fiscal Sustainability, Peer Benchmarking,
Pension Performance & Infrastructure Investment
Council Member Briefing
Prepared: May 2026 | FY 2025-26 Adopted Budget Cycle
FOR COUNCIL USE
INTRODUCTION & METHODOLOGY
City of Orange | Council Member Fiscal Briefing | FY 2025-26 2 How This Analysis Was Formed
1 12-Year City of Orange Budgets FY 2014-15 through FY 2025-26 adopted budgets — revenue, expenditures, FTE, fund balances, CIP programs. Actuals used where available.
2 6 Peer City Budgets (FY 2023-2026) Fullerton, Costa Mesa, Huntington Beach, Santa Ana, Garden Grove, Mission Viejo — normalized per capita & per 10K residents.
3 CalPERS Pension Analysis Funded status, POB performance ($281M issued 2021), employer contribution projections through FY 2054-55.
4 2024 Pavement Management Program 318.5-mile network assessment — PCI scores, deferred maintenance backlog, 7-year CIP schedule, funding gap analysis.
5 Integrated Statistical Analysis Trend analysis, CAGR calculations, stress testing, peer benchmarking computations, and cost reduction modeling.
Limitations: Analysis relies on publicly adopted budget documents and CalPERS projections. All projections are for planning purposes only. 12-YEAR GENERAL FUND TREND ANALYSIS
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 Expenditure CAGR: 4.8% | 38% growth from 20-21 to 24-25 Revenue CAGR: ~4.3% | 50 bps below expenditure growth Surplus/(Deficit)Expenditure ($M)Revenue ($M)Fiscal Year $5.0$97.5$102.5FY14-15
$1.5$107.8$109.3FY16-17
$2.2$116.0$118.2FY18-19
$2.5$113.5$118.0FY19-20
$0.0$107.0$107.0FY20-21
$12.1$127.8$139.9FY21-22
($0.5)$139.4$138.9FY22-23
$2.7$143.9$146.6FY23-24
$1.3$147.9$149.2FY24-25
($0.7)*$149.6*$147.0*FY25-26
S&B at 83%+ of GF operating — primary cost driver at 4.8% CAGR. Revenue over-concentrated in Sales + Property Tax (80%+).
City of Orange FTE Balances
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 FTE approx. 700 (2016-2018)
FTE approx. 658 (2019-2021)
COVID Relief $27 MM (2021/22)
FTE approx. 740-760 (2024/25) budget and *vacancies hired Pay increases and some salary equity adjustments
Approx 90 HC increase from 2020-2021 to 2023-2024
Hiring freeze in 24-25 and Budgetary decrease 25-26
*Audit Committee Financial Review
City of Orange Fund Balances
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 *Audit Committee Financial Review
Total Fund Balance increasing through 2010s and Flattening in 2020s Workers Comp Negative for Years and approx. $8-9 million negative for last decade City of Orange Account Balances
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 Orange Cash and Inv.
Balances continuing to
rise QoQ for last 2 years
FY 2025-26 ADOPTED BUDGET SNAPSHOT
City of Orange | Council Member Fiscal Briefing | FY 2025-26 5 $147.0M
Total Revenue
$149.6M
Total Expenditure
($2.6M)
Structural Deficit
Key Context
● City projected $19M deficit for FY24-25 but resolved to surplus through adjustments ● Higher-than-anticipated revenues and lower-than-anticipated expenses could drive FY26 deficit closer to $0 ● Revenue initiatives underway: fee study, paid parking, street sweeping, economic development ● Salaries & Benefits = 83%+ of GF operating expenditure ● Assumptions miss on actual HC funded vs Budgeted and Fire Dept OT Expense will partially offset 5-YEAR FORECAST — 3% REVENUE / 3% EXPENDITURE GROWTH
City of Orange | Council Member Fiscal Briefing | FY 2025-26 6 With equal 3%/3% growth, the deficit stays flat rather than ballooning — but never self-corrects.
CumulativeAnnual DeficitExpenditureRevenueFiscal Year
($0.7M)($0.7M)$149.6M$148.9MFY 25-26 (Base)
($1.4M)($0.7M)$154.1M$153.4MFY 26-27
($2.2M)($0.8M)$158.7M$157.9MFY 27-28
($3.0M)($0.8M)$163.5M$162.7MFY 28-29
($3.8M)($0.8M)$168.4M$167.6MFY 29-30
($4.6M)($0.8M)$173.4M$172.6MFY 30-31
KEY INSIGHT: The structural gap is the FY26 base gap carried forward. Efficiency gains of $0.7M+ close it. Cumulative $4.6M gap over 6 years is manageable vs. original City estimate of $44.5M.
REVENUE SENSITIVITY — THREE SCENARIO STRESS TEST
City of Orange | Council Member Fiscal Briefing | FY 2025-26 7 Base (3%/3%) Optimistic (4%/2.5%) Slow Growth (2%/3%)
Slow Cum.Slow GapOptim. Cum.Optim. GapBase Cum.Base GapFY ($0.7M)($0.7M)($0.7M)($0.7M)($0.7M)($0.7M)26
($3.1M)($2.4M)$0.8M$1.5M($1.4M)($0.7M)27
($6.9M)($3.8M)$4.7M$3.9M($2.2M)($0.8M)28
($12.4M)($5.5M)$11.1M$6.4M($3.0M)($0.8M)29
($19.6M)($7.2M)$20.2M$9.1M($3.8M)($0.8M)30
($28.6M)($9M)$32.1M$11.9M($4.6M)($0.8M)31
BOTTOM LINE: Only the Optimistic scenario self-corrects. Base and Slow Growth both require cost-side action. The Slow Growth scenario (2% rev) produces a $28.6M cumulative hole — nearly the City's entire catastrophic reserve. Cost reduction is not optional. *City has been running 4.3% revenue growth on average over the last 12 years and out pacing recent budget assumptions. Set rev/exp assumptions to realistic, accurate and achievable targets to inform right budgetary actions. City has been outpacing rev targets over the last few years.
CALPERS – Pension Obligation Assumption Explanation
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 Rate of Return Actuals
21-22: -6.1% return
22-23: 5.8% return
23-24: 9.3% return
24-25: 12.1% return
*2023-2024 Investment Basket
*2024-2025 Investment Basket
*2025-2026 Current Stock Performance
CALPERS – Pension Obligation Assumption Explanation
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 2025-2026 – Forecasted Return at 12% - conservative at lower bound Estimated ReturnAsset Class Proxy
+20% to +30%Public equities
+3% to +6%Bonds / fixed income
+15% to +20%Private equity
+6% to +12%Real assets
+5% to +8%Private debt / cash
Approx WeightAsset Class
39%–42%Public Equity
28%–30%Fixed Income
15%–18%Private Equity
13%–15%Real Assets
2%–4%Private Debt / Cash
Estimated CalPERS Return:
~12% to 16% with a midpoint estimate around: ~14%
Here’s the logic.
Estimated asset mix
CalPERS’ FY2024-25 allocation was approximately:
Market performance during the period
Approximate returns from July 1, 2025 → May 11, 2026:
25-26: 12% return (lower end forecasted)
Future Years: 6.8% return (forecasted)
CALPERS FUNDED STATUS — AS OF 6/30/2026
City of Orange | Council Member Fiscal Briefing | FY 2025-26 9 Assuming 12% return for FY 2025-26 | 6.8% discount rate forward
COMBINED
102.5%
Surplus: +$30.64M
MISCELLANEOUS
105.3%
Surplus: +$24.3M
PUBLIC SAFETY
100.8%
Surplus: +$6.34M
Funded %SurplusLiabilitiesAssetsGroup
105.3%+$24.3M$458.1M$482.4MMiscellaneous
100.8%+$6.34M$756.3M$762.6MPublic Safety
102.5%+$30.64M$1,214.4M$1,245.0MCOMBINED
IMPORTANT: Pension surplus remains within the CalPERS account and cannot be leveraged for other components of the City's budget.
CALPERS – Misc and Public Safety Funding Status
City of Orange | Council Member Fiscal Briefing | FY 2025-26 4 MISC Group Public Safety Group
PENSION OBLIGATION BOND — PERFORMANCE ANALYSIS
City of Orange | Council Member Fiscal Briefing | FY 2025-26 10 $281M
POB Issued (2021)
@ 2.7% Interest
$383.1M
Investment Value
by 2026
+$64.2M
Net Arbitrage
Gain
$37.9M
Total Interest
Paid (5 yrs)
Annual CalPERS Investment Returns
ReturnYear
-6.1%FY 21-22
+5.8%FY 22-23
+9.3%FY 23-24
+12.1%FY 24-25
+12.0%FY 25-26 (Est.)
POB Verdict: NET WIN
● Gross gain: +$102.1M on $281M invested
● After $37.9M interest cost: +$64.2M net
● 22.8% cumulative net return over 5 years
● Surplus stays in CalPERS account
EMPLOYER CONTRIBUTION RATE PROJECTIONS
City of Orange | Council Member Fiscal Briefing | FY 2025-26 11 Baseline vs. Scenario (11.6% FY25, 12% FY26, 6.8% forward) Scenario Long-RunBaseline Long-RunUAL EliminatedScenario FY26Baseline FY26Plan
8.02% (FY28)8.02% (FY44)FY 27-2811.71%17.28%Misc. Plan 374
13.27% (FY29)13.27% (FY43)FY 28-2919.45%29.77%Safety Plan 375 ~$120M cum. savingsN/AFY 28-2915.56%23.49%Combined
Key Takeaways
● Under scenario assumptions, UAL eliminated 14+ years ahead of schedule ● Misc. UAL eliminated by FY27-28 — saves ~$2.2M/yr in employer contributions ● Safety UAL eliminated by FY28-29 — saves ~$7.1M/yr
● Cumulative savings through FY54-55: ~$120M+
● Reduced employer rates free GF capacity for other priorities (not from surplus withdrawal) ● Stock market returns are projections. Will need to monitor returns PUBLIC SAFETY PENSION RISK — BIGGEST THREAT
City of Orange | Council Member Fiscal Briefing | FY 2025-26 12 69% GF Concentration in Public Safety = Outsized Pension Volatility Risk Why This Matters
● Public Safety at 100.8% funded — any market correction erodes $6.34M surplus
● Every 1% pension cost increase = ~$1.5M additional GF pressure ● 69% PS concentration means pension volatility has outsized budget impact vs. peers at 52-63%
● Even at 6.8% discount rate, both groups likely remain funded — but Safety margin is razor thin
Peer PS % of GF
PS % of GFCity
68.6%Orange
~63%Fullerton
53.9%Huntington Beach
52.5%Costa Mesa
The single most effective risk mitigation for pension exposure is reducing Public Safety's share of GF spending toward peer benchmarks (65% near- term target).
PEER BENCHMARKING — PUBLIC SAFETY % OF GENERAL FUND
City of Orange | Council Member Fiscal Briefing | FY 2025-26 15 Orange is 5-16 percentage points above every OC peer in Public Safety spending as a share of GF.
Orange
68.6%
Police 41.4% | Fire 27.2%
Fullerton
63%
Police 33% | Fire 30%
Huntington Beach
53.9%
Police 32.2% | Fire 21.7%
Costa Mesa
52.5%
Police 32.6% | Fire 19.9%
Police FTE: 257 Fire FTE: 127 (OT 18% of S&B)
PAVEMENT MANAGEMENT PROGRAM — NETWORK OVERVIEW
City of Orange | Council Member Fiscal Briefing | FY 2025-26 13 318.5
Centerline Miles (miles)
$1.065B
Replacement Value
80.9 Citywide Condition (PCI)
Network Breakdown
PCIMilesCategory
81.695.9MPAH (Major Arterials)
80.3222.6Local Streets
80.9318.5Total
Condition Distribution
Good / Satisfactory 41.7%
Preventive Maintenance 31.6%
Rehabilitation Needed 25.4%
Reconstruction Needed 1.3%
OCTA M2 Compliance: City qualifies for 10% local match reduction (PCI > 75). Construction costs up 40% from 2022-2024.
PAVEMENT FUNDING GAP — $46.6M DEFERRED BACKLOG
City of Orange | Council Member Fiscal Briefing | FY 2025-26 14 $10.38M/yr
Required Annual Funding
$1.7-3.1M/yr
Annual Funding Shortfall
$46.6M
Deferred Backlog
ShortfallBudgetedNeedPeriod
($1.69M)$18.34M$20.03MCurrent Biennium
($3.13M)$19.24M$22.37MNext Biennium
MPAH $3.77M + Local $6.61M$10.38MAnnual Avg Required
7-Year CIP Spending (MPAH)
MPAH SpendFY
$1.54M2024-25
$3.08M2025-26
$2.99M2026-27
$4.10M2027-28
$3.5-4.0M2028-29
$7.0-8.0M2029-31
Critical Risk
● Construction costs up 40% (2022-2024) — threatens all projections ● Gap widening from $1.69M to $3.13M per biennium
● Backlog target: $33-39M by FY31
● Key corridors: Cambridge, Taft, Collins, Glassell, Katella ● Close gap through operational efficiency savings
LIBRARY SERVICES — 50% ABOVE PEER AVERAGE
City of Orange | Council Member Fiscal Briefing | FY 2025-26 18 Orange
$45/cap
34 FTE budgeted
Huntington Beach
~$27/cap
Est. budgeted
Orange Library FTE Breakdown (FY25-26)
BudgetedFrozenAuthorizedCategory
27.0—27.0FT Regular
4.5—4.5PT Benefitted
2.56.5259.025PT Non-Benefitted
34.06.52540.525TOTAL
Recommendation
Option 1: Open the branch libraries back
up and staff them @ 22 FTE
Est. Annual Savings: $1.2M - $1.4M
Option 2: Sell the Branch libraries and staff
libraries @14 FTE
Est. Annual Savings: $1.9M - $2.2M
Option 3: Sell one branch library and staff
other 2 @18 FTE
Est. Annual Savings: $1.6M - $1.8M
Total Open Hours (84/week)
Taft: 16 hrs
El Modena: 16 hrs
Main: 52 hrs
*$1,200/hr – Library operating
FINANCE DEPARTMENT — HEADCOUNT ISSUE, NOT COMPENSATION
City of Orange | Council Member Fiscal Briefing | FY 2025-26 19 Garden GroveHBCosta MesaOrangeMetric
~172K~203K~109K~140KPopulation
33~2026.7530.25Finance FTE
1.921.012.372.16FTE per 10K Residents
Est.Est.$227K$177KCost per FTE
Est.Est.$6.07M$5.36MTotal Finance Budget
Anomalies Flagged
● Purchasing/Warehouse function (Sr. Buyer, Buyer, Stock Clerk, Warehouse Specialist) — many peers have consolidated or outsourced
● Multi-layered management: Asst. CM → Budget Mgr → Asst.
Finance Dir → 4 division managers
● HB runs finance at 1.01 FTE/10K — 53% more efficient than Orange at 2.16
Recommendation
Target: 20 FTE (-10.25)
Via utility billing automation + purchasing consolidation.
Centralization of finance function and software/tech upgrades.
Est. Annual Savings:
$1.5MM - $1.95MM
COST REDUCTION & EFFICIENCY Options
City of Orange | Council Member Fiscal Briefing | FY 2025-26 20 BOTTOM LINE: Expanded savings opportunity of $15.9M-$24.2M annually. Closes $2.6M deficit. Includes 18 ambulance operators enabling 4-man crews (hold constant manning at 3 firefighters), Mills Act overhaul ($300-400K), and FTE reduction to 680. No tax increases required. Increasing Property Tax Roles and Ensuring Business Growth are pivotal for continued revenue health. *Add county islands? High Est.Low Est.Initiative
$1,400,000$1,200,000Library FTE (34→22)
$2,500,000$2,180,000Fire OT ReducƟon (18%→12%)
$900,000$400,000Organizational Scoping Review – Leader Ratios $500,000$200,000Improved Asset Management
$4,500,000$3,000,000PS Target (68.6%→65% GF)
$1,950,000$1,500,000Finance FTE (30→20)
$750,000$300,000Economic Dev. / Property Tax
$400,000$200,000TOT Optimization
$300,000$200,000Mills Act Accountability
+$1.5MMCost-neutral18 Ambulance Ops (4-man crews)
$3,500,000$2,000,000FTE Reduction to 680 Citywide
$600,000$350,000AI/Automation (HR & Fin) + IT centralized services $1,900,000$1,500,000Fee Study (underway)
$1,000,000$500,000Revenue Diversification (TOT?)
$19,700,000$12,950,000TOTAL
Risks to Monitor
City of Orange | Council Member Fiscal Briefing | FY 2025-26 22 ● May/June Investment portfolio underperformance — CalPERS FY26 return may miss 12% assumption. ● Future years may miss CalPERS 6.8% annual assumption
● Not addressing pavement backlog growth and allowing the PCI to drop too far ● Major unforeseen infrastructure impacts
● Workers Comp deficit compounding at -$761K/yr
● Liability impacts to the city
● Revenue concentration: 80%+ in two tax sources – loss of additional property tax revenue or large sales tax revenue sources
● Public Safety percent of budget and pension obligations ● Fuel price instability
KEY RISKS — STOCK/ECONOMIC DOWNTURN & CALPERS EXPOSURE
City of Orange | Council Member Fiscal Briefing | FY 2025-26 29 Stock Market/Economic Downturn Creates CalPERS Unfunded Liability Risk CalPERS Pension Exposure
CalPERS assumes 12% return FY25-26
If actual return is 0% or negative:
PS funded drops from 100.4% → below 95%
$2.77M surplus erodes entirely
Unfunded liability re-emerges
Every 1% shortfall = ~$1.5M more GF pressure
At 69% PS, Orange absorbs pension volatility at 1.3x peer rate A -5% CalPERS return creates $50-60M unfunded liability swing Economic Recession Impact
Revenue 80%+ concentrated in Sales + Property Tax
Both decline simultaneously in recession
2008-2010 precedent: Sales Tax fell 25%
Slow Growth scenario (2%/3%): $40.6M cumulative deficit by FY31 Reserves at risk if recession + pension cost escalation coincide Other Operational Risks:
Construction/inflation costs
Workers' Comp deficit compounding at -$761K/yr
Labor market tightness for police recruitment
State/Federal unfunded mandate risk
CRITICAL SCENARIO: A simultaneous stock market downturn (-10%) and economic recession could create a $50-60M unfunded liability swing in CalPERS while reducing City revenue by 5-8%. At 69% PS concentration, this would create a fiscal emergency similar to Vallejo's 2008 crisis. Reducing PS concentration to 65% is the single most effective mitigation strategy.
APPENDIX A — CALPERS CONTRIBUTION RATE DETAIL
City of Orange | Council Member Fiscal Briefing | FY 2025-26 23 Employer Contribution Rates: Baseline vs. Scenario (Selected Years) Combined Scen.Combined BaseSafety ScenarioSafety BaselineMisc. ScenarioMisc. BaselineFiscal Year
15.56%23.49%19.45%29.77%11.71%17.28%FY 25-26
15.18%22.95%18.90%29.10%11.50%16.85%FY 26-27
12.74%21.96%17.50%28.05%8.02%15.92%FY 27-28
10.63%20.63%13.27%26.50%8.02%14.80%FY 28-29
10.63%19.35%13.27%24.80%8.02%13.95%FY 29-30
10.63%14.48%13.27%18.50%8.02%10.50%FY 34-35
10.63%11.84%13.27%14.90%8.02%8.80%FY 39-40
10.63%10.63%13.27%13.27%8.02%8.02%FY 43-44
Scenario assumptions: 11.6% return FY24-25, 12% return FY25-26, 6.8% discount rate forward. UAL eliminated: Misc. by FY27-28, Safety by FY28-29. Cumulative savings ~$120M through FY54-55.
Annual CalPERS Returns & POB Performance
POB issued: $281M @ 2.7% (2021) | Current value: $383.1M | Gross gain: +$102.1M | Interest paid: $37.9M | Net gain: +$64.2M APPENDIX B — PAVEMENT CIP SCHEDULE & CORRIDOR DETAIL
City of Orange | Council Member Fiscal Briefing | FY 2025-26 24 Key CorridorsTotalLocal Spend (Est.)MPAH SpendFiscal Year Cambridge St, Wanda Rd$8.15M$6.61M$1.54MFY 24-25
Taft Ave, Collins Ave$9.69M$6.61M$3.08MFY 25-26
Glassell St, Santiago Blvd$9.60M$6.61M$2.99MFY 26-27
Katella Ave, Chapman Ave$10.71M$6.61M$4.10MFY 27-28
TBD per PMP update$10.1-10.6M$6.61M$3.5-4.0MFY 28-29
TBD per PMP update$10.1-10.6M$6.61M$3.5-4.0MFY 29-30
TBD per PMP update$10.1-10.6M$6.61M$3.5-4.0MFY 30-31
Pavement Network Summary
ValueMetric
318.5Total Centerline Miles
$1.065 BillionReplacement Value
80.9 (Good)Citywide PCI
$10.38M/yrAnnual Funding Need
$1.7-3.1M/yrCurrent Annual Shortfall
$46.6MDeferred Backlog
$33-39MBacklog Target (FY31)
+40% (2022-2024)Construction Cost Escalation
Treatment Types by Need
● Good/Satisfactory (41.7%) — routine maintenance
● Preventive Maintenance (31.6%) — slurry seal, microsurfacing ● Rehabilitation (25.4%) — overlay, mill & fill
● Reconstruction (1.3%) — full replacement
● OCTA M2: PCI >75 = 10% local match reduction
APPENDIX C — PEER CITY COMPARISON DETAIL
City of Orange | Council Member Fiscal Briefing | FY 2025-26 25 Mission V.Garden Gr.Santa AnaHBCosta MesaFullertonOrangeMetric ~91K~172K~310K~203K~109K~139K~140KPopulation
Est.Est.Est.$299.4M$189.9MEst.$149.6MGeneral Fund
ContractN/AN/A53.9%52.5%~63%68.6%PS % of GF
N/AN/AN/A$96.2M$63.5M$66.8M$61.9MPolice Budget
N/AN/AN/A$429$553$402$424Police $/cap
N/AN/AN/A~350~200196.0257.7Police FTE
OCFAN/AN/A$65.0MN/A$37.8M$40.6MFire Budget
ContractN/AN/A$310N/A$242$272Fire $/cap
N/AN/AN/A~200N/A88.0126.75Fire FTE
N/AN/AN/A~$27N/A$30$45Library $/cap
N/AN/AN/AEst.N/A23.334.0Library FTE
N/A3369-72~2026.7531.030.25Finance FTE
N/A1.922.231.012.372.232.16Fin. FTE/10K
Notes: Mission Viejo is a contract city (OCFA, OCSD). HB and Costa Mesa carry large Non-Departmental line items (19.5% and 12.4% respectively), which inflates their GF denominators. 'Est.' values are estimated from partial budget data. All data from FY 2023-2026 adopted budgets.
Historic
Preservation
Update
May is National Historic Preservation
Month!
419 Contracts
97 Contracts in violation
Mills Act
February 17thOld Towne Preservation Association/Orange
Legacy Alliance “Listening Session”
March 16thJoint Planning Commission/Design Review
Committee Study Session
March 25thCommunity Workshop
Late-MayAdministrative Draft Ordinance from
Consultant for Internal Review
Late-JulyPublic Hearing Draft Complete
AugustDesign Review Committee and Planning
Commission Hearings
OctoberCity Council Hearing
Historic Preservation
Ordinance
El Modena Barrio Story Map
Thank you!
Non-Renewal vs. Cancellation
Non-Renewal
Penalty-Free
Contract “Sunset” - Gradual
increase in property tax over 10
years
Owner or City initiated
Cancellation
City initiated
Contract immediate end
Instant loss of tax benefits
Penalty: mandatory 12.5% of
fair market value assessed paid
to the county assessor’s office
1. Re-investment of the tax savings to
restore, rehabilitate, and maintain the
historic integrity of the property
2. Annual Fee
3. Annual Report
4. Current 10-year Plan
Mills Act
Requirements
Design Review Committee
Scope change: October 2025
Notable Projects:
Fletcher Small Lot Subdivision approved by CC on April 28th Tustin (Best Buy Site) Residential Development approved by Planning Commission on April 6th scheduled for CC on June 23rd
Rancho Santiago Planned Unit Development approved by PC on April 20th and scheduled for CC on May 26th
CHARTER CITY DISCUSSION
FIRST PUBLIC HEARING
COMPARING GENERAL LAW AND
CHARTER LAW CITIES
Charter Law CitiesGeneral Law Cities
Draw some authority from a locally adopted charter as
well as State law.
Draw much of their authority from State statutes.
May create local rules for elections, contracting,
governance structure, and local programs.
Must follow standardized rules and procedures
pursuant to State law.
Can rely on locally adopted home rule charter to
address issues deemed to be a “municipal affair. ”
Must abide by State law regardless if the issue is
purely local.
QUOTE
NON-EXHAUSTIVE AND FLUCTUATING
LIST
Ambiguity in the California Constitution coupled with court decisions and legislation have resulted in a changing (and often dwindling) list of issues deemed to be a “municipal affair. ” Statewide ConcernMunicipal Affair
Traffic ControlPolice Authority
Numerous Housing LawsMunicipal Elections
Brown Act, Public Records Act, and Political Reform
Act
Qualifications for local officials
Prevailing Wage LawPublic Contracting
DRAFT CHARTER FOR POLICY DISCUSSION
The proposed charter includes nine articles detailing general policy statements for City Council and public review and feedback. Generally, the draft Charter can be summarized into the following categories:
1. Incorporation of Powers and Municipal Affairs (Articles I and II) Article I – Incorporation and Powers.
Article II – Municipal Affairs and General Laws
2. Form of Government and City Council Structure (Articles III and IV) Article III – Form of Government
Article IV – City Council
3. Term Limits and Vacancy Procedures (Articles V and VII) Article V – Term Limits
Article VII – Vacancies in Office
4. Procurement, Contracting, and Local Control (Article VI) Article VI – Municipal Affairs, Procurement, and Local Control
5. City Assets, Public Utilities, and Eminent Domain (Article VI) Article VI – Municipal Affairs, Procurement, and Local Control
6. Fiscal Responsibility and Legal Provisions (Articles VIII and IX) Article VIII – Fiscal Responsibility
Article IX – Legal Provisions
LOOKING FORWARD
City Council Initiated Charter: Draft Ballot Measure Timeline DeadlineStep
April 9, 16, and 21, 2026Notice First Public Hearing
Tuesday, May 12, 2026Conduct First Public Hearing
May 21, 28, 2026 and June 2, 2026Notice Second Public Hearing Tuesday, June 23, 2026Conduct Second Public Hearing
Tuesday, July 14, 2026Conduct Vote to Submit Charter Measure to Voters Friday, July 17, 2026Signed Resolutions Sent to the Orange County Registrar of Voters Friday, July 31, 2026Last Day to Submit Direct Arguments and Impartial Analysis Tuesday, November 3, 2026Election Day
Revenue Measures
1 Estimated Annual RevenueRevenue Measure
$37 Million1% Sales Tax
$2.5 MillionTransient Occupancy Tax Increase
$10.7 MillionUtility User Tax
$3,000-$6,000 per vacant parcelVacant Property Tax
$2.8 MillionDocumentary Transfer Tax
$2.5 MillionParking Operator Tax
Unknown – Separate Direction RequestedSale of Utility Systems $4 Million – Separate Direction RequestedCannabis Gross Receipts Tax Unknown – Separate Direction RequestedBusiness License Tax Modernization One-Cent Sales Tax Measure
2 Description:
Additional local sales tax on the purchase of tangible goods within the City of Orange. Assuming a 1% increase, this measure would add 1-cent for every $1 dollar spent.
Estimated Additional Revenue:
At a 1% sales tax rate (1-cent for every $1 dollar), it is estimated the City would receive an additional $37 million in annual revenue.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Transient Occupancy Tax
3 Description:
Often referred to as a hotel tax or bed tax, a transient occupancy tax (TOT) is a tax imposed on short-term lodging stays and applies to any occupancy of 30 consecutive days or less.
Estimated Additional Revenue:
The City’s current 10% TOT is projected to generate $6.3 million by the end of the fiscal year. At each 1% increase, it is estimated the City would receive an additional $600,000 in revenue.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Utility User Tax
4 Description:
A Utility User Tax (UUT) is a locally imposed tax on the use of utility services and is typically calculated as a percentage of a customer’s monthly bill. Utility services typically subject to the UUT include electricity, natural gas, water, and telecommunications (e.g., internet and cable).
Estimated Additional Revenue:
The City currently does not have a UUT in place. At a 4% UUT, the estimated revenue is $10.7 million.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Vacant Property Tax
5 Description:
A vacant property tax (VPT) is an annual tax generally imposed on property owners whose residential, commercial, or undeveloped properties remain vacant for extended periods of time. VPT’s intend to reduce blight and encourage economic activity.
Estimated Additional Revenue:
The City currently does not have a VPT in place, and revenue would range year-to- year dependent on the number of vacant parcels. In using the City of Oakland as an example, it could generate a little over $1 million.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Parking Operator Tax
6 Description:
Locally imposed tax collected as a percentage of the fee paid by an individual to park in a parking facility. The tax is typically collected and remitted to the City by the parking operator.
Estimated Additional Revenue:
The estimated revenue would depend on how the tax is structured. If the tax intends to focus on larger operators, staff estimates this could potentially generate $2.5 million. As a point of comparison, Santa Monica has implemented a parking operator tax and reported $14 million in revenue during FY25.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Documentary Transfer Tax
7 Description:
Often referred to as a Real Property Transfer Tax, the Documentary Transfer Tax (DTT) is a tax imposed on the transfer of real property when a deed, lease or other transferring instrument is recorded. As a general law city, the DTT in Orange is $1.10 per $1,000 of the sale price. The DTT revenue estimate for FY26 is nearly $650,000.
Estimated Additional Revenue:
Dependent on how the tax is structured. In Santa Monica, the DTT depends on the sale price. If the transaction is $5 million or less, then a $3.00 per $1,000 of the final sale price rate is imposed. Based on the FY26 year-end estimate, if the $3.00 rate is used, this could generate meaningful revenue.
However, it is likely this increase could only be imposed if the City has an adopted Charter.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Sale of the City’s Utility Systems
8 Description:
California Public Utilities Code Section 10061 authorizes cities to lease, sell, or transfer its water and sewer utility. This is a significant policy decision, and requires multiple steps and approvals.
Estimated Additional Revenue:
Unknown - the City of Bellflower completed the transfer of its water utility in 2022 for $17 million. Given the larger scale of Orange’s combined utility operations, it is expected the City would receive proposals exceeding this amount. The City could conduct a request for proposal process to better understand the potential value while not obligating the City to sell either system.
Cannabis Gross Sales Tax
9 Description:
The City currently prohibits all commercial cannabis-related activities. If commercial activity is allowed in the future, a gross receipts tax is imposed on gross business receipts.
Estimated Additional Revenue:
Highly dependent on City Council policy direction, but as a point of comparison, the City of Costa Mesa has imposed a 7% gross receipts tax and has reported revenues slightly above $4 million.
Vote Requirements:
City Council: Two-Thirds (5/7) to place on November 2026 Ballot Orange Voters: General Purpose (50%+1)| Special Purpose (66.67%) Business License Tax Modernization
10 Description:
This is a tax paid by business operators for the privilege of conducting business in the City.
Estimated Additional Revenue:
Potential revenue depends entirely on the scope of any modernization efforts.
Administrative adjustments may generate limited revenue while expanding to a gross receipts-based model may generate significant ongoing revenue. A comprehensive review of the City’s existing business license program would be first step towards modifying the existing program.
Transient Occupancy Tax RateCity
8.0%Laguna Niguel
8.0%La Palma
8.0%Mission Viejo
8.0%Irvine
8.0%Los Alamitos
8.0%Westminster
8.0%Costa Mesa
9.0%Fountain Valley
10.0%Laguna Woods
10.0%Lake Forest
10.0%Aliso Viejo
10.0%Yorba Linda
10.0%San Juan Capistrano
10.0%Dana Point
10.0%Laguna Hills
10.0%Cypress
10.0%San Clemente
10.0%Brea
10.0%Placentia
10.0%Huntington Beach
10.0%Newport Beach
10.0%Orange
10.0%Fullerton
11.0%Santa Ana
12.0%Stanton
12.0%Seal Beach
12.0%Buena Park
13.0%Tustin
14.0%Laguna Beach
14.5%Garden Grove
15.0%Anaheim
228,000,000.00$ POB
85,000,000.00$ UAL
27,685,000.00$ LEASE-REV BOND
33,098,170.00$ OPEB
12,533,587.00$ COMPENSATED AB
16,493,888.00$ CLAIMS PAYABLE
402,810,645.00$