TO: Honorable Mayor and Members of the City Council
FROM: Jarad Hildenbrand, City Manager
1. Subject
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Initial review of the preliminary 13-Year Financial Sustainability and Investment Strategy
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2. Summary
Staff has developed a preliminary 13-Year Financial Sustainability and Investment Strategy to provide the City Council and community with an initial framework for how additional locally controlled revenues, if approved by Orange voters in November 2026, could be invested to strengthen Orange for the long term.
The preliminary Strategy assumes additional General Fund revenues associated with Measure I, the Public Safety/Essential Services Measure, and Measure J, the Hotel Tax Modification Measure. This assumption is for planning purposes and does not advocate for or against either measure. The decision on Measures I and J belongs to Orange voters.
Informed by Rebuild Orange: Local Control and Accountability, the Strategy is organized around four long-term priorities:
• Strengthen Orange’s Finances
• Protect Public Safety and Essential Services
• Repair, Maintain and Beautify Orange
• Grow Orange’s Economy
The Strategy is not a fixed 13-year budget. It establishes the priorities, financial discipline, accountability, and outcomes intended to guide the City over the 13-year period, while individual investments would be evaluated and authorized through future public budget and appropriation processes. Financial conditions, professional assessments, organizational capacity, project readiness, and community needs would inform those decisions over time.
Measure I is temporary, making long-term sustainability fundamental to the Strategy. The objective is to use the 13-year period, if approved by voters, to strengthen the City’s finances, protect essential services, reinvest in aging infrastructure and facilities, strengthen the local economy, and leave Orange better positioned to sustain those investments after the temporary revenue expires.
Staff is seeking City Council direction on the proposed priorities, identified needs, appropriate level of financial flexibility, and the outcomes Orange should seek to achieve over the 13-year period.
3. Recommended Action
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Receive and provide direction on the preliminary 13-Year Financial Sustainability and Investment Strategy.
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4. Fiscal Impact
There is no fiscal impact associated with receiving and providing direction on the preliminary Strategy. No expenditures identified in the Strategy are authorized or appropriated by this action.
For planning purposes, the Strategy assumes additional General Fund revenues associated with two measures that will be considered by Orange voters on November 3, 2026. If approved, Measure I is estimated to initially generate approximately $37 million annually and would remain in effect for 13 years from its operative date. Measure J would modify the City’s Transient Occupancy Tax and is estimated to generate approximately $3 million annually in additional General Fund revenue. If both measures are approved, the City is estimated to initially receive approximately $40 million annually in additional General Fund revenue.
Actual revenues and investment costs will vary based on economic conditions, taxable sales, hotel activity, inflation, labor and construction costs, project readiness, and future City Council decisions. The Strategy intentionally preserves unallocated financial capacity to respond to changing conditions, emergencies, cost escalation, and unforeseen needs.
If only one measure is approved, staff would return with an updated financial forecast and recommendations. If the proposed additional revenues are not approved, the investments contemplated by the Strategy could not be implemented within the framework presented, and the City would need to address its ongoing financial challenges within available revenues.
5. Strategic Plan Goals
The preliminary Strategy supports multiple goals contained within the City’s Fiscal Years 2025-2030 Citywide Strategic Plan. For purposes of this long-range framework, those objectives are organized around four community outcomes: stronger City finances; protected public safety and essential services; repaired, maintained, and beautified community infrastructure; and a stronger local economy.
6. Discussion and Background
November 2026 Revenue Measures
The City Council has placed two locally controlled revenue measures before Orange voters at the November 3, 2026 General Municipal Election.
Measure I, the proposed Public Safety/Essential Services Measure, would establish a one-cent general transactions and use tax for general governmental purposes. It is estimated to initially generate approximately $37 million annually and would expire 13 years from its operative date. The ballot question identifies priorities including 9-1-1 response, police and fire protection, crime prevention, parks, homelessness, wildfire protection, streets and potholes, and critical infrastructure.
Measure J, the proposed Hotel Tax Modification Measure, would increase the City’s Transient Occupancy Tax from 10% to 14% for hotels with 11 or more rooms, maintain the 10% rate for hotels with 10 rooms or fewer, and expand application of the tax to online and other travel companies. It is estimated to generate approximately $3 million annually in additional General Fund revenue and would remain in effect until ended by voters.
The preliminary Strategy assumes approval of both measures solely for planning purposes. Revenues would be deposited into the City’s General Fund and used for City services and investments in Orange. If Measure I is approved, its revenues and expenditures would be separately accounted for and subject to the accountability requirements established by the measure, including annual independent audits, public reporting, and review by an Independent Oversight Committee.
Rebuild Orange and the Community We Maintain
The City Council previously adopted Resolution No. 11689 establishing Rebuild Orange: Local Control and Accountability. It establishes principles of fiscal discipline, transparency, independent oversight, operational efficiency, measurable results, and long-term planning. The preliminary Strategy translates those principles into a long-term financial and investment framework.
Orange is a full-service city serving approximately 140,000 residents. The City maintains approximately 322 miles of streets, 7,842 streetlights, 158 traffic signals, 26,000 street trees, 22 parks, eight fire stations, three libraries, 82 City-owned buildings, and more than 533,000 square feet of City facilities. In 2025, Police responded to more than 82,000 calls for service; Dispatch answered more than 46,000 9-1-1 calls; and Fire responded to 18,960 calls for service.
These assets and services require continued investment. Streets, buildings, fire stations, vehicles, emergency equipment, playgrounds, computers, and communications systems deteriorate or become obsolete over time. Delaying investment often increases the eventual cost and transfers the obligation to a future budget and generation. The City is developing a broader Orange by the Numbers inventory to establish measurable baselines and better quantify the assets and services for which the City is responsible.
A 13-Year Opportunity - Not a 13-Year Spending Plan
The Strategy is a long-term investment framework, not an annual spending plan multiplied by 13 years. Costs, infrastructure conditions, technology, service demands, and economic conditions will change over time. Accordingly, the Strategy establishes long-term priorities and financial discipline while allowing individual projects, funding levels, and timing to be evaluated through future public budget and appropriation processes.
Across the four priorities, individual investment decisions would be guided by three general investment principles:
• Stabilize. Address financial obligations, organizational needs, reserves, long-term liabilities, and other risks that could undermine sustainable services.
• Rebuild and Reinvest. Restore service and organizational capacity where appropriate and reinvest in existing infrastructure, facilities, parks, vehicles, equipment, technology, and systems based on demonstrated need.
• Invest for the Future. Favor investments that create lasting value, reduce future costs and risks, establish sustainable maintenance and replacement cycles, strengthen essential services, improve organizational capacity, or expand Orange’s recurring economic and revenue base.
Although individual investments will evolve, the four priorities provide continuity throughout the 13-year period.
Financial Guardrails for Implementation
Because the Strategy covers a 13-year period, financial discipline must remain a continuing commitment. Each year, staff would update the City’s long-range financial forecast and evaluate actual revenues, reserves, long-term liabilities, investment performance, organizational capacity, asset conditions, service demands, project readiness, and other relevant factors before recommending future investments.
• Maintain structural balance. Ongoing expenditures should be supported by sustainable ongoing revenues, with particular consideration given to the expiration of temporary revenues.
• Protect and rebuild reserves. When General Fund reserves are below the Council-established target, restoration of reserves should remain a financial priority.
• Actively manage long-term liabilities. Pension and OPEB investments should be evaluated using current actuarial information, liability levels, investment performance, market conditions, liquidity, and professional advice.
• Prioritize lasting value. Where practical, temporary revenues should strengthen the City’s balance sheet, address accumulated liabilities, reduce deferred maintenance, and create, preserve, or modernize long-lived public assets.
• Supplement rather than supplant existing investment. Existing General Fund, Gas Tax, Measure M, grant, enterprise, restricted, dedicated, and other eligible resources should continue to support their appropriate purposes. Strategy resources are intended to restore, expand, accelerate, or modernize investment beyond the existing baseline.
• Evaluate post-sunset impacts. New or restored ongoing expenditures supported by temporary revenues should be evaluated based on whether they can be sustained after Measure I expires.
• Preserve flexibility. Annual recommendations may adjust the amount, timing, or funding method of individual investments while remaining consistent with the Strategy’s four priorities and intended outcomes.
Priority 1: Strengthen Orange’s Finances
A fundamental objective is to rebuild and strengthen the City’s financial foundation. The Strategy identifies investments to rebuild General Fund emergency reserves, stabilize pension obligations, fund Other Post-Employment Benefit obligations, restore Workers’ Compensation Fund reserves, address accrued leave liabilities, and manage other long-term financial obligations.
The appropriate funding strategy would be evaluated using updated actuarial information, market conditions, investment performance, liability levels, available resources, and professional advice, with input from the City’s Investment Advisory Committee, as appropriate. Pension resources, for example, could be directed toward additional CalPERS unfunded liability payments, a Section 115 Pension Stabilization Trust, or a combination of both.
The 13-year period provides an opportunity to make measurable progress on financial pressures that have accumulated over time. Temporary revenues should be managed with discipline: rebuilding reserves, addressing existing obligations and liabilities, avoiding unsustainable commitments, and strengthening the City’s ability to maintain essential services after Measure I expires.
Priority 2: Protect Public Safety and Essential Services
Public safety represents the City’s largest General Fund responsibility and a significant component of the preliminary Strategy. The Police Department is budgeted for 155 sworn officers and 75 professional staff and operates a fleet of 136 vehicles. The Strategy identifies investments in staffing and retention, public safety communications and the Emergency Dispatch Center, command and control capabilities, a Real-Time Crime Center, officer health and wellness, aging equipment, and security at parks and public facilities.
For Fire, the Strategy identifies investments in emergency medical response capacity, fire prevention and community risk reduction, wildfire protection, training and specialized response, firefighter health and wellness, apparatus and safety equipment, and aging fire stations. Orange operates eight fire stations, several of which are more than 50 years old and require significant modernization.
The Strategy also identifies investment in homelessness outreach, services, and enforcement. The objective is to ensure Orange has the people, facilities, equipment, and technology necessary to provide reliable public safety and essential services for the next generation.
Priority 3: Repair, Maintain and Beautify Orange
Orange’s infrastructure represents decades of community investment. This priority is intended to preserve that investment, address accumulated deferred maintenance, and move toward more sustainable maintenance and replacement cycles. Potential investments include:
• street rehabilitation and preventive maintenance;
• sidewalk replacement and traffic-safety improvements;
• traffic signal and streetlight modernization;
• parks, playgrounds, landscaping, and neighborhood beautification;
• stormwater and drainage improvements supported by appropriate eligible resources;
• graffiti, illegal dumping, shopping cart, and public right-of-way maintenance;
• fire stations, libraries, community and recreation facilities; and
• renewal of aging General Fund-supported public facilities and capital assets.
Not every asset category currently has a comprehensive condition assessment, replacement schedule, or quantified deferred-maintenance estimate. The Strategy therefore anticipates professional assessments and planning efforts that could provide more detailed information regarding long-term needs, including a Facility Condition Assessment, Parks Master Plan, technology planning, pavement and transportation information, and other departmental asset, fleet, equipment, and operational studies.
As better information becomes available, individual allocations may increase, decrease, accelerate, be deferred, or be redirected. The objective is not simply to repair what is failing today, but to substantially reduce deferred maintenance and establish more sustainable maintenance and replacement practices.
Priority 4: Grow Orange’s Economy
Long-term financial sustainability cannot rely solely on controlling expenditures or additional tax revenue. Orange must also strengthen its underlying economy and recurring revenue base.
The Strategy identifies investments to modernize the General Plan and Zoning Code, strengthen economic development capacity, attract and retain businesses, identify sales-tax leakage and retail opportunities, support commercial districts, improve development and business permitting, and position Orange to capture new private investment. Local revenues may also be used strategically to make projects grant-ready and leverage regional, state, federal, and other outside investment.
The objective is sustained private investment, a stronger commercial base, increased local economic activity, and growth in recurring General Fund revenues that can help support public safety, infrastructure, and essential services after Measure I expires.
Organizational Capacity, Workforce and Technology
Successfully implementing the Strategy will require sufficient organizational capacity to plan, procure, manage, deliver, and maintain the investments contemplated over the 13-year period. Additional funding alone will not produce the intended outcomes without the appropriate structure, staffing, technical expertise, systems, and project-management capacity.
The Strategy therefore contemplates a citywide organizational assessment to evaluate the City’s structure, classifications, staffing levels, spans of control, technical expertise, and service-delivery models. The assessment would consider whether existing resources are appropriately located, where additional capacity may be necessary, and whether work is best performed by City employees, consultants, contractors, shared services, or a combination of delivery methods.
Additional revenue does not reduce the City’s responsibility to operate efficiently and hold the organization accountable for results. Consistent with Rebuild Orange, the City will continue evaluating staffing, service-delivery models, technology, contracting opportunities, and operational practices.
Technology is also fundamental to organizational capacity. An Information Technology Strategic Plan and Technology Assessment could establish a long-term roadmap for cybersecurity, system replacement, disaster recovery, operational resilience, and other technology investments.
How Future Investments Should Be Evaluated
As individual programs and projects are considered, staff recommends evaluating:
• Community benefit and public safety or service impact;
• Financial sustainability and reduction of future costs or risks;
• Asset preservation and avoidance of larger future costs;
• Economic benefit and potential recurring revenue;
• Ability to leverage grants or other outside resources;
• Project readiness and implementation capacity;
• Measurable results; and
• Long-term sustainability after Measure I expires.
City Council Direction and Community Engagement
This preliminary Strategy reflects staff’s first assessment of needs and investments based on input from City departments. Presenting the framework before the election allows the City Council and community to understand what staff has identified, question assumptions, identify missing needs, and discuss desired long-term outcomes. The discussion is informational and planning-oriented and does not determine how any person should vote on Measure I or Measure J.
Staff is specifically seeking Council input on:
• Are the four priorities right, and what is missing?
• What should receive greater or lesser emphasis?
• What is the appropriate balance among ongoing services, infrastructure, financial stabilization, technology, and economic development?
• What should Orange have accomplished when Measure I expires?
Following this initial review, staff anticipates community town halls and other outreach to provide factual information regarding the City’s financial outlook, services and infrastructure, proposed revenue measures, and preliminary Strategy, and to receive community feedback.
Measuring Success and Accountability
The Strategy should ultimately be judged not by how much money is spent, but by what those investments accomplish. As the Strategy is refined, staff will develop measurable baselines and outcomes addressing financial condition, long-term liabilities, public safety and service capacity, infrastructure and deferred maintenance, facilities and parks, organizational performance, economic development, recurring revenues, and outside funding leveraged.
If Measure I is approved, an Independent Oversight Committee will be established in accordance with the voter-approved ordinance. Measure I revenues and expenditures will be separately accounted for within the General Fund and subject to annual independent audit, public reporting, and Committee review. The City Council would retain final authority over expenditures through the normal public budget and appropriation processes.
What Should Orange Look Like When Measure I Ends?
Because Measure I would be temporary, success should be evaluated not only by what occurs while the revenue is collected, but by the condition of Orange when it ends.
• Finances should be stronger, with healthier reserves, better-managed long-term obligations, and less financial risk.
• Public safety and essential services should have benefited from sustained reinvestment in staffing, facilities, equipment, and technology.
• Streets, sidewalks, parks, fire stations, libraries, public facilities, and neighborhoods should be better maintained, with substantially less deferred maintenance.
• Orange’s economy and recurring revenue base should be stronger through business attraction, private investment, improved development processes, and reduced revenue leakage.
• The City organization should be better aligned, appropriately staffed, technologically modern, and capable of maintaining the assets and services improved through the Strategy.
The desired outcome is straightforward: when Measure I ends, Orange should be financially stronger, economically stronger, safer, better maintained, and better positioned to sustain the services and infrastructure the community expects.
Planning From the Sunset Backward
The expiration of Measure I should influence financial decisions beginning in the first year, not simply as the sunset approaches. The City should regularly evaluate recurring expenditures against the revenues reasonably expected to remain after Measure I expires.
Temporary revenues may support ongoing services, particularly public safety and other essential services, but new or restored recurring commitments should be evaluated based on whether they can ultimately be supported by underlying General Fund revenues, including ongoing TOT revenue if Measure J is approved, revenue growth achieved during the 13-year period, and other sustainable resources.
The goal is to avoid reaching Year 13 structurally dependent on a revenue source that was always intended to expire. Orange should plan backward from the sunset so that expiration of Measure I is a planning benchmark rather than a financial cliff.
If Additional Revenues Are Not Approved
The preliminary Strategy identifies investments and service needs that cannot be accommodated within the City’s existing General Fund financial forecast. If the proposed revenue measures are not approved, the Strategy cannot be implemented within the framework presented.
Many contemplated investments would not occur or would need to be delayed. Opportunities to replenish reserves, stabilize underfunded funds, reduce long-term liabilities, and accelerate infrastructure reinvestment would be limited. The City would also need to address its ongoing financial challenges within existing revenues.
Potential actions could include eliminating or freezing vacant positions and reducing programs and service levels. Following expiration of the City’s current labor agreements on June 30, 2027, additional personnel reductions, including potential layoffs, may also need to be evaluated. Depending on the City’s financial position, public safety vacancies could remain unfilled, changes to Fire staffing or deployment could be required, and reductions in other departments could affect permitting, development review, infrastructure, parks, facilities, and other services.
These actions are not being proposed through this item, and no specific service reductions have been determined. The City Council has previously committed to revisiting the budget in January 2027 if the proposed revenue measures are not approved. Staff would return at that time with an updated financial forecast and options for aligning ongoing expenditures with available revenues.
Next Steps
Tonight represents the City Council’s first review of the preliminary Strategy. Council direction will help establish the long-term policy framework and guide the next phase of analysis and community engagement.
Following Council direction, staff will refine the Strategy, continue development of the Orange by the Numbers inventory, refine financial assumptions and measurable outcomes, and, if authorized, incorporate the citywide organizational assessment, Facility Condition Assessment, Parks Master Plan, Information Technology Strategic Plan and Technology Assessment, and other relevant studies.
Following the November 3, 2026 election, staff will return to the City Council with recommendations based on the election results and updated financial conditions. If Measure I is approved, staff will also initiate formation of the Independent Oversight Committee in accordance with the voter-approved ordinance. If neither measure is approved, staff will return in January 2027 with an updated financial forecast and options for bringing ongoing expenditures into alignment with available revenues.
Conclusion
The preliminary Strategy establishes a framework around four long-term priorities: strengthen Orange’s finances; protect public safety and essential services; repair, maintain and beautify Orange; and grow Orange’s economy. It establishes a commitment to financial discipline, public accountability, and measurable outcomes while preserving the City Council’s ability to evaluate and authorize individual investments as conditions change.
The decision on Measures I and J belongs to Orange voters. Regardless of that decision, the underlying challenges identified in this report remain. Orange must address long-term financial obligations, maintain and reinvest in aging infrastructure, protect essential services, modernize facilities and systems, and strengthen the economic base necessary to support the community over the long term.
If additional revenues are approved, success should ultimately be measured by what Orange has to show for the investment when Measure I expires. The purpose of the Strategy is to provide a disciplined, transparent, and adaptable framework for addressing today’s needs while leaving Orange financially stronger, safer, better maintained, and better positioned for the generations that follow.
7. ATTACHMENTS
• Preliminary 13-Year Financial Sustainability and Investment Strategy