Telepeer

Costa Mesa officials say slowdown in local sales tax revenue has created deficit

March 14, 2025

Costa Mesa is expecting a $3.6 million deficit for the final three months of the city’s current budget, forcing the City Council to consider what planned improvement projects might need to be delayed.

The deficit largely comes from a slowdown in expected sales tax revenue, officials said. Almost half of the city budget comes from sales tax, driven by consumer goods and automotive industries that dominate Costa Mesa.

To get ahead of the shortfall, the City Council has been given some options for cutting the deficit, including delaying several maintenance and other improvement projects at city-owned facilities.

The projected deficit spurred city leaders to suggest looking at raising the city’s hotel tax and service fees to bring in more revenue along with looking at ways to encourage businesses to open up shop in Costa Mesa.

City Manager Lori Ann Farrell Harrison said delaying capital improvement projects creates cost savings while minimizing the effect on public services.

“It’s a good place to turn, many cities will turn to that,” she said. “It’s projects we can defer for either six months or a year, basically until the economy gets better without affecting the core services for the public.”

Half of the city’s budget is dedicated to public safety, she said. The city is also considering implementing a soft hiring freeze in the coming weeks and later eliminating unfilled positions, though that wouldn’t affect the police and fire departments.

Some projects outlined for deferral include improvements to the city’s westside police sub-station and the senior center, building a butterfly garden, maintenance items at City Hall and a modernization upgrade for the Costa Mesa County Club.

The city will also shift what it spends for street sweeping to be paid completely by gas taxes instead of partly by the general fund.

The city’s total budget is $187 million for the year. Another option to close the deficit would be to dip into the city’s $60 million of reserves.

The council at a later meeting will hear more details about possibly delaying the projects.

Costa Mesa’s current budget ends on June 30. The city soon will present additional strategies to help balance the new budget beginning on July 1.

Costa Mesa is moving now to cut costs to help avoid the possibility of taking more drastic measures in the future, city officials said.

Councilmembers said they also hope the city can look at ways to increase revenue.

Mayor John Stephens said the sentiment constituents have shared with him is that Costa Mesa is too slow to process applications from businesses. He shared a story about Matty’s Patty’s, a burger restaurant co-founded by chef and actor Matty Matheson and Pat Tenore that opened in December, taking two years to get entitlements to open.

Each month not open cost the owners and the city money, Stephens said. “The consequence of delay is time that we are not getting sales tax.”

“I’m concerned we’re being perceived as a city that is not friendly to business and that is impacting our revenue,” he added. “I have not done a study on that, but it’s a concern.”

Stephens suggested looking at whether the city’s hotel and business license taxes and other service fees are high enough so that residents aren’t paying an outsized share toward the city budget.

Councilmember Manuel Chavez said the council’s discussion signals to him a shift to swing the pendulum toward maximizing revenue streams for the city, “a healthy, organic thing to do.”

Orange County Register

News Details

Costa Mesa officials say slowdown in local sales tax revenue has created deficit

Leave a Reply Cancel reply

News

CONTACT INFO

QUICK LINKS

SERVICES

CURRENT NEWS