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Orange City Council likely to commit to balanced budget rule; bringing in consultants to help

March 14, 2025

With a new fiscal year just about a quarter away, Orange leaders are looking to get the city’s finances in order with outside help.

The City Council also is likely to approve a new fiscal policy that mandates a yearly balanced general fund budget. Last year, Orange ran a $19.1 million general fund deficit.

Orange is hiring Grant Thornton, a global accounting and consulting firm with an Orange County office, to help city leaders quickly reassess City Hall’s organizational structure and find opportunities for budget cuts and revenue development.

“Let’s go department by department and understand what’s happening in the budget,” said Grant Thornton partner Shawn Stewart, who made his pitch to the City Council on March 11.

“The value we bring to the equation is we’re objective,” Stewart added. “We’re not part of the city, and we’re able to come in and really take a hard look at things.”

Stewart said he’s already met with City Manager Tom Kisela and reviewed some information about Orange’s finances.

Based on what he’s seen, Stewart said he doesn’t believe there’s any evidence of fraud that might have caused the city to run chronic budget deficits since the Great Recession — deficits that escalated with time into the $19.1 million shortfall last year.

Audits back him up.

The most recent of which, a comprehensive audit for the fiscal year 2024 shown to the council in March, revealed no anomalies, according to Lance, Soll and Lunghard, another independent CPA firm.

Stewart suggested that Orange wound up in this fiscal hole, not because of fraud, but because of a pattern of delivering more services than it could afford.

“The money didn’t really vanish,” he said. “It was used by the city in its operations.”

In the current budget cycle, Orange leaders have cut city services across many departments.

The City Council has already reduced library hours, frozen unfilled staff and public safety positions and cut funding for holiday celebrations. At one point, the council even considered cutting janitorial services at City Hall before backing off due to staff complaints of insect infestation and dirty bathrooms.

Despite more austerity, Orange is still projected to run a sizeable budget deficit for the fiscal year ending in June. The city is projecting to collect $145.2 million in revenues for city operations this fiscal year while making $156.2 million in expenditures.

To square the budget, the City Council had hoped that voters would approve a local half-cent sales tax increase in November that could have raised up to $20 million per year for 10 years.

That ballot measure was narrowly defeated in the general election, sending the council back to the drawing board.

With other revenue-generating plans — such as paid parking around the Orange Plaza — remaining in the works, the City Council believes tit can continue to cut costs by providing government services more efficiently.

Councilmembers also hope the Grant Thornton team’s organizational assessment will shed light on the city departments that lag behind benchmarks set by other municipalities.

“Ultimately, how are we running our city to meet the needs of our residents in a way that’s sustainable over time in a more streamlined organization way?” asked Councilmember John Gyllenhammer. “I think that’s where our gap is, and I think that’s where we need to spend our time.”

It’s unclear at this point how much Orange will pay for Grant Thornton’s services. Stewart made it seem like that number could fluctuate depending on the level of services Orange ultimately requests.

For now, Stewart said his company’s initial services will be a “sprint.”

“We would anticipate this would be about an eight-week project,” he said. “The idea is to do something rapidly in order to help the city put things back on the right course.”

Gyllenhammer said the city should focus on its return on investment.

“I think we should spend $100,000 if we have $101,000 on the back end of it,” he said, using those numbers arbitrarily to exemplify his thinking.

While consultants are coming in, Orange also is taking internal steps to clean its fiscal house.

The City Council gave direction to City Finance Director Trang Nguyen to develop the first set of fiscal management policies in city history.

“This is a key pillar to Orange putting its fiscal house in order,” said Mayor Dan Slater. “We have never in city history had a fiscal management policy. This is huge.”

“It’s a long time coming,” City Manager Kisela added.

Councilmembers said they intend to approve such policies, which Nguyen outlined to them on March 11, before the new fiscal year.

Nguyen’s policy outline includes a mandate that the City Council pass a structurally balanced general fund budget before the start of the fiscal year on July 1.

She also says the City Council, as part of its annual budget process, will need to review a new financial model that shows how short-term spending affects long-term reserves.

The budget policy will also tie recurring non-personnel expenditure growth to the Consumer Price Index, and it will define priorities for how the city must balance the budget in light of unforeseen reductions in revenue.

In that situation, the city would freeze vacant positions, suspend most overnight training and suspend non-essential purchases of supplies, equipment, vehicles, services and capital improvement projects.

Among other measures, the policy also would commit Orange to creating a plan to pay back the city’s reserve fund within two years after any event where it must make a withdrawal from that fund.

“If we commit to this, we have a balanced budget going forward, which I think is tremendous, and I think it’s about time we brought something like this forward,” Gyllenhammer said.

His colleagues agreed, unanimously approving the draft plan, 6-0. Councilmember Denis Bilodeau was absent from the meeting.

Orange County Register

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Orange City Council likely to commit to balanced budget rule; bringing in consultants to help

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