06.01 Proposed FY 2020-2021 Budget 2 - Budget MessageJuly 28, 2020
Honorable Mayor and Members of the City Council:
Submitted for your consideration is the Fiscal Year 2020-2021 (FY21) Budget. This
Budget responds to the ongoing economic downturn and incorporates the City’s firm
commitment to fiscal responsibility, effective use of our resources, and high quality
service delivery to our residents, businesses, and visitors.
The past few months have been challenging for the Orange community, largely due to
the impacts of COVID-19. Since the unexpected spread of COVID-19, the nation
continues to face an economic challenge unlike anything it has seen in nearly 100 years.
Almost overnight, the economy, which had boasted abundant jobs and soaring stock
values, has fallen into disorder. Although local and regional economies continue to
struggle, businesses are slowly re-opening with modifications to follow State and County
guidelines. The long-term effects are still unclear as public policy related to COVID-19
continues to evolve.
Our revenue is still significantly down from pre-COVID conditions, and while it is predicted
that there are positive signs of the economy emerging from the lockdown, the City
continues to face major uncertainty due to changes in public policy, market conditions,
and current events affecting the lives of all our citizens.
Despite these conditions, there continue to be reasons why we have a bright future in
Orange. We remain one of the safest cities in California; we have an outstanding business
environment and are home to several major corporations, hospitals, regional shopping
centers and a diverse group of small businesses; we have one of the nation’s largest
historical districts – Old Towne Orange with its thriving plaza area commercial district; we
have excellent and well-maintained residential neighborhoods and parks, and; our
residents have tremendous community spirit with a great deal of pride in their hometown.
In spite of the pandemic, Orange continues to take a proactive response to address all
issues affecting our citizens and business community. The budget for FY 21 has been
prepared to be responsive to the needs of the citizens and businesses of the City of
Orange while being fiscally responsible given the downturn of the economy and the
impacts related to the COVID-19 pandemic. At $115.8 million, the General Fund budget
is less than the FY 20 budget in spite of rising PERS retirement and labor costs.
Finally, to allow time to complete labor negotiations and fine-tune projections, the City
Council is being asked to adopt this FY 21 budget a month after the start of the fiscal
year. While this is not the City’s customary practice, the additional time has allowed for
more analysis of revenue projections, further refinement of expenditures, and finalizing
negotiations with all bargaining groups regarding labor-related costs.
GENERAL FUND REVENUE
Total General Fund revenues for FY 21 are projected to be $107.5 million, representing
a decrease of 10.7% from pre-COVID-19 projections and a 7.1% decrease from FY 20
estimated revenue.
Sales Tax is the largest source of General Fund revenue. In FY 21, the City
anticipates sales tax receipts to be $40.6 million, a $2.1 million (4.9%) decrease from
the FY 20 estimate, with the biggest decline occurring in the fuel-service station sector.
Fuel sales are expected to be $937,000 (10.0%) lower than the FY 20 projections as
commuting, travel, and tourism decline, as a result of the health crisis. In spite of
COVID-19, it is expected some stores will not see a drop in sales tax, particularly big
box retailers such as Target, Walmart and Best Buy. However, general retail stores,
such as clothing and specialty retail, will likely have significant drops in sales as these
stores struggle to attract shoppers as consumers may have changed their purchasing
habits. At the Outlets at Orange, management is reporting strong foot traffic from
consumers since they reopened in June. At this point, we are waiting for performance
results, although we do expect that retailers there will see sales decline in comparison
to the same period last year. It is likely The Outlets will be negatively impacted by the
continued closure of The Disney Resort theme parks. At the Stadium Promenade, we
will likely see a reduction of sales as fans are barred from sporting venues and the
movie theaters are still non-operative. The automotive industry did see an uptick in
sales in May and June. The question remains whether this is sustainable since it may
be inferred that pent up demand during those months was a result from the stay-at-
home order this past March. Finally, one bright spot in sales tax revenue is from online
sales. Largely due to COVID-19, consumers have continued to increase their
spending through online retailers. As such, we anticipate County allocations for online
sales will continue to trend upward at a $405,000 (6%) increase.
Property Tax, the second largest source of General Fund revenue, is estimated to be
$44.0 million for FY 21. While assessed valuation has increased, property tax revenue
remains consistent with FY 20 primarily due to potential non-payments from residents
who have suffered job losses and other economic hardships.
Transient Occupancy Tax (TOT) is expected to be $1.9 million, a 50% reduction
from FY 20. Business and leisure travel remain at depressed levels during the
pandemic. We expect TOT to recover steadily in the latter part of the fiscal year as
hotels slowly resume services when COVID-19 concerns are hopefully largely
diminished or removed. Again, this sector is dependent on the reopening of the
Disneyland Resort and Anaheim Convention Center.
Fees for Services and Licenses and Permits account for combined $10.2 million,
9.5% of General Fund revenues, and are set by the Master Fee Schedule. With the
adoption of the FY 19 budget, City Council approved a significantly updated Master
Fee Schedule model. As part of the preparation of the FY 21 budget, staff has updated
current charges for services based on revised time estimates and costs for delivering
each service. With the proposed fees, we anticipate recovering approximately 71% of
costs associated with provided services. The total revenue impact of the
recommended fees represents an increase in General Fund revenue of approximately
$454,000, which has been included in the total FY 21 revenue of $107.5 million. This
increase is primarily due to higher permit and planning and inspection fees for some
Building Division charges, based on the actual cost of providing the services.
Increases in fees for zoning clearance reviews, fire construction permits,
encroachment applications, and encroachment plan checks and inspections, also
contribute to the increase in revenue. While many of the proposed fees reflect
increases based on actual cost of providing services, several fee decreases reflect
reduced time estimates in providing the services. Updated proposed fees for new
construction, plan check, and inspection fees are also included in the recommended
fees. Further, staff has reviewed the animal control and shelter charges. These fees
are administered and collected by Orange County Animal Care (OCAC) to offset the
City’s costs. As cities are allowed to set their own fees for animal licenses and
services, staff is proposing updates to animal service fees. Most notably, the fee for
a dog license will increase from $35 to $36. The proposed fee increase will generate
an additional $20,000, bringing revenue from animal control fees to $888,900. As the
total cost for the OCAC contract is $2.0 million, the net cost is projected at $1.1 million.
Use of Money and Property is expected to be $1.6 million, $401,000 (20%) below
the FY 20 estimate. This projected amount accounts for a potential further decline in
interest rates due to economic uncertainty caused by the pandemic.
FY 21 General Fund Revenues
Sales Tax
$40,619,959
37.79%Other Taxes
$678,900
0.63%
Property Taxes
$43,958,186
40.89%
Licences and
Permits
$4,694,693
4.37%
Fines & Forfeitures
$1,939,510
1.80%
Fees for Services
$5,526,243
5.14%
Franchises
$2,290,532
2.13%
Charges to Other
Funds
$2,586,559
2.41%
Revenue from
Other Agencies
$1,103,833
1.03%
Use of Money &
Property
$1,602,630
1.49%
Miscellaneous
Revenues
$590,918
0.55%
Transient
Occupancy Tax
$1,940,010
1.77%
While we anticipate the projected revenue amount of $107.5 million for FY 21 will be the
base from which we will recover, we remain cautious that any future growth in General
Fund revenue will be modest and will occur gradually as the economy recovers with the
re-opening of businesses in all sectors of the industry and commerce.
What is not included in the FY 21 revenue budget are any funds from the Federal Stimulus
packages that have already been approved or are being considered by Congress. While
the City has received $1.2 million in CARES Act funds in FY 20 for direct and unbudgeted
COVID-19 related expenses, the amount we will receive in FY 21 is unknown and
therefore is not included in the FY 21 budget. Further, while the City expects a loss of
over $16.0 million in revenues for FY 21 due to COVID-19 impacts, Federal Stimulus
packages to date have not included any revenue backfill funds.
GENERAL FUND EXPENDITURES
AND BUDGET BALANCING STRATEGIES
The City is fortunate that its history of conservative spending practices positioned us to
weather the sudden economic downturn due to COVID-19. The City has continued to
implement budget balancing measures over the past three years and has remained
vigilant in controlling spending growth during better financial times.
Over the past several months, the City Council addressed budget related issues at three
budget sessions. Through their leadership, the resulting budget balancing strategies were
developed collaboratively, involving all City departments and bargaining groups. The
$115.8 million General Fund expenditure budget reflects the following balancing
measures:
Additional Operational Budget Reductions : In FY 19, the City implemented an
Operational Budget Reduction (OBR) strategy. In response to rising operating costs
outpacing expenditure, departments were asked to reduce General Fund salaries and
benefits (S&B) and maintenance and operations (M&O). In addition to the existing
OBR strategy, departments will reduce M&O budgets an additional 5% for FY 21.
These reductions include further cutbacks in travel and training budgets, and printed
publications, the renegotiation of service contracts, and delayed replacement of office
equipment and furniture and fixtures. While departments have been able to keep up
services levels through creativity and hard work, their operating budgets are being
stretched as far as they can. Departments will continue to address operational
challenges as a result of these and past budget reductions. The OBR for FY 21 nets
a savings of $2.8 million.
Freezing Vacant Positions: The City currently has over 50 vacant full-time or part-
time benefitted positions, many of which are being counted as part of previous budget
reduction measures. In addition, there are several vacant positions that will need to
be filled, given their vital role in the organization. However, nine positions have been
identified that will be kept vacant throughout FY 21, generating $750,000 in savings.
Further savings are anticipated as attrition occurs during the year and those positions
are held vacant. It is important to note that the number of funded Full Time Equivalent
(FTE) positions has decreased significantly from 796 FTEs in FY 09 to 724 FTEs in
FY 21 as a result of the hiring freeze and elimination of positions during the Great
Recession. Therefore, as the City transitions from a “hiring chill” to more of a “hiring
freeze” in FY 21, organizational impacts could be significant. Going forward, each
position will be carefully evaluated to determine operational impacts balanced against
budgetary savings.
Labor Negotiation Savings: As salaries and benefits comprise about 70% of the
City’s General Fund Budget, reducing those costs is a critical component to closing
the FY 21 budget gap. Starting in early May, we began to meet with our labor group
partners to assist with our budget balancing efforts. It is anticipated that renegotiated
agreements with these groups will generate a total savings of $1.7 million, which we
include as an additional reduction to budgeted expenditures. We are extremely
appreciative of the employees of this City for their collaborative approach to our
budget situation, which illustrates their commitment to the organization and to the
residents and businesses of Orange.
Alternative Funding for Fire Headquarters: Initially, the General Fund expenditure
projection for FY 21 included $1.5 million to pay for the first year debt service for the
Fire Headquarters-Station No. 1 lease revenue bonds. With a revised first year debt
service of $1.1 million, the first year debt service payment can be covered by the
Capital Projects Fund, reducing the direct impact on the General Fund.
Use of Reserve Funds: in 1996, the City Council established the Catastrophic
Reserve Fund which has primarily been funded by the prudent practice of transferring
end-of-year savings into that “rainy day” account. The intent of the Catastrophic
Reserve Fund is to provide a vital fiscal resource to the City during times of natural
disaster or other calamity that severely impacts the City’s financial stability. It is
important to emphasize that in the 24 years of its existence, the City has never had to
utilize these funds as a budget balancing measure. However, the effects of the
COVID-19 pandemic have reached such a level that the City’s financial stability has
been severely impacted. Therefore, we proposed $4.4 million transfer from the
Catastrophic Reserve to help alleviate a portion of the deficit. Likewise, the PERS
Set-Aside Fund was established to serve as a reserve fund in the event the City
needed a source of funds to address rising PERS costs. The proposed $2.1 million
transfer from this fund represents the amount PERS costs will increase for FY 21.
Finally, based on the strength of the Capital Projects Fund, we propose to transfer
$2.0 million from that fund to the General Fund Operating Budget. All total, the FY 21
Budget will utilize $8.5 million of reserve funds as a budget balancing resource.
As a result of these balancing measures, the $115.8 million General Fund Expenditure
budget for FY 21 remains slightly less than the adopted budget General Fund
Expenditures for FY 20. This decrease was achieved in spite of increases in employee
retirement (PERS) costs, salary and benefit costs, and contractual obligations. With the
use of reserves as a budget balancing source, the General Fund is balanced with
revenues exceeding expenditures by $150,531.
FY 21 General Fund Expenditures
ESTIMATED GENERAL FUND BALANCE FOR FY 21
The FY 21 projected beginning General Fund unreserved fund balance is $5.6 million.
Revenues and reserve transfers of $116.0 million and expenditures of $115.8 million
result in a surplus of about $150,000, bringing the unreserved fund balance to $1.7 million,
after recommended transfers of $4.1 million from the unreserved fund balance to the
following funds: $1.0 million to the Equipment Replacement Fund; $500,000 to the
Vehicle Maintenance Fund; $1.1 million to the Computer Equipment Replacement Fund;
$900,000 to the IT Maintenance Fund; and $600,000 to the Liability Fund. Due to the
need for continued budget reductions, we propose the FY 21 budget not include a transfer
of General Fund monies to the Catastrophic Reserve, which after the previously
mentioned transfer to General Fund, will have a balance of $15.7 million. This results in
a FY 21 estimated ending General Fund reserved and unreserved fund balance of $17.4
million.
Non-Departmental, 1,060,782 , 0.9%
Fire, 30,257,257
26.5%
Community
Development,
4,688,142 , 4.1%
Community
Services,
9,101,243 , 8.0%
Library Services,
5,135,182 , 4.5%
Administration,
5,885,961 , 5.2%
Public Works ,
8,037,623 , 7.0%
Police, 49,875,742
43.7%
Estimated Available General Fund Balance
Unreserved Fund Balance Available @ 6/30/20 $5,610,683
FY 21 Estimated Revenues $107,492,463
FY 21 Estimated Revised Expenditures (115,841,932)
Net Surplus (Deficit) (8,349,469)
Transfers In from Reserves 8,500,000
Unreserved Fund Balance Available @ 6/30/21 5,761,214
Transfers Out
Transfer to Equipment Replacement Fund (1,000,000)
Transfer to Vehicle Replacement Fund (500,000)
Transfer to Computer Replacement Fund (1,100,000)
Transfer to IT Maintenance Fund (900,000)
Transfer to Liability Fund (600,000)
Total Transfers Out (4,100,000)
Estimate Available Fund Balance @ 6/30/21 1,661,214
General Fund Catastrophic Reserve 15,667,960
Est. Reserved & Unreserved General Fund Balance @ 6/30/21 $17,329,174
FY 21 Reserve and Unreserved Fund Balances
Estimated Available Reserves @ 6/30/21
Accrued Liability/PERS set-aside (Fund 760) $ 4,164,852
Business Investment Fund (Fund 115) 23,595
Capital Projects (Fund 500) 4,713,999
All Other Internal Service Funds (various) 10,301,842
Total Est. Available Reserves @ 6/30/21 $19,204,288
Unreserved General Fund Balance $ 1,661,214
General Fund Catastrophic Reserve $15,667,960
Total Est. Available Reserves @ 6/30/21 $36,533,462
REVIEW OF OTHER KEY FUNDS
While the General Fund accounts for 44% of overall expenditures, there are several
other funds managed by the City. The FY 21 budget reflects a total of $281.2 million in
expenditures for all funds. The key areas are summarized below:
The Water Enterprise Fund, which includes both operating and capital expenditures, is
projected to begin FY 21 with an available fund balance of $7.4 million. Revenue and
expenditures are estimated at $36.9 million and $42.7 million, respectively, which
includes $5.9 million in water capital projects and an increase of operating expenses due
to the anticipated need to purchase water from MWDOC caused by the shutdown of five
wells. As a result, the expected ending FY 21 available fund balance is about $1.9 million.
With the last water rate increase occurring in January 2022, the City will begin the process
of a water rate study in July 2021 to provide the City Council with strategies and solutions
for their consideration.
The Sanitation Fund, which includes sewer maintenance, tree trimming and
environmental compliance services, is projected to begin FY 21 with an available fund
balance of $3.9 million. FY 21 revenue projections are $5.9 million and expenditures are
$6.0 million, resulting in an estimated ending fund balance of $3.8 million. Specific to the
Sewer Capital Projects Fund, the FY 21 revenue estimate is $2.2 million and capital
improvement expenditures towards sewer line replacement and maintenance are $2.4
million. The estimated FY 21 ending fund balance is $1.7 million.
The Gas Tax Fund is projected to begin FY 21 with an available fund balance of about
$450,000. FY 21 revenue estimates are $3.4 million with expenditures of about $3.8
million, resulting in an ending fund balance of about $20,000. Specifically, The Road
Maintenance and Rehabilitation Account (RMRA) will begin FY 21 with a fund balance of
about $335,000. In FY 21, the City will receive about $2.5 million from the State, which
will be fully allocated towards Pavement Management Program expenses.
CITY HIGHLIGHTS FOR FY 21
Despite the economic challenges we are facing, there is much room for optimism. As we
enter FY 21, the City has many opportunities to make positive enhancements and
changes in the community and in the organization:
COVID-19 Response Requires Reinvention and Innovation: A true test of an
organization is how it responds in a time of crisis. Therefore, I am extremely proud of
our City organization in how we have responded to the many challenges the pandemic
has presented. To continue to deliver the high level of services the community
expects, we have continuously had to reinvent our service delivery model. This
includes new services such as electronic building plan-check services, curbside library
materials pickup, virtual recreation and community programing, electronic employee-
related documents processing, a reservation system for public counter visits, and
remote internal and external meetings. These are services that will continue beyond
the pandemic and will improve our efficiency as well as enhance our reach within the
community.
Supporting Local Business: Maintaining our tax base is critical to the City’s ability
to provide the highest level of services and programs to our residents and businesses.
In these unprecedented times, the City continues to be innovative in its approach to
assist Orange businesses. As a response to the evolving public policy from the
Governor’s office regarding COVID-19, we established the “Orange Plaza Paseo” in
Old Towne, transforming the 100 blocks of north and south Glassell Street, as well as
parking areas along Chapman Avenue, into a series of public spaces, creating an
inviting and safe environment to dine and shop. The public’s response to the Orange
Plaza Paseo has been tremendous, and the restaurants and retailers are reporting
strong sales. Additionally, the Small Business Assistance Program was established,
aiming to provide relief to small businesses affected by the COVID-19 crisis. Through
CARES Act funding provided by the County, $3.4 million in grants will be distributed
to assist small businesses with payroll, capital, and operating expenses.
Continued Focus on Economic Development: Attracting and retaining businesses
in Orange has always been a critical focus for the City. Recognizing the strength of
our local economy is an essential driver to the success of the City, our staff continues
to look at traditional and innovative ways to provide business development services. A
vital component of our business development program is ensuring for a streamlined
and efficient land use entitlement process. Some of the key businesses that are
currently in the entitlement process and plan to invest in Orange include Prologis, who
is building a 200,000 sq. ft. industrial logistics warehouse; St. Joseph’s Hospital, who
is building a 116,000 sq. ft. medical office building, and Kherut, who is developing an
industrial kitchen and commissary. Already home to two In & Out Restaurants, the
iconic burger establishment is planning a third location in Orange. In addition, Chick-
fil-A will soon begin construction on their restaurant on South Main Street. Finally, in
Old Towne, several high quality restaurants are coming to the Plaza area, including
Philz Coffee, BossCat, Brewery 1886, Stubrik’s, Butaton Ramen, and O Sea. No
doubt, this new wave of restaurants were attracted to the Plaza area following the
completion of the Old Towne West Metrolink Parking Structure, which provides over
600 free parking spaces to our downtown patrons and Metrolink commuters.
City to Conduct its First District-Based Elections: In November, the City will be
transitioning from a five person City Council – four directly elected at-large Council
members and a directly elected at-large Mayor, to a seven person City Council,
including one directly elected at-large Mayor. The City’s six new voting districts will
each elect one Council member. Obviously, there will be changes in how City Council
business is conducted going forward. To that end, the City Council Chambers are
being upgraded to accommodate two additional Council members at the dais. As part
of this project, we are including a few technology enhancements to improve the voting
system as well as the name designations.
New Fire Headquarters to Begin Construction: After nearly two decades of
planning, the City will soon break ground on a new Fire Headquarters facility on East
Chapman at Water Street. The $34.4 million project will replace the 50-year old Fire
Station No. 1 and Headquarters building, and provide for improved administrative and
training space, and increased room for fire apparatus. To fund the project, the City
issued bonds in early July, the first time in 30 years we have assumed debt to
complete a capital improvement project. Due to the City’s strong fiscal standing, we
were given a “AA-“ rating which allowed for us to issue bonds at a very favorable true
interest cost of 2.95%.
Body Cameras for the Police Officers Going Live in August: In March 2020, the
City Council approved a contract with Axon for the purchase and installation of body-
worn and in-car cameras for the Orange Police Department. This project coincides
with the need to replace the current in-car camera system as it has reached end-of-
life. Implementation will begin in August and will transition through the fall. Once
complete, every police officer, while assigned to patrol, will be equipped with a body-
worn camera, thus increasing the transparency and accountability of the Police
Department.
New Website and Customer Reporting Tool Coming Soon: While the City’s current
website platform is only four years old, it is essential that this vital communication and
services tool stays relevant, useful, and fresh. As website technology has significantly
evolved over the past four years, we are planning to complete a major renovation of
the City’s website during FY 21. In addition, this fall we will be implementing a new
mobile-enabled customer reporting tool which will allow the public to submit service
requests and report issues on their mobile devices. This easy to use application will
streamline the customer service request process, both for the public as well as for
staff.
Innovation and Technology Improvements: In response to public sector processes
and services becoming more reliant on technology, and after 35 years of outsourcing,
the City established the Information Technology (IT) Department to bring key functions
in-house. In April 2019, as part of this transition, eight new full-time equivalent
positions were created to provide for higher level technical support, business
development services, and overall management of the City’s IT infrastructure. The
transition to primarily in-house services has exceeded expectations as it has been
more nimble, responsive, and efficient. As the transition is complete, during FY 21 we
will be focusing on enhancing the City’s IT environment, including a new agenda
management application, facility access security system, and water management
system. In addition, we will be enhancing our network security infrastructure in
response to concerns for cyber security, particularly in the public sector.
City Continues to Make Significant Investments in its Capital Improvement Plan
(CIP): Over the past several years, despite challenging economic conditions, we have
seen a high level of capital improvement activity in Orange. Looking forward, the CIP
identifies 159 projects proposed for the five-year period. For the upcoming fiscal year,
there are 23 new budgeted projects and continued investment in 136 projects that are
either a continuation of previously approved plans, or anticipated to start during the
out-years. With these proposed projects, the City Council will be investing $70.0
million in the upcoming fiscal year and $144.8 million over the five-year planning
horizon. This is a major investment in the City’s infrastructure, and represents a
significant commitment to our community’s future. Funding for the CIP comes from
different sources including Gas Taxes, Measure “M”, Developer Impact Fees, State
and Federal Grants, former Redevelopment Bond Proceeds, and Community
Development Block Grants. The following are highlights of the FY 21 Capital
Improvement Plan:
o Construction of Fire Station Headquarters.
o Rehabilitation of the Police Headquarters Roof and Atrium.
o Installation of shade sails over existing tot lot equipment at El Camino Park.
o Installation of LED lighting at El Camino Park tennis courts.
o Renovations to update El Modena Park.
o Renovations to the Handy Park Community Room and parking lot.
o Rehabilitation of the Children’s Courtyard at the Orange Public Library &
History Center.
o Maintenance and rehabilitation of City streets through $12.1 million in SB 1,
gas tax and CDBG funds.
o Commitment of $5.6 million towards 17 projects intended to maintain or
improve the City’s water production and distribution, including $1.1 million for
pipeline replacement.
o Commitment of $750,000 toward various City infrastructure, facility, and
parking lot improvements.
City is a Leader in the Response to Homelessness and Affordable Housing: The
City continues to be a leader in the county-wide response to the homelessness.
Through the Orange Police Department’s efforts with the HEART Team, as well as
the Bike Team, the City provides daily outreach and public safety services to the
homeless community. In addition, the City has been a partner with Mary’s Kitchen for
over 35 years in support of their mission to provide meals and essential supplies to
those in need. The City has also been an active leader in the efforts of the North
Orange County Service Planning Area (NSPA). Specifically, the City has been a
significant funding partner for two homelessness navigation centers located within the
north county area. The City has committed a majority of its SB 2 (Building Homes and
Jobs Act) funds for shelter development as well as on-going operations. Once
completely built out, the two navigation centers will provide 250 beds to the homeless
community in the 13 north county cities. Finally, the City is working with Orange
Housing Development Corporation, a local non-profit affordable housing developer to
develop a 62-unit permanent supportive housing project on surplus property adjacent
to the City’s Corporation Yard. This transitional housing project will be an essential
resource to those individuals that are transitioning from homelessness or housing
insecurity to permanent housing. We continue to encourage the development of
additional affordable and permanent supportive housing units in Orange. Finally, in
partnership with the City, Orange Senior Housing, Inc. will be building the Katella
Terrace Apartments, a 74-unit deed-restricted, affordable senior housing project near
the intersection of Katella Avenue and Tustin Street. We continue to encourage the
development of additional affordable and permanent supportive housing units in
Orange.
New Housing Construction Continues: The Southern California housing market
continues to demand additional housing units. As such, the demand for residential
real estate in the City of Orange has remained steady and the City’s larger housing
development projects have continued in spite of the pandemic. Of note, construction
should be complete by the end of 2020 on the 250-unit Toll Brothers apartment project
in the Town & Country area and the 100-unit Branch West apartment project on West
Katella. Through FY 21, construction will continue on the 700-unit Fairfield apartment
and townhome project in the Town & Country area. Construction is expected to begin
on two apartment projects approved near The Outlets. Finally, there are several
housing projects, both for sale and rental, currently going through the entitlement
process.
LOOKING FORWARD
With the economy slowly recovering from the months long shut-down due to the COVID-
19 pandemic, and the possibility of more restrictive guidelines due to a rise in the number
of cases, the current financial times remain unclear. The economy continues to improve
incrementally, but it seems like it’s two steps forward, then one step back. As a result, the
City still faces some significant financial challenges. In addition to addressing the FY 21
budget deficit, the City is also facing a structural General Fund deficit for the next several
fiscal years due to both lower revenues as a result of COVID-19, as well as higher PERS
rates.
Although we base many of our budget assumptions on expert economic forecasts,
detailed trend analysis, and complex financial calculations, certain conditions cannot
always be predicted or forecasted. Certainly, COVID-19 has proven that.
The City Council’s prudent policies continue to set the stage for staff to meet the
budgetary challenges and demands of FY 21. While it is important to continue on the path
of caution to ensure long-term fiscal health, the City Council works hard to be able to
allocate the necessary resources to allow the City to provide the citizens and businesses
of the City with the excellent services they have come to expect.
Following the adoption of the FY 21 Budget, staff will continue monitoring the incoming
revenues and reviewing regional economic data that so that we can stay focused on the
status of our current fiscal condition as well as plan for an equally challenging FY 22
budget. We are hopeful the gradual reopening of the economy will result in a slow rebound
in economic activity. However, many conditions are still unknown and dependent on a
variety of factors such as public policy, marketing conditions, and the current events
affecting the lives of our residents.
THANKS AND APPRECIATION
Undoubtedly, the preparation of this budget would not be possible without the dedication
and commitment of the City’s Department Heads and their key staff members. To each
of them, I extend my thanks and appreciation for their hard work, dedication, and “can do”
approach as we develop this budget, particularly in light of additional Operational Budget
reductions. The extra effort required to prepare the departmental budgets coincides with
the exceptional demands of the City’s day-to-day operations. Furthermore, I would like to
thank all City of Orange employees. Their willingness to work with the City Council and
City management to renegotiate existing contracts is greatly appreciated. Given the fiscal
challenges we faced in preparing this Budget, the high level of teamwork and cooperation
was evident.
I would also like to express my appreciation to the members of the City Council for your
confidence in the City’s management team as well as your policy direction in this budget
process. This document reflects the directions and suggestions you offered, as well as
the sincere compassion you have for this community.
Sincerely,
Rick Otto
City Manager