Anaheim officials warn of midyear shortfall as hotel tax and property growth lag

Anaheim city staff told the City Council on March 25 that the city expects to finish fiscal 2024–25 with roughly $8.4 million less than the budget the council adopted in June, driven primarily by weaker-than-projected transient occupancy tax and somewhat lower property tax growth.

The Finance Department presentation—delivered by Director Moreno and budget manager Diane Lee—reviewed the city’s $2.3 billion adopted budget, explained that the general fund is the main discretionary resource (about 21% of total budget) and laid out a five‑year forecast that assumes continued TOT and property tax recovery but at lower rates than originally projected.

The nut graf: the city still plans to maintain service levels for now, but officials said they are relying on limited one‑time resources and structured paydown of legacy resort‑related obligations (LPMR) to get through the next few years. Council members pressed staff for follow‑up detail about Visit Anaheim marketing strategy, housing pipeline risks and use of deficit bond proceeds.

Key budget drivers and staff outlook

City staff said the three largest general fund revenue sources—transient occupancy tax (TOT), sales tax and property tax—remain the “big three.” The adopted TOT estimate for 2024–25 was about $271 million (roughly 42% of general fund operating revenue). Staff now expect to finish the year at about $241 million, a decline they attributed to a stronger dollar, some travel timing effects around major anniversaries and broader uncertainty affecting international visitors. Sales tax is tracking slightly above budget; property tax is expected to be roughly $2.5 million under budget because assessed values grew less than forecast.

The adopted general fund budget for 2024–25 assumes use of $42.4 million in deficit bond proceeds; staff said recent LPMR obligations decreased this year and that partially offset TOT declines. After the net adjustments, staff reported a roughly $8.4 million shortfall relative to the June adopted plan.

How the city proposes to bridge the gap

Staff emphasized that personnel costs and public safety commitments drive the bulk of general fund spending. City leaders said they intend to avoid immediate service cuts by relying on a combination of: (a) remaining deficit bond proceeds and working capital set aside; (b) roughly $10 million in previously reserved funds; and (c) targeted one‑time draws where needed. The city manager said the deficit bonds' proceeds will be exhausted next year but that LPMR payoff remains a central piece of the multi‑year plan to restore recurring balance.

Council questions focused on risk: Councilmembers asked whether the $8.4 million figure could change (staff: yes, it could get better or worse but likely will not swing dramatically this late in the year) and what contingency steps would be taken if the LPMR paydown schedule slips or a recession reduces revenues. Staff said they are updating LPMR payoff projections and will return with refined numbers during the formal 2025–26 budget process in May and June.

Visit Anaheim and TOT strategy

Multiple councilmembers pressed for more information on Visit Anaheim’s marketing strategy and whether the tourism bureau is adjusting tactics to capture domestic group and convention business rather than relying on luxury or international travelers. The city’s liaison said Visit Anaheim is investing above its adopted budget in advertising and is pursuing more convention leads; the council asked for a follow‑up list of recent and prospective conventions and greater detail on advertising increases.

Housing, homelessness and the housing trust fund

Councilmembers used the workshop to probe housing and homeless program budgets. Staff reported several affordable housing projects in active phases, including Miraflores (85 units, completed December 2024), the Azure Apartments (conversion of former Studio 6 to 87 supportive units, expected September 2025) and other projects. Staff cautioned that project‑based Section 8 voucher availability is limited because vouchers draw on a shared regional bank of funds; absorbing federally allocated emergency housing vouchers in 2026 will put additional pressure on that single pool of Section 8 resources.

Council members and staff also discussed the newly established Anaheim Housing Trust Fund and said city leaders intend to bring proposed guiding principles and a recommended allocation framework to council in late April or May when the first tranche of funds is expected to be available.

Public safety and program revenue

Anaheim Fire & Rescue reported strong ambulance program returns: staff said ambulance billing is expected to cover nearly 25% of the department’s general fund operating budget in 2024–25. The presentation also summarized new public‑safety hires funded in the adopted budget and service enhancements for code enforcement and homeless response.

Why this matters

The general fund supports police, fire, community services, public works and planning. With public safety representing more than half of general fund uses, the city faces limited options for recurring reductions that would not affect core services. Council members said they would not support service cuts in the near term but want clearer multi‑year projections and contingency plans before the May budget hearings.

What’s next

Staff will deliver updated revenue and expenditure projections and the city manager’s proposed 2025–26 budget in May, then conduct public budget workshops in June with final adoption scheduled for June 17. Council members requested additional briefings from Visit Anaheim, more granular data on homeless outreach outcomes (how many people were offered services and how many accepted), and a follow‑up on LPMR payoff scenarios.

Ending

City leaders framed the midyear update as a call for vigilance: staff recommended using one‑time resources now to protect services while they refine assumptions for next year’s budget, and council members requested specific follow‑ups on Visit Anaheim strategy, vacancy and pipeline risks in affordable housing, and contingency options if revenue trends worsen.

Speakers cited in this article: Director Moreno (budget presentation), Diane Lee (budget manager), Yvette Ramirez (budget team), Arlene Roa (budget team), Mayor Aiken (Mayor), Councilmember Natalie Rubakova (District 3), Councilmember Carlos Leon (District 6), Councilmember Kurtz (District 4), Councilmember Meeks (District 5), Councilmember Bayless (District 1).

Ending note: All figures reported in this story reflect the city staff presentation and council discussion; staff said some line items and forecasts will be updated during the May budget cycle.