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Santa Ana council approves midyear budget adjustments amid declining cannabis and sales-tax revenues
Summary
Council approved a midyear budget update that reduces some one-time capital transfers, adds 13 reallocated full-time positions, and keeps recurring reserves, while members pushed for more sidewalk and alley funding ahead of the FY26 budget cycle.
The Santa Ana City Council on March 4 approved midyear adjustments to the fiscal 2024–25 budget after staff outlined revenue shortfalls in cannabis and sales taxes and proposed a mix of one-time reductions and targeted investments.
City staff told the council the city has seen falling gross receipts in cannabis sales and weaker-than-expected Bradley-Burns and Measure X sales-tax receipts; the midyear update reduces sales-tax estimates by approximately $5.0 million in total and proposes roughly $2.94 million in one-time adjustments across several funds to rebalance the year. The council vote on the package was 6–1, with Councilmember Lopez dissenting.
The report recommended using one-time reductions — including a $1.4 million reduction in the alley-improvement program and a $1.5 million cut in transfers to the public benefit fund tied to cannabis revenues — while adding recurring spending of about $473,000 for items such as street-light utility costs, graffiti abatement, and a new plan-check software subscription. Staff also proposed 13 full-time position changes, presented as reassignments offset by part-time and contract savings.
“While some revenue sources are underperforming, growth in other areas is partially offsetting the decline,” Acting Director of Finance Alejandro (acting director of finance and financial services) said in his presentation, noting stronger utility-user tax collections tied to higher electricity rates and increased consumption during recent heat waves.
Councilmembers pressed staff on priorities for the remaining unallocated funds. Several members urged restoring or protecting alley and sidewalk repair funding. Councilmember Hernandez said alley improvements can reduce blight and homelessness-related impacts in some neighborhoods and called for keeping alley work as a visible, year-to-year priority. Councilmember Becerra and others asked staff to target gas-tax and other restricted transportation funds to high-value corridors and to look for ways to convert underused assets at the Santa Ana Regional Transportation Center to revenue-generating uses.
Councilmembers also discussed longer-term issues: the staff memo points to a forthcoming March 18 session to seek preliminary direction for FY26 and staff noted upcoming labor negotiations that could affect future years. Staff said they will return with the FY26 early direction request and additional detail on proposed construction staffing and capital requests, including a proposed in-house construction crew to replace some outsourced work.
A majority of councilmembers supported the midyear package as a balanced step to maintain fiscal responsibility while protecting programs they prioritized; Councilmember Lopez opposed the package citing concerns about cutting alley funds and requested further analysis on recent tariff actions and potential impacts on local auto-related revenues.
The council approved the midyear resolutions and amendments to the classification and compensation plan and authorized the amended full-time position schedule by a 6–1 vote (Lopez opposed). Staff said it will continue to monitor receipts and return with a third-quarter update and with materials for the FY26 budget process.
