The Fullerton City Council convened for a budget study session on July 14, engaging in nearly two hours of presentations followed by a lengthy period of public comments. As the session progressed, council members focused on identifying the community’s priorities, culminating in a discussion about the city’s financial direction.

While no formal vote was taken, the session laid the groundwork for significant decisions, including a proposed half-cent sales tax aimed at funding roads and infrastructure improvements. This measure is expected to be included in the agenda for the council’s upcoming meeting on July 21.

Additionally, the timeline for the budget adoption has been pushed back to August, pointing to ongoing discussions that continue to reveal differing opinions among council members. The council will need to address these disagreements in the coming week as they work toward a consensus on the city’s financial future.

Council Member Discussion

Mayor Fred Jung opened council comments with a speech reminding the room that no decision would be made that evening — then took responsibility for the budget. Referring to a public speaker who had criticized him minutes earlier, he said he doubted they agreed on much, “but I do agree with her that the budget is my fault and I own that.“

What followed was a long explanation of how his own position had moved. As “the son of an immigrant small business owner,” he said, he is “culturally opposed to any kind of tax increase,” which he considers regressive and hardest on those who can least afford it. He came to the council believing it.

But he rejected the premise that Fullerton’s government is bloated. “It’s shrunk not by a little, but quite a lot,” he said, noting the Police Department once had 168 positions and now has roughly 130 — smaller by significant percentages than the City of Orange, which is itself working through fiscal problems. He defended the decisions that raised costs: voting to keep the Fire Department rather than contract with OCFA, and approving what he called the most significant compensation increase in recent department history to stop the exodus of employees. “I stand 10 toes behind that decision.” But, he added, “this all came at a cost.” He called this year’s misallocation of reserves “a gut punch.“

Jung then made the arithmetic case against cuts alone. A city Fullerton’s size should draw 35% to 45% of revenue from property tax and 10% to 15% from sales tax, he said; Fullerton runs above 20% on sales tax, “out kicking our coverage.” The city has “looked under the financial rock, looked between the funding couch cushions.” Cutting to a healthy budget without ignoring infrastructure and degrading quality of life, he said, “that’s not factual.“

He recounted championing two special tax measures last year — a half cent for street upgrades, a half cent for public safety — and what he failed to predict: hard-line federal immigration enforcement that damaged trust in the community.“Turns out a public safety special tax may not work right now.“

He closed with history: Hunt Foods, Hughes Aircraft and Kimberly-Clark all left, and the warnings that Fullerton was becoming a bedroom community “are coming to roost now.” A gas station on Harbor Boulevard — not Costco — was a top ten revenue generator in this city for a decade, he noted. Later, he added that the 80-plus-acre former Hunt site development once generated 20% of the city’s revenue, and that Fullerton no longer has parcels of that size; West Coyote Hills is no longer developable following the Watershed Conservancy’s purchase.

He also pushed back on speakers blaming “the majority,” pointing out that the one member who has voted against every budget during his tenure sits to his right [indicating Mayor Pro Tem Nicholas Dunlap]. “So I don’t know that he bears any responsibility, but I certainly bear my share, if not more than most.“

Councilmember Dr. Shana Charles raised critical questions about the implications of introducing a half-cent sales tax to improve local roads. Director of Public Works Steven Bise indicated that such a measure could generate approximately $15 million annually, although the exact amount would vary based on the ordinance’s draft. Bise clarified that the additional funds would supplement existing street funding, increasing it from roughly $8-9 million to an estimated $15 million, addressing the city’s backlog without replacing proposed budgetary cuts.

During the discussion, Charles pressed staff to explain the importance of maintaining reserves, noting that a minimum reserve of 10% can safeguard against emergencies and help ensure the city’s credit rating remains intact, thereby securing its ability to issue debt over consecutive years of deficits.

Other budgetary clarifications included that the recruitment for a new Administrative Services director remains funded in all scenarios, while discussions continued over the elimination of the Deputy Director position. A noted 7% decline in charges for services was attributed primarily to reduced state intergovernmental transfer revenue, lower ambulance billing collections, and fire user fees falling short of previous projections.

Charles confirmed that the security personnel cuts at City Hall and the Hunt Library involve contract vendors rather than city employees, which aligns with the city’s narrative of instituting “no layoffs.” Regarding the financial obligations to the Successor Agency, she noted that the $11.6 million figure relates to outstanding bonds, with a final payment expected in the first half of FY 2027-28, outside the General Fund calculations.

In her remarks, Charles expressed opposition to the privatization of critical city assets such as the water system and the airport, emphasizing the importance of maintaining control over these resources. However, she remained open to discussing the potential sale of surplus city property, albeit without endorsing an $80 million valuation proposed by a colleague.

Highlighting the significant cuts outlined in Scenario A of the budget, Charles indicated that if any restorations were to be made, she would prioritize the reinstatement of the Deputy Fire Chief position, voicing concern over the police staffing ratio of 0.8 per 1,000 residents.

She framed the discussion around the budget, suggesting that Scenario A should be linked to a half-cent sales tax increase. Charles recounted a recent bus tour along the 91 Express Lanes with council members from across the county, including the mayor of Orange, who, despite differing ideologies, is pursuing a 1-cent general sales tax to address similar fiscal challenges.

Ultimately, she proposed a hybrid budget scenario that would utilize some reserves, but not the full amount, and moved to include a discussion on potentially placing a half-cent roads-and-infrastructure measure on the November ballot during the upcoming council agenda on July 21. Staff indicated that the budget discussion is already slated for that night and that her direction would be incorporated.

Councilmember Dr. Ahmad Zahra opened with a correction — the last budget, he said the record shows, passed 4-1 with Jung voting no.

“The issue has always been and always will be a revenue problem,” he said. He traced it to 2019’s Measure S, opposed by critics who insisted the deficit could be fixed without a sales tax; the roughly $31 million in one-time American Rescue Plan Act funds that “bought us some time“; and the five or six years since, during which the city went through three election cycles without putting another measure on the ballot, cancelled a cannabis ordinance he estimated conservatively at $3 to $5 million annually, delayed housing developments only to approve them anyway, and endured management turnover that produced “an exodus of employees. All of that is money.“

He was harsh on the budget’s history, describing it as “smoke and mirrors” balanced with misleading information, and noting the Grant Thornton report’s transparency findings. “Yes, we voted for it,” he said, but the details told a different story from the presentations. No fraud investigation was in the audit’s scope, he added, yet the city posted on social media that there was no fraud.

His asks were structural and immediate: protection mechanisms at the next meeting, objective and not overridable “by a council whim,” so the misallocation cannot recur. He said any cuts must be short-term and highly selective — asking which vacancies the city has genuinely lived without for three years or more — and warned against defunding positions that will hurt next year.

He is open to using some reserves: “This is a very unique situation, and I think reserves are meant for situations like this.“

In the long term, he said he has championed a sales tax and even proposed dedicating one, but that trust has to come first.“We need to have those mechanisms, those protection mechanisms, in place before we even consider that. And that has to happen very fast because we’ve run out of time.“

He opposed privatization and charter city proposals as “politically motivated” — they “will not generate revenue,” he said. “What they will do is open up to more corruption.” He argued cuts to economic development are cuts to future revenue; that graffiti abatement should be maintained because reduction creates “a broken window effect“; that code enforcement cuts carry similar risk; and that the city should be tracking the economic activity events generate, noting some downtown businesses see their highest sales of the year during museum-hosted events.

“I live in this city, I love this city,” he said, adding that this is the last budget he will work on. “I think everybody is responsible; we all are… This is the time when we should come together, learn from the past and understand where we went wrong.“

Councilmember Jamie Valencia, in her second budget and first full cycle, focused on process. Defunded positions can be restored, staff confirmed, but only by coming back to council for reauthorization — at any time the council chooses. Quarterly budget updates have been the norm, though the cycle has slipped; the City Manager noted that budgets can be amended throughout the year whenever an appropriation comes to council, so “there can always be course corrections.“

She asked staff to explain credit downgrades in public-facing terms. The answer: rating agencies periodically reassess the city — S&P has just requested an interview — and a downgrade makes Fullerton less marketable in the bond market, meaning worse terms on future debt. “It’s like a city credit score.” Weak reserves, staff confirmed, can hurt the rating.

Returning later with prepared comments, she made the case for discipline as strategy: reserves protect against recession and natural disaster “so we don’t have to slash all the jobs in the future when times get tougher,” and signal to businesses that Fullerton “is a reliable place to invest and hire.” Previous fiscal irresponsibility, she said, has led to growing deficits, potential credit downgrading, higher interest costs and less money for services. “It’s not an easy choice. It doesn’t come lightly at all.“

Mayor Pro Tem Nick Dunlap framed the problem as 30 years old. The failure to invest in infrastructure, he said, produced conditions that in 2018 dollars amounted to roughly $125 million in road repairs, now inflated to upwards of $185 million.

He addressed Norby’s contracting proposal directly, saying he had raised it with the Sheriff’s Department himself: not only did they say the savings claim was inaccurate, but he also reported that they said a city like Fullerton wouldn’t really benefit from Sheriff’s service. Yorba Linda and Mission Viejo, he said, are very different cities with different needs.“People toss out those things as sort of low-hanging fruit… but the reality is I just don’t think that’s a suitable option.“

At the airport, he noted the city would likely owe the federal government substantially if the property were repurposed, and that he doesn’t view it as the “silver bullet” some believe. On surplus property, though, he agreed: “There’s no reason that we shouldn’t be more active there.“

He responded pointedly to the speaker who accused him of deflecting responsibility by pointing to votes he didn’t cast: “I’d say that’s absolute hogwash.” Every member, he said, votes at each moment for what they believe carries the city forward, “and I stand by those votes.“

His central disagreement with Charles is the timeframe. Past decisions, he argued, were “predicated on tax increases that they thought would succeed… only to see those go down in flames.” Thirty years of revenue growth, in his reading, has gone almost entirely to labor cost increases rather than roads and infrastructure — “Like it or not. And I don’t say that disrespectfully. It’s the facts.” So a one-year bridge won’t do: “We really have to look at this as a two- to three-year bridge.“

“We are in a situation not where we want to cut, but because we have to cut.“

He also endorsed better reporting — a concise executive summary of the city’s financials in place of a budget document” about the size of the phone book” — as the kind of transparency the public is actually asking for.

City Manager Eddie Manfro sought clarity before adjournment: absent other direction, staff will bring back scenarios A, B and C on July 21. Jung confirmed and added that the discussion must include a revenue generator.

On the sales tax, Jung was emphatic that next week is the deadline: “If there’s going to be a discussion next week, there also has to be action. There has to be a vote… It’s our last opportunity.” He confirmed the request is for a special — dedicated — tax, which is what Charles asked for and what he agreed with. He also flagged the public’s clear preference: “The public clearly wants a sunset provision. I would encourage staff to look at that.“

On Zahra’s protection mechanisms, Jung directed the City Manager and staff to meet with him and bring options to Tuesday’s meeting rather than adjudicate them from the dais. Zahra pointed to the auditor’s list of recommendations, a lobbyist registry he has already agendized, and oversight committees and public input requirements written into any measure itself. When Jung noted the lobbyist registry is a separate item, Zahra tied it back: “This is about building trust and transparency… in order to get something on the ballot.“

Manfro then raised sequencing: he needs to know which scenario he’s producing before he can produce a budget book. Adoption moves to August.

“These are tough choices,” Jung said in closing. “I’ve heard plenty of direction from our council. I expect these scenarios will be brought back on the 21st for a decision next week.“