Santa Barbara’s financial reserves are full at the moment, but officials say there may be some lean years on the horizon.
“The General Fund is in good financial shape, but facing some challenges looking forward,” said City Administrator Paul Casey during his Thursday morning State of the City address at the Lobero Theatre.
“Revenues have been mixed, with property tax strong, bed tax stable, and sales tax soft.”
The city has a general fund, for services like police, fire fighting and parks and recreation, and an enterprise fund for operations that support themselves through fees.
Mr. Casey said accounts have been at full policy levels for the past three years with 25 percent of its $180 million general fund budget in reserves for disasters and “economic uncertainties.”
Sales tax, one of the city’s biggest revenue generators, grew at around 5 percent per year from 2011 to 2015, but tapered off starting in 2016 and has been largely stagnant ever since.
Mr. Casey said he expects to see around 1 or 2 percent sales-tax growth per year for the foreseeable future.
While a tax on recreational cannabis may prop up those numbers a bit when storefronts start to open, Mr. Casey said the overall decline in sales tax is a state and national issue caused by a variety of factors.
“More on-line shopping, the decline of large national department stores; a low inflationary environment until recently; and a trend toward experience over traditional retail ? something we see locally with the success of the Funk Zone as one example,” he said.
“We continue to see large chains leaving Santa Barbara as they retrench nationwide. This is unsettling and difficult for property owners, neighboring businesses, employees, residents ? and the city.”
Mr. Casey said Santa Barbara’s retail landscape is adapting to meet the needs of local customers and expressed hope that Target and Amazon coming Downtown will provide traffic neighboring eateries, breweries and retail stores.
“Target will be extremely popular once it opens April 7 ? and parking will be very tight for the first six months. Shop early. But shop often,” urged Mr. Casey.
“We are all in this together as we go through this generational transition of retail and its impact on downtown.
“For the city, it helps fund important services, such as public safety, libraries, and parks.”
State adjustments to the CalPers pension system will increase the city’s pension $2 million to $2.5 million per year by fiscal year 2025.
The city will offset the costs by limiting wage increases, exploring increased cost-sharing with employees and “managing our budget prudently.”