Goleta City Council members will convene at 5 p.m. Tuesday in a special meeting to review the preliminary operating budget for fiscal years 2021/22 and 2022/23, along with the preliminary five-year operating budget forecast for the general fund.
City staff worked to develop a budget that restores existing levels of service that were temporarily reduced due to the financial impacts and economic uncertainty of the COVID-19 pandemic, including programs and projects that were deferred. Additionally, the draft budgets address policy direction as provided in the city’s Strategic Plan and each department’s annual work program.
Total revenues are projected at $31.5 million in FY 21/22 and $33.1 million in FY 22/23. Revenue growth is primarily due to sales tax and transient occupancy tax returning closer to normal levels and an increase in cannabis tax revenues, according to the staff report. Total expenditures are projected at $31.7 million in FY 21/22 and $32.2 million in FY 22/23, which include one-time expenditures of $1.6 million in year 1 and $1.2 million in year 2.
“While the effects of the COVID-19 pandemic have remained throughout FY 20/21, recent occupancy and average daily rate data has shown hotel tax revenue is now gradually trending toward pre-pandemic levels,” the staff report says. “In addition, the city has experienced new cannabis tax revenue in FY 20/21, and it was higher than anticipated.
“Staff expects gradual increases over time as additional cannabis businesses with pending applications become operational. However, uncertainty still exists, and it is still unknown how long the economic slowdown caused by the pandemic will linger and the speed of future recovery of our local economy.”
The meeting will also explore revenue assumptions, expenditure assumptions, projected fund balance and reserves, an updated five-year forecast through FY 25/26 and unfunded priorities.
Property tax is the General Fund’s most stable revenue source and is projected to be $8 million for FY 21/22 and $8.2 million in FY 22/23. Three factors determine the annual change in property tax revenue for the city: inflation, transfer of ownership and Proposition 8 recapture (an additional increase in assessed property value). It is anticipated that values will remain high, though it is assumed there will be a slowdown of real estate sales activity.
Overall sales tax revenues are projected to reach $7.3 million in FY 21/22 and $7.6 million in FY 22/23, and overall TOT revenues are assumed to be $10 million for FY 21/22 and $11.1 million for FY 22/23. For reference, TOT was at $11.6 million in FY 18/19, and staff’s current projections assume TOT revenues to reach those levels by FY 24/25.
Finally, staff made conservative budget estimates for cannabis business tax revenues for FY 21/22 and FY 22/23, and is currently projecting $2.6 million FY 21/22 and $2.7 million in FY 22/23.
The City Council will be asked to consider funding options on a city allocation from the $1.9 trillion American Rescue Plan Act of 2021 in the next few months. Goleta will receive close to $6 million in funding, which is 5.6% higher than the original estimates.
The meeting will begin at 5 p.m. Tuesday, and can be viewed on Goleta Channel 19 or online at https://tinyurl.com/goletameetings.