The Goleta City Council approved a two-year budget Tuesday afternoon, embarking on what is expected to be the city’s most difficult financial year since inception followed by a revenue “bump” under the terms of its revenue neutrality agreement with Santa Barbara County.

The city’s General Fund wasn’t enough to handle the 11 percent increase requested by the Santa Barbara County Sheriff’s Department, a rate that is about twice the typical yearly increase expected for law enforcement. Finance Director Tina Rivera said the city also finds itself needing to fund some “pent-up needs” regarding technology and process improvements as well as insurance liabilities and street and facility maintenance.

Combine those factors with the struggling economy of the past couple of years and increases in expenses, and for the city to make it with a $15.6 million budget for fiscal year 2011-12 and a $17.7 million budget for 2012-13 it had to, among other things, dip into $1 million in reserves and decrease its public safety contract by two positions.

“The public safety costs increased out of proportion with anything we can afford,” Rivera told Noozhawk. “I think we’re one of the fortunate communities.”

The city will still be contributing an additional $787,000 over the next two years to its public safety contract with the county.

But it’s not all doom and gloom, as the city awaits a revenue “bump” because of the changes that are part of its revenue neutrality agreement. All of the bed tax and more of the sales taxes the city shares with the county as mitigation from incorporation will go back to the city — a total of $2.94 million.

City employees also will contribute to their retirement benefits, traditionally paid for by the city and a practice employed by many public agencies to enhance recruitment. Now employees will pay 2 percent of payroll toward their pension plans starting this upcoming fiscal year, with future percentages to be determined every year until the target 7 percent is reached. 

Meanwhile, the city granted a years-overdue cost-of-living allowance increase that would offset the new employee contributions. A 2.5 percent increase will be implemented for the first year, with another 2.5 increase expected in the second year.

— Noozhawk contributing writer Sonia Fernandez can be reached at sfernandez@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews.