The Santa Barbara City Council got a look at the city’s most pressing issue Tuesday: the budget. It wasn’t a pretty picture.

Before the four-hour session got under way, each council member was presented with a briefing binder no less than three inches thick, detailing the city’s financial conundrum. Santa Barbara faces a $10.8 million budget deficit in the next fiscal year if no actions are taken, and city staff have been wrestling for months with how best to address the shortfall.

City Manager Jim Armstrong said it’s one of the most challenging budgets he’s worked on. Every department in the city is affected by the implications of the document. Measures the city will be exploring include reducing department budgets, increasing fees and charges, labor measures like mandatory furloughs, and delays to capital improvements.

“There’s a little pain everywhere,” Armstrong said. “But I don’t think the overall quality of services will suffer too much.”

Armstrong acknowledged a tendency to react to a small portion of the plan, and encouraged people to immerse themselves in the entire budget, considering the broader context. Click here to view Santa Barbara’s fiscal year 2010 budget.

At the center of Tuesday’s discussion was the city’s $104.6 million General Fund, and finance director Bob Peirson said the deficit was caused by unprecedented declines in General Fund revenue. Although the city has a fully funded $16.5 million disaster reserve, and a $1 million capital reserve, it’s budget reserve is nearly depleted.

Peirson said his staff estimates sales tax receipts being more than $2 million short by June 30, the end of the current fiscal year. The transient occupancy tax, which is paid largely by visitors who stay in hotel rooms within city limits, was also estimated to be down $1 million. Property taxes for this year should only be short a nominal amount, about $141,000 for 2009.

One of the most dramatic numbers in the report showed transient occupancy tax revenue of $759,867 last month, which was down 24 percent, or $240,706, from a year ago, due in large part to the global recession.

The report showed revenue projections that have the city’s sales tax declining 1.4 percent and TOT by 2.2 percent. The report projects a 3 percent increase in property taxes, based on consultations with the Santa Barbara County Assessor’s Office, which says it believes that figure to be accurate.

The budget’s projected 2010 numbers are based on a multiyear forecast, which relied on a 4 percent growth rate from a 20-30 year time frame.

“Of course, we’re not in those normal times anymore,” Peirson acknowledged.

Reducing labor costs is what staff is hoping will save the city $1.5 million, by instituting furloughs, eliminating vacation cashouts and freezing benefits. Managers and supervisors who are paid from the General Fund have already accepted these reductions, and Peirson said the city should see a savings of about $840,000 as a result. But the city still needs about $660,000 worth of labor concessions to come out of discussions with the other groups, which include police and fire departments and the Service Employees International Union Local 620. Formal discussions are under way with the SEIU and informal discussions have begun with police and fire personnel.

Capital programs reductions are slated to save the city about $800,000. An example of one of these reductions calls for a 15-month delay in replacing the city’s financial management system. An 8 percent reduction for funding to community organizations like the Convention & Visitors Bureau of Santa Barbara and the Downtown Organization has also been proposed.

Reducing budgets by department is also key. One of the hardest hit will be the Parks and Recreation Department, which can expect $1.3 million less in General Fund expenditures and could eliminate as many as 10 positions. Click here for detailed documents of how each city department will be affected.

Peirson said it was vital to keep public safety from being affected by the cuts, and that public safety departments would only see a 4.7 percent funding decline, while nonsafety departments would see nearly double that amount.

Increases in fees for building permits and land development will also be enforced, as well as with parking citations, vehicle release and dog licensing fees.

Peggy Langle of the Santa Barbara Humane Society was one of several public speakers who said she was concerned the cuts would have a further negative impact on already skeletal services, like animal control.

The council also acknowledged the magnitude of work involved with approval of the budget.

“I would say that this budget in particular, because of the challenges we’re facing in the city, is one of the most important things I’ve done in my life,” Councilman Das Williams said. “I think that we will have to delve deeply into it, because it will set a precedent as to where we go from here.”

Councilwoman Iya Falcone said it would be up to the community to express what its priorities are.

“I’ll do what you want, in terms of where your priorities lie,” she said. “But you have to show up at budget meetings.”

The public is invited to a budget work session from 2-5 p.m. Thursday, as well as a series of meetings on the impacts to the individual city departments. Adoption of the 2010 budget is expected in late June.

Thursday, 2-5 p.m.
(Special Work Session)
Administrative Services
City Administrator
Mayor & Council
City Attorney
Community Development Department

Monday, 6-9 p.m.
(Special Work Session)
Library
Parks & Recreation

Tuesday, 2 p.m.
(Regular Council Meeting)
Capital Program Budget

Wednesday, May 6, 9 a.m.-noon
(Special Work Session)
Public Works

May 26, 6-9 p.m.
(Special Work Session)
Fire
Police

June 1, 3-6 p.m.
(Special Work Session)
Airport
Waterfront
Finance
Non-Departmental

June 2, 2009
9:30 a.m. -11 a.m.
(Special Work Session)
Budget Deliberations (if needed)

June 9, 2009, 2 p.m.
(Regular Council Meeting)
Budget Deliberations (if needed)

June 16-Invoice, 2 p.m.
(Regular Council Meeting)
Budget Deliberations (if needed)

June 23
(Regular Council Meeting)
Budget Adoption

— Noozhawk staff writer Lara Cooper can be reached at lcooper@noozhawk.com.