The Santa Barbara City Council will decide on Tuesday whether to place a half-cent sales tax on the November ballot.
City staff, led by Finance Director Keith DeMartini, proposed the ballot measure to offset a projected $7.1 million budget deficit next fiscal year.
DeMartini said during a media briefing earlier this week that officials are facing some “tough decisions.”
“We can fairly reasonably project what our tax revenues are going to be over the next couple of years with some basic economic assumptions,” DeMartini said.
The city is facing fiscal challenges, largely centered on personnel and rising construction and pension costs. Insurance rates are also rising, DeMartini said.
“Our revenues are definitely projected to go up,” DeMartini said. “It’s just that they’re not going up at the same rate as our expenditure growth.”
According to city projections, the general fund deficit could grow by 5-7%, or $11-15 million, within the next three years. If voters approve the proposed increase in November, the new sales tax could bring in about $15.6 million annually.
The half-cent increase would bring Santa Barbara’s sales tax to 9.25%. The city’s current sales tax is 8.75%.
City officials claim the proposed tax would bring Santa Barbara in line with other “destination” communities, such as Pasadena and Santa Monica.
The last time voters approved a measure like this was Measure C in 2017, a one-cent sales tax increase that would generate $22 million annually. Measure C was designed to fund public infrastructure, such as fixing roads and other projects.
The new measure would be designated for funding city services and programs, along with homelessness and housing programs.
The city says the proposed tax would help fund the costs of services– including emergency response, the Local Housing Trust Fund, and programs such as libraries and parks.
Over the past few years, other ideas have been floated as ways to deal with Santa Barbara’s deficit, including increasing the transient occupancy tax and installing a vacancy tax.
A vacancy tax would be an assessment on property owners who neglect their properties or leave them unoccupied. The topic was discussed by the City Council in 2022, but it did not move forward with the idea.
Property insurance costs are among the big problems taking a toll.
“Our property insurance alone for our hundreds of facilities have gone up by more than 20% annually over the last three years,” DeMartini said. “That’s way greater growth than any of our tax revenues are experiencing.”
The 2025 Fiscal Year budget is scheduled for a vote from the City Council in June. The ballot measure is also scheduled to be presented to the council on Tuesday.
