Ahead of the second year of a two-year budget plan, the Goleta City Council reviewed and approved the city’s operating budget and capital improvement plan. The city is expecting an increase in expenses as construction costs rise and the city focuses on infrastructure improvements.

Luke Rioux, finance director for the City of Goleta, said the proposed operating budget for the general fund ensures that the city doesn’t rely on one-time funds or temporary funds to cover ongoing costs. He said it will help prevent future budget shortfalls and prevent the disruption of services. 

In the aftermath of the COVID-19 pandemic, Goleta continues to show financial growth. However, rising energy and fuel costs, increasing labor expenses and supply chain disruptions could lead to financial insecurity and complicate the city’s efforts to address maintenance issues and fund projects, according to Rioux.

He said the city will face the challenges by conducting fee and rate studies, prioritizing capital improvement projects and evaluating tax-exempt finance options for major projects.

Goleta’s total ongoing revenue for fiscal year 2024-25 is estimated at $49.9 million, while expenditures are expected to be $51.4 million, which includes $48.3 million in ongoing expenditures and $3.1 million in one-time expenditures.

Mayor Pro Tempore Luz Reyes-Martín brought up some concerns over how much money is going to capital improvement projects, with the total for the next five years projected to be more than $150 million.

The projects include the Ekwill Street and Fowler Road extensions, the San Jose Creek bike path, construction on Hollister Avenue Bridge, and more. 

“That CIP budget is very sobering,” Reyes-Martín said. “I want to urge us to take a closer look at that CIP list of projects to really determine what is on there that is perhaps no longer reasonable or feasible, might have just been there for many years, and if it warrants removing something for that list.”

As many Goleta residents know, improving road conditions is a big priority for the city as of late with the city focusing on Project Connect and other road improvements. The total budget for pavement rehabilitation is roughly $6 million. 

This year, Public Works will have the most expenditures of any city department, passing the Police Department, which usually has a higher total. 

Councilman Stuart Kasdin brought up a report from earlier this year stating that $7.7 million would be needed to maintain pavement conditions, and that with a budget of only $6 million, conditions would deteriorate quicker.

He asked whether pavement would be part of a debt financing plan that city staff will be proposing later this summer.

Rioux explained that pavement improvements will have to compete with other projects such as Project Connect or repairing the Cathedrals Oaks crib wall for debt financing. 

“If we make a big investment to pavement upfront, we’d be able to decrease over time the long-term cost of the pavement program. That was one of the goals” Kasdin said. “I understand that we have a lot of different interests. I think what I’d like to see is to get it so our pavement is not deteriorating further.”

Kasdin also suggested that if the city is unable to meet the goals in terms of pavement quality, then they should adjust the goals. 

“If it’s an unrealistic goal, let’s change it,” Kasdin said. “Let’s figure out something that is realistic, that we can hit, that makes sense, where we’re not going to see the pavement deteriorating.”

The five-year forecast shows the city’s general fund expenditures exceeding revenue for the next two fiscal years, but then revenue is expected to exceed expenditures in the 2026-27 fiscal year. Rioux explained that the reason for that is because of one-time funds being used on improvement projects. 

While the city’s revenue from property and sales taxes is expected to grow, tax revenue from cannabis businesses is expected to drop 45%. Rioux said the city was anticipating more than $1 million in cannabis tax revenue, but now it’s expecting only $630,000 because of financial troubles from a large tax contributor. 

Sales and property taxes are each expected to have a 4% increase from the previous fiscal year. Hotel taxes are expected to increase 3% from the fiscal year despite occupancy rates trending downward.