While Goleta’s finances are stable today, city staff say there could be challenges going forward because of unpredictable federal funding, policy changes and the risk of an economic recession.
On Tuesday, the City Council reviewed the preliminary operating budget for the next two fiscal years, which led to some heated conversations about the city’s past and how it will get through the future.
Luke Rioux, the city’s finance director, told the council that while ongoing revenues will be able to cover baseline expenses, the city will need to find new revenue sources to address deferred maintenance, expand programs and increase services.
The city’s pavement maintenance budget is expected to be $6 million per year for the next two years. There is also an estimated $4 million of carryover from fiscal 2024-25 that will go into the 2025-26 pavement budget, according to City Manager Robert Nisbet.
However, it’s estimated that in order to contain the city’s current road conditions, it would need to spend about $19 million a year.
Street paving is the city issue that members of the public brought up the most in the past year, Nisbet said during Friday’s State of the South Coast address.
Mayor Paula Perotte said the city needs to look into ways to bring in extra revenue for street paving.
“I just see that we have to bring in some kind of revenue that’s just for pavement,” Perotte said during Tuesday’s meeting. “I know we’ve spent a lot and we’ve done a lot, but it’s going to be hard to catch up and really bring it to where it needs to be.”
She noted that the city has the lowest transient occupancy tax rate in the area and that they could explore raising the tax to cover pavement costs. TOT is levied on hotels, motels and short-term rentals.
Councilman James Kyriaco said he was hesitant to raise the TOT rate since voters passed Measure B in 2022. Measure B is a sales tax increase that was advertised to put revenues toward Old Town improvements, road improvements, public safety and other issues.
“I do think we need to make these investments. I do think we need to invest more in pavement. Perhaps if we’re talking about a special tax in whatever form it ends up being that can only be applied to pavement, perhaps then I could get there,” Kyriaco said.
He also said they could have had more money for pavement now if the city had given voters the option of a sales tax increase before 2022.
“We are, in some respects, paying the price for a lack of generating revenue in prior years, and I just think that it’s important that we acknowledge that,” Kyriaco said.
Councilman Stuart Kasdin pushed back on the idea that the city should have tried to get the sales tax earlier, specifically during the 2020 election. He added that he voted against a sales tax at the time as it would have raised taxes for residents during the COVID-19 pandemic.
“We were in the middle of a pandemic where the economy was shutting down. We had inflation going on. We were at the risk of recession, and we have a responsibility to our public, not just to ourselves and our plans and our projects,” Kasdin said.
Perotte got choked up toward the end of the meeting as she said she hoped the council could continue to work through the issues facing the city.
“We’ve always had struggles and challenges, but with the way things are going now, it seems more intense, but I think that we will get through this,” Perotte said.
One of the major changes to the budget is that the city will temporarily stop its $250,000 contribution to the housing-in-lieu fund for the next two years in order to keep a balanced budget.
The fund collects fees from developers who choose not to include affordable units in their housing projects. That fee then goes toward developing future affordable units. The fund still will exist, but the city will pause its contribution to the fund, according to the preliminary budget.
Kyriaco said he wished they didn’t have to look at pausing the contribution but that he believed the city was still doing enough to support affordable housing.
“I’m convinced that the steps that the council has been taking on affordable housing — the policy decisions, the partnerships that we’ve made — that we will meet our obligation to house our community with a diversity of housing types so that we can maintain a diverse community,” Kyriaco said.
The budget won’t be finalized until June 17, and the capital improvement project budget will be discussed separately in a few weeks.