Despite tax increases in recent years, the conversation in Santa Barbara has again centered on revenue shortfalls and the potential need to raise taxes even more.

It comes up in budget hearings, policy debates and discussions about the city’s long-term (and bleak) financial outlook.

The assumption is simple: the city needs more revenue, so we must raise taxes.

But that framing misses the deeper root cause issue. Santa Barbara doesn’t have a revenue problem. It has a customer problem.

Sales tax is one of the best health indicators of a local economy. It reflects behavior, not projections. It shows where people actually choose to spend their money.

And in our case, that spending is shifting somewhere else and helping drive the revenue shortfalls.

According to the California Department of Tax and Fee Administration, local sales tax revenues throughout California have risen in recent years, driven largely by inflation and post-COVID-19 pandemic spending patterns.

Santa Barbara has seen that increase on paper.

But that headline covers up a deeper, more unsettling problem: We are not capturing our fair share of regional economic activity.

Neighboring communities, particularly Goleta, have become dominant retail centers because they offer what today’s consumers demand in convenience, accessibility and efficiency.

Large-format retailers, easy parking and clear navigation translate directly into higher transaction volume and stronger sales-tax revenue.

Santa Barbara, by contrast, has made it harder to spend money.

State Street, once the economic backbone of the city, has struggled to convert visitors into customers.

Vacancy remains elevated, retail diversity has narrowed and the experience has become inconsistent. Foot traffic alone does not generate revenue, actual transactions do and those are declining.

In financial terms, this is revenue leakage or lost opportunity.

When residents shop elsewhere, we lose revenue. When visitors don’t convert into buyers, we lose revenue. When storefronts sit empty, we generate no revenue.

To compound that problem, we are also losing businesses. Companies like Sonos and Umbra have reduced or relocated operations outside the city.

These moves are not just symbolic. They represent a shift in economic impact. Jobs move. Spending moves. Employees move and taxable activity follows.

Over time, that compounds into a meaningful erosion of the city’s economic base.

This is not accidental. It is the result of real policy choices the city has made.

Santa Barbara has prioritized restrictions, additional ordinances and complicated processes over outcomes, and ideology over execution.

The prolonged closure and uncertainty around State Street downtown, the lack of a clear and permanent access strategy, and a business environment that is often slow, complex and expensive to navigate have all contributed to declining sales tax revenue.

Ask yourself this question: would you invest your business in State Street, given the uncertainty of the future, its current situation and the difficult regulatory process?

I think the vacant storefronts speak volumes about the answer to that question.

Whether it remains closed, opens up or something in between is almost a moot point. It’s the lack of a strategy and the difficulty of doing business here that have led to the current situation.

Additionally, some critics say retail is dead. To a certain degree, they are correct, but the more accurate answer is that it has changed.

Yes, many people buy online today, but when they shop in person, they want experiences and demand convenience.

In some cases, the shopping experience is as important as the products being sold. All you have to do is visit Coast Village Road or Camino Real Marketplace to see whether retail is dead.

I think your bigger challenge would be finding a parking place, which makes it abundantly clear if retail is dead or not.

At the same time, there has been no coordinated strategy to compete with neighboring cities that are actively optimizing for retail performance.

If we are honest, we have made it harder to open a business, harder to operate one, and harder for customers to engage with them. And the market impact is painfully obvious.

As bad as it sounds. It can be fixed with decisive and swift execution. Here are three steps we should consider to show results:

Step 1 — Restore Access to Our City’s Financial Heartbeat

Implement a clear, permanent State Street plan that allows for: 

• Limited, controlled vehicle access during the day when shoppers are out.
• Make sure it is clean and safe. It needs to be welcoming.
• Access for parades, events and things to bring people back downtown.

Step 2 — Fast-Track Business Openings

Create a “fast track” for retail and restaurant tenants in existing spaces:

• Pre-approved uses and curated categories, including pop-ups.
• Streamlined inspections and reviews.
• Parallel, not sequential, reviews. Time kills deals. Speed creates momentum.

Step 3 — Actively Curated Retail Mix

Adopt a proactive leasing and recruitment strategy:

• Target high-performing retail categories.
• Partner with property owners to fill vacancies.
• Incentivize experiential retail that converts visitors into spenders.

Santa Barbara has every advantage going for it: brand, beauty and demand.

We have organizations like the Downtown Santa Barbara Improvement Association and the Santa Barbara South Coast Chamber of Commerce that care and can help, but today, we are not executing and converting that advantage into revenue.

It is true that we are collecting marginally more in sales tax, but I would argue that it is largely because prices have risen, not because we are generating more economic activity.

Raising taxes is a quick and painful band-aid for our revenue problems, but it won’t last if our city’s core economic engine continues to decline.

We need to ask how to increase revenue, not taxes, and win back businesses and locals to downtown. Because until we do, we will continue to fall further behind.

We need strategies and solutions that think long term and create a sustainable and vibrant future.