Santa Barbara Finance Committee member Eric Friedman, hesitant to discuss increasing the transient occupancy tax, notes that the Tourism Business Improvement District Tax increase just went into effect a couple of years ago.
Santa Barbara Finance Committee member Eric Friedman, hesitant to discuss increasing the transient occupancy tax, notes that the Tourism Business Improvement District Tax increase just went into effect a couple of years ago. Credit: Rebecca Caraway / Noozhawk photo

To make up for budget deficits, the City of Santa Barbara may turn to voters to increase property transfer taxes and hotel occupancy taxes.

The Santa Barbara Finance Committee discussed adding two ballot measures for the Nov. 3 election, an increase in the city’s transient occupancy tax (TOT) and increasing property transfer taxes for properties worth more than $3 million.

The city is considering the ballot measures as a way to generate more revenue.  

The city’s general fund budget for fiscal year 2026 includes total revenues of $243 million and total expenditures of $244.5 million, resulting in a $1.6 million operating deficit, forcing the city to dip into reserves, according to the city staff report.

City staff claims that without any additional revenue or cost reductions, there will be larger budget deficits going forward, forcing the city to use more reserves to balance the budget, further depleting the reserves, according to the city staff report. 

The Finance Committee, which consists of City Council members Eric Friedman, Meagan Harmon and Wendy Santamaria, was generally cautious about the impact that raising the transient occupancy tax would have on the local tourism industry.

“If we are increasing it, we should take into account the real consequences and ripple effect it has on our local economy and, frankly, a real property transfer tax — while, of course, it is a cost on the seller of the home — it seems to me it has a more limited ripple effect on the local economy,” Santamaria said.

Santa Barbara Finance Committee member Wendy Santamaria says she is generally cautious about the impact that raising the transient occupancy tax would have on the local tourism industry.
Santa Barbara Finance Committee member Wendy Santamaria says she is generally cautious about the impact that raising the transient occupancy tax would have on the local tourism industry. Credit: Rebecca Caraway / Noozhawk photo

The city wants to raise the TOT rate from 12% to 14%. If voters approve it on the November ballot, it would go into effect next Jan. 1. 

The additional revenue would bring in $2.9 million in fiscal year 2027 and $5.8 million in fiscal year 2028, the first full year the increase would be in effect, according to the city staff report.

During public comment, Kathy Janega-Dykes, president and CEO of Visit Santa Barbara, warned that increasing the TOT could lower the demand for hotel rooms. 

“The most significant impact is what happens beyond our hotels,” Janega-Dykes said. “When our visitors don’t come, spending declines across the local economy. Our restaurant, retail recreation, transportation and other visitor supported businesses, they all feel the effects.”

While Friedman said he did want to have discussions about increasing the TOT, he was hesitant, noting that the Tourism Business Improvement District Tax increase just went into effect a couple of years ago. 

“Let’s let that play out rather than hit with another tax,” Friedman said. 

Friedman did support the property transfer tax, noting that it would have a limited impact on most residents.

If voters approved the property transfer tax increase of $9.50 per $1,000 on property transfers of more than $3 million, it would go into effect in early 2027. The tax is expected to generate $5 million in revenue after the first full year of implementation, according to the city staff report.

Santa Barbara Finance Committee member Meagan Harmon expresses being conflicted over the burden that raising taxes would have on residents.
Santa Barbara Finance Committee member Meagan Harmon expresses being conflicted over the burden that raising taxes would have on residents. Credit: Rebecca Caraway / Noozhawk photo

Residents selling a property for more than $3 million would be responsible for paying the tax. 

While Harmon did support moving the measures forward for council consideration, she was openly conflicted over the burden that raising taxes would have on residents. 

“The transfer tax is more pointed or more cabined, which I really appreciate and I think that is a huge benefit, but it’s still our residents and I still struggle with the ever-increasing burden,” Harmon said.

The potential ballot measures are set to be reviewed by the whole City Council on March 3. After that, the city will conduct more polling with voters and those results will be reviewed by the council in July, when they will decide on whether to place the measures on the Nov. 3 ballot.

— Noozhawk staff writer Rebecca Caraway can be reached at rcaraway@noozhawk.com.