Sales tax revenues from Santa Barbara’s Measure C came in short by about $1.2 million for the 2018 fiscal year, a number that the city’s finance director called a big hit.
The city budgeted $5.5 million for the fiscal year, which ended June 30, but only $4.3 million came in.
“That’s a big hit for us, well below our budget expectations,” said Finance Director Bob Samario. “It is a very significant variance.”
Measure C was passed by city voters last November and raised the city’s sales tax rate from 7.75 percent to 8.75 percent, effective in January.
City officials estimated the 1-percent rate increase would bring in an estimated $22 million a year, and the general tax revenue could be spent on any general government services. The city said the money will be spent on infrastructure maintenance.
The 8.75 percent rate is the highest in Santa Barbara County.
Samario blamed the sales tax deficit on a few of factors, including the Jan. 9 debris flow, an overall decline in retail sales tax revenues, and businesses not calculating the sales tax increase, which was in effect for half of the 2018 fiscal year.
“Really it’s been impacted by the transition for businesses to have to now add 1 percent to their sales taxes to their point of sales system,” Samario said.
“My guess is there has been a lack of compliance, a lack of knowledge, or compliance, to add that 1 percent. Hopefully we will see that money come back in the future but at this point is really a significant shortfall.”
To make up for the budget deficit, the city will have to repay the general fund for the shortfall from 2019 sales tax revenues, he said.
“We are going to have to true that up this year, which means we are going to have that much less money to spend in 2019.”
The city plans to spend its Measure C sales tax money on road maintenance and building a new police station.