City of Santa Barbara Trudges Through Budget Reviews

Santa Barbara City Council continued its review of the Fiscal Year 2025 recommended budget on Tuesday, hearing details on the overall costs and revenues for the city’s enterprise budgets — including the airport, waterfront, and downtown parking fund.

The “enterprise budgets” are outside of the general fund and are intended to pay for themselves, with revenues offsetting the costs of doing business, but as the city approaches an estimated budget deficit of at least $7.1 million, city leaders are taking a close look at how to mitigate that deficit, which could grow to more than $11 million due to the recent struggles of the downtown parking fund.

The original Fiscal Year 2025 recommended budget considered a radical overhaul of the city’s downtown parking program, which would have shortened the free-parking periods in both lots and garages and instituted a new pay-for parking model on city streets for the first time in the city’s history. But last week when the plan was presented to the city council, its members made it clear that they wanted nothing to do with the proposed price hikes.

Instead, council directed staff to come back with another plan to extend the free parking period to 90 minutes in lots and garages, and maintain a 75-minute free parking period on the street. Council also recommended that the city look into employee and local passes, and to look into other funding sources to operate and maintain the hardware.

On Tuesday, Finance Director Keith DeMartini gave the council a peek at what this could mean to the parking fund: an expected $3.8 million deficit. 

With the changes originally recommended by staff, the parking fund was projected to bring in $16.3 million with expenditures at $15 million. But after the council shot down that plan last week, DeMartini estimated that expected revenues could fall to $13.4 million in 2025, while costs will rise to $17.5 million.

“Now that the city is moving in a new direction,” DeMartini said, “it is important to note that there will be revenue implications because of that.”

The decision to extend the free-parking period was considered a win for the community, but DeMartini explained that it could cost the city a minimum of $1.4 million in lost revenue.

Reducing employee passes from $140-$165 to around $70 a month would amount to $800,000 in revenue loss, he said, while instituting $30 a month or $300 annually would end up costing the city up to $700,000 in revenue. Altogether, if council passes every new suggestion, it could cost the city nearly $3 million in expected revenues.

In the meantime, the city will look into alternative funding sources, such as Measure C funds for capital improvements up to $2.8 million, or transferring money from the general fund to pay for State Street plaza maintenance. As it is, the city may have to transfer funds to account for the depleted Downtown Parking Fund reserves, which is projected to end with a $5.6 million shortfall by the end of 2025.

DeMartini said staff will continue to evaluate parking options, and the council can make their ultimate decision during final budget deliberation on June 4 and budget adoption on June 11.

In total, the eight enterprise funds — which include airport, downtown parking, golf course, waterfront, and wastewater/solid waste funds — are projected to bring in a combined $280 million in revenues in 2025, while costing more than $279 million in expenses. 

Across the board, the city has struggled to match the growing costs of salaries, benefits, and insurance. For the city’s self-insured properties, costs increased by 32 percent from in 2022, then by 24 percent and 23 percent in the next two years.

“Those are very, very steep increases,” DeMartini said.

The Waterfront Fund, which brings in about $22.1 million in revenues against $23.2 million in expenses, has also suffered from the insurance hikes. The deductible for Stearns Wharf has increased from a quarter-million to more than $3 million in just three years.

City Council made no action, but will continue budget deliberations on June 4. To view the city administrator’s recommended budget in full, visit the city website.