Dark Clouds on Fiscal Horizon

The Santa Barbara City Council faced a grim reality Tuesday when City Finance Director Rob Pierson notified elected officials that City Hall was confronting a $5.5 million general fund shortfall for this current fiscal year-which ends the last day of June-and a $9 million projected shortfall for the following one.

“In the 20 years I’ve been working here, I’ve never seen it so bad,” Pierson said. Sales tax revenues are down $1.25 million and fees are down $1.5 million, the latter due to a slowdown in development and real estate activity. Typically, the city budget shows a surplus of $2.5 million at the end of the year. This year, however, all city departments are being required to tighten their belts, though the police and fire departments will feel less pinched than others. So far, no layoffs are predicted, though a hiring freeze means that some positions will not be refilled.

Meanwhile, the council is negotiating with the union representing its service employees, which seeks pay raises of 3 and 5 percent over the next two years. Some councilmembers are inclined to give the union some kind of raise, and then ask the members to agree not to accept it until the economic conditions improve. Union members have already been asked to identify potential cost cuts. Additionally, some councilmembers have noted that a number of businesses are behind on their business license fees, and councilmembers have suggested an aggressive collection campaign could reduce the shortfall. The mayor and members of the City Council will reduce their own expenses by 30 percent.