In what feels like the opening pebble toss in a match between Goliath and David, the City of Goleta fired a formal request to the County of Santa Barbara to amend the Revenue Neutrality Agreement (RNA). The two sides meet on Thursday to discuss the obscure document, which Goleta claims has hobbled the city’s ability to maintain its services to its residents while unfairly benefiting the county.
The county supervisors held a closed-door session on Tuesday regarding Goleta, and the only comment made in public afterward was County Counsel Mike Ghizzoni re-stating the text in the day’s agenda for the closed meeting: that the letter opened the county to “significant exposure to civil litigation … involving the 2002 Revenue Neutrality Agreement.”
That agreement was approved by voters when Goleta was officially carved out of the county in 2002. The purpose was to compensate Santa Barbara County for the property and sales tax it lost to the newly formed city — or to neutralize the financial effect. The city now sends one-third of its sales tax to the county and half its property taxes, or about $7 million annually.
Like the rest of the world, Goleta has suffered serious losses of revenue because of COVID-19. Not only are citizens unemployed, spending less, and producing less sales tax, but tourists are staying home. Goleta’s hotel bed tax, which was a mainstay revenue source, dropped by $3 million between March and June of this year.
The city tried to raise an additional one percent sales tax this summer, but the proposal failed to get a supermajority vote of four members of the City Council to be put on the November ballot. That tax, city attorney Michael Jenkins explained on Wednesday, would have belonged entirely to the city; none of it would have been part of the RNA payment to the county. It was expected to reap about $7 million annually. Following that defeat, both Jenkins and City Manager Michelle Green proposed to the council to bring the RNA back to the county for a discussion, said Jenkins, as a means to increase the city’s revenue.
Without substantial help, the city’s letter states, Goleta faces a shortfall of $1.3 million in its response to the coronavirus health crisis. It has been unable to provide recreation services, affordable housing, senior assistance, and other necessary services because of its hamstrung finances. Goleta argues that the total $122 million the county has received under the RNA has more than compensated it for the loss of the area’s revenues. Jenkins noted that the county has also added a revenue source in the form of cannabis since the 2002 agreement was made.
In past conversations about the RNA, county executive Mona Miyasato said that what Goleta services cost the county hadn’t been examined since the last talks in 2014. At that time, according to a county webpage, the county paid $11.3 million toward safety-net services like public health and behavioral wellness, and services like the court system, and elections; the city had paid about $9 million that year.
Rather than litigation, which Jenkins has not ruled out, the city’s letter proposes phasing out the revenue sharing over time. Whether the county agrees remains to be seen.
Clarification: This story was revised to note that County Counsel’s statement was not reflective of any confidential discussion, simply a paraphrase of the item’s description in the day’s agenda.
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