Santa Cruz County board adopts tentative FY2025-26 budget with 3¢ property tax reduction

The Santa Cruz County Board of Supervisors on July 8 unanimously adopted the tentative fiscal year 2025–26 budget, approving staff recommendations that reduce the county’s primary property tax rate by 3 cents and include a 3% cost‑of‑living adjustment for eligible employees.

Chief Deputy Chavez, who presented the budget, said the county’s “focus for this tentative budget is to provide [a] stable financial foundation with a conservative budget ensuring continued delivery of essential mandated services,” and described the plan to reduce the primary tax rate from 4.0065 to 3.9765 for the upcoming tax year and to continue the same 3¢ reduction annually for the next three years subject to annual review.

The nut graf: County staff said the tentative budget aims to balance continued delivery of mandated services, capital projects and workforce competitiveness while relying heavily on external grants for many capital initiatives. Staff reported total general fund budgeted expenditures of about $43.8 million and total budgeted resources across all funds of roughly $156.5 million; special revenues fell from the prior year primarily because American Rescue Plan Act (ARPA) allocations ended.

Budget highlights and details Chief Deputy Chavez told the board the recommended property tax reduction is a four‑year plan the board asked staff to analyze, and staff will reassess annually based on assessed‑value projections. The presenter said, based on assessor projections and other assumptions, staff recommends lowering the primary tax rate by 0.03 (3 cents) in the coming year and repeating that reduction each year for the next three years if conditions permit.

Staff listed the county’s largest general fund obligations as public safety, the board’s transfers out (including statutory transfers to the jail district and debt service), and operational costs for departments such as IT and maintenance. Chavez explained the board’s department includes transfers out of about $1.6 million for items that the general fund must support, citing debt service, animal control (an intergovernmental agreement with the City of Nogales), environmental health, the county tuberculosis program, upkeep of the historic courthouse, and a contribution to the Santa Cruz Fair Association.

Revenue and funds Chavez summarized other revenue projections that feed the general fund: county half‑cent sales tax (projected at about $4.0 million), shared state sales tax receipts (projected about $7.1 million acknowledging the state reporting lag), vehicle license tax, building permits, federal Payment in Lieu of Taxes (PILT), and lottery distributions. He said the drop in special revenue funds from the prior year was mainly because ARPA funding that helped in prior years has ended.

Capital projects and grants County management and staff emphasized that much of the capital projects fund is paid by grants and appropriations rather than local sales or property taxes. The presentation listed seven transportation projects included in capital planning, including the Ruby Road bridge over the Union Pacific Railroad and Potrero Creek, interchange/frontage modifications at I‑19/Ruby Road to Rio Rico Drive, a creek bridge replacement on Elgin Road and chip‑seal pavement management covering roughly 30–40 miles annually. Flood control and parks projects were also listed, including studies and park and recreation improvements.

Personnel and benefits The tentative budget includes a recommended 3% cost‑of‑living increase for eligible employees, which staff estimated would cost about $325,000 to the general fund. Staff also reported budgeted full‑time equivalents of 236 and projected payroll‑related costs of about $21.59 million; those totals include employer contributions for health insurance, retirement, FICA and Medicare. Chavez said projected health‑insurance costs rose about 4.5% and that county staff recommend the county absorb that increase rather than passing it to employees.

Audits and follow up Separately, Board members and staff discussed ongoing reviews of cash‑handling procedures after a prior incident and said the board engaged an external firm, Heinfeld & Meech, to audit departments that handle cash; the county expects that firm on site July 14–17 to review practices and interview employees. The county is also coordinating with the Office of the Auditor General, which has assigned the audit work to a private firm because of conflict‑of‑interest considerations.

Board action and next steps After the presentation, a supervisor moved to adopt the tentative budget as presented by Chief Deputy Chavez; another supervisor seconded the motion. The board voted “aye,” and the motion carried unanimously. The budget adoption on July 8 sets the county’s tentative spending and tax‑rate limits for FY2025–26; staff noted the tentative budget can be reduced later but may not be increased above the adopted limits without further board action and follow‑up schedules to the state.

The board said staff will continue monitoring the effects of recently passed federal legislation that could change Medicaid or other grant funding and invited the public to an open house in the corridor outside the boardroom after the meeting for additional questions on the budget and projects.

Ending Chairman (unnamed) closed discussion by thanking finance staff and department leaders for the work on the budget and invited public questions at the open house following the meeting.