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City releases preliminary FY2025 fourth-quarter results; shortfall expected to be larger than budgeted
Summary
City staff reported preliminary fiscal year 2025 results, showing a larger-than-budgeted general fund deficit driven primarily by weaker sales-tax receipts; staff warned figures are preliminary pending year-end close.
The Santa Barbara City Council reviewed preliminary fourth-quarter financial results for fiscal year 2025 on Sept. 16, 2025, with Finance Director Keith Demartini reporting a preliminary general-fund shortfall larger than the amount the council adopted in June. Demartini said staff currently project a fiscal-year deficit of about $6.8 million, compared with an adopted FY2025 general-fund budget that assumed a $4.6 million deficit (not counting amounts necessary to meet the city's reserve target). The finance director said that number may improve modestly after final close because some Measure I sales tax received in July will be attributable to June activity.
Demartini briefed the council that property-tax receipts came in roughly on budget while sales-tax revenues trailed projections by roughly $1 million. Transient occupancy tax (TOT) revenues were slightly above budget, he said. On the expenditure side, Demartini told the council that general-fund departments came in under budget overall; the city plans to present a multi-year general-fund forecast to the Finance Committee on Oct. 14, 2025, which will include updated pressures and cost projections for FY2026 and beyond.
Several enterprise funds also showed imbalances on the preliminary statements. Demartini highlighted the Clean Energy Fund as an outlier with a preliminary FY2025 deficit of about $11 million; he said that largely reflected timing and the way revenues tied to supplier purchase agreements are recorded and that a multi-year view showed the fund remains in overall good standing. He cautioned the council the enterprise funds must cover their own operating costs from their revenues, and any shortfalls typically draw on those funds' own reserves.
Demartini and staff said the numbers are preliminary and that staff do not expect major changes when the city completes the formal year-end close and the auditors complete the annual comprehensive financial statements. That audited package, the finance director said, will be presented to the Finance Committee in early 2026 and then to the full council on consent.
The council pulled the Q4 item from consent for discussion and later approved the related resolutions (council motion recorded; vote recorded as unanimous among members present; Mayor Rouse absent).
