Santa Barbara Council approves $2 million from reserves for local housing trust fund, debates second-year pledge

The Santa Barbara City Council voted on June 10 to direct $2,000,000 from the city's general fund reserves into the Local Housing Trust Fund for fiscal year 2026, after extended discussion about the budget, Measure I revenues, and risks to the city's reserves.

City Finance Director Keith DeMartini and Budget Manager Natalia Glusick presented the city administrator's recommended two-year budget and a set of staff-recommended technical adjustments. DeMartini noted the recommended budget incorporated voter-approved Measure I revenue and left the general fund with a modest projected surplus before the council's changes; Glusick described the city's cost-recovery approach to fee setting and listed departmental fee updates that contributed to the revenue picture.

The council debated a finance committee recommendation that would fund a $3,000,000 baseline allocation for affordable housing in fiscal years 2026 and 2027 and add $2,000,000 in FY 2026 to be repaid prior to any additional allocations. Council Member Sneddon moved the FY 2026 allocation of $2,000,000 to the Local Housing Trust Fund, seconded by Council Member Harmon. The motion passed 6-1 (Sitton: yes; Friedman: yes; Gutierrez: yes; Jordan: yes; Harmon: yes; Santa Maria: yes; Mayor Rouse: no).

Council members debated whether to make a similar $2,000,000 commitment for FY 2027 at the same meeting. A motion to appropriate the second-year $2,000,000 passed in a separate roll-call 4-3 vote (Yes: Gutierrez, Harmon, Santa Maria, "Wissettin" (as recorded); No: Friedman, Jordan, Mayor Rouse). Several council members said they supported funding affordable housing but wanted to wait for additional revenue and reserve information before making a multiyear pledge. Mayor Rouse repeatedly urged caution because of federal funding uncertainty and possible disaster-related costs.

Public commenters urged larger investments in affordable housing. Speakers included local housing advocates and nonprofit representatives: Richard Applebaum of CLUE, Diane Black of the League of Women Voters, and community members who described housing and homelessness needs. Library advocates including Barbara Cronin Hirschberg and Dina Davis urged preservation of library hours and services funded by Measure I.

Council offices questioned several budget assumptions during the hearing. Council Member Jordan pressed staff about the number and timing of open collective-bargaining agreements and the city's vacancy-savings assumptions; DeMartini confirmed the city was negotiating at least two units and that unresolved labor agreements could increase costs. Council Member Friedman asked about the status of state matching funds for a local housing trust fund and was told the city had applications pending but that the state had not made additional match commitments.

Council members also discussed alternatives to one-time transfers, including pursuing new revenues (TOT audit, vacancy tax, enhanced infrastructure financing district) and leveraging partnerships with housing developers and nonprofit builders. Staff said consultants (NHA Advisors) are conducting long-range fiscal forecasting and feasibility work for potential revenue tools and enterprise fund forecasting.

The council approved a set of staff-recommended technical budget adjustments earlier in the meeting; those adjustments were adopted by separate motion and roll-call vote. Council members asked staff to return with a balancing strategy that would explain how any use of reserves would be replenished.

Ending

With the votes, the council moved forward with a measure to add $2,000,000 in FY 2026 to the Local Housing Trust Fund and set a separate, narrower approval for the FY 2027 allocation. The council directed staff to prepare budget adoption materials for the June 17 meeting that reflect the changes and to include a plan for how reserve draws would be balanced or replenished in coming budget cycles.