Santa Barbara City Finance Committee Gets Clean Audit, Approves Annual Comprehensive Financial Report

The Santa Barbara City Finance Committee on March 10 received an unmodified audit of the city’s fiscal-year 2025 financial statements and voted to approve the annual comprehensive financial report.

Keith D. Martini, the city’s finance director, opened the presentation and noted the report supports debt issuance and public accountability; he also said the city has received the Government Finance Officers Association award for excellence for 37 years. Natalie Loli, the city controller, summarized the governmentwide results, saying the city’s net position rose by about $24 million over the prior year while tax revenue increased roughly $7.3 million but much of the increase is restricted and not immediately spendable. “When I’m mentioning an increase of 24 million, it does not state that the 24 millions are fully spendable,” Loli said.

Auditor Joe Luden of Clifton Larson Allen told the committee that the firm issued an unmodified (clean) opinion on the FY2025 financial statements, describing that as “the highest level of opinion that you can have.” Luden explained auditors obtain reasonable—but not absolute—assurance through sampling and control testing and perform limited procedures on supplementary information.

Committee members used the discussion to press staff on the distinction between book or capital wealth and liquid reserves. Council Member Harmon praised the clean audit but asked how the city can show a strong net position while running operational deficits. Martini and Loli explained that the net position figure reflects capital assets and other non-liquid items (buildings, equipment) and therefore does not substitute for cash reserves available to meet short-term obligations. Martini said the committee should focus on cash and reserve metrics when discussing the city’s ability to respond to emergencies.

Staff also flagged continuing pressures: several enterprise funds face constraints (the clean energy and downtown parking funds performed below the prior year), and downtown parking had a negative fund balance of just over $2 million in the FY2025 results. The finance director also noted an underfunded self-insurance fund and rising operating costs such as property insurance, which he said has been increasing by roughly 20% annually in recent years.

The committee discussed near-term budget planning and the Section 115 trust established to mitigate pension liabilities. Martini said earnings in that trust are expected to help address long-term pension obligations but emphasized the need for active reserves management and engagement in the upcoming FY2027 budget cycle.

Member Harmon moved to approve the staff recommendation to accept the ACFR; Member Santa Maria seconded and the motion passed unanimously by the members present. The transcript records an inconsistency: Santa Maria was noted as not present at roll call earlier in the record but later is recorded as seconding the motion. The meeting was then adjourned.

The committee will receive a Q3 update in May and continue budget work sessions in advance of the FY2027 budget process.