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Finance committee hears Q3 report showing roughly $10.2 million general‑fund shortfall; approves budget adjustments
Summary
City finance staff reported a projected $10.2 million general‑fund deficit for FY2026, noted depleted contingency reserves and a 25% reserve policy target, and presented enterprise fund results and proposed budget adjustments and position changes. The committee unanimously approved staff recommendations and will forward adjustments to council.
The Santa Barbara City Finance Committee on May 19 received the city’s third‑quarter financial report for fiscal year 2026, which projects an approximate $10,200,000 general‑fund deficit for the year and recommends several budget amendments and position reclassifications for council consideration.
Finance Director Keith Demartini told the committee staff are projecting an "approximate $10,200,000 deficit in the general fund" for FY2026 when required reserve contributions are included, and said contingency reserves have already been fully depleted. Demartini noted the council‑adopted reserve policy target is 25 percent and warned that, without corrective action, reserves will continue to decline.
City Controller Natalie Licoli reviewed enterprise fund performance. She reported short‑term rental and settlement revenue of about $2,800,000 year‑to‑date and summarized results across Water, Waterfront, Solid Waste, Clean Energy, Airport, Downtown parking and Golf funds. Licoli highlighted $65,000,000 year‑to‑date Water revenue (about 75 percent of budget) and said the Water enterprise projects a year‑end loss in its fund forecast; the airport expects a projected loss in the current year as well.
Staff also outlined proposed budget amendments included in the council packet: two capital renovation appropriations described in the packet totaling $5,000,000 and $6,000,000 (project names and full descriptions are in the council packet), a $689,000 grant‑funded sidewalk and crosswalk safety project, enterprise fund transfers and an increase of $2,100,000 to cover year‑end charges. Demartini and Licoli described position reclassifications and a handful of salary adjustments with limited material fiscal impacts; the changes are listed in detail in the council agenda report and would take effect May 30.
A motion to accept the interim financial statements, recommend council adoption of the proposed third‑quarter budget adjustments, and approve the listed position and salary control resolution changes was moved, seconded and passed unanimously by members present. Demartini said staff will continue quarterly reporting, with a Q4 report likely in October and an annual comprehensive financial report early in 2027.
