Even as city faces deficit and turbulent financial picture, Santa Cruz residents opting out of budget process

The discussion and approval of the 2024-25 budget for the City of Santa Cruz went smoothly this year. Though perhaps a little too smoothly considering the city’s recent, and projected, financial turbulence. 

The city government projects to raise more money in local taxes, fines and fees (that is, the dollars that come directly from the pockets of its people) than it ever has: about $141 million. Part of that is the $8 million the government expects to receive from March’s Measure L, a voter-approved, permanent sales tax increase of one half-cent. Sales taxes ($35.3 million) are now expected to overtake property taxes ($28.6 million) as the city’s largest tax revenue source.  

But the city’s coffers are not flush with cash, at least not compared with its expenses. The city ended the 2023-24 fiscal year with a $1.5 million deficit. City Manager Matt Huffaker proposed this year’s budget with a more than $2.4 million deficit. Huffaker said the city, over the past two years, has not held enough money in its reserves, a fund that basically operates as the city’s piggy bank. Yet, in order to balance this and last year’s budgets and cover the deficits, the city government had to break into that piggy bank, which now holds $22 million (more than a third is restricted to pension-related costs). This next year will also be the first in which Santa Cruz has no one-time state or federal cash to help pay for its homelessness initiatives, leaving the city to shoulder that full $9.6 million bill. 

In their budget messages, Huffaker and Elizabeth Cabell, the city’s finance director, said the city’s expenses are going to continue to increase with rising pension costs, staff raises and inflation. Without significant changes, Huffaker and Cabell predict the city will continue to see deficits in at least eight of the next 10 years. 

“Utilization of one-time funds to balance ongoing operations is not sustainable over the long term,” Huffaker wrote. “We will need to continue exploring opportunities for additional cost recovery, operational efficiencies, and new revenue sources.”

Basically, the city can’t keep smashing its piggy bank. Santa Cruz’s future financial health will likely depend on the government raising more money from the governed or cutting back on services.

And yet, when it came time to talk about any of this — how the government would spend its residents’ (and, partly, its visitors’) money, the idea that the city might look for new ways to charge residents fees and taxes even in the wake of a sales tax increase, or how this new, greater dependence on sales taxes to fund city services leaves Santa Cruz more vulnerable to economic downturns — almost no one showed up. 

Across two budget hearings held by the government and the city’s elected decision-makers, only two people publicly offered their thoughts on how the city should spend the people’s money, both during the May 28 meeting. 

Barbara Meister, of local group Communities Organized for Relational Power in Action (COPA), urged the city to put money into tenant protections. Resident Garret Phillip criticized the city’s financial planning and questioned how the budget had ballooned since 2015-16 while the population had decreased. Phillip’s comments contained a summary of the email he sent the city about the budget — the only budget email the city received, according to the documents it published. 

That was it. Even for a city of about 62,000 people, Mayor Fred Keeley said this was perplexingly low. The budget, he said, is “the single most important vote” the city council casts all year, and one that touches almost every priority issue in Santa Cruz. 

“I don’t know what [my emotion] is, but there is something bubbling up from the neck down about the fact that we don’t have more public interest or participation in the budget,” Keeley said. “People will show up all year long talking about all types of things. Oftentimes, when you track where they go, they almost always have a place in the budget.” 

In previous years, the city manager’s office would present the budget to the community and city council across two separate public hearings and a third, final meeting of more public comment, last-minute amendments and a vote. This year, the city trimmed the public budget meetings from three to two. Keeley said the new format was, perhaps, too efficient. 

Reached by phone, Councilmember Sandy Brown joked that the City of Santa Cruz’s budget process was “the quickest in the West.” She agreed this year’s process was “too efficient,” but acknowledged that recent years drew the same, sputtering turnout. Brown echoed Keeley’s sentiment, saying people are failing to see the connection between the issues they care about and the budget. 

“I often say that we don’t organize in Santa Cruz, we mobilize around a particular issue or candidate or measure, but when the campaign is over everyone goes home,” said Brown, who has seen activism around broader city topics splinter and wane over the years. “A lot of people feel pretty beat down. They feel their voice doesn’t matter, and it’s a self-fulfilling prophecy in many ways. They try to show up and use their voices but the city council votes a different way.” 

Brown, who is in her final year of an eight-year run on the city council, said there is no quick fix. She remembered how, during her first term in office, then-Mayor David Terrazas helped initiate “budget 101” workshops that invited leaders of different communities and organizations within Santa Cruz — “people with constituencies,” as Brown put it — in order to help connect the dots on how the budget affected their missions. The city was active in recruiting and bringing people together for those workshops, but it’s a practice that has faded among the carousel of new leadership. 

In an email, Huffaker said he considers the budget to be a reflection of community input and feedback, albeit somewhat indirectly. Huffaker said the budget’s north star is the city’s Strategic Plan. 

“That plan was developed with robust community input and a community survey,” Huffaker said. “I’m proud to say the budget is a direct reflection of what the community told us was most important to them.”

However, the city manager said a strategic refresh could be on the horizon, which “could include budget 101 outreach meetings and other new ways for the community to participate.”

Councilmember Shebreh Kalantari-Johnson said limited participation has become a hallmark of the budget process, but sees the issue as a bigger question of “authentic engagement of the community in a way that feels digestible.” Kalantari-Johnson, who in 2025 will transition from an at-large city councilmember to representing the Westside’s District 3, said the city’s shift toward district-based council representation will help with engaging residents on the budget issue. 

“I do think there is a gap in making that information more accessible; it’s available, but it’s not digestible for the layman,” said Kalantari-Johnson, who noted that she felt this year’s budget process worked well. “There is work for us to do, and I think working through districts will really help with that.” 

Joy Schendledecker, who ran against Keeley for mayor in 2022 and against Kalantari-Johnson for the District 3 city council seat in March, said diminished public participation is a result of “real participation and accountability from city councilmembers.” Schendledecker said people feel shut out, largely because of the city council’s makeup. Brown is largely seen as the lone progressive vote amongst her more centrist Democrat colleagues. Brown, who terms out this year, will be replaced by incoming councilmember Susie O’Hara, considered to align more with the mayor and five other councilmembers. 

“People, more and more, are thinking, ‘Why bother? We’re going to work on other political projects where we feel like we can have an impact,’” Schendledecker said. “Burnout comes from repeatedly not getting traction. People are skeptical.”

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