‘Never seen anything so dire’: Santa Cruz County running low on funds thanks to climate change

From Carlos Palacios’ perch as the chief executive of county government, Santa Cruz County has entered a “profound moment” in its history. County Supervisor Bruce McPherson said he’s “never seen anything so dire” in his nearly 12 years as a local elected official. 

The county is scrambling to figure out how it will persevere through another fiscal year of limited funding and forecast deficits in the years to come. Facing steep financial woes is not new for Santa Cruz County. What is new is the source of those woes: climate change. 

Since 2017, the county has suffered seven presidentially declared disasters, including the 2017 storms and floods, the CZU wildfire, COVID-19 and the multiple emergencies endured last winter, including the New Year’s Eve floods and the Pajaro River levee breach in March. Over the past seven years, the county has spent $250 million of its own funds responding to just those disasters. The federal government, which is supposed to cover the local costs of disaster response, still owes the county $144 million. 

Because it has been funding its own climate disaster response, with the federal government slow-rolling its repayment, Santa Cruz County is now running out of money. Last week, budget manager Marcus Pimentel told the board of supervisors that it might need to take out an $85 million loan, on taxpayer credit, just to finance some of the storm repairs to completion. If so, it would be the largest debt the county has ever taken on for infrastructure repairs, and it won’t even cover half of the damage still awaiting fixes. 

The loan would cover projects already started in the wake of the 2023 storms. Yet, there is another roughly $64 million in damage from those storms as well as about $40 million from the 2017 storms that the county cannot afford. That amounts to $104 million in remaining storm damage that won’t be fixed until there is money, according to Matt Machado, director of the county’s public works department. Securing that money could take years.  

After multiple requests, the county’s public works department did not provide a list of those projects covered by the loan and those left out. However, the county’s public database shows that five roads are still closed from damage during the 2023 winter storms, each located in the mountains: parts of Schulties, Redwood Lodge, Lodge, China Grade and Stetson roads have been shuttered since early last year. 

This puts the county in a Catch-22, Palacios said. The projects deferred because of a lack of funds will only get more expensive, and the areas more vulnerable, as the years pass. The likelihood of more storms and climate-related disasters looms over every season. Palacios said the fiscal reality makes the county’s response a more complicated question. 

“As we’re responding to these events, which are happening more frequently and at higher intensities, we’re spending so much money and the reimbursement process is so slow that it puts us in danger as we get ready for the next storm,” Palacios told Lookout. “How do [we] respond to that? We still have $100 million worth of projects dating all the way back to 2017. What happens if there is another storm this winter, or next winter? The magnitude is too big for local governments.” 

Palacios said the county will not be hampered from responding to emergency and life-threatening situations in future storms. If a bridge or road washes out and turns a community into an island, there are emergency federal funds that will allow for a rapid response. However, if a bridge washes out that, at worst, forces drivers to take an extended detour, it could potentially be years before the county has enough money to fix it, Palacios said. 

JM Brown, McPherson’s chief of staff, told Lookout that if the county didn’t take out this debt to pay for repairs already underway, residents would eventually feel the effects beyond disaster response, such as staff cuts that could affect services and other “tough choices.” However, those impacts could still come down the line. The loan is to buy the county time while it waits for federal government reimbursements, but Pimentel said the federal reimbursements would likely only cover 70-80% of that $85 million, leaving the county with tens of millions of dollars to cover on its own, plus loan interest. 

Last year, the county had to take out nearly $50 million in loans just to cover basic expenses while it waited for federal reimbursements. 

When the county put together its strategic plan six years ago, the costs of climate change was a possibility to consider. As the county gears up for its next strategic plan, “it’s probably going to be the biggest issue we deal with,” Palacios said.

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