Challenges, successes and expected trends for four northern Santa Barbara County cities, as well as the county as a whole, were among the main topics of discussion during a forum presented Thursday night by UC Santa Barbara’s Economic Forecast Project.
The North Santa Barbara County Midyear Report, which drew about 100 attendees to the Alisal Guest Ranch in Solvang, featured insights and commentary from the city managers of Lompoc, Santa Maria, Buellton and Solvang, as well as Jeff Frapwell, the assistant CEO of Santa Barbara County.
The local civic leaders painted a mostly optimistic picture, citing steady or improving tax revenue, but each also identified several challenges that they are navigating or expect to have to deal with in the near future. Those challenges could be impacted by a future recession, according to Peter Rupert, the executive director of the UCSB Economic Forecast Project and the first presenter at Thursday’s forum.
“Is there a recession coming? Yeah,” Rupert said, shortly after noting that the present economy was looking strong, particularly with low unemployment rates throughout the county and U.S. overall. “When? Don’t know. No economist knows. … So be a little bit wary of that.”
Here’s a look at some of the individual municipalities:
Lompoc City Manager Jim Throop pointed to the arrival of new businesses as an example of his city’s recent successes, but he acknowledged that Lompoc has several issues it will need to sort out in the coming months and years.
Chief among those, he said, is the city’s unfunded pension liability that he expects will cause the city to operate at a deficit in its next budget cycle, as well as problems retaining staff and finding qualified candidates to replace those workers who leave.
“From an economic standpoint, Lompoc is not in the same position as everybody else,” said Throop, who took over as Lompoc’s top city employee last June. “We have a lot of variables that are outside of our control that are keeping us from moving forward. That was one of my goals — to come in and kind of shake the tree and get things moving.”
To illustrate the pension issue, Throop noted that the city went from expending about $1 million annually in pension payments 15 years ago to an expected $14 million annually in the coming years. He also noted that Lompoc struggles being so far away from Highway 101, meaning that people often have to make it a point to visit the city, and he said that Lompoc needs to expand its borders through annexation to continue growing revenue.
Tourism does great when Vandenberg Air Force Base hosts rocket launches, he said, but can lag during periods between launches.
As the only manager of a North County city that fully embraced the cannabis industry, Throop said he is expecting those new businesses to generate revenue going forward, but noted that he will remain conservative in those estimates initially.
Lompoc’s first cannabis business, a dispensary, opened Friday.
“Right now, this next budget cycle is going to be critical for the city,” Throop said. “It could change the face of the city with the services that may or may not be there. But the economic challenges, not only are they difficult, but they are incredibly exciting.”
He played off Lompoc’s longtime tagline as the “City of Arts and Flowers” when he said that, during his interview for the city manager’s job, he proposed embracing cannabis and flipping that slogan to: “Wine, Weed and Flower Seed.”
“We’re missing opportunities, and they’ve been missed for decades,” he said, noting that he plans to reestablish relationships with VAFB, among other outreach.
City Manager Jason Stilwell said he considered the state of Santa Maria’s economy to be “healthy.” He noted that the city has the highest level of sales tax revenue in the county and pointed to the city’s low unemployment.
Among the challenges for the city, he said, is overcrowding in housing, which he attributed to rising prices for housing. The result of more people living together “is changing the community’s character,” he said.
Stilwell said that hotel tax revenue has been flat, though he noted that the city has benefited from people who chose to stay in hotels in northern Santa Maria rather than pay more to stay in Pismo Beach, for example.
The main economic challenges for the city, he said, will be to try to grow tourism and to keep the industrial sector growing despite trends showing that the qualified employee pool is shrinking.
He pointed to online commerce as a threat to the city’s retail market.
“It’s just a changing demographic,” he said. “Some of the retail sector is strong (and) some of it’s going away, so how that evolves, I think, will have an impact.”
Like Throop, he also pointed to pension costs as a potential negative economic driver.
As for the city’s successes, Stilwell said he was especially proud of the city’s dedication to enhanced public safety, which he said has improved quality of life, and he also pointed to a renewed focus on bringing in more higher education options — he specifically cited the University of La Verne moving into town — and the city’s new fiber-optic high speed internet network.
“We’ve already seen that the ag community is really embracing that,” he said of the new high-speed internet, noting that farmers in the area have updated a lot of their technology thanks to the service.
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Given that Solvang gets more than half of its $8 million in annual revenue from tourism, interim city manager Rick Haydon focused a lot of his comments on that particular industry, at times getting assists from recently retired city manager Brad Vidro, who moderated the panel discussion.
“Solvang is a lot different than my counterparts up here on this panel,” said Haydon, who was in his 18th day running the city. “[Transient occupancy tax] is the lifeblood of the city of Solvang.”
He said that TOT, or hotel tax, revenue was expected to continue rising.
“From Christmas to New Year’s, you couldn’t find a parking space in town, it was so crowded,” he said.
One of the major challenges for the city, Haydon said, will be to fill those hotels in the middle of the week. Weekends have held steady with high occupancy, but weekdays are still lagging, he said.
He also pointed to e-commerce as a threat to the city’s retail industry.
Another challenge for Solvang, according to Haydon, will be to retain workers who earn low wages. Solvang is extremely limited on low-income housing, so a lot of the people who earn low incomes commute from places like Lompoc, which has a much higher share of affordable housing. As more jobs become available in those other cities, Haydon said, those workers will likely choose to remain and avoid the commute.
Overall, though, Haydon noted that “As long as tourism is up, Solvang will be up.”
City manager Marc Bierdzinski cited Buellton’s budget and continuing business growth among the city’s successes.
Helping the budget situation, Bierdzinski said, is that the city has a much lower pension liability compared to other cities, due in large part to the fact that it has only 19 city employees and no public safety departments.
“We have a general fund budget that is always in balance and we usually get more in than we spend and have a very, very healthy reserve in the general fund, and that’s thanks to a city council that is fiscally prudent and a fantastic finance department staff to make sure we’re following what we’re supposed to be doing,” he said.
Among the recent economic growth areas, he said, is the city’s Avenue of Flags Plan, in which the city plans to revitalize the area with Art Deco architecture. He said three developers are already interested in projects related to the plan.
He also pointed to the city’s recent growth in restaurants, wineries, breweries and distilleries in the Industrial Way area, and mentioned the plans for a new bowling alley.
“It’s kind of exciting down there,” he said.
Among the challenges noted by Bierdzinski was “retail leakage,” which he attributed to a rise in online purchases, and he also said the city would likely need to raise its water and sewer fees for the first time since the city was incorporated in 1992 in an effort to increase revenue.
Santa Barbara County
Jeff Frapwell, the county’s assistant CEO, said he expected unincorporated county revenue to remain stable. He noted that the county will likely be unable to grow since much of the inhabitable land is owned by the federal government, either with VAFB or within national forests, or is within the county’s cities.
Like Throop in Lompoc, Frapwell pointed to cannabis as a potential revenue driver down the road.
“Agriculture is part of our heritage (and) cannabis is a crop that has a potential advantage here on the Central Coast,” he said. “So our challenge has been: How do you regulate that and how do you control that so it’s done responsibly?”
While he said that the cannabis industry has economic potential, he noted that expectations wouldn’t be raised too high.
“In the current year budget we put about $5.6 million in cannabis tax money into the budget, assuming that will come in,” he said. “I think that will materialize.
“But the other edge of that sword is what happens with enforcement,” he added, noting that the county has consulted with other municipalities to make sure it moves forward in the most prudent manner possible in regards to enforcing cannabis regulations.
Of that $5.6 million in expected revenue, Frapwell said that $2 million has been earmarked for enforcement and to "stave off" those businesses that operate without licenses.
“We’ll see,” he said of the future of the cannabis industry in the county. “I think in Santa Barbara (County) we can meet all of California’s demand for cannabis, just in the acreage that we have slated to go in production. So, there’s a saturation issue.”