Santee’s proposed $72 million operating budget for fiscal year 2026-27 includes moderate reserves, but officials said they are concerned about the city’s long-term fiscal outlook and are advancing a potential 1-cent sales tax measure in hopes of generating more revenue.
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City leaders met Wednesday to discuss the proposed budget, which forecasts $68 million in revenue and about $66.6 million in spending, reflecting about a 3% overall increase in revenue.
Officials expect to end the 2026-27 fiscal year with about $14.9 million in reserve balance, which is slightly higher than the city’s 22% minimum policy.
Facing $327.7 million in unfunded infrastructure projects, higher costs associated with Sheriff’s Office services and what officials describe as unfunded state mandates, city leaders said they are concerned about long-term financial sustainability.
“The reserve trend is very alarming,” Councilmember Laura Koval said, noting gradual reductions in reserves in the city’s 10-year budget forecast.
While long-term budget predictions indicate reserves could fall below the city’s 22% minimum, city officials made it clear that a proposed appropriations package that includes below-policy reserves would never see the light of day.
Those concerns prompted city leaders to consider placing a sales tax measure on the ballot in November, despite their own reservations.
“We’re at the point now where there is no place left to cut; it becomes unsafe beyond this,” Councilmember Rob McNelis said.
Officials originally hired research firm TeamCivX to survey support for a half-cent sales tax for 10 years, but pivoted to 1 cent for 10 years during a recent meeting, citing the need for additional revenue to cover infrastructure and public safety needs.
The survey found 58% of potential Santee voters would support a one-cent sales tax measure, while 33% of respondents said they opposed it.
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A one-cent sales tax measure is still feasible for the upcoming election, the survey found, but it noted “it will require outreach and communications and if referred to the ballot, support from an independent committee not affiliated with the city.”
The city anticipates $14 million in revenue over 10 years if the measure is passed by voters.
Two years ago, Santee voters rejected Measure S, a citizen-led initiative that would have enacted a half-cent sales tax for 15 years to specifically fund fire protection and emergency services.
City leaders and the consultant group anticipate voters will be more supportive of a measure that isn’t focused on funding emergency services.
With a 4-1 vote, the council recommended staff prepare potential ballot language for their consideration at an upcoming meeting. Councilmember Ronn Hall voted against the advancement, which he previously stated he opposed.
“We want to word it in such a way that it would become very hard for people to not understand what we are committing to,” Koval said, adding that she would want there to be an oversight committee if the tax measure is passed.
The city’s largest revenue source is property tax, making up an estimated $29 million in anticipated revenue for the upcoming fiscal year. Sales tax trailed behind, generating an anticipated $20.8 million for the upcoming year.
Budget forecasts do not anticipate the development of Fanita Ranch, a 3,000-home development proposed by developer HomeFed that was recently blocked by an appellate court ruling. No such developments were included in the studies, but that could create additional revenue, Koval noted.
The proposed budget will be presented to the City Council for the final time during their next regular meeting on June 23.
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