California’s Santa Barbara borrows for police station and park

One of Southern California’s wealthy cities is tapping the municipal bond market to build a new police station and renovate an oceanfront park. 

Santa Barbara — where the median home sells for roughly $2 million — is borrowing $124.2 million in the municipal bond market through its finance authority. The bonds are backed by lease payments the city will pay each year from its general fund, which is comprised of revenue including property and sales taxes, as well as other tourism-related collections.

The city has been planning for a new police headquarters for years, and voters approved a one-cent sales tax increase in 2017, which will help support the project.

The existing facility was built in 1959 for a staff of 85, which has grown to more than 200 sworn and non-sworn officers. The station is outdated, too small, inefficient, and has never been retrofitted for earthquake, according to the according to the city. 

“It’s really a priority project for this community,” Keith DeMartini, the city’s finance director, said in an interview, adding that the city is coming to market “as quickly as we can.” 

Local government infrastructure projects are generally paid for by revenue a city collects through property taxes or other kinds of levies.

For wealthy enclaves — like Santa Barbara — where home values stretch into the millions and attract beach-going tourists that spend money at hotels and restaurants, those collections are abundant. The city collected about $42 million of property taxes in the 2022 fiscal year, roughly 53% more than a decade earlier, according to bond offering documents. That’s been driven by a sharp increase in property values, which are poised to reach $29 billion in 2025, the documents state. 

The lease-backed bonds are rated Aa2 by Moody’s Ratings, the third-highest level, and one notch below the city, which was upgraded last month. 

Moody’s lifted Santa Barbara’s bond rating one notch reflective of “the city’s growing economy along the southern California coast with a strong tourism industry” and above-average resident income and very-strong assessed property value, according to its Oct. 29 report. 

Roughly $90 million of proceeds from the debt will be used to finance the new station, which will be built on land now used for a parking lot and feature amenities including a fitness center, shooting range and community space. 

“Police departments have had a heck of a time hiring and retaining staff in recent years,” said DeMartini. “We truly believe that this will be a really strong draw for people to want to come work for our city.” 

Roughly $13 million of the bond deal will be used overhaul a city park, known as Dwight Murphy Field, located steps from the Pacific Ocean. The new park will feature multiple turf fields, an outdoor fitness gym and picnic areas. 

The deal is expected to price Wednesday through a competitive auction, according to investor documents.