General government activities of the City are financed through seven major revenue categories:
- Taxes (excluding property taxes) - contains the largest single revenue source - sales tax. Also included in this category are franchise taxes, utility tax, admission tax, and transient occupancy taxes. Sales tax is collected by the state with a portion remitted to the city; the others are collected directly by the city.
- Property Tax - Includes revenues which are assessed and collected by the County of Santa Cruz and forwarded to the city.
- Revenue from Use of Money and Property - Includes revenue secured by investing the funds of the city and for rents of city-owned property.
- Licenses and Permits - Includes revenue derived from the issuance of business permits, etc.
- Fines and Forfeitures - Includes funds collected by the city, as well as funds collected and distributed by the state and county.
- Revenue from Other Agencies - Consists of state license money, taxes, and fees collected and distributed by the state, along with federal, state, and county grants.
- Fees for City Services - Includes fees charged by Parks and Recreation, Planning, Police, Fire, and other city departments.
These revenues, along with nonrecurring revenue (insurance refunds, donations, etc.) and transfers from various sources, are used to support most aspects of city government. Enterprise funds (water, sewer, and refuse) are self-sufficient. Construction funds for city projects are also separately maintained. They are derived through bond proceeds, federal and state grants, and some of the revenue sources noted above.
The City is allowed to issue general obligation bonds under Section 1418 of the City Charter with a limit that cannot exceed the sum of 15% of the total assessed property valuation for the purpose of the city's taxation. The limit has not been reached. A two-thirds popular vote is needed to pass general obligation bonds according to the terms of Proposition 13. The City can also issue revenue bonds for enterprise funds such as the water fund. Revenue bonds can still be authorized by the City Council.
The Finance Department provides internal auditing services, and regular audits are made by an independent auditing firm.