Last week we wrote about the gaping donut hole in Santa Barbara County when it comes to funding for economic development.

Our example was Monterey County’s decision to restructure several departments and make way for a senior manager in the economic development area.

Now comes further proof that economic development activities, which should be the top priority for communities trying to dig out from the recession, just have not risen to the top of the priority list in South Santa Barbara County.

In recent weeks, Santa Barbara Mayor Helene Schneider has floated the idea of temporarily barring nonprofits from applying for some  $1 million in Community Development Block Grant funding  next year that’s set aside for capital projects and economic development. Instead she wants devote the funds  to “shovel-ready” city construction projects derailed by Gov. Jerry Brown’s dismantling of redevelopment authorities, or RDAs, last year.

One such paused project was a multimillion-dollar makeover of the city’s police headquarters that never quite seemed connected to the elimination of blight.

Unfortunately, barring nonprofits from block-grant funding would put at least a temporary halt to funding for Women’s Economic Ventures, which has received $25,000 to $50,000 a year from the block grant to teach entrepreneurship skills and provide startup and expansion loans to men and women looking to launch and expand businesses.

An exchange of letters between WEV founder and CEO Marsha Bailey and Mayor Helene Schneider underscores the desperate times for both organizations — $25,000 matters a great deal to both the city and the nonprofit. Schneider told the Business Times that her idea was preliminary and she acknowledged that “there’s a return” on WEV’s training and loans in terms of new jobs. WEV estimates that its graduates pay an estimated $1.5 million in local and state taxes every year.

But $25,000 to $50,000 also could be a key piece of a contract to providing lighting to the West Side of Santa Barbara to keep its streets safe at night. If that is the case, something is badly out of whack. Safe streets and startup training for low-income entrepreneurs should both be at the top of the city’s list of budget priorities — instead the city is desperately hunting for every last crumb of Community Development Block Grant funding.

Meanwhile, within the block grant money, some $150,000 goes to “human services.” WEV, being an economic development organization, can’t apply for the human services funding.  Thinking rationally, if the city really needed to grab WEV’s $25,000 for a year, businesses or wealthy individuals could step up to plug the gap.

But why on earth would Santa Barbara, a global destination for tourists, an emerging hub for technology companies and a community oozing with wealth, be scraping to grab $25,000 to fix street lights? And, at that, grabbing it  from the one organization that could actually provide $25,000 in tax revenue through new businesses and increased employment?

Santa Barbara and Santa Barbara County need to re-prioritize spending to focus on organizations that create jobs and generate taxes. That’s the issue that really should be on the table when Mayor Schneider takes up Community Development Block Grant funding at a hearing on Oct. 16. Instead, two worthy activities — safer streets for West Santa Barbara and ongoing funding for WEV — will be pitted against each other. That’s a shame.