Thanks to a rebound in tourism, including an influx of foreign visitors, Santa Barbara is on pace to set a record for hotel tax revenue in 2011-12.

While the city’s overall sales taxes also are increasing, they’ve not yet rebounded to pre-recession levels, said City Manager Jim Armstrong. He delivered the annual state of the city address Jan. 18 at a luncheon meeting of the Greater Santa Barbara Lodging & Restaurant Association.

“It’s been a good 18 months,” Armstrong told about 70 political and business leaders at the event at the Canary Hotel. He said the city’s general fund balance is a relatively healthy $18 million after posting a $1 million surplus for the last fiscal year. However, he added that “sales taxes are far from peak.”

Armstrong said the city is navigating through the loss of its redevelopment agency revenue stream, but that more needs to be done to address the problem of funding for the downtown district, a huge draw for tourists.

He said that despite headlines, overall crime is down and the city is finding ways to deal with homelessness, a chronic problem that is “more than just a law enforcement issue.” An additional problem is pension reform, which Armstrong said will have to be addressed through negotiations with public employees.

County Auditor-Controller Robert Geis said that he expects “a mild recovery with tepid growth,” with the exception of the hotel tourism industry which is on pace to exceed tax revenue expectations.

He said property taxes are a significant weak spot in the revenue picture, with growth expected to be just “2 to 3 percent for the next four or five years.”

Santa Barbara County has reduced its employee count by 13 percent in order to meet reduced spending targets, while the city of Santa Barbara has cut about $8 million from a general fund budget that at one time was $105 million.