City Council – May 24, 2022
Financial Status Update and Budget Study Session for the FY 2022-23 Proposed Budget and FY 2022-24 Biennial Capital Improvement Program Agenda – Budget Study Session
1. Proposed FY 2022-23 Budget / Financial Status Update
2. Capital Improvement Program FY 2022-24 Biennial Budget
3. City Fees and Rates
4. Revenue Measure Discussion
2 Santa Monica's Budget Process
3 The Budget is the result of collaboration between the community, City Departments led by the City Manager’s Office, and the City Council June
Adoption of
the first year
of the Biennial
Budget and
Public Hearing
October
Staff reports on
year-end budget
performance,
proposes
adjustments
January/February
Staff reports on midyear
budget performance,
updated forecast,
proposes adjustments
May 24 • Proposed Biennial CIP
Budget document
available to the public • Proposed Budget
presented to City
Council
June 28
Adoption of
the second
year of the
Biennial
Budget and
Public Hearing
Budget Overview – FY 2022-23 Proposed Budget
4 FY 2022-23 Proposed Budget
Citywide Expenditures - $664.7 million* • FTE Change: • +43.2 Permanent • +4.1 As-needed General Fund - $393.5 million • FTE Change: • +14.7 Permanent • +1.9 As-needed *Citywide expenditures are net of reimbursements and transfers between funds Economic Climate
• Recovery is happening
• Unemployment rate has fallen sharply from pandemic levels • Inflation is highest in 40 years, rising interest rates • Supply chain issues, Ukraine disrupting market
• Uncertainty about COVID’s short and long term impact
• City labor negotiations with 9 employee bargaining units Staffing shortages
Higher costs
Delays
5 Ongoing Challenge: General Fund Revenues Still Lagging General Fund Financial Forecast Update
Fiscal Resiliency Components • Revenue and expenditure
projections reflect economic
climate • Including all we can to still keep a
balanced budget • Continue to leverage ARPA funds
to stay afloat • Gradual rebuilding of reserves • Capital budget restored in FY 2025-26 • Pay FY 2020-21 Measure GSH to
Housing Trust Fund • Resume pay down of unfunded
pension liability 7
Status of City Services
8 Services continue to operate at reduced levels
• Library services at approximately 33%
• Youth programs at 30% or less
• Mobility on Demand program at 75%
• Miles Playhouse, Camera Obscura Art Lab closed
• Permitted park events - no Facilities Maintenance support • Graffiti removal, alley paving, tree pruning, and sports field maintenance at reduced frequencies • Capital projects continue to wait for funding
General Services:
Incremental Rebuilding Paired with New Needs
9 Using Federal CARES and ARPA funds, savings and revenue growth Support services as they reopened
• In-person services at Main Library and 3 branches, Permitting, Youth and Recreation programs Safe & Clean
• Personal protective equipment (PPE), Health restriction compliance, Trash collection, Downtown safety deployment, Pier Vending Task Force
Homelessness and prevention
• Therapeutic van and CRU, Multi-disciplinary street teams, Tenant counseling, Homeless services delivery audit Economic Recovery
• Outdoor dining, Rent abatement, Stipends and emergency assistance Furthering progress based on values
• Racial equity, GSH payments to affordable housing, 311 Urgent Needs
• ~$2.5M One-Time Funds
• Pier Vending Task Force
• Volunteer Coordinator
Zero cost adjustments to strengthen
services in:
• Customer Service (311)
• Partnerships
• Permitting and Park Planning
• Cybersecurity
• Facility Maintenance
• Aquatics
• Public Safety Officer Program
• Fire Inspections
• Business License outreach and compliance
• Multi-modal Mobility Network
Corrections and Adjustments
• ~$674,000
• Revenue-sharing Measure GSH
• Increased Gas Tax funding
• Corrections to fully fund existing
staffing in City Manager's Office,
Community Services and Library
General Fund Expenditure Changes Total FTE Changes 16.6 Permanent 14.7
As-Needed 1.9
Self Sufficient Funds • Water, Wastewater, Big Blue Bus • Airport, Housing Authority, Cemetery, Community Broadband • Stormwater Management Fund and Special Revenue Source Fund Funds Requiring Attention • Resource Recovery & Recycling (RRR) will remain self-sufficient through FY 2023-24 and is evaluating the need for rate changes in 2023
Non-Self Sufficient Funds • Beach Fund and Pier Fund were significantly impacted by the pandemic and rely on support from the General Fund, ARPA Funds, and Special Revenue Source Fund to maintain a positive fund balance
Other Funds Financial Forecast Update
11 • Sustainable Water Infrastructure Project Expenses (Wastewater, Clean Beaches & Water Funds)
• Transportation Capital Projects Management support position (Special Revenue Source Fund)
• Adjustment for revenue-sharing Measure GSH (Special Revenue Source Fund)
• Positions to enhance customer service, maintain and expand operations (BBB Fund, Community Broadband Fund, Beach Fund, and RRR Fund)
Other Funds Expenditure Changes
Total FTE Changes 30.7
Permanent 28.5
As-Needed 2.2
Net increase of approximately $0.4 million: • Airport Fund – $1.2m increase from new leases • Beach Fund - $1.3m decrease in parking revenues • Big Blue Bus Fund - $0.8m reduction in grant reimbursement from decreased capital expenditures • Gas Tax Fund - $0.6m increase in State Gas Tax apportionment revenues • Miscellaneous Grants Fund - $2.3m increase from grant awards and reimbursements • Pier Fund – $0.6m increase from percentage rents • Wastewater Fund - $0.9m decrease in pass-through revenues for Capital Facilities Fees and Amalgamated System Sewerage Facilities Charges • Water Fund - $1.4m decrease in Capital Facilities Fees and Water Meter Installation Fees • Other Funds - $0.1m increase Other Funds Revenue Changes
Capital Improvement Program
14 CIP Budget Process & Funding Sources
• CIP Budget Process
Biennial Budget – FY 2022-23 and FY 2023-24
Five-year planning period FY 2022-23 through FY 2026-27 CIP review and recommendations to Council
• Funding Sources
General Fund
Enterprise Funds
Grant Funds
Local Return Funds
CIP Budget Priorities *
• Mandated Activities
• Council / Community Priorities
• Fiscally Responsible Projects
*Proposed projects represent critical infrastructure needs, projects that cannot be deferred without compromising essential operations or public health and safety or generate revenue.
Budget Summary by Fund
100 Projects in the Proposed Budget
Will bring the total CIP portfolio to 243 projects
All Funds (20)
FY 2022-23: $88.4 million
FY 2023-24: $96.1 million
General Fund
FY 2022-23: $13.8 million
FY 2023-24: $13.1 million
Diverse Funding Sources
CIP Budget Trends (in millions)
$239
$186
$231
$94
$71
$101 $109
$146
$67 $75
$7 $9 $14 $13
$0
$50
$100
$150
$200
$250
FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 All Funds General Fund
CIP Program Areas of Focus
Maintaining Clean and Safe Public Spaces
Park Improvements and Planning
Water & Stormwater Projects
Modernization of critical City Infrastructure
Maintaining Clean and Safe Public Spaces
Park Improvements and Planning
Water & Stormwater Projects
Modernization of Critical City Infrastructure
Unfunded CIP Categories
Estimated at
$300M
Infrastructure Maintenance
New Infrastructure
Parks
Pier and Beach
Planning
Streetscape and Lighting
Unfunded CIP Projects (Not Comprehensive)
Unfunded Projects
• Parking Structure 1 Seismic Retrofit
• Memorial Park Expansion
• City Yards Modernization
• Lincoln Neighborhood Corridor
Streetscape
• Street Light Upgrades
• Vehicle and Computer
Replacement
• Airport ParkExpansion
• Memorial Park Phases 2-3
• Fire Station7
• Historic City Hall North Wing
Building System Upgrade
• Pier Deck Upgrades
• Pier West End Upgrade
City Fees and Rates
• Parklet Program Fee Structure
• Fire Department Fees
• Cemetery Fees
27 Transient Occupancy Tax
• 50% + 1 vote to pass
• Increase tax on hotel stays by
1%
• Increase tax on vacation rental
properties by 3%
Over $4M in new revenues
Library Parcel Tax
• 66.67% vote to pass
• $0.07 per square foot single
family
• Various fixed rates for multi-unit,
commercial and industrial
$4M in new revenues dedicated
to the Library
Revenue Measure Update
2022 Santa Monica
Voter Survey Results
Conducted by Goodwin Simon Strategic Research
for the City of Santa Monica
May 2022
Methodology
• The purpose of the survey was to explore the viability of two possible revenue measures for the November
ballot: • An increase in the city’s transient occupancy tax (TOT) • A parcel tax to support Santa Monica public
libraries
• Results are based on a representative sample of 700
Santa Monica voters likely to participate in the 11/22
general election
• The survey was fielded May 3 to May 9, 2022 online
via text and email invitations and by land and cell
phone
• Margin of error = +/- 3.67% at a 95% confidence level • 1% of interviews completed in Spanish 30 General attitudes
about the city and
its priorities
31 Homelessness and crime are seen by voters
as the most urgent problems in Santa Monica
24%
25%
18%
11%
30%
33%
55%
82%
Traffic
Trash/litter in downtown/beach areas
Crime
Homelessness
Urgency of Problems Facing the City
1= not urgent, 5 = very urgent
4 rating 5 rating
32 93%
73%
58%
54%
4+5
Priorities for the Post-Pandemic Period
33 27%
21%
27%
34%
36%
20%
41%
52%
49%
48%
49%
67%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Committing to racial equity and inclusion
Making the city more affordable
Making the city more sustainable
Helping community members and businesses with economic recovery Restoring public services that were reduced during the pandemic Enhancing public safety
Importance of Each as City Considers New Policies
Somewhat important Very important
73%
68%
76%
82%
85%
87%
Very + Somewhat Important
Response to
Proposed Ballot
Measures
34 TOT measure:
Vote result:
70% definitely/probably yes
21% no
“To address homelessness, improve 911 emergency
response times and neighborhood police
protection, make public areas safer and cleaner,
including streets, sidewalks, parks, and the beach,
and provide other vital City services, shall the City
of Santa Monica increase the transient occupancy
tax – which is paid entirely by overnight visitors --
by 1% for hotels and motels, and by 3% for vacation
rental properties, providing approximately $4.1
million annually, until ended by voters, with all
funds benefiting Santa Monica?”
35 This measure would need 50%+1 vote to pass.
Library Tax Measure:
Vote result:
41% Definitely or Probably Yes
51% no
“To restore funding needed to reopen Santa
Monica Public Library branches closed during the
pandemic, restore and expand library hours, add
books and other library materials, and expand
programs, services, and digital access for seniors,
students, and other residents, shall the City of
Santa Monica levy a tax of $0.09/square foot for
single-family homes, with different rates for other
property types, adjusted annually, raising about
$4,000,000 per year for 20 years, with all funds
used only for Santa Monica public libraries?”
36 This measure would need a 66.67% vote to pass. It starts with 41% of likely voters who would definitely or probably vote yes. Cutting the tax rate to 5 cents/square foot raises support to 48% who would definitely or probably vote yes, still far below the two-thirds threshold.
Top Preferences for
uses of the TOT
funds
37 Top responses to proposed uses of TOT
funds
38 Uses of TOT Funds
Strongly
favor
SW
favor
All
favor
All
oppose
Address homelessness in SM 70% 15% 85% 13%
Reduce crime and enhance safety in
SM neighborhoods 67% 20% 87% 9%
Make public areas including streets,
sidewalks, and parks safer and
cleaner
62% 26% 88% 9%
Reduce crime and enhance safety in
downtown area 62% 23% 85% 11%
Reduce crime and enhance safety in
beach areas 61% 27% 88% 11%
Recommendations
1. We do not suggest moving forward with the library
tax for the November, 2022 election. The poll finds
that a library parcel tax would not attain the
supermajority vote required for approval.
2. We do recommend that the City moves forward with
a measure on the November, 2022 ballot to increase
the TOT.
3. We suggest communicating to voters the need for
additional resources to enhance safety and address
homelessness.
39 June 28 – Public Hearing: Adoption of the FY 2022-23 Exception Budget • Final changes
• Resolutions
July – Formal approval to place tax on ballot
Next Steps
40