City Council
Report
City Council Meeting: March 11, 2023
Agenda Item: 11.A
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To: Mayor and City Council
From: David White, City Manager, City Manager's Office
Subject: 2023 Council Workshop to Select Council Priorities and Provide Direction on the Fiscal Year 2023-2025 Budget
Recommended Action
Staff recommends that the City Council:
1. Receive the FY 2023-24 through FY 2027-28 Five Year Financial Forecast;
2. Consider and approve the proposed organizational priorities;
3. Discuss and provide direction on items that will inform the preparation of the Fiscal Year 2023-2025 budget, including:
a. A proposed allocation of Measure CS funds;
b. A Strategic Plan to address homelessness, funded on a one-time basis using Measure CS funds;
c. A conceptual framework for a new organizational structure to align and focus the City’s work on Council priorities, the implementation of newly adopted tax measures including Measure GS, and the Moss Adams Homelessness Study;
d. Potential reallocation of existing resources to reinvest in restorations and initiatives that align with Council priorities.
Introduction
As Santa Monica plans for its next biennial budget, the process provides an opportunity to reflect on the work of recent years and the state of the organization and to look ahead to what is most important for our community.
Santa Monica, like the region, State and Nation, has weathered the impacts of COVID19 and has now sunset emergency orders related to the pandemic, acknowledging we have developed the tools to live with the virus. Our businesses and neighborhoods 2 of 38
have all felt the impacts resulting from this pandemic, which fundamentally changed our local economy as the ways we socialize, gather and shop changed locally and the ability and willingness to travel shifted globally. This has brought a focus on clean and safe streets and spaces and the need to revitalize and diversify our local economy.
Likewise, our community has been increasingly impacted by the challenges of people experiencing homelessness and we are called upon to work with our government and non-profit partners to ensure everyone has secure housing and to address the impacts of addiction, mental illness and economic injustice.
Through this turbulent period, Santa Monica continued to advance its work in the areas of sustainability and community resilience, working to be more water self-sufficient, encouraging the transition to electric vehicles and appliances that rely on power from clean energy sources, and enhancing our open spaces where we can be active and connect with our neighbors. We have also renewed our commitment to racial and social justice, advancing dialogues within our community and City organization to address systemic racism and ensure Santa Monica is equitable, just and welcoming for all.
Guided by our stated values of accountability, equity, inclusion, innovation, resilience, safety, and stewardship (adopted by the Council in 2019), the City strives to serve our community while grappling with a reduced workforce, reduced revenues, challenges in recruitment and retention, and near total change in organizational leadership and Council membership over a short period of time. We have also confronted unprecedented costs from litigation. Through all of this, Santa Monica continues to recover and current investment in our community well positions us to continue on this trajectory.
The 2023 Council Workshop provides an opportunity, as we plan for the Fiscal Year 2023-2025 Biennial Budget and provide an updated picture of our financial forecast, to ensure our budget is a reflection of our priorities and values, to hear from our Council and community, to affirm and expand our priorities, and to better understand where we need to make the best use of our limited and restricted new resources over the next two years.
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Financial Forecast and the Biennial Budget
The City’s economy showed a strong recovery over the past 18 months but is now showing signs of softening. Labor shortages, supply chain issues, historically high inflation and economic volatility continue even as the world shifts from a pandemic state. This is compounded by a continued slowdown in global tourism with political and economic disruptions in Europe and Asia and realization that knowledge workers that once filled our community in the daytime have yet to return to the office in the same numbers.
The City’s General Fund relies on the revenue streams from our local economy, including sales and hotel taxes, parking revenues, and property taxes. While our local economy is recovering and General Fund revenues are growing, levels are still below what they would have been had the economy not been disrupted by the pandemic.
At the same time, demands on the General Fund have reduced total non-restricted reserves, which include Rainy Day reserves. As of June 30, 2022, General Fund nonrestricted reserves amount to 70% of what they were as of June 30, 2019. Strong reserves are necessary to cushion the delivery of services from the impact of emergency expenditures, contingent liabilities, and economic uncertainty. Since 2020, demands on these reserves have been compounded by:
• Delivery of essential services during the COVID-19 Pandemic. • Payments of over $107 million in legal settlement payments related to allegations of sexual abuse by a former employee.
Looking ahead, the General Fund has multiple unprecedented liabilities that must be planned for and addressing these liabilities will impact our ability to broadly address community and organizational needs. The City is in settlement negotiations for another set of claims related to allegations of sexual abuse by the same former employee.
Additionally, the City is in litigation over a request to transition to district elections. The case is currently waiting to be heard in the California Supreme Court and if the City 5 of 38
loses the case, the financial impacts to the City will be high. Finally, the City has significant capital liabilities that must be addressed, including the seismic retrofit of Parking Structure 1 at a cost of up to $25 million. The City has taken many actions to strengthen our organization, but the impacts of these financial liabilities alone will limit our ability to address much needed services, staffing restorations and the budgeting process.
This situation is attenuated by the enduring economic volatility for local economies that rely on a strong hospitality and retail sector powered by visitors and office workers. As a result, the City must diligently balance program restoration and urgent needs with rebuilding its reserves.
An earlier than expected economic recovery in FY 2021-22 provided one-time surplus revenues that have been set aside for contingent liabilities and for working capital that will be needed to supplement revenue growth as the pace of the General Fund’s recovery is expected to slow.
Looking ahead, the City has the opportunity to expand services addressing its priorities over the next biennial period and beyond using new funding streams approved by Santa Monica voters in November 2022. While these measures will provide much needed support for specific programs and services, the City continues to operate with extremely limited resources for general services and many services, as well as infrastructure and equipment maintenance, continue to operate at a reduced level. This landscape, three years after the pandemic-induced closures and restructuring, is difficult for our community and staff teams, who expect a return to full-service delivery and quick progress on community priorities.
To continue moving forward in recovery, Council has the option to consider a reallocation of funds from another purpose, which the City has done periodically navigating volatility throughout the pandemic. Allocation of these funding streams will require additional planning, community input, and Council direction. However, staff is 6 of 38
highlighting potential uses and timelines along with this report to provide a suggested path forward for the chosen priorities.
General Fund Forecast Update
The Five-Year Financial Forecast has been updated from the Forecast presented in May 2022. The figure above shows the balance of General Fund revenues less expenditures on an annual basis for the next five fiscal years. The Forecast shows the probable scenario which incorporates the assumptions listed below. As shown, annual revenues would slightly exceed expenditures (in the range of $100,000-$200,000) for the next three years. This positive balance reflects the use of working capital reserves beginning in FY 2024-25. Future projected negative balances of $0.6 and $1.5 million, respectively, in FY 2026-27 and FY 2027-28 represent 0.1% and 0.3% of revenues for those two years. These negative balances are at a level that can be managed over the next three years.
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1. New Revenue Projections
The revenue forecast for the next five years is informed by actual revenues generated in the first half of the year and updated assumptions based on economic trends and projections by hospitality industry, sales tax and property tax experts.
In the April 11, 2023, Midyear Budget Adjustment staff report, staff will propose to increase FY 2022-23 General Fund revenues by approximately $21.5 million (5.1%) in FY 2022-23. While significant, these are primarily one-time adjustments as revenue growth will moderate in FY 2023-24 due to a softening economy and the recovery slows. More detail on each revenue source is included below. Changes to the FY 2022- 23 budgeted revenues will be included for adoption in the April 11, 2023, Midyear Budget Adjustment staff report.
Looking at the next five fiscal years of the Forecast period, revenues are anticipated to increase by an average of 3.5% a year, compared to the 30% increase that occurred over the two years since FY 2020-21. It is anticipated that revenues will not fully recover until FY 2027-28. While the City has already seen a loss of nearly $170 million since 2020, revenues will still lag behind normal growth by nearly $85 million over the next five years, for a total loss of approximately $255 million over 8 years. Included in the Forecast are the new digital kiosk revenues- an initial signing bonus of $4 million followed by minimum annual guaranteed revenue sharing of $5 million starting January 1, 2025.
The following is a summary of major revenue source trends:
Sales Taxes Including GSH transaction and use tax
FY 2022-23 revenues are anticipated to be $7.3 million (~10%) above budget. Much of this is carryforward of strong FY 2021-22 results which reached and even slightly exceeded pre-COVID levels. However, FY 2022-23 levels are only 2% more than FY 2021-22 actuals, and a further softening is expected in FY 2023-24 before a more typical annual growth rate of about 3% projected for the remainder of the Forecast period. It is important to note that half of the $7.3 million is immediately transferred to the School District and the Affordable Housing Trust Fund per Measure GSH. 8 of 38
Utility Users Tax
FY 2022-23 estimated revenues are exceeding budget by $2.8 million (8%), mostly due to spikes in electricity and gas costs. It is anticipated that these increases will level off and, in the case of gas, decrease. Increases of about 1-2% annually in the later years of the Forecast are mostly driven by increased water/wastewater rates.
Transient Occupancy Tax (TOT)
FY 2022-23 estimated revenues are $3.1 million (5%) above budget, primarily due to the impact of Measure CS increasing TOT rates, and higher than anticipated average room rates, partially offset by a number of rooms being off-line due to property renovations. Occupancy rates are not expected to hit pre-COVID levels until 2024.
International travel is slowly increasing, and business travel is still lagging. The revenue forecast is also impacted by further property closures. Revenues from Measure CS are programmed to address the impacts of homelessness and public safety.
Parking Facility Taxes
FY 2022-23 estimated revenues are $1.3 million (14%) greater than budget, mostly driven by higher than anticipated revenues from private parking facilities with another 5% increase projected for FY 2023-24. Thereafter, revenues are projected to grow 2- 3% annually, but not reach pre-COVID highs until at least FY 2027-28.
Property Taxes
FY 2022-23 estimated revenues are ~$1.9 million (2.5%) above budget. Santa Monica assessed values are anticipated to continue to grow during the Forecast period (3-4% annually), which reflects slower rates than the growth of the last few years as higher interest rates impact activity.
Business License Tax
FY 2022-23 estimated revenues are ~$1 million (3%) more than budget. Increases are expected to range from 1-4% annually during the Forecast period. There is still uncertainty due to the lingering effects of remote work and office vacancies. As a result, these revenues are not expected to reach pre-COVID levels during the Forecast period. No impacts from business license modernization or the implementation of Measure HMP (cannabis) are included.
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Documentary Transfer Tax
FY 2022-23 revenues are projected to be $1 million below budget and nearly $7 million below last fiscal year as the number of transfers has declined significantly.
However, a one-time bump in transfers may occur before March 1e as parties involved in large property transfers may complete transactions before Measure GS implementation. Revenues are projected to decrease by approximately $1 million in FY 2023-24 and then increase moderately over the Forecast period.
Parking
FY 2022-23 revenues are approximately $0.7 million less than budget mostly due to lower than anticipated parking meter revenue. Revenues are expected to moderately increase annually thereafter until they reach pre-COVID levels in FY 2026-27. The projections do not include the impact of potential parking rate increases to City-owned facilities.
Fees/Charges
FY 2022-23 revenues are about $1.8 million more than budget primarily reflecting a one-time SB 90 (mandated cost) reimbursement from the State. A 2.5% annual increase is projected throughout the remainder of the Forecast.
2. Updated Expenditures
The Forecast includes negotiated and projected cost of living increases, as well as projected pension rates informed by recent portfolio earnings trends, and projected healthcare rates. Additionally, the Forecast includes approximately $11.4 million more than previously projected in subsidies and advances to the Pier and Beach Funds, primarily resulting from the exclusion of parking rate increases pending a review of past and planned future rate increases by the California Coastal Commission (CCC). These increases had previously been included in the funds’ projections as administrative changes.
Built into the Forecast are the following service restorations or enhancements that were previously funded with one-time funds in FY 2022-23:
• the Community Response Unit (CRU) in the Fire Department; • Library services at their FY 2022-23 current level (which still does not include a full reopening of all locations).
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Also included in the Forecast are allocations of Measure CS revenues to new expenditures that will be proposed as part of the FY 2023-24 Proposed Budget in May 2023 and are discussed further below.
The following are not included in Forecast expenditures but could be funded to some extent by a reallocation of funds discussed in item 7 below:
• the continuation of one-time payments to the School District to support the youth sports program and the Playground Club supervised afterschool care at all elementary schools;
• restoration of programs and capacity for City operated youth programs and recreation; and
• additional restoration of Library services.
Staff will return to Council on April 11, 2023, with proposed FY 2022-23 Midyear Budget adjustments. Increases in FY 2022-23 expenditures totaling approximately $11.5 million reflecting updated pass-thru expenditures based on increased revenue estimates (Measure GSH Transaction and Use Tax and parking revenue sharing agreements), reappropriations of prior year commitments related to settlement agreements, and other adjustments will be included in the April 11, 2023, report. Any projected Measure CS revenues are set aside for Measure CS appropriations (see #3 below).
3. Use of Reserves
The May 2022 Forecast assumed that the General Fund FY 2022-23 budget would require an infusion of $10.7 million from FY 2021-22 surplus revenues. However, given the updated FY 2022-23 revenue projections, these funds will remain in reserves as working capital. Due to lagging revenue recovery, staff has allocated this working capital to fill budget deficits in years FY 2024-27.
4. 15% Contingency Reserves Gradually Restored
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In FY 2022-23, revenues are set aside to increase the Rainy Day fund to 13% of operating expenditures. The Forecast assumes that the City will continue to increase the threshold level for its Rainy Day fund, or contingency, by 0.5 percentage point each year, reaching 15% in FY 2026-27. On May 5, 2020, Council authorized staff to lower the General Fund contingency reserve level from 15% of ongoing expenditures to
12.5% to help balance the budget while revenues experienced severe declines. Strong reserves protect our ability to provide essential services and retain jobs during emergencies and economic fluctuations. They are also a signal of a City’s financial health and critical to maintaining the City’s AAA bond rating.
5. Capital Improvement Program
Prior to the pandemic, the General Fund allocated $21 million a year to its capital improvement program (CIP). This amount was reduced to $7.3 million in FY 2020-21 and has increased to $12.4 million in FY 2022-23. The Forecast shows funding restored to $21 million in FY 2025-26. The amount allocated to the CIP is not enough to address deferred infrastructure and equipment maintenance, technology/computer and fleet replacement, price escalation, and a renewed focus on community amenities that were put on hold during the pandemic. At this time, a total of almost $300 million in projects remain unfunded, including a complete remodel of Parking Structure 1 and other parking structure upgrades, the Memorial Park Expansion project, Lincoln Blvd. (LiNC) improvements, City Hall North building system upgrades, Pier deck and railing upgrades, Fire station facilities, Gandara Park Restoration, the Public Landscape Division relocation and City Yards Modernization improvements along Michigan Ave.
While the prior forecast assumed that an additional $4 million a year would be allocated to the CIP, beyond the $21 million baseline, beginning in FY 2026-27, the current circumstances do not allow for this additional investment.
6. Paying Deferred GSH Tax Revenue to Affordable Housing Previous forecasts reflected the payment of the $6.3 million deferred amount to the Affordable Housing Trust Fund over three years beginning in FY 2023-24. Council deferred the annual transfer of Measure GSH tax revenues from the General Fund to the Housing Trust Fund (per a November 2016 voter-approved advisory measure) in 12 of 38
May 2020 to support critical General Fund services in the face of revenue losses. To allocate funds to this payment during the forecast period would require program reductions beyond current levels. As a result, this repayment continues to be deferred throughout the forecast period.
Other Funds Forecast Update
A number (not all) of the City’s Enterprise Funds, which rely on user fees like water utility fees, are anticipated to continue operating with appropriate levels of reserves and sufficient revenues to cover their operating and capital needs, while others will require adjustments discussed below.
Funds other than the General Fund (Other Funds) fall into three categories: 1) funds that realize sufficient revenues to sustain operating and capital costs; 2) funds that will require some attention during the forecast period in order to remain healthy while also implementing critical programs; and 3) funds that will have an impact on the General Fund, either because they will require subsidies or can no longer sustain funding streams to the General Fund. Similar to the General Fund, the projections in the Other Funds reflect economic impacts of the pandemic.
Self-Sustaining Enterprise Funds
The following enterprise funds are projected to bring in sufficient revenues to support operations throughout the updated Forecast period:
The Water and Wastewater Funds will maintain a positive balance throughout the forecast period. Rate adjustments approved by Council on January 28, 2020, as well as a revenue bond issued in August 2021, a Clean Water State Revolving Fund Loan, and four recent grant awards are allowing the Funds to maintain current operations while also completing $200 million in capital projects to increase local water supply. It is important to note that the Water Fund broke ground in January 2022 on the last project identified in the Sustainable Water Master Plan to significantly reduce the City’s reliance on imported water by 2023, which is an upgrade and expansion of the Arcadia Water Treatment Plant. The Wastewater Fund also recently completed the 13 of 38
Sustainable Water Infrastructure Project (SWIP) to add a sustainable, drought-resilient water source to the City’s water supply and a ribbon cutting ceremony was held in November 2022.
The Department of Transportation (DoT) Big Blue Bus (BBB) Fund will continue to make strategic investments that will safeguard the reliability of transit service and provide equitable and safe access to transportation for all while enhancing customer experience through outreach and community engagement efforts. The BBB Fund will continue to maintain a positive fund balance over the forecast period through the use of Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) funds.
This one-time federal funding provides financial support to transit agencies in response to the adverse impact of the pandemic on transit operations and ridership. Big Blue Bus ridership has increased 26% over FY 2021-22 ridership and is now at 60% of prepandemic levels. BBB is providing 80% of pre-pandemic service reflecting a gradual and steady recovery. The Department remains steadfast in its efforts to restore service to pre-pandemic levels; however, these efforts have proven to be challenging due to the national shortage of Motor Coach Operators.
The Airport Fund is projected to remain self-sustaining throughout the forecast period.
Included in the forecast are several capital improvement projects planned for FY 2022- 23 and FY 2023-24, including Parking and Airfield pavement maintenance and building and facility improvements to enhance lease revenue opportunities.
The Cemetery Fund will maintain a positive fund balance throughout the forecast period. Although the inventory for plots is expected to be depleted by FY 2029-30, staff continues to assess overall Cemetery operations, projected plot sales, and reconfiguration and development of the Cemetery area in order to extend inventory and maintain fiscal sustainability.
The Housing Authority Fund is stable and will maintain a positive fund balance throughout the forecast period. The CARES Act approved additional administrative funding for the Santa Monica Housing Authority which will supplement traditional 14 of 38
Section 8 administrative funding, ensuring a positive fiscal outlook through the five-year forecast window.
The Stormwater Management Fund and Special Revenue Fund will generate adequate revenues to remain sustainable throughout the forecast period.
Funds Requiring Attention
The Resource Recovery & Recycling (RRR) Fund will remain self-sufficient through FY 2023-24, partially attributed to the infusion of one-time funds from the closeout of old construction and demolition projects. Subject to proposed rate increases being adopted by the City Council, the forecast includes a FY 2023-25 biennial proposal for the addition of 15.12 FTE permanent positions to address service gaps in the collection of solid waste, street sweeping, and compliance with the State’s Short-Lived Pollutants Act SB 1383 and the City’s corresponding mandatory organics ordinance adopted in November 2021.
To remain solvent and address operational and capital needs, staff presented rate recommendations to Council on February 28, 2023, with the new rates anticipated to be effective in August 2023. If approved, the recommended rate adjustments would generate sufficient revenues to maintain a positive fund balance throughout the forecast period and allow the fund to rebuild reserves.
The Vehicle Management Fund and Information Technology Replacement & Services Fund will maintain positive balances through the forecast period. However, to maintain a positive balance, the Funds have had to defer scheduled replacement and maintenance of equipment, primarily due to a two-year suspension/reduction in FY 2020-21 and FY 2021-22 in funding from the General Fund associated with revenue shortfalls from the pandemic. In the Vehicle Management Fund, the suspension totaled $8.8 million and resulted in the majority of the 227 vehicles scheduled for replacement to be deferred to FY 2022-23 and beyond. In the Information Technology Replacement & Services Fund, the suspension totaled $3.4 million and resulted in the deferment of all computer equipment replacements for two years beyond their scheduled 15 of 38
replacement. This is not sustainable and funding needs to be restored. As General Fund revenues continue to gradually improve, funds will need to be earmarked to immediately address areas that cannot withstand the replacement timing lag and to gradually resume the previous schedules for replacement and maintenance. The General Fund will begin partial repayment to the Information Technology Replacement & Services Fund in the amount of $1.1 million over three years beginning in FY 2025- 26, which will help the fund maintain a positive fund balance throughout the forecast period; however, it is projected that costs for software subscriptions and cloud-based services will continue to outpace the established revenue contributions to the fund.
Funds That Will Impact the General Fund
The Pier Fund was severely impacted by the pandemic and the forecast shows a structural deficit. The fund is reliant on General Fund subsidies to offset some of the impacts of COVID-19 and maintain a positive fund balance. The primary revenue sources for the Pier Fund are lease payments and parking income. The updated forecast includes an increase in lease rental revenue for FY 2022-23, reflecting the anticipated recovery to pre-pandemic levels. The Pier Deck parking lot closed to vehicles in the spring of 2020 and did not re-open until December 2022 for Monday through Thursday only. In the first two months that the Pier Deck parking lot has been open, it has generated about a third of the revenues that it generated for the same period pre-pandemic. Given the amount of time the parking lot has been closed, the uncertainty of full reopening and the limited data currently available, it is difficult to project when parking revenues will return to previous levels. Additionally, the City is in the planning stages of the Pier Bridge Replacement (funded through the Caltrans Highway Bridge Program), which will impact parking revenues once construction begins in FY 2026-27, as access to the Pier Deck parking lot will be impacted. Staff continues to seek efficiencies and revenue generating opportunities to support unfunded capital expenditures and address the structural deficit. However, the Capital Budget includes over $20 million in unfunded Pier projects and it is projected that the fund will require General Fund subsidies of $5-10 million over the forecast period depending on how quickly parking revenues return to pre-pandemic levels. 16 of 38
The Beach Fund, which supports Beach and Beach House operations, is also projecting a structural deficit during the forecast period. The fund was impacted by pandemic closures and required prior year advances from the General Fund and a loan from the Special Revenue Source Fund. The primary revenue source for the Beach Fund is parking revenues, which returned to pre-COVID levels in FY 2021-22. However, the forecast includes a reduction in parking revenues due to setbacks in the implementation of a projected rate increase pending California Coastal Commission (CCC) approvals, a key step in the process to implement a rate increase. A rate increase will be added back to the forecast when CCC approvals have been obtained.
Staff continues to seek efficiencies and revenue generating opportunities to support unfunded capital expenditures and address the structural deficit. However, over $5 million in identified capital projects remain unfunded and it is projected that the fund will require General Fund subsidies of $14.4 million over the forecast period, if a parking rate increase is not implemented.
The Community Broadband (CBB) Fund, supporting CityNet operations, will maintain a positive fund balance throughout the forecast period by eliminating a transfer to the General Fund. This transfer, totaling $1.2 million over three years, was established during the restructure to help the General Fund recover from revenue losses related to the pandemic. While the elimination of the transfer negatively impacts the General Fund, this measure will ensure that CBB has the capacity to address critical operational needs and continues to support the City in its economic recovery. Community Broadband operations have been impacted by the shift to teleworking and accompanying office closures. While the execution of service agreements with Verizon Wireless and T-Mobile for their 5G deployments help maintain the fiscal stability of the CBB Fund, operating cost growth is projected to outpace revenue growth absent significant operational changes. To that end, for FY 2023-25, staff will evaluate changes to the structure of CityNet operations to identify ways to control costs.
State of the Organization
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Santa Monica is a community that has thrived for several decades thanks to our reputation as a world class tourist destination, a robust local economy with a focus on health, tech and entertainment, and a strong retail sector, along with our actively engaged community members and committed workforce. The COVID-19 pandemic introduced a scale of disruption to our community and local economy, the impacts of which will be felt for many years.
Impacts of COVID-19
Once viewed by employees, existing and future, as a stable organization where jobs were secure and the work aspirational, the restructuring narrowed the organization’s focus. Due to the impacts of the COVID-19 pandemic, the City was faced with having to undertake a major restructuring that reduced the workforce by approximately 20% and the budget by approximately 24% in the spring of 2020. The outlines of the plan were first presented in “A Plan for Our Future” on May 5, 2020. Revisions were subsequently made and the restructuring was formalized with the adoption of the FY 2020-2021 Budget on June 23, 2020. This resulted in the elimination of 298.7 permanent full-time equivalent (FTE) positions and 122.4 as-needed FTE positions, of which 234.0 permanent FTE positions and 103.4 as-needed FTE positions were in the General Fund. Reducing the total workforce from 2,298.3 to 1,877.2.
In addition to significant reductions in service levels and community programming, results of the restructuring included many employees taking early retirement, being demoted, and temporary pay cuts. Staff worked on the restructuring, in an immediate and abrupt fully remote capacity, over just a one-month period not knowing what the status of their jobs would be as a consequence. The resulting impacts to morale from the budget reductions continue to be felt across the organization exist to this day.
The news of this restructuring came as employees shuttered and reengineered City services in the face of a public health emergency. And this was shortly followed by some of the greatest community unrest experienced in Santa Monica as the nation wrestled with vivid depictions of racial injustice in America. 18 of 38
While emergency orders are lifted and people strive towards pre-Covid normalcy, the pace of service restoration to 2019 levels is the source of great frustration among our community and staff. As outlined in the above budget status update, financial conditions have incrementally improved, however looming liabilities and numerous planned temporary, yet significant, constraints specific to Santa Monica will continue to slow our recovery. This report and Council Workshop are intended to provide clarity and transparency to these impactful, but not necessarily obvious constraints to the pace of recovery in Santa Monica as we endeavor to restore service levels and address community need and council priorities.
To help align signs of economic recovery we are all experiencing with current service levels, context provided by an historic and current organization status update will help to address the cognitive dissonance between our general experiences and current City resources. The restructuring, outlined in the May 5, 2020, staff report, shifted the City in key ways. Nearly every department had to reduce its budget and workforce. The table below compares, by department, current staffing levels to pre-Covid levels. This includes incremental restorations or urgent service enhancements that have taken place since June 2020. The delta compares where staffing levels are today compared to 2019. The level of vacancies identified across departments exemplifies recruitment and retention challenges across a wide swath of the organization (see Issues Facing the Organization, below).
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Staffing by Department FY 2019-2020 vs FY 2022-2023 and Current Vacancies Department
FY 19-20
FTE FY 22-23 FTE Delta Vacancies*
Council 1 2 +1 1
City Manager 66.1 55.9 -10.2 12
City Attorney 48.9 43.5 -5.4 1
Clerk 13.5 12 -1.5 0
Comm. Dev. 103.5 85 -18.5 7.6
Comm. Services 189.7 145 -44.7 13.4
Finance 77.8 65.3 -12.5 4
Fire 136 138 +2 3
Human Resources 28.2 28 -0.2 2
Info. Services 54 52.5 -1.5 8
Library 112 68 -44 5
Police: All Staff 443.3 406 -37.3 26
PD-Sworn 229 221 -8 5
PD-Non-Sworn 181 166.5 -14.5 26
PD-A/N 33.3 18.5 -14.8 10
Public Works 525.9 462.4 -63.6 43.5
Transportation 498.4 469.2 -29.2 53.5
TOTALS 2,298.3 2,032.6 -265.7 180
*Notes: Permanent Budgeted Vacancies as of Pay Period Ending 02/25/23; Hourly as-needed employee vacancies are not tracked due to the way they are budgeted. Example: a budget for 1.0 FTE as-needed Crossing Guard can be filled with four employees, each working approximately 10 hours per week, and stay within budget.
In addition to the loss of FTE positions across the organization, bargaining units also made sacrifices to support their membership as well as help the organization navigate pandemic impacts. Some of the key measures taken are outlined below. 20 of 38
2020 Restructuring Impacts by Bargaining Unit
Bargaining
Unit
No COLA
2 yrs
Temporary
Pay Cuts
Loss of Sick
Leave Cash Out
(2 Years)
Loss of Salary
Survey
ATA X X
EPP X 5-20% of base salary
for 1 Year
IBT X
FEMA X 2.5% of base salary for
1 Year, 1% for 1 Year
X
1109 X 2.5% of base salary for
1 Year, 1% for 1 Year
X
MEA X X
AFSCME X X
PALSSU X X
PAU X 10% of base salary for
2 Years
X
POA X X X
SMART TD X X
STA X X
Following the restructuring,
• Santa Monica Public Library had to eliminate operations in all of its branch libraries as did many other beloved City facilities;
• The City combined the Housing and Economic Development and the Community and Cultural Services Departments to form the Community Services Department; • Many positions responsible for responding to customer inquiries and supporting operations were eliminated leaving departments to struggle to effectively serve customers; and
• Operations across the City focused on ensuring a clean and safe Santa Monica, responding to the health emergency, and sustaining our local economy meaning most staff saw a significant shift in their daily work life.
As our economy returns, most City revenue streams are beginning to return. This has allowed the City to incrementally restore City services as well as make important 21 of 38
investments in the community priorities of addressing homelessness, a clean and safe Santa Monica, and an equitable economic recovery.
Today, the organization stands at 88% of the staffing levels Citywide compared with 2019 and many programs and services continue to operate in a manner that does not match community need. With the help of one-time funds and some revenue recovery, the City has been able to partially reopen all of its branch libraries, restore some youth services, and resume some of the essential maintenance of the public infrastructure that was put on hold during the pandemic. However, there remains a persistent gap between staff’s ability to deliver services and meet community expectations to return to a desired level of services:
• Youth enrollment and program offerings at CREST, Virginia Avenue Park and Police Activities League (PAL) are limited and in jeopardy due to the need for additional permanent and as-needed staff resources to operate aligned with Child Protection Program staffing ratios and serve people on waitlists • Afterschool Sports and Playground Club one-time funding to SMMUSD ends 6/30/23
• Summer Lunch program in jeopardy
• 3 of 5 libraries partially open with full services, though with reduced hours (currently 44% of pre-pandemic levels); the remaining two branches open on a self-service basis only
• Miles Playhouse, Camera Obscura Art Lab closed and requiring staffing and maintenance resources
• Limited permitted park events due to insufficient Facilities Maintenance support • Graffiti removal, alley paving, tree pruning, at reduced frequencies • Public counter hours of service limited
• Reduced support for business and permit applicants
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Issues Facing the Organization
The slowing economic recovery combined with heavy workloads leading to burnout, high cost of living, and extreme commute times is resulting in the City organization experiencing greater levels of turnover among newer and younger employees as they seek more compensation, schedule flexibility and growth opportunities. The following outlines some of the issues facing the City organization today:
High Staff Turnover
Today, the City’s attrition rate is close to 10%, with many opting to retire or leave for other career options. The City organization had operated with an attrition rate of approximately 5% for many years. While exceptionally low, this ensured stability in the workforce. It is possible that attrition could rise to about 20% in the coming years with many staff eligible to retire and individuals seeking other employment options in this very competitive labor market. The City could once draw talent because of its reputation for stability and focus on priorities and attractive retirement formula and pay. However, today Santa Monica’s retirement formula is consistent with all other agencies and the City’s payrates are not as attractive in this economy.
Extremely Competitive Labor Market
The City had over 630 requests for recruitments in the past 12 months. These recruitments yielded far fewer qualified candidates, receiving anywhere between 20%-50% of the number of applicants compared to 2019. Many of these recruitments had to be conducted multiple times to draw sufficient qualified candidates, impacting City services and operations.
Staff Burnout and Low Morale
28% of staff who took the City-sponsored engagement survey state/reference burnout and low morale as a contributing factor in their current work experience. The increased demands from COVID-19 combined with striving to provide excellent service with fewer staff has taken its toll on the organization. A 2022 Staff Engagement Survey showed high levels of burnout and stress among the City workforce. Staff burnout is also fueled by the high level of disruption in City priorities and focus, staff turnover, and near complete turnover in City leadership.
Staff today long to feel a connection with their peers, to be valued and appreciated by their management, and feel an alignment of personal and organizational values. 23 of 38
City leadership is taking all of these issues seriously as the workforce is essential to excellent service delivery and responsiveness to community needs and Council priorities. As Council affirms its priorities for the next two years, there is an opportunity to signal to staff that the era of high disruption is ending and that the organizational leadership is focused on priorities important to the community and to the workforce. 24 of 38
Selecting Council Priorities for FY 2023-2025
Council priorities are an important component of the City’s budgeting process, informing recommendations on new investments and focusing staff efforts and projects, particularly when financial and staff resources continue to be constrained. Priorities inform what issues are most important to Council and how staff inform and analyze projects and policy recommendations. They also serve as an important tool through which to communicate information on work most important to the community.
In March 2021, following the restructuring of City operations and feeling the full impacts of COVID-19 on our local community and economy, the Council adopted Addressing Homelessness, Clean & Safe Santa Monica, and Equitable & Inclusive Economic Opportunity & Recovery to inform the FY 2021-2023 Biennial Budget.
Staff recommends Council retain the existing three priorities and add – Racial Equity and Social Diversity and Sustainable and Connected Community to create opportunities to engage the Council and the community in these areas. In developing these priorities for this Council workshop, staff reviewed survey results from a community survey taken in May 2022 as well as reviewed Council actions and direction to staff over the last two years. As a result of this analysis, staff proposes Council adopt these priorities for the FY 2023-2025 budget.
As we think about priorities for the next two years, we find ourselves in a transitional period. The COVID-19 health emergency is over but the impacts from the disruption to our community and economy remain. In preparation for this workshop, staff looked at input we have received from the community through our surveys as well as actions and direction received from Council in the last two years.
The City conducted a Community Survey in May 2022 that captured community sentiment on the most important issues in Santa Monica. The survey asked 25 of 38
respondents about both the most urgent issues as well as priorities for once the COVID19 pandemic was over.
Urgent Issues for Santa Monica
Priorities for the Post-Pandemic Period
About the Survey
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• 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 - 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
In addition to reviewing these survey results, staff examined areas of focus from Council over the last two years as well as department work plans. Staff examined Council Discussion items placed on the agenda by Councilmembers and found a focus in the areas of racial equity and social diversity and creating a sustainable and connected community.
In the area of racial equity and social diversity, Council has taken important first steps to advance City efforts, including the formation of the Diversity, Equity and Inclusion Office in the City Manager’s Office to advance this work. Council adopted a Racial Equity Statement in 2020, and since that time, has implemented resources to ensure access to language services in City communications and public meetings, initiated work to recontextualize the murals in Historic City Hall, and supported cultural celebrations as annual events. Council also adopted a Statement Against Hate and formally apologized to the City’s African American residents and their descendants for harms caused by redlining and other systematic inequities. In April 2023, the City Diversity, Equity, and Inclusion (DEI) team will provide Council with an update on the City’s work, including data on the makeup of the City workforce, efforts to engage the community on DEI issues, and work to further develop the City workforce’s understanding of DEI principles.
For sustainable and connected community, Council has adopted aggressive goals to support making Santa Monica sustainable and resilient, including the Climate Action Plan, Zero Waste by 2030, Water Self-Sufficiency, Reducing Greenhouse Gas 27 of 38
Emissions, and the Electric Vehicle Master Plan. These plans and the associated goals have led to investments in water recycling and sourcing local water supplies, transitioning to an electric bus fleet, electrifying buildings, and supported efforts to attain water self-sufficiency, advance our electric vehicle infrastructure and electrify buildings, and expand our EV charging network. Council also emphasized the importance of sustainability in the planning for the future of the Santa Monica Airport following its expected closure in early 2029. The language for this priority statement is taken from the City’s Sustainable City Plan. Staff presented an overview of the City’s sustainability efforts to Council at its February 14, 2023 meeting and will return in March 2023 to report on the City’s progress on its sustainability goals and make recommended updates to the Sustainable City Plan.
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Recommended FY 2023-2025 Council Priorities
Addressing Homelessness
Prevent housed Santa Monicans from becoming homeless and increase the supply of affordable housing; address the behavioral health needs of vulnerable individuals; and advocate for regional capacity to address homelessness.
Clean & Safe Santa Monica
Create an atmosphere marked by clean and safe public spaces and neighborhoods, including parks for recreation and leisure activities.
Cultivate Economic Recovery and Expand Community and Cultural Amenities Cultivate economic opportunity and recovery and invest in community and cultural amenities for all community members.
Racial Equity & Social Diversity
The City of Santa Monica acknowledges the effects of generational and institutional racism, and its consequences that continue to impact our residents. These lessons of our history cannot be ignored. The City is committed to advancing racial equity and social diversity to improve the wellbeing of people who live, work, play, and do business in our City and create a community where differences in life outcomes cannot be predicted by race, class, gender, disability or other identities.
Sustainable & Connected Community
Ensure that City policies and programs enhance our resources, prevent harm to the natural environment and human health, and benefit the social and economic wellbeing of the community for the sake of current and 29 of 38
future generations.
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Furthering Our Priorities: New Revenue Streams and
Potential Reallocations
The City has the opportunity to expand services addressing the City’s priorities over the next biennial period using two new funding streams (Measure CS and Measure GS) approved by Santa Monica voters in November 2022. Additionally, the Council may authorize a change in the City’s Fiscal Policy related to the expedited paydown of unfunded pension liability to free up to $2.5 million annually during the Forecast period to assist in restoring General Fund services while revenues recover.
While voters also approved Measure HMP, which imposes an additional tax on cannabis retailers and other licensed cannabis businesses, further work is required to amend the amend the Municipal Code to allow for an increase of cannabis-related retail establishments and revenues are not anticipated during the upcoming biennial period.
Priorities: Addressing Homelessness and Clean and Safe
The new on-going revenue streams that will be generated through Measures CS and GS will provide the infusion of funds necessary to develop a comprehensive Homelessness Strategic Plan (HSP) and accelerate the City’s work on addressing homelessness, producing and preserving affordable housing, preventing homelessness, and maintaining clean and safe public spaces.
Initial efforts will be focused on expending Measure CS funds to develop the HSP and to implement investments prioritized in May 2022, with a plan for Measure GS to follow.
To move quickly on preliminary implementation work surrounding Measure GS, as this tax will take time to generate resources and given the anticipated workload surrounding its implementation, staff is proposing a new organizational structure to create capacity for this work and formation and support of an oversight committee, that aligns with the implementation of the HSP. A conceptual framework for a new organizational structure to align and focus our work on this priority realigns the Community Services Department (CSD), facilitating the creation of a Housing and Human Services Department 31 of 38
committed to lead our interdepartmental work addressing homelessness and planning for implementation of GS work while continuing the critical work on housing and services for those in greatest need in our community.
Staff would bring forward a proposed organizational realignment to support the management and administration of Measure GS programs and projects as part of the FY 2023-25 Biennial Budget process. Additionally, staff would bring forward a Midyear proposal to transfer a vacant position from the Community Services Department to the City Manager’s Office/Office of Communications to support the organization’s communication and community engagement efforts associated with this priority.
An overview of the focus areas for the two new departments:
• A new Housing and Human Services Department would create a department with a core focus—administering a comprehensive array of housing, educational, and social services, programs, and investments to support vulnerable populations. This, in turn, supports an inclusive and diverse Santa Monica, a place that dedicates local investments in the community’s basic needs for education, housing, and stability. • A new Recreation and Culture Department would create capacity and leadership to focus on efforts and initiatives that build community and advance an agenda focused on the arts and cultural affairs, which is essential to our economic revitalization. Some of these initiatives include the future of the Miles Memorial Playhouse and Camera Obscura buildings, reframing City Hall murals, and leveraging the Beach House as a tourist destination and a key element of Santa Monica’s beachfront brand. Establishing more focused leadership around recreation will align partnership opportunities addressing the conflicts between demand for recreational amenities and capacity, and support improving customer service through a new recreation management system, park attendant program, and a 21st Century approach to community events.
Because we have ambitious goals to create housing, and Measures CS and GS have created an historic, once-in-a lifetime infusion of new resources and community 32 of 38
expectations, a new organizational structure is being proposed to focus leadership and expedite implementation of these dedicated resources.
Measure CS funding (Effective March 1, 2023)
What it is Generated from an additional 1% Transient Occupancy Tax on hotel stays and 3% on home-share stays.
Amount Staff projects that the tax will generate $1.4 million in FY 2022-23, $4.7- $4.8 million in FY 2023-24 and FY 2024-25, respectively.
Restrictions While this is a general revenue tax, meaning that it is not restricted as to its use, community polling done in anticipation of Council approving the Measure for the ballot showed an urgent need for new funds to address the impacts of homelessness and to enhance public safety.
The measure itself, which received 73% of the vote, noted the intent for these funds to be spent, according to community and Council direction, to address homelessness, improve 911 emergency response times and neighborhood police protection, and improvements to the safety and cleanliness of our public spaces.
Proposed Uses Staff proposes a set of uses for Measure CS funds that were presented by staff in the May 2022 Update on Local Efforts Addressing the Regional Homelessness Crisis and were included in descriptions for potential use of Measure CS funds leading up to the November 2022 election, and further affirmed as high priority recommendations presented by the City’s Internal Auditor in its November 2022 Homelessness Study. This list of enhancements represents a coordinated effort across many City departments focused on addressing homelessness and public safety:
• Expansion of the City’s homeless multidisciplinary outreach teams’ work beyond the Downtown and Beach area (Recommendation 18, Homelessness Study);
• Redesign of the SAMOSHEL interim housing program to
accommodate 24/7 intakes, giving additional options for after-hours intake and facilitating SMPD transports for people experiencing homelessness and non-urgent behavioral health issues
(Recommendation 15, Homelessness Study);
• Expansion of the Police Department’s Homeless Liaison Program (HLP) (Recommendation 15, Homelessness Study);
• Continuation of Clean and Safe programs funded on a one-time basis in the current budget.
These include:
• The Directed Action Response Team (DaRT), which further increases resources responding to people experiencing
homelessness and allows public safety resources that had been 33 of 38
shifted to deal with increased activity in the Downtown, Pier and Beach to be redistributed to neighborhoods and patrols throughout the City;
• Transition of an expanded security services program at Downtown parking structures to a permanent program;
• Expansion of public space maintenance investments, including enhancements to ensure higher-risk cleanup activities are performed safely, using an additional, specialized team and higher frequency cleanup efforts focusing on encampments
(Recommendation 10, Homelessness Study), and maintenance of the water features at Ken Genser and Tongva Parks;
• Enhanced monitoring and enforcement of the City’s home-sharing ordinance.
• The preparation of a comprehensive Homelessness Strategic Plan (HSP) that builds on the City’s Four Pillars framework and the Moss Adams Audit on Homelessness to set clear policy direction, promote alignment across City stakeholders, and support regional efforts. The HSP will lay out a coordinated and systemic vision for the expansion of the homelessness response system, measurable outcomes and goals, and accompanying strategies. The process to develop the HSP will incorporate Santa Monica’s community partners, people with lived experience of homelessness, service providers, city agencies, and public and private sector partners to align around a clear vision, set of outcomes, and investments. With this plan, the City seeks to increase continuity in an inherently shifting policy environment; improve focus on measurable objectives; and increase internal alignment and regional coordination; all towards the goal of preventing, ending, and addressing homelessness in Santa Monica. (One-time funds, Recommendation 1, Homelessness Study).
Implementation
Timeline
Programming of the funds would occur along with the adoption of the FY 2023-25 Biennial Budget. The Measure CS Advisory Committee will advise the City Manager in the programming of these incremental tax revenues before each year’s budget adoption. While the Police Department works to recruit and train its new HLP team, Measure CS funds programmed for HLP team positions would be used in the shorter term to reinforce and enhance public safety technology. 34 of 38
Measure GS (Effective March 1, 2023*)
What it is A citizen’s initiative ballot measure that enacts a third tier Documentary Transfer Tax of an additional 5% for property sales over $8 million, with revenue going to fund homelessness prevention, affordable housing projects, and schools.
Amount Documentary Transfer Taxes are a volatile revenue source. Using property sales data from the past ten years, a recent consultant report projected an average $49 million in annual revenue if the tax was applied to these sales. The range of potential revenues from one year to the next, however, reflects the volatility, ranging from $16 million to $123 million. It is also possible that this revenue stream will skew lower in its first few years, as impacted sellers may expedite sales to occur before March 1, 2023, or delay sales indefinitely.
Restrictions Funds are restricted according to the ballot measure as follows:
• First $10 million in incremental revenue is provided to the School District;
• Next $40 million in revenue is allocated to homelessness prevention and affordable housing, with the following restrictions on uses:
• Compliance, implementation, administration, including supporting the Resident Oversight Committee (6% maximum)
• Income Assistance (ongoing or emergency) to rent-burdened Santa Monica households and Extremely Low, Very Low, and Low Income (ELI, VLI, LI) households with seniors, minors, or people with disabilities priority (30% -50%)
• Acquisition and rehabilitation of rental properties as deed-restricted affordable housing or create new deed-restricted affordable housing for ELI, VLI, LI, or MI households with the addition of prior year unspent income assistance to the fund balance (50% minimum) • Programs and services to preserve tenancy of ELI, VLI, LI, MI Households including code compliance, legal services, loans, grants for earthquake retrofit or other unit improvements (remaining funds)
• Incremental revenue above $50 million a year would be shared between the School District (20%) and homeless prevention and affordable housing uses (80%)
Proposed Uses Measure GS will provide resources to produce and preserve affordable housing and prevent homelessness at a scale far beyond the City’s current administration of rental assistance programs, disbursement of Housing Trust Funds to support affordable housing projects, and programs to prevent homelessness. Such a significant level of investment presents a ground-breaking opportunity for the City to embark on implementing the recommendations laid out in the Homelessness Study. The first step will be the preparation of a Homelessness Strategic Plan. Staff expects to award a contract for the HSP in the coming months.
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Implementation
Timeline
The volatile nature of this revenue source, especially in its first year, the level of planning that must occur, and the timing of the lawsuit points to a longer horizon for the programming of these funds. However, planning and organizational adjustments can begin as early as FY 2023-24 for what will likely be a multi-year Measure GS implementation strategy.
*There is currently a reverse validation action that seeks to invalidate Measure GS.
Because there is no pending request to stay the implementation of the tax, the tax will go into effect on March 1, 2023. The lawsuit may take several months to resolve; as a result, any tax collected and spent by the City would be considered a contingent liability until resolution of the lawsuit.
Priorities: Equitable & Inclusive Economic Opportunity and Recovery, Racial Equity and Social Diversity, and Sustainable and Connected Community As shown in the Forecast, the General Fund does not currently have the financial capacity to restore services or further efforts focusing on economic and community revitalization, racial equity and social diversity, or sustainability. Council may consider suspending its Fiscal Policy related to making additional discretionary paydowns of the City’s unfunded pension liability (Principles for Pension Funding) until further notice.
Council had suspended these payments in May 2020, with a planned resumption in FY 2022-23. While paying down unfunded liabilities at an accelerated rate is a prudent fiscal management tool, mitigating future year interest costs, the City needs to weigh this long-term fiscal management tool against the current state of our community services.
In 2019, Council adopted the policy to make additional discretionary payments to CalPERS, the City’s pension fund, over a period of 13 to 15 years in order to expedite the repayment of the unfunded pension liability. This policy superseded a prior policy that required the City to make additional paydowns of at least $1 million per year. The expedited payment schedule would lower interest costs and result in cost avoidance over a period of 30 years. In 2019, the City’s programs were operating at full strength, reserves were strong, and the General Fund had the capacity to take on additional payments of $2.5 to $3.5 million a year beyond the annual required pension 36 of 38
contribution. To date, the City has made additional paydowns of over $88 million under the umbrella of these policies, making it a leader in this achievement among other members of CalPERS. Additionally, in March 2020, Miscellaneous staff negotiated the end of the Employer Paid Member Contribution (EPMC) with no commensurate salary increases, which lowered pension benefits for Miscellaneous employees hired prior to July 2012 and further lowered the City’s unfunded liability by $35 million (projected amount at the time).
Given the work done so far to mitigate pension costs, and in the face of continued reduced programs and services that put stress on members of the community, from families seeking afterschool care, to community members who rely on library resources and small businesses still struggling to regain their foothold, staff proposes that Council consider suspending implementation of the unfunded pension liability paydown policy to allow the reallocation of $2.5 million in the General Fund to cover service restoration in key areas. Suspending the paydowns would make funds available in other operating funds as well, ranging from $8,000 to $100,000 for most funds, and approximately $455,000 for the Big Blue Bus fund. It is not feasible to continue the paydowns for some funds and not others as payments are not separated by fund in the PERS portfolio.
Council may choose to resume payments in the future once revenues recovery sufficiently to cover restored services.
An allocation of $2.5 million in General Funds could be used to restore City services in key areas to deliver critical services and deliver new programs that support the City’s work in economic and community revitalization, racial equity and social diversity, and sustainability. A $2.5 million allocation in funds could:
• Support public, free, art and cultural programming and events through the Art of Recovery program
• Further restore Library hours and services
• Support restoring the permanent and as-needed staff required to meet the staffing ratios, per the City’s Child Protection protocols, at Youth Programs, and to continue funding for the Playground Club program
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• Implement a program offering reduced Resource, Recycling and Recovery rates for qualifying low-income households
• Establish a Tenant Improvement Fund to assist small businesses • Add Planning and Economic Development staffing to support economic development
In addition to these investments, staff recommends the City establish a fund for diversity, equity and inclusion. As part of the Out of Home Wayfinding franchise agreement, Big Outdoor agreed to return two percent of its earnings to the City. Staff recommends allocating this portion of funding (approximately $100,000-$250,000 per year starting in FY 2025-2026) to an Equity Fund that can be used to support the City’s work to advance equity.
The City’s work addressing the Sustainability priority is largely funded by the City’s Enterprise Funds, including the Water, Wastewater, Resource Recovery and Recycling, and Big Blue Bus Funds, which have all made significant and strategic investments and operational shifts to advance this work.
Allocating resources, as outlined above, is needed to address City Council priorities and address community need. Despite these allocations, there is no doubt that we still have a long way to go. The financial forecast presented to City Council well demonstrates our financial challenges, but these investments represent a positive step forward and an opportunity to advance our recovery.
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Next Steps
The Council workshop is the first step in the City’s biennial budget process, which will culminate in the FY 2023-25 budget being presented for adoption on June 27, 2023.
Between the workshop and budget adoption, there will be a series of opportunities to further inform the City’s work on its priorities and refine the proposed budget, including:
March 14 Sustainability Report Card and Sustainable City Plan Updates April 11
April 25
FY 2022-23 Midyear Budget Review
Diversity, Equity and Inclusion Update and Workplan
May 9 Annual Report on Homelessness
May 15 Publication of Proposed FY 2023-25 Biennial Operating Budget and FY 2023-24 Proposed Capital Improvement Program Budget May 23 Budget Study Session
June 27 FY 2023-25 Budget Adoption
Prepared By: Christopher Smith, Assistant to the City Manager Approved Forwarded to Council
Attachments:
A. Santa Monica's Homeless Strategic Plan RFP Overview
B. Written Comments