City Council
Housing Authority
Report
City Council Meeting: February 27, 2024
Agenda Item: 11.B
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To: Housing Authority, Mayor and City Council
From: Oscar Santiago, Director, Finance Department, Budget Subject: Financial Status Update and FY 2023-24 Midyear Budget Recommended Action
Staff recommends that the City Council and Housing Authority:
1. Appropriate FY 2023-24 midyear revenue and expenditure budget adjustments and approve corresponding adjustments to the FY 2024-25 budget plan. (Attachment A)
Staff also recommends that the City Council:
1. Receive an update to the FY 2023-24 through FY 2027-28 Five Year Financial Forecast;
2. Adopt a Resolution establishing new classifications and adopting salary rates for various positions (Attachment B);
3. Approve the position and classification changes (Attachment C);
4. Adopt a Resolution abolishing unused and obsolete classifications and associated salary rates (Attachment D);
5. Authorize the City Manager to accept a grant award in the amount of $200,000 from the California Department of Aging’s Local Aging & Disability Action Planning (LADAP) Grant Program in support of strategic planning efforts to address the needs of older adults and people with disabilities, and to execute all necessary documents to accept the grant and all grant renewals;
6. Authorize the City Manager to accept a grant award in the amount of $135,000 from the U.S. Department of Homeland Security, Federal Emergency Management Agency (FEMA) Hazard Mitigation Grant Program (HMGP) through the State of California, Governor’s Office of Emergency Services (CalOES) for the Office of Emergency Management in the City Manager’s Office, and to accept all grant renewals; and
7. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines.
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Summary
The Midyear Budget Review is an important touchstone in the City’s monitoring of its economic recovery and is an opportunity to assess whether adopted budget projections are on track. The midyear outlook is positive, reflecting an economy that continues to recover. The current investments in our community, approved during the FY 2023-25 budget, have positioned us to maintain our progress towards addressing community needs, and revenues are projected to marginally exceed previously budgeted amounts.
However, the City continues to navigate various challenges, ranging from economic uncertainty resulting from inflation and high interest rates, volatility of the insurance market and increased medical costs, consumer and work behavior changes, the need to address deferred infrastructure and equipment maintenance, and contingent liabilities from additional claims stemming from allegations of sexual abuse by a former employee and volunteer and over a request to transition to district elections. Therefore, while there are positive signals in the City’s revenue streams, the combined impact of these challenges limits the City’s ability to bring forward enhancements to programs and services beyond what was approved in the FY 2023-25 budget adopted last June.
The February 2024 Five Year Forecast for all City funds includes the updated revenue and expenditure budget adjustments proposed in this report as FY 2023-25 Midyear adjustments, as well as updated revenue and expenditure projections going forward. In keeping with the momentum of the recovery, the General Fund Forecast shows a balanced budget on an annual basis for the current and next five fiscal years. This is made possible through the use of working capital reserves that supplement revenue growth in the short term. The majority of the non-General Funds will remain selfsufficient during the forecast period.
The Midyear Budget Review provides an opportunity to adjust the current budget based on eight months of actual data. Budget adjustments are important, as they inform future year projections and assist staff in updating the five-year financial forecast and the budget targets for the FY 2024-25 budget plan. The revenue and expenditure adjustments are further detailed below. A complete list of all adjustments are included in Attachment A.
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Proposed budget adjustments for Fiscal Year 2023-25:
Revenues (in millions)
Fund FY 2023-24 FY 2024-25
General Fund $ 1.18 $ 6.40
Other Funds $ (0.16) $ (2.41)
Total All Funds $ 1.02 $ 3.99
Expenditures (in millions)
FY 2023-24 FY 2024-25
Fund Operating Capital Operating Capital
General Fund $ 0.00 $ - $ 4.45 $ -
Other Funds $ (0.21) $ 8.64 $ 3.14 $ 1.21
Total All Funds $ (0.21) $ 8.64 $ 7.59 $ 1.21
All proposed staffing adjustments, including additions and deletions of positions with net zero cost impact and those funded by the reallocation of funds within departments’ current budgets are detailed in Attachment C. The report also includes recommendations to adopt resolutions to establish new classifications and salary rates for various positions and to abolish unused and obsolete classifications and associated salary rates; and to approve the acceptance of grant awards from the California Department of Aging to support strategic planning to address the needs of older adults and people with disabilities and from the U.S. Department of Homeland Security FEMA to support the preparation of the City’s Local Hazardous Mitigation Plan.
Background
On June 27, 2023, the City Council adopted the FY 2023-25 Biennial Budget (Attachment E). The operating budget provides a plan, built upon community-driven priorities, to continue to rebuild, restore and reenergize our community through strategic investments informed by the five priority areas Council identified at its workshop on March 11, 2023. The investments were funded using new revenue sources coming 4 of 27
from voter approved measures, public and private partnerships, rate adjustments, reallocated funding, working capital reserve funds, and successful grant applications.
The FY 2023-24 Adopted Capital Improvement Program (CIP) Budget is focused on strategic investments in maintaining and enhancing critical City infrastructure and City facilities essential to providing services.
The City’s audited financial statements as of June 30, 2023, published in the Annual Comprehensive Financial Report and posted on the City’s website in early February 2024, confirm that the City’s General Fund realized sufficient revenues in FY 2022-23 to 1) maintain its working capital reserve funds, which will help maintain service levels in the short term while revenues continue to recover and 2) enable us to increase the General Fund operating contingency reserve, which protects our ability to provide essential services during emergencies and economic fluctuations, by another 0.5% to $52 million. While this is a positive milestone towards rebuilding General Fund reserves, it is important to note that the City’s General Fund reserve level is still significantly lower than it was in pre-COVID years.
As of June 30, 2023, General Fund total non-restricted reserves amount to approximately 50% of what they were as of June 30, 2019. Since 2020, demands on reserves have been impacted by a severe loss of revenues as a result of the pandemic (estimated at $170 million through June 30, 2023), and legal settlement payments related to allegations of sexual abuse by a former employee and volunteer. Of the total $229.8 million paid in legal settlements, $159.6 million was covered using General Fund reserves, while the remainder was covered by insurance funds and reserves from the City’s Housing Trust Fund, Water Fund and Workers Compensation Fund. Drawing on reserves and borrowing from other funds has limited the City’s ability to bring forward programs, services and capital projects that meet current council priorities and community and organizational needs.
Discussion
The national and State economies continued to recover in the fourth quarter of (calendar year) 2023. National economic growth as measured by Gross Domestic 5 of 27
Product (GDP) grew over 4.8% and 3.3% in the third and fourth quarters of 2023, respectively. The deceleration in GDP in the fourth quarter was primarily due to slowdowns in federal government spending, residential investment, and consumer spending. Economists project that growth in the U.S. economy in 2024 and 2025 will be tempered (less than 2% annual GDP growth) as interest rates remain high and inflation rates slowly recede. It is projected that interest rates will remain relatively unchanged until mid to late 2024 when the Fed is expected to begin cutting. In December 2023, the UCLA Anderson Forecast indicated that the threat of eminent recession has faded, fueled by continued strength in the labor market; expansionary government policies; new national policy to encourage infrastructure, green energy and computer chip development in the U.S., which has pumped billions into the economy; and consumer spending, which remains strong. However, some economists still believe a recession could happen.
Santa Monica’s economy continues to show recovery in consumer spending and the tourism sector. Property values in the City remain the third highest in Los Angeles County. As interest rates moderate or are reduced, it is projected there will be an increase in home sales and that prices, which are leveling off or declining, will rebound – thereby increasing assessed property values. This will have a positive impact on the City’s property tax and real estate transfer tax revenues.
General Fund Five-Year Financial Forecast Update
The February 2024 General Fund Five-Year Financial Forecast incorporates the revenues and expenditures budgeted for FY 2023-25, as revised with midyear budget adjustments. The Five-Year Financial Forecast shows the balance of General Fund revenues less expenditures on an annual basis for the next five fiscal years. The Forecast assumptions and results were updated from those presented in the March 11, 2023 Council Workshop (Attachment F).
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Notes: *includes the use of one-time working capital. Chart reflects Master Facilities Use agreement with SMMUSD expiring June 30, 2027. Forecast assumes that Measure YY/GS agreement with SMMUSD, which expires on June 30, 2028 is renewed. See discussion below.
As shown in the chart above, with the help of working capital reserves, the General Fund maintains a balanced budget until FY 2027-28 when revenues are anticipated to exceed expenditures.
Revenue Projections: The revenue forecast 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. These factors inform the midyear changes that are included in the forecast. On the revenue side, staff proposes adjustments to increase General Fund revenues by approximately $1.2 million and $6.4 million in FY 2023-24 and FY 2024-25, respectively, as compared to the original budget. While the FY 2024-25 change is a significant increase, it is primarily due to continued recovery in the tourism sector, which is impacting Transient Occupancy Tax revenues, and to increases in Business License Tax revenue from greater than projected gross receipts reported by businesses in FY 2023-24 and 7 of 27
focused compliance efforts resulting from a dedicated business license inspector position. The additional midyear revenue allows the City to continue to have a balanced budget using essentially the same level of working capital reserves ($27.6 million), as in the 2023 forecast, to fill the gap between revenues and expenditures, while addressing midyear expenditure changes, cost increases throughout the forecast for items such as pension rates informed by recent portfolio earnings trends, healthcare rate increases due to inflation at an annual rate of 10%, significant increases to contributions towards property insurance and general liability/auto self-insurance, ongoing funding for the Police Department crime data center, and funding to implement and pay for the ongoing costs of a new permitting system.
Staff projects that growth across all General Fund revenue streams will moderate to an average 3.7% for the remainder of the forecast. It is anticipated that General Fund revenues will not recover to the level projected prior to the pandemic until FY 2026-27.
While the City has already experienced a loss of nearly $170 million since 2020, revenues will lag behind pre-pandemic projected growth by nearly $34 million more over the next five years, for a total revenue loss of approximately $204 million over 7 years, as shown in the chart below.
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Expenditure Projections: The Forecast has been updated to include projected cost of living increases; pension rates informed by recent portfolio earnings trends; healthcare rate increases due to inflation at an annual rate of 10%; significant increases to contributions towards property insurance and general liability/auto self insurance, based on an independent actuarial analysis of the fund, to ensure sufficient resources are available to cover claim expenses and increased excess insurance premiums; ongoing funding to cover the costs of the Police Department real time crime center once grant funding is exhausted; and funding to implement and pay for the ongoing costs of a new permitting system. Additionally, the General Fund forecast includes payments starting in FY 2027-28, to the Information Technology and Vehicle Management Funds to pay deferred internal service contributions that were suspended during the pandemic. These funds had to defer replacement schedules as a result of two years of suspended contributions. As a result of having to address these expenditure increases, the General Fund does not currently have sufficient funding available to restore programs and services above current levels.
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Use of Working Capital Reserves: The General Fund will require the use of $27.6 million in working capital reserves to fill budget deficits in fiscal years 2024-27. While the use of reserves to cover ongoing expenditures is not a sustainable financial practice, this is a short-term measure as staff expects revenue growth to moderate for the next few years. Funding was previously set aside as working capital reserves to support operations while revenues recover.
Master Facilities Use Agreement with Santa Monica-Malibu School District: The City of Santa Monica and the Santa Monica-Malibu Unified School District (SMMUSD) have enjoyed a long-standing partnership in serving the Santa Monica community. This has resulted in a series of joint revenue measures and joint-use agreements between the City and school district. In 2012, the City and SMMUSD entered into a Master Facilities Use Agreement that provided the City with access to various SMMUSD facilities. This agreement was extended in 2022 and expires in 2027. In 2018, the City entered into the Measure YY/GS Master Facilities Agreement, which provided the City with access to additional SMMUSD facilities. The original term of the Measure YY/GS Master Facilities Agreement expires on June 30, 2028 and may be extended for an additional 10 years, subject to the approval of the governing bodies of both the City and SMMUSD. Unlike the Master Facilities Use Agreement, the resources transferred to SMMUSD pursuant to the Measure GS/YY Master Facilities Agreement result from advisory measures approved by the voters that specified that half of the City’s transaction and use tax revenues should be allocated to SMMUSD for various purposes. Finally, in 2022, the voters approved Measure GS, which requires that the City transfer the first $10 million in resources generated by this property transfer tax to SMMUSD. The chart below illustrates the resources transferred to SMMUSD under these various agreements from FY 2019-20 to FY 2024-25. 10 of 27
Given that the Master Facilities Agreement expires within the five-year forecast period, the City’s forecast demonstrates the financial impacts to the City if the agreement expires and a scenario in which the agreement is perpetuated based on existing terms.
If the Master Facilities Agreement expires in 2027, it is anticipated that the City will generate a surplus in FY 27-28 that is currently projected at $13.3 million, whereas if the agreement is extended pursuant to existing terms, the City would generate a mild surplus of about $500,000 in FY 27-28. Given that the Measure GS/YY Master Facilities Agreement results from voter approved initiatives, the forecast assumes that the agreement will be extended in 2028. Resources from the expiration of the Master Facilities Agreement could be deployed to restore critical City services, however, the impacts of potentially not having access to certain SMMUSD facilities will have to be evaluated.
Contingency Reserves Gradually Restored: In FY 2023-24 the General Fund budget will be backed by a Rainy Day fund totaling 13.5% of ongoing expenditures. The Forecast assumes that the City will continue to rebuild its Rainy Day fund, reaching 15% of ongoing expenditures in FY 2026-27. Strong reserves are necessary to provide 11 of 27
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 credit rating.
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. The Forecast shows funding restored to $21 million in FY 2025-26. Of the $21 million set aside for capital projects, the majority of it is budgeted for required ongoing maintenance, vehicle and technology replacement, safety-related repairs and debt service, leaving less than one-quarter of the funding available for community amenities and enhanced services. The reduction of the CIP over the last four years has resulted in deferred infrastructure, technology and vehicle maintenance replacement. In addition, over $358 million in citywide projects remain unfunded. More information on General Fund funded and unfunded projects is included in the CIP Addendum included in the Proposed FY 2023-25 Biennial Budget.
Other Funds Financial Forecast Update
Among the larger funds contributing to the City’s operations, the Water, Wastewater, Big Blue Bus (BBB), Airport, Resource Recovery and Recycling (RRR), Cemetery and Housing Authority Funds have sufficient revenue to cover operational and capital needs during the forecast period.
The Pier and Beach Recreation Funds are projected to require General Fund assistance. Continued revenue constraints, including the partial closure of the Pier Deck parking, and pending plans to adjust beach parking rates, are significantly contributing to the situation.
FY 2023-25 Midyear Revenue and Operating Expenditure Budget Adjustments Midyear budget adjustments are made to reflect updated revenue projections, and to facilitate continuity in key service areas, for the reasons noted below. 12 of 27
Revenue Adjustments – General Fund: Staff projects General Fund revenues to reach approximately $436.1 million in FY 2023-24. This projection is based on actual data from July 2023 to February 2024 as well as anticipated changes in economic conditions and community behaviors over the remainder of the fiscal year. These projections require adjustments to increase FY 2023-24 Revised Budget revenue targets in the General Fund by approximately $1.2 million. A summary of the significant budget adjustments is shown below. Attachment A lists all revenue budget adjustments by department and fund.
Sales Taxes Including GSH transaction and use tax
Revenues are anticipated to be $0.7 million and $0.6 below budget in FY 2023-24 and FY 2024-25, respectively, primarily due to corrected allocations of Santa Monica’s share of the Countywide use-tax pools, the continued impact from the consumer shift from brick-and-mortar purchases toward online sales, and a shift in consumer spending away from tangible goods and towards services that are not subject to sales tax. Starting in FY 2025-26 revenues are projected to increase by a 3% average growth for the remainder of the forecast period.
Transient Occupancy Tax (TOT)
FY 2023-24 estimated revenues are about $0.2 million (0.3%) below budget, primarily due to the delayed reopening of the Regent Hotel and the impact of the hotel worker strikes. FY 2024-25 revenues are projected to increase by about $4.2 million (6.0%) over budget plan reflecting greater than projected TOT revenues from the delayed closure of the Fairmont Miramar for renovation and gradual recovery in the tourism sector. The forecast reflects stronger business, group and international travel growth starting mid-2024 and reaching peak 2019 levels by late 2025/early 2026 at annual increases ranging from 6 to 15%, as tourism recovers and as hotels that closed and will close for renovations reopen by the end of the forecast period.
Parking Facility Taxes
FY 2023-24 revenues are anticipated to be about $0.05 million (0.4%) below budget, 13 of 27
reflecting changing behavior patterns of parkers, including the increased use of free 90-minute parking in the structures, prevalence of telecommuting and hybrid work schedules and use of alternative modes of transportation. FY 2024-25 revenues are expected to increase by about $0.21 million (1.9%) due to higher revenues from private parking facilities, offset by revenue loss at the Pier and the 1550 Lot during the Pier Bridge reconstruction project that will start in spring 2025 and last about two years. The forecast reflects moderate annual growth of 1.75%, reflective of changing behavior patterns of parkers. Staff is currently in the process of evaluating the potential to place a General Tax on the November 2024 ballot to increase the parking facility tax to reduce traffic congestion and the risk of traffic fatalities and serious injuries in Santa Monica, while preserving free 90-minute parking in the downtown lots.
Property Taxes
FY 2023-24 revenues are expected to be $1.5 million (1.8%) above budget, which is consistent with the 2% CPI adjustment applied per Proposition 13 this year and robust revenues derived from the former redevelopment project areas. FY 2024-25 revenues are expected to increase by $1.2 million (2.6%) following the same trend as FY 2023-
24. As interest rates moderate or are reduced, it is projected there will be an increase in homes sales and that prices, which are leveling off or declining will rebound - increasing assessed property values. This is reflected in the revenues over the forecast period, which are projected to increase in the range from 2.7% to 5%.
Business License Tax
Business license revenues are anticipated to be about $3.4 million and $2.7 million above FY 2023-24 and FY 2024-25 budget, primarily due to greater than projected gross receipts reported by businesses in FY 2023-24. This trend is anticipated to continue throughout the forecast. Additionally, another factor for the revenue increase are the focused compliance efforts by the Business License Inspector, a position that was added in FY 2022-23. It is projected that the increases will moderate between
0.3% and 2.2% annually during the forecast period. Staff is currently undertaking a 14 of 27
major effort to modernize our business license tax program, which had not been significantly reviewed in over two decades. The impact of this project has not been included in the forecast.
Parking
FY 2023-24 revenues are approximately $0.2 million less than budget primarily reflecting a change in behavior patterns of parkers, including the increased use of free 90 minute parking in the structures, the prevalence of telecommuting and hybrid work schedules, and use of alternative modes of transportation by visitors to Santa Monica.
FY 2024-25 revenues are expected to increase by about $0.8 million (2.3%) due to moderate economic growth and one-time revenues associated with Cirque du Soleil’s return to Santa Monica in the winter of 2024. The forecast reflects moderate annual growth of 1.75%, reflective of changing behavior patterns of parkers. Staff is currently in the process of conducting a citywide parking study, with recommendations expected back in late 2024 to inform potential parking rate changes that would be brought to the City Council and submitted to the California Coastal Commission in 2025.
Fees/Charges/Other
FY 2023-24 revenues are anticipated to be approximately $2.5 million below budget, primarily due to a later than projected receipt of the first supplemental payment (per Development Agreement) for the Miramar development project due to project delays, less than projected printing and passport services revenues and decreased revenues from commercial inspections by the Fire Department. FY 2024-25 is expected to be $1.0 million lower than budget plan, primarily due to an adjustment related to the Miramar development project. The budgeted amount for the Miramar project reflected annual additional supplemental payments of $3.6 million once the hotel closed for construction, however, due to project delays it is projected that the City will receive the first supplemental payment of $2.0 million instead. The decrease is partially mitigated by increased permitting fees due to the additional building inspectors to help expedite the permitting process.
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Revenue Adjustments – Other Funds: FY 2023-24 and FY 2024-25 revenue changes in the Other Funds result in decreases of approximately $0.2 million and $2.4 million, respectively. Significant revenue adjustments in other funds are summarized below. All revenue budget changes are detailed in Attachment A.
• Big Blue Bus Fund – Decrease of approximately $1.9 million in FY 2023-24 and $2.3 million in FY 2024-25, reflects a deferral of anticipated capital revenue due to the rebidding of 7th street activation project and timing of procurement and acceptance of 15 battery electric buses.
• Housing Authority Fund – Decrease of $0.7 million in FY 2023-24 and $0.8 million in FY 2024-25, primarily from lower voucher utilization of Emergency Housing Voucher (EHV) and Housing Choice Vouchers (HCV)/Section 8 HAP Vouchers due to the prolonged period of time it takes a voucher holder to successfully find and lease a unit. The decreases also reflect lower voucher utilization of Section 8 HAP vouchers due to a delay in the lease-up of 57 projectbased units at 1413 Michigan Avenue. Decreases are partially offset by a disbursement from the U.S. Department of Housing and Urban Development (HUD) for retroactive reconciliation of administration fees. • Miscellaneous Grants Fund – Increase of approximately $1.8 million in FY 2023- 24 related to grant awards. The increase primarily reflects funding for the Douglas Park Playground Reconstruction project, funded through a combination of local funds and grant funds from the Los Angeles County Regional Park and Open Space District under the Los Angeles County 2016 Measure A grant program. Increases also include two new grants to support the needs of older adults and people with disabilities living in Santa Monica and for the preparation of the City’s Local Hazard Mitigation Plan. FY 2024-25 reflects a decrease of $0.7 million, primarily to correct the 2021 UASI Grant, which has been closed out but was inadvertently budgeted.
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• Resource Recovery and Recycling Fund – One-time increase of $0.6 million in FY 2023-24, reflecting security deposit forfeitures due to non-compliance by construction and demolition-related contractors.
• Risk Management Administration Fund – Increases of $0.3 million in FY 2023-24 and $0.8 million in FY 2024-25, reflect increased payments from various funds for their share of property insurance costs based on the September 2023 actuarial analysis, to ensure the fund is sufficiently funded to cover increased insurance premiums.
• Self-Insurance, Bus Fund – Increases of $0.3 million in FY 2023-24 and $1.0 million in FY 2024-25, reflecting the payment by the Big Blue Bus Fund based on an actuarial analysis conducted in September 2023 to ensure the self-insurance fund has sufficient funding to cover expenses.
• Self-Insurance, Comprehensive Fund – Increases of $0.5 million in FY 2023-24 and $3.1 million in FY 2024-25, reflecting payments from various funds for their share of the City’s general liability costs based on the September 2023 actuarial analysis, to ensure the fund is sufficiently funded to cover claims and increased insurance premiums.
• Vehicle Management Fund – Increase of approximately $4.5 million in FY 2023- 24 and $1.6 million in FY 2024-25, primarily reflecting a one-time contribution from the RRR Fund for the purchase of six new RRR vehicles and associated ongoing costs, as well as an expected increase in contributions from other funds as a result of increased costs, associated with cost of living increases, for delivering the services.
• Water Fund – Decreases of approximately $4.9 million in FY 2023-24 and $5.0 million in FY 2024-25 reflecting decreased water sales resulting from water use reduction as mandated by the City’s Water Conservation Ordinance, partially offset by an uptick in large development permits and the associated development fees.
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Operating Budget – General Fund – Expenditure Adjustments: Staff proposes General Fund operating expenditure adjustments that result in an approximate $1,848 increase to the General Fund budget in FY 2023-24 and a $4.5 million increase in FY 2024-25.
The net increases to the General Fund expenditures are projected to be offset primarily by greater than projected tax revenues, described earlier in this report, as well as new field permit and building permitting fee revenue. While Attachment A details all expenditure adjustments, highlights are noted below.
• $2.6 million increase in FY 2024-25, reflecting increased payment to the SelfInsurance, General Liability and Auto Fund for the General Fund’s share of the City’s general liability costs based on the September 2023 actuarial analysis, to ensure the self-insurance fund is sufficiently funded to cover claims and increased insurance premiums.
• $0.4 million increase in FY 2024-25 reflecting increased payments to the SelfInsurance, Risk Management Fund for the General Fund’s share of property insurance costs based on the September 2023 actuarial analysis, to ensure the self-insurance fund is sufficiently funded to cover increased insurance premiums. • One-time increase of $36,000 in City Council Discretionary funds and $14,000 for travel expenses ($2,000 to the Mayor, Vice Mayor, and each Councilmember), funded by staffing adjustments in the City Manager Office and the reallocation of funding in Non-Departmental from an item that is no longer needed, but inadvertently budgeted. Council travel and discretionary funds will be discussed later in this report.
• One-time cost of $93,125 to retain the consulting firm of Fetterman Dunn to undertake the necessary research, estimate staff and legal resources needed, and prepare a conceptual Tenant Protections and Right to Counsel program for Council consideration in Summer 2024. This item is funded by the Housing Trust Fund.
• One-time cost of $95,500 to purchase a Below Market Housing (BMH) software enhancement to the current online portal, which will create a more efficient and streamlined customer service experience for affordable housing waitlist 18 of 27
applicants, housing providers, and staff. This item is funded by the Housing Trust Fund.
• The addition of 1.0 FTE limited-term Project Support Assistant in the General Fund to support the Airport Conversion project, funded by the Airport Fund. • Appropriation of $302,752 in FY 2024-25 for 2.0 FTE Building Inspectors to improve permit processing time. The positions are funded by one-time department savings from reduced overtime and professional services expenditures in FY 2023-24 and additional Building and Safety revenues starting FY 2024-25.
• Appropriation of $28,098 in FY 2023-24 and $70,965 in FY 2024-25 for 1.0 FTE Guest Services Assistant to improve customer service for Community Recreation facilities, including the issuance of outdoor sports facility permits. The position is funded by increased field permit revenues.
• Reduction of $26,250 in FY 2023-24 and $102,750 in FY 2024-25 related to GSH related allocations to Santa Monica Malibu School District and the Affordable Housing Trust Fund, as a result of reduced Transaction and Use Tax revenues. • One-time $1,170,000 adjustment to the City’s pension contribution related to the unfunded liability in FY 2024-25. The new amount is based on the revised valuation reports provided by CalPERS.
Operating Budget – Other Funds – Expenditure Adjustments: Staff proposes operating expenditure adjustments in the Other Funds, that result in an approximate $0.2 million decrease and $3.1 million increase, in FY 2023-24 and FY 2024-25, respectively.
Attachment A details all expenditure adjustments. Significant increases are summarized below:
• $0.5 million and $0.5 million increases in FY 2023-24 and FY 2024-25, respectively, reflecting increased payments from various funds to the SelfInsurance, General Liability and Auto Fund for their share of the City’s general 19 of 27
liability costs based on the September 2023 actuarial analysis, to ensure the fund is sufficiently funded to cover claims and increased insurance premiums. • $0.3 million and $0.4 million increases in FY 2023-24 and FY 2024-25, respectively, reflect increased payments from various funds to the SelfInsurance, Risk Management Fund for their share of property insurance costs based on the September 2023 actuarial analysis, to ensure the fund is sufficiently funded to cover increased insurance premiums.
• $0.3 million and $1.0 million increases in FY 2023-24 and FY 2024-25, respectively, reflect increased payments from the Big Blue Bus Fund to the SelfInsurance, General Liability and Auto Fund based on the September 2023 actuarial analysis, to ensure the fund is sufficiently funded to cover claims and increased insurance premiums.
• A transaction to transfer funds in FY 2023-24 from the operating budget to the capital improvement budget as follows: $522,327 in the Miscellaneous Grants Fund and $67,673 of Transportation Impact Funds from the Special Revenue Source Fund, for the Santa Monica Boulevard Safety Enhancement study resulting in net zero impacts to each fund.
• $0.4 million increase in FY 2024-25 in the Resource Recovery & Recycling Fund, reflects payment to the Vehicle Management Fund, and the corresponding $0.4 million appropriation in the Vehicle Management, to pay for the ongoing maintenance of six new vehicles.
• A decrease of $1.7 million in FY 2023-24 and $0.3 million in FY 2024-25 in the Housing Authority Fund, representing lower Housing Assistance Payment (HAP) voucher utilization primarily due to a delay in the lease-up of 57 project based units at 1413 Michigan Avenue as well as lower voucher utilization due to a longer lease-up period on the Emergency Housing Voucher and Serial Inebriate Programs.
Staffing Adjustments – All Funds: The combined midyear staffing adjustments in all funds result in a net increase of 9.3 permanent FTE positions (7.3 in the General Fund) 20 of 27
partially offset by deletion of 8.0 FTE temporary positions in the General Fund. The changes are summarized below and detailed in Attachment C. Unless otherwise noted, any changes that would result in a fiscal impact will be offset by the reallocation of budgeted funds within departments’ budgets, resulting in a net zero impact to FY 2023- 25 budget. Attachment B is the Salary Resolution detailing new classifications and salary rates.
The City Manager’s Office is proposing changes to realign resources to focus on the City’s 911 dispatch center’s Computer Aided Dispatch (CAD) software, ensuring round-the-clock functionality and connection of CAD with the City’s integrated public safety systems, as well as to centralize supervision of the City’s video production staffing and resources. These changes result in no new FTE.
The City Attorney’s Office is proposing a change to better align a position with the duties performed. The cost of the increase will be absorbed within the department’s existing budget. This change results in no new FTE.
The Community Development Department proposes the addition of 2.0 FTE Combination Building Inspectors in the General Fund to create greater capacity to perform inspections, thereby ensuring compliance with the City’s building regulations, reducing permit processing time, and improving the City’s permitting process. As discussed in the expenditure changes section, the positions will be funded by one-time department savings from reduced overtime and professional services expenditures in FY 2023-24 and additional Building and Safety revenues starting FY 2024-25. This change results in 2.0 new permanent FTEs.
The Finance Department is proposing several changes to help create career progression opportunities, align positions with duties performed and improve staff recruitment and retention. These changes result in no new FTE.
The Human Resources Department is proposing changes to better align resources to the department’s current priorities managing the day-to-day administration of the 21 of 27
department. The changes will enable HR to be better positioned to support employee and organizational development, including refocused efforts on citywide staff training. These changes result in no new FTE.
The Information Services Department proposes the net addition of 1.0 FTE in the General Fund. Leveraging the recent vacancy of a management position, the department is proposing to add a GIS Technician to better support GIS Services including the implementation of the technology, video systems and development of the GIS layers required for the new Real Time Crime Center, and to add a Business Process Technology Analyst to provide focused support for the new Permitting and Land Management system. The Department is also proposing some changes to ensure we safeguard the city from the increasing threats to our digital environment and improve our long-term resilience as well as create opportunities for interoperational support, rather that siloed functions. These changes result in 1.0 new permanent FTE.
The Library is proposing a change to address the growing needs of the Library’s Literacy Education for Adults and Families (LEAF) program, which is being expanded to include enhanced English as a Second Language (ESL) services.
LEAF comprises seven flagship services and a variety of outreach events offering free literacy services to all ages. This change results in no new FTE.
The Public Works Department proposes the addition of 1.0 FTE limited-term Project Support Assistant in the General Fund to address the current backlog of maintenance and construction projects at the Airport and will be funded by the Airport Fund. In addition, the Department proposes the addition of 2.0 FTE positions in the Vehicle Management Fund to improve preventative maintenance required for the safety of City staff, reduce downtime of vehicles and lessen disruption to City operations, and ensure compliance with State and Federal regulations. These changes result in 1.0 new limited-term FTE in the General Fund, funded by the Airport Fund and 2.0 new permanent FTE in the Vehicle Management Fund. 22 of 27
The Recreation & Arts Department proposes the net addition of 3.3 permanent FTE, offset by the deletion of 8.0 FTE temporary positions and additional revenues, to activate the Miles Playhouse and Camera Obscura facility and expand arts and culture programming throughout the City, enhance access to park facilities for community use, and to improve customer service for Community Recreation facilities including the issuance of outdoor sports facility permits. The cost of the added positions will be offset by additional field permit revenues and by repurposing existing staff resources within the department. These changes result in 3.3 new permanent FTE and a reduction of 8.0 temporary FTE.
The Department of Transportation is proposing a change to centralize the financial and administrative tasks for the Mobility division, which has not had a permanent, budgeted analyst since the budget restructuring process in 2020. The change will provide critical oversight of all Mobility grants, fees, contracts, financial reporting, and budget development. It will also allow the department’s Transportation Planners to focus on their core functions advancing city priority projects, including capital projects that protect the safety of all roadway users and advance equity by lowering household transportation costs, as well as regional transportation coordination, particularly as the city prepares for major events including the World Cup and LA28 Olympics. This change results in no new FTE.
Resolution to delete obsolete position classifications
As part of its efforts to maintain the City’s classification plan, the Human Resources Department recently conducted a review of the classification plan to determine which classifications were no longer being used and for which there is no foreseeable need.
Human Resources Department staff, after consultation with the relevant City leadership, has determined that the identified classifications presented in the attached resolution (Attachment D) are obsolete and may be removed from the classification plan.
Therefore, Human Resources Department staff recommend these classifications and associated salary rates be abolished.
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Capital Improvement Program (CIP) Budget Adjustments
Recommended changes to the FY 2023-24 CIP budget include a net budget increase of approximately $8.6 million and $1.2 million in FY 2024-25. The budget changes are detailed in Attachment A and summarized below.
Non-General Funds – Capital Budget:
Vehicle Replacement Program – changes include $4.0 million in the Vehicle Management Fund to pay for the purchase of six (6) new vehicles, including 2 new bulky item collection vehicles. This increased cost in the Vehicle Management Fund is offset by a corresponding $4.0 million reimbursement, as an internal service contribution, from the Resource Recovery and Recycling Fund.
Santa Monica Boulevard Safety Enhancement Study – increase of $590,000 funded by grant funds in the amount of $522,327 from CalTrans and a required local match of $67,673 from Transportation Impact Fee funds. The Santa Monica Boulevard Safety Enhancement Study was approved by Council on November 14, 2023. Staff requests that funds be moved to the Capital Improvement Program.
Grant Related Changes
Acceptance of Grant Awards
California Department of Aging – Local Aging & Disability Action Planning (LADAP) Grant: On November 13, 2023 the City of Santa Monica was awarded a $200,000 grant through the competitive, statewide Local Aging & Disability Action Planning (LADAP) Grant Program. The local age-and disability-friendly plans developed through this opportunity are aimed at improving a community’s livability for people of all ages, centering on equity, cultural competency, community engagement, and disability inclusion principles and practices. Staff recommends that Council authorize the City Manager to accept the LADAP award so that staff may proceed with development of a strategic plan to address the needs of older adults and people with disabilities living in Santa Monica. If authorized, the Human Services Division (HSD) will begin planning activities in Q1 2024, including the release of a Request for Proposals (RFP) to identify a subject-matter expert to help lead the planning process 24 of 27
alongside City staff, non-profit partners, Commissions, and key stakeholders. HSD plans to return to Council in Q1/Q2 2024 with an RFP award recommendation.
U.S. Department of Homeland Security, Federal Emergency Management Agency (FEMA) Hazard Mitigation Grant Program (HMGP): The U.S. Department of Homeland Security, Federal Emergency Management Agency (FEMA) Hazard Mitigation Grant Program (HMGP) through the State of California, Governor’s Office of Emergency Services (CalOES) awarded the Office of Emergency Management a $135,000 grant to support the preparations of the Local Hazard Mitigation Plan. Staff recommends that Council authorize the City Manager to accept the FEMA grant so that funds can be utilized to conduct a social vulnerability analysis that builds upon the City’s Local Hazard Mitigation Plan. A consultant would identify and assess the City’s social vulnerabilities in relationship to local natural hazards, focusing on the Pico Neighborhood, Census Tract 7018.10. The consultant would also present constructive recommendations on community-based, equity-focused mitigation measures may improve community resiliency. The analysis and plan would be conducted with a heavy emphasis on community engagement, including consensusbuilding events to better educate community members on local hazards and collect feedback on community-driven priorities. The findings and final plan would be provided in an accessible format for community members and create a distribution strategy to better prepare Santa Monica residents.
Additional Grant Funding
California Office of Traffic Safety for the 2023 STEP (Selective Traffic Enforcement Program) Grant: The Santa Monica Police Department (SMPD) was previously awarded a $306,000 Selective Traffic Enforcement Program (2023 STEP) grant from the California Office of Traffic Safety (OTS) for a year-long program of education and special enforcement efforts to help prevent traffic-related deaths and injuries. SMPD was recently awarded an additional award amount of $31,600.
California State Library Zip Books Project: In FY 2022-23, the California State Library awarded the Library a grant of $2,690 from California Library Services Act 25 of 27
funds to purchase books that are not available at local libraries (“Zip Books Project”.) The California State Library recently awarded the Library additional funding of $2,787 for the Zip Books Project for FY 2023-24.
Council Discretionary Funds: Included in the FY 2023-24 midyear adjustments is a onetime appropriation of $36,000 to Council discretionary funds. With this change, the amount unprogrammed for FY 2023-24 will be $80,681. The annual appropriation of Council discretionary funds occurs once a year at budget adoption and is adjusted annually for cost of living. The FY 2023-24 Adopted Budget amount was $125,150.
On June 27, 2023, Council directed staff to reappropriate unspent FY 2022-23 individual Councilmember travel budgets at the end of the year to the FY 2023-24 Council budget, to supplement existing Council discretionary funds. The reappropriated amount was $9,762. As of February 8, 2024, Councilmembers have collectively spent 35% of the $59,486 in their individual travel funds, and there are remaining funds of $38,601. Staff recommends permanently adopting the practice of reappropriating unspent travel funds to supplement existing Council Discretionary fund allocation.
Past Council Actions
Meeting Date Description
06/27/2023
(Attachment E)
Adoption of the First Year and Approval of the Second Year of the FY 2023-25 Biennial Budget Adoption
Environmental Review
The FY 2023-24 Midyear Budget is categorically exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines. The Midyear Budget is covered by the common sense exemption which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” Therefore, it can be seen with certainty that actions would not result in adverse physical impacts on the environment, and as such, is categorically exempt from CEQA.
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Financial Impacts and Budget Actions
Recommended FY 2023-24 midyear budget adjustments, and related FY 2024-25 adjustments, result in:
• Revenues: FY 2023-24 and FY 2024-25 citywide increases of approximately $1.02 million and $3.99 million respectively
In millions FY 2023-24 FY 2024-25
General Fund $ 1.18 $ 6.40
Other Funds $ (0.16) $ (2.41)
Total All Funds $ 1.02 $ 3.99
• Expenditures: FY 2023-24 and FY 2024-25 citywide increases of approximately $8.43 million and $8.80 million respectively
In millions
Operating
FY 2023-24 FY 2024-25
General Fund $ 0.00 $ 4.45
Other Funds $ (0.21) $ 3.14
Total All Funds $ (0.21) $ 7.59
In millions
Capital
FY 2023-24 FY 2024-25
General Fund $ - $ -
Other Funds $ 8.64 $ 1.21
Total All Funds $ 8.64 $ 1.21
• FTEs: The combined midyear staffing adjustments in all funds result in a total net increase of 1.3 FTEs.
Permanent Temporary
General Fund 7.3 (8.0)
Other Funds 2.0 0.0
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Total All Funds 9.3 (8.0)
Details of FY 2023-24 and FY 2024-25 budget adjustments are in Attachment A.
Prepared By: Jennifer Young, Budget Manager
Approved Forwarded to Council
Attachments:
A. Attachment A - Budget Adjustments
B. Attachment B - Salary Resolution
C. Attachment C - Position and Classification Changes
D. Attachment D - Abolishment Resolution
E. Attachment E - June 27, 2023 Staff Report – FY 2023-25 Budget Adoption (Web Link)
F. Attachment F - March 11, 2023 Staff Report – Council Workshop (Web Link) G. Written Comments
H. PowerPoint Presentation