Santa Monica City Council
May 28, 2024

City Council
Report
City Council Meeting: May 28, 2024
Agenda Item: 7.A
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To: Mayor and City Council
From: Oscar Santiago, Director, Finance Department, Budget Subject: Fiscal Year 2024-25 Proposed Budget and Fiscal Year 2024-26 Biennial Capital Improvement Program Budget
Recommended Action
Staff recommends that the City Council:

1. Review and provide direction to staff regarding the FY 2024-25 Proposed Operating Budget Adjustments (Attachment A) and FY 2024-26 Proposed Biennial Capital Improvement Program (CIP) Budget (Attachment B);

2. Direct staff to proceed with setting the FY 2024-25 Operating and FY 2024-26 Biennial Capital Improvement Program (CIP) Budget Adoption hearing on June 25, 2024;

3. Provide direction for staff to evaluate other funding mechanisms such as general obligation bonds to support the City’s capital improvement program in future budget cycles;

4. Review and provide direction to staff on establishing 23 new fees, which include fees for Emergency Medical Services (EMS), facility rentals and use, Certified Unified Program Agency (CUPA), film permits, materials for the Junior Lifeguard Program, grading review permit, and City planning; revising 36 fees, which include fees for CUPA, fire permits, airport, landscape services, Concealed Carry Firearm permit (CCW) renewal application, medicinal cannabis, and mortuary services; and the deletion of three fees, which include fees for library, and EV user (Attachments C and D); and

5. 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.

Summary
The City operates with a two-year operating budget, a municipal best practice that maximizes stable, long-term planning while streamlining the process for financial management and policy making. The City’s Proposed Budget for FY 2024-25 (the 2 of 38
second year of the FY 2023-25 Operating Budget approved by Council in June 2023), is an important milestone in the City’s continued recovery from the disruption and economic losses that accompanied the COVID-19 pandemic and fiscal impacts of unprecedented liabilities. The City has restored many services and these investments in our community, approved during the FY 2023-25 budget, have positioned the City to maintain progress towards addressing community needs.

While the long-term economic outlook is positive, resources remain constrained. The City continues to face liabilities such as a difficult economic climate, slow revenue recovery, challenging labor market, deferred equipment and infrastructure maintenance, and unknown impacts of legal liabilities from additional claims of alleged sexual abuse by a former employee and volunteer and over a request to transition to district elections.

As a result, full recovery is taking longer than anticipated. As we look ahead to address these challenges, with limited resources and reserves significantly lower as compared to pre-Covid years, it is imperative that we hold the line on spending, reallocating existing resources as needed, to address high priority operational and community needs, specifically in the General Fund. The Proposed FY 2024-25 Budget includes minimal changes to the approved budget plan (primarily funded by the reallocation of resources and/or new revenues).

FY 2024-25 is also the first year of the FY 2024-26 Proposed Biennial Capital Improvement Program (CIP) Budget, which follows the same principles of fiscally sustainable and outcome-driven resource allocation of the operating budget, as it strives to invest in maintaining and enhancing critical City infrastructure and City facilities essential to providing services. Funding for critical infrastructure protects the City’s existing capital investment and minimizes future maintenance and replacement costs.

While staff had anticipated to expand the General Fund CIP for FY 2024-26, including addressing deferred maintenance and adding new projects, a conservative approach is being taken at this time due to resource constraints and as a strategy to safeguard our fiscal stability, at a time when much uncertainty remains around the impact of contingent legal liabilities.
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The total Citywide Proposed Budget for FY 2024-25, net of reimbursements and transfers, is $763.5 million, $462.5 million of which is in the General Fund. The proposed adjustments reflected in the Citywide Proposed Budget represent a 1.3% increase over the FY 2024-25 Approved Budget Plan (as adjusted for Council approved changes throughout FY 2023-24) as summarized below:
• Operating Budget - $4.8 million increase from revised budget plan:
o General Fund – approximately $1.0 million, or 0.2% increase, including

3.9 net FTEs. The increase is primarily from equity adjustments as required by bargaining group agreements, various staffing adjustments funded by consumer protection funds and enterprise funds and staffing changes funded by new revenues, including revenues from various recreational programs.
o Other Funds – approximately $3.8 million, or 1.3% increase, including 8.0 net FTEs. The increase is primarily from equity adjustments as required by bargaining group agreements, increased investment in the City’s Preserving Our Diversity (POD) program 1, the addition of staffing to support the City’s growing water/wastewater infrastructure and further integrate multimodal transportation, and to enhance event programming at the Annenberg Community Beach House, which will be funded by new Beach Fund revenues.
• Capital Budget - $6.2 million, or 6.2% increase from the revised budget plan:
o General Fund – decrease of approximately $1.9 million, or 13% reflecting deferral of select projects, due to limited funding and as a strategy to safeguard our fiscal stability at a time when much uncertainty remains around the impact of contingent legal liabilities.
1 The Preserving Our Diversity (POD) program is a City-funded basic income program which provides monthly cash assistance to over 200 eligible seniors (65+, low-income, living in a Santa Monica rentcontrol apartment prior to January 1, 2000) to help meet their basic needs and support aging in place. 4 of 38
o Other Funds – approximately $8.1 million, or 9.6% increase primarily focusing on maintaining critical City infrastructure and City facilities essential to providing services.

Summary of Citywide FY 2024-25 Proposed Budget (in millions):

FY 2024-25
Approved
Budget Plan1
FY 2024-25
Proposed
Changes
FY 2024-25
Proposed
Budget
Citywide Budget before adjustment for
reimbursements & transfers $848.3 $10.9 $859.2
Less reimbursements & transfers 2($94.9) ($0.8) ($95.7) Citywide Budget net of reimbursement &
transfers $753.4 $10.1 $763.5
Citywide FTE Permanent Positions 2,018.3 14.3 2,032.6
Citywide FTE As-needed Positions 87.3 (2.3) 85.0
Total FTEs 2,105.6 12.0 2,117.6
1 Approved Budget Plan includes all Council-approved budget changes made in FY 2023-24. 2 These are technical adjustments to eliminate double counting of certain expenditures appearing in two funds.

The revenue and expenditure adjustments are further detailed below. A complete list of all adjustments are included in Attachment A. 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 H and classifications impacted by equity adjustments are listed in Attachment I. This report includes proposed revisions to various fees as detailed in Attachments C and D.

Background
On June 27, 2023 (Attachment E), Council adopted the first year and approved the second year of the FY 2023-25 Biennial Operating Budget. The budget reflects the most substantial restoration of ongoing services and introduction of enhanced services to date since the 2020 budget restructuring. The budget was built upon community-driven priorities, to continue to rebuild, restore and reenergize the community through strategic 5 of 38
investments informed by the five priority areas Council identified at its workshop on March 11, 2023 (Attachment F). The restoration was made possible through a combination of a new voter-approved revenue source, moderate revenue growth, the reallocation of funds, new revenues from public and private partnerships, and staff’s ability to expand capacity for cost-covering programs. At that time, Council also adopted the second year of the FY 2022-24 CIP Budget.

On February 27, 2024 (Attachment G), as part of the midyear budget review, Council approved certain revisions to the FY 2023-24 Adopted Operating and CIP Budget that adjusted revenues and expenditures and approved corresponding adjustments to the FY 2024-25 Operating Budget Plan. Staff also presented the February 2024 Five Year Forecast to Council, which indicated that growth across all General Fund revenue streams would be moderate, that revenues would not recover to the level projected prior to the pandemic until FY 2026-27 and, that with the help of working capital reserves, the General Fund is projected to maintain a balanced budget until FY 2027-28, at which point revenues are anticipated to exceed expenditures.

Additionally, the forecast indicated that General Fund total non-restricted reserves are significantly lower than prior to the pandemic, amounting 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. 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 loans from non-restricted reserves in 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. Since February, staff completed an exceptionbased budget process for FY 2024-25, identifying budget adjustments to reallocate resources to higher priority areas, invest in existing programs to enhance services, and adjust salaries to ensure the City is able to recruit and retain qualified staff in this competitive labor market (as detailed in the Staffing Adjustments section below). 6 of 38
While all department-initiated budget changes in the General Fund are entirely offset by efficiencies and reallocation of funds in other budgeted areas, employees have a right to request a compensation study of their position classification in accordance with the applicable Memoranda of Understanding. Whether a compensation study is submitted by an employee, a department, or agreed to during the collective bargaining process, Human Resources staff undertake a comprehensive evaluation of the marketplace that includes review of comparable positions in other cities in our region, the marketplace in general, and internal alignment with similar positions in the City. The goal of this evaluation is to ensure positions are fairly compensated and the City remains an employer-of-choice in an extremely competitive labor market. When a classification’s salary is adjusted, Human Resources staff must also evaluate any impact to related classifications, including supervisors and managers, to ensure an appropriate salary differential. These equity adjustments are also included.

The General Fund capital program, which was impacted by the budget reductions due to the pandemic, was drastically reduced over the past four fiscal years, and despite incremental annual increases, the program remains severely underfunded. Prior to the pandemic, the City set aside $21 million annually for preventative maintenance of infrastructure, vehicle and equipment replacement, new technology, and park and mobility improvements.

Planning efforts for large projects, such as the Airport Conversion project, require project funding as well as future ongoing funding to cover the operating costs once these projects have been completed. Capital improvements at the Beach and Pier that cannot be supported by the Beach and Pier Fund revenues, compete for limited General Fund allocations. In addition, staff anticipates needing infrastructure upgrades in preparation for the 2028 Olympics to accommodate the anticipated increased number of visitors.
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Discussion
Overview of Economic Conditions
The national and State economies continue to recover. The Gross Domestic Product (GDP) growth rates were 4.9% and 3.2% in the third and fourth quarter of 2023, respectively. The March 2024 UCLA Anderson Forecast projects a slowing growth during the first three quarters of 2024, though not a recession, and later leveling off at

2.5% starting in 2025. The primary driver is capacity limitations as the unemployment rate remains low and there are not enough new hires to expand. The ongoing threat of continued gridlock in Washington, conflicts in Russia/Ukraine and the Middle East, the shutdown of trade with China, and ramifications from climate change could negatively impact the forecast. Interest rates remain high, as inflation has not yet reached the Federal Reserve target of 2%. February’s core inflation rate (excluding energy and food) was 3.8% and the forecast for inflation in 2025 is 2.7%, still above the Federal Reserve target. The main drivers are increases to rent and transportation costs, primarily labor for auto repairs, neither of which are influenced by higher interest rates. It is projected that interest rates will remain relatively unchanged until late 2024.

California has record employment, productivity is increasing, per capita income is increasing, and the economy is growing. For the last year, Los Angeles has been growing slower than the U.S. but recently has started to exceed U.S. growth. Santa Monica’s economy continues to show a slow recovery in consumer spending and the tourism sector. Santa Monica’s fourth quarter 2024 sales receipts were down 11.4% from a year earlier as consumer spending shifts to household essentials and away from luxuries. International tourism and business travel continue to lag behind pre-pandemic levels, and slow growth is anticipated for 2024 before recovering in 2025. 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.
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General Fund
On February 27, 2024, a comprehensive five-year forecast was presented to Council, encompassing updated revenue projections and operational considerations. Staff projects that growth across all General Fund revenue streams will moderate to an average 3.7% throughout the forecast period. The 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 while the City continues to navigate various challenges, ranging from economic uncertainty, 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 legal liabilities.

Revenues are anticipated to track in accordance with projections, with no significant changes noted at this time, except for minor adjustments related to staffing enhancements. The forecast provided a detailed analysis of anticipated revenue and expenditure patterns, offering a valuable snapshot of the City's financial outlook.

As we move forward, it’s important to keep a close watch on a few key revenues. • Sales Taxes (both sales and use and transaction and use tax) continue to be impacted by inflation, high interest rates, consumer debt and changes in consumer spending. Online shopping has leveled off after peaking during the pandemic. Consumers are feeling the pinch of inflation with high prices, shifting their spending to household essentials, experiences, and more moderately priced dining. Luxury car sales are down and automobile prices have experienced a “price correction” from their post pandemic highs. Retail sales are down 10% but higher prices, due to inflation, are partially offsetting the impact. The expectation is that sales tax will increase 4.5% before leveling off to 3%. • Transient Occupancy Taxes (hotel tax) forecast reflects stronger business, group and international travel growth starting mid to late 2024 and reaching peak 2019 levels by late 2025/early 2026 at annual increases ranging from 6 to 15%, 9 of 38
as tourism recovers and as hotels that closed and will close for renovations reopen by the end of the forecast period.
• Business License Tax revenue is expected to grow as focus continues on compliance and collection of delinquent accounts. A proposed tax measure is anticipated to go to the voters in November 2024. If approved, the City could experience nominal revenue growth due to the modernization of the tax structure which will include aligning specific tax rates with neighboring jurisdictions and tax rate reductions to small and medium sized businesses.
• Property Tax and Documentary Transfer Tax are affected by the number of transfers and the total number of property sale transfers. In 2023, including single family, multifamily, commercial and industrial experienced a 28% decline compared to transfers in 2022. The City experienced a 24% decline in the number of single family home transfers in 2023 from 2022 and the additive value from those sales (difference between purchase and sale price) decreased 25%.

However, the transfer of ownership assessed value is forecasted to increase

1.9% for the next two years before increasing to 3% in outer years as interest rates decline.

Other Funds
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 continue to 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.

Actions to safeguard our fiscal stability as a result of recent legal claims The City has made progress in its economic recovery, restoring vital community services and making investments in the community that foster a positive long-term 10 of 38
economic outlook. However, ongoing challenges such as reduced reserves, economic uncertainty resulting from inflation and high interest rates, volatility of the insurance market and increased medical costs, consumer and work behavior changes, and a competitive labor market continue to hinder the expansion of services and implementation of new capital projects in the General Fund.

These challenges are further exacerbated by increased liabilities, including those related to claims of sexual abuse against minors by a former employee and volunteer.

Since 2020, the City has paid $229.8 million in settlements. Additionally, litigation over a request to transition to district elections has yet to be resolved.

Given the increased risk and the City’s low level of reserves, staff continues to evaluate strategies to safeguard fiscal stability and rebuild reserves to address these liabilities, while protecting existing resources. Some of the actions being implemented and/or evaluated, which are detailed below, include:
• deferring important General Fund capital projects in FY 2024-25 and FY 2025- 26;
• continuing to evaluate the potential sale of City-owned properties; and • suspending payment, over two years, to the Housing Trust Fund (excluding payments for POD and staffing).

In addition to these actions, staff continues to litigate with its excess insurance providers demanding compensation for the settlement payments. The resolution of these litigation efforts, anticipated to be completed later this year, would inform whether the City would need to proceed with any of the actions below.

Reduced General Fund Capital Improvement Program
The Capital Improvement Program has been reduced for FY 2024-26 by deferring some projects temporarily. The deferred projects include new one-time project requests, projects that potentially qualify for outside funding, and those that could be phased over multiple years. This strategy enables the City to retain much needed resources for the time being, while still having the flexibility to 11 of 38
restore project funds in the future, if resources become available as we gain clarity on the impact of new claims and on any funds received from the excess insurance providers.

Additionally, staff continues to evaluate other funding mechanisms such as general obligation bonds to support the City’s capital improvement program in future budget cycles.

Sale of City-owned properties
In March 2021 and October 2022, (attachments K and L) Council adopted Resolutions to declare various City-owned properties as surplus land. Since that time, staff has been evaluating the potential sales of such properties as 1636 5th Street (Apple Building), 1635 5th Street (Parking Lot 29) and the Expo Line Parking Lot. Other properties also being evaluated include Fire Station 1 and the City TV property at 1654 19th Street.

Each of these parcels comes with some level of complexity that create timing issues; the process required for the sale of the properties and receipt of proceeds could mean funds are not available when needed if a settlement is reached in the short-term. There are also some operating costs the City would bear in certain circumstances. For example, selling Fire Station 1 would require the relocation of the Promenade Maintenance Division to another building, while selling the City TV property may result in a loss of approximately $250,000 in planned annual transfers, over 6 years, to repay the amounts owed to the General Fund for the original purchase of the building, therefore, the net proceeds may not be as lucrative (more analysis is required to determine this). Additionally, some of these properties are not solely owned by the General Fund, which could result in having to split the proceeds with other funds.

Suspend Measure GSH Transfers to the Housing Trust Fund Since 2020, the General Fund has had to draw from reserves and borrow from other Funds to address the economic impacts of revenue losses from the pandemic and unprecedented legal settlements. In total, the General Fund has 12 of 38
borrowed approximately $58 million, including $36.5 million from the City’s Housing Trust Fund (includes deferrals of Measure GSH transfers) and nonrestricted reserves from the Water Fund ($15.0 million) and Workers Compensation Fund ($6.5 million). The money was borrowed with the intent to replenish the funds over time, as per the payment plan approved by City Council on October 24, 2023.

Effective FY 2024-25, staff will suspend GSH payments, over two years, to the Housing Trust Fund (excluding payments for POD and the amount used to cover staffing costs). As with the action to defer CIPs, this strategy enables the City to retain much needed resources for the time being, while still having the flexibility to resume the payments in the future, if resources become available as we gain clarity on the impact of new claims and on any funds received from the excess insurance providers.

Other options
Staff could also evaluate the option of issuing a Judgment Obligation Bond to pay for any legal expenses. However, some of the major concerns with that option would be:
• The City does not have funds readily available to pay for annual debt service on new bonds.
• The net cost to the City, after interest and cost to issue a bond, would be significant.
• A bond commits the City to making annual payments for decades, depending on the amortization period, funds that could be otherwise used to enhance or expand services in the future.
• Bonding would impact the city’s bond rating, which increases borrowing costs, and may impede our ability to Bond in the future.

More analysis is needed if this is an option that Council wants to consider. 13 of 38
Finally, as we get more clarity on the impact of new claims and funds freed-up by the options presented above, with Council approval, staff may pursue other initiatives such as evaluating the City’s existing partner agreements and related commitments.

Proposed Adjustments to the FY 2024-25 Revised Budget Plan While City Council approves the Biennial Budget every two years, per the City’s Charter, Council must adopt a budget annually. In year 2 of the Biennial Budget term, Council adopts the second year of the budget, including the adoption of any adjustments made to the original budget plan. The FY 2024-25 budget plan has already been revised to incorporate changes approved by Council throughout FY 2023-24. The items noted below are new proposed adjustments for FY 2024-25.

Revenue Adjustments – General Fund
Projected revenues for the FY 2024-25 Proposed Budget total approximately $458.9 million. This results in approximately $0.3 million, or 0.1% increase from the FY 2024-25 Approved Budget Plan (as adjusted for Council approved changes throughout FY 2023- 24). The adjustments primarily reflect new community program revenues funding associated staffing adjustments, as well as reimbursement from the service provider, to offset the cost of electricity and maintenance for additional EV chargers.

Revenue Adjustments – Other Funds
Adjustments in the Other Funds result in an increase of approximately $3.9 million, or

0.9%. Significant revenue adjustments include:
• Airport Fund – Decrease of approximately $3.2 million, primarily due to adjusted rates and charges for landing fees, aircraft tie-down fees, fuel flowage fees and aircraft hangar leases to ensure the City’s compliance with applicable federal standards as required by the Consent Decree. Further information regarding the adjustments is discussed later in this report.
• Beach Recreation Fund – Increase of approximately $0.8 million, which includes a one-time increase from a negotiated event rental agreement with Cirque du 14 of 38
Soleil, as well as an ongoing increase in Beach House rental revenue reflecting increased demand.
• Big Blue Bus Fund – Net increase of approximately $1.4 million, primarily related to revenues from project drawdowns and reimbursements to align with projected capital expenditures.
• Information Technology Replacement and Service Fund – Increase of approximately $0.65 million reflecting updated contributions from non-General Funds to align with actual costs of replacing computer equipment. • Local Return Fund – Increase of approximately $1.1 million to align the allocation of Proposition A and Proposition C Local Return revenues with recently revised regional estimates.
• Miscellaneous Grants Fund - Increase of approximately $2.5 million primarily from completion of various Mobility projects resulting in earlier than expected receipt of grant reimbursement revenues.
• Wastewater Fund - Increase of approximately $0.5 million related to increases in pass-through revenues for Capital Facilities Fees and Amalgamated System Sewerage Facilities Charges from an uptick in construction permits.

Attachment A details all revenue budget changes.

Expenditure Adjustments - General Fund
General Fund operating expenditure adjustments for FY 2024-25 result in an approximate $1.0 million, or 0.2% increase to the General Fund budget in FY 2024-25.

While Attachment A details all expenditure adjustments, significant increases are summarized below:
• Approximately $0.5 million increase related to changes in salaries (equity adjustments) for existing classifications resulting from employee-initiated compensation studies in accordance with the respective Memorandums of Understanding, as well as equity adjustments for related classifications impacted by salary compression. Compression/compaction occurs when the difference in 15 of 38
salary between subordinate/supervisor classifications decreases. In addition, other equity adjustments from department-initiated studies are being offset by the reallocation of funds within departments budgets and reimbursement from other funds. All equity adjustments are included in Attachment I. • Approximately $0.2 million increase, offset by the use of Consumer Protection Funds, for staffing changes described in the Staffing Adjustments section below. • Approximately $0.3 million increase, entirely offset by new revenue and reimbursements from other funds, for staffing adjustments (described in the Staffing Adjustments section below) to enhance community programming, including contract classes, field rentals, basketball and softball leagues as well as adult soccer and pickleball programs.

Expenditure Adjustments – Other Funds
Operating expenditure adjustments for FY 2024-25 in the Other Funds result in a $3.7 million, or 1.2% net increase. While Attachment A details all expenditure adjustments, significant increases are summarized below:
• Beach Recreation Fund - $0.2 million increase in the Beach Recreation Fund, representing the addition of 1.0 FTE Cultural Affairs Venue Supervisor, projected to be offset by increased activation of the Annenberg Beach House. • Big Blue Bus Fund - $1.8 million increase primarily related to changes in salaries (equity adjustments) for existing classifications, including equity adjustments for related classifications impacted by salary compression, as well as the addition of

1.0 FTE Chief Planning Officer, as described in the Staffing Adjustments section below. All equity adjustments are included in Attachment I. • Special Revenue Source Fund - $1.1 million increase primarily to increase POD enrollment capacity by approximately 100 more senior households and implement a Consumer Price Index (CPI) increase to the existing 205 households on the Preserving Our Diversity (POD) program, leveraging Housing Trust funds, and an increase from the Cultural Arts Trust funds to maintain the current funding level of the Art of Recovery program.
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• Water Fund - $0.6 million increase for the addition of 5.0 FTE, as described in the Staffing Adjustments section below.

Staffing Adjustments - All Funds
The combined staffing adjustments in all funds result in a net increase of 11.9 FTE positions (which includes 6.3 permanent FTE in the General Fund, partially offset by the deletion of approximately 2.3 FTE temporary positions). The changes are summarized below and detailed in Attachment H. 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 2024-25 budget. For specific classifications impacted by the changes noted below, refer to the ID numbers on Attachment H.
• City Manager’s Office: Through reduced reliance on temporary staffing, printing and mailing services and funding from the RRR fund, the department would fully offset the cost of the following changes without adversely impacting services to the community.
o Convert a vacant Customer Services Assistant position to a Supervisor position to streamline day-to-day operation and supervision of the 311 team (ID# 01).
o Convert a part-time, as-needed Production Specialist position to permanent to address increased demand for video content for essential communications that provide updates to the community about city programs and initiatives (ID# 02).

These changes result in an increase of 1.0 permanent FTE and the deletion of 0.5 asneeded FTE in the General Fund. • City Attorney: The cost of the following changes will be funded utilizing Consumer Protection funds without impacting the General Fund or current operations. Creation of the Deputy City Attorney IV classification to recognize proven superior expertise and performance as leaders in the office through work 17 of 38
on the most complex issues. This change is expected to yield substantial cost savings by retaining legal work in-house rather than outsourcing it to external counsel at significantly higher rates. Furthermore, it aligns with the City’s Diversity, Equity, and Inclusion (DEI) objectives, offering growth opportunities for experienced deputy attorneys and enhancing our ability to retain top talent. The CAO is also proposing adjustments to the Assistant City Attorney and Chief Deputy City Attorney ranges due to equity, compaction, prior pay cuts, and inflation, with an adjustment for the Assistant City Attorney of 8% and Chief Deputies 5%.
• Community Development: The following cost neutral change results in the addition of a Building Official position through deletion of another position, to manage the Building & Safety division, which better aligns with the structure of most other California municipality building divisions (ID# 04). • Department of Transportation: The department has identified savings in contractual and professional services, that can be leveraged without negatively impacting services to make the proposed General Fund staffing adjustments.

The staffing adjustments in the BBB Fund are offset by the reallocation of overtime. These adjustments further align and integrate multimodal transportation planning in Santa Monica and improve operational performance and service to the community including:
o Restoration of 1.0 FTE Fiscal Staff Assistant III position in the General Fund, to align staffing levels with parking services that have been restored since the pandemic (ID# 05).
o Restoration of 1.0 FTE Traffic Painter position in the General Fund, to maintain the City’s roadway network’s thousands of street signs, miles of lane markings, and ever-expanding use of flexible bollards in roadway applications to slow vehicles and improve safety (ID# 06). o Upgrade a Lead Customer Services Assistant position to a Supervisor position in the BBB Fund, to establish and maintain standards for 18 of 38
customer service quality, responsiveness, and professionalism, as our community’s demand for fixed-route and paratransit services return to prepandemic levels (ID# 07). o Addition of a 1.0 FTE Chief Planning Officer that will advance greater alignment and integration of the Department’s functions that collectively plan and deliver an accessible, attractive, and safe multimodal transportation network for the community, while leading strategic transportation planning for major events such as the 2026 FIFA World and LA28 Summer Olympics and the impacts of future housing development.

The position will be 75% funded by the BBB Fund and 25% funded through reallocation of the Mobility Division’s General Fund budget (ID# 08).
o Addition of a Chief Administrative Officer position and 1.0 FTE Principal Administrative Analyst position in the BBB fund offset by the deletion of

1.0 position in the Transit Finance Division, to enhance and integrate DOT’s administrative and financial operations and create bandwidth to seek additional grant funding for City Mobility and Transportation projects. (ID# 09).

These changes result in a net increase of 4.0 permanent FTE (2.0 FTE in the General Fund and 2.0 FTE in the Big Blue Bus Fund).
• Finance: By bringing the maintenance of the equipment that counts farebox revenue in-house and suspending the purchase of a software system, the department has identified funding to offset the cost of the following staffing changes without impacting operations:
o Net addition of 0.25 FTE Revenue Collections Assistant hours to align staffing levels with current volume of bus fare collection work and ensure compliance with critical internal controls (ID# 10).
o Restore a Principal Buyer position by deleting a vacant Buyer position, to better align operations. The position will support the procurement work 19 of 38
underway with local, small, and underprivileged businesses to promote equitable economic growth, updating and developing policies and procedures; and provide highly responsible and complex assistance to the Procurement Manager (ID# 11).

These changes result in a net 0.25 permanent FTE increase in the General Fund.
• Fire: The cost of the following staffing change will be offset by saving from shifting from an annual maintenance model for the fire station alerting system to requesting maintenance as needed. There is no anticipated impact to operations as service has rarely been called in recent years and will still be provided as required.
o Upgrade of a Captain position to a Battalion Chief position to align with the succession plan outlined in the department’s 2023 Strategic Plan (ID# 12). • Housing and Human Services: The following cost neutral changes result in the transfer of an ADA Coordinator position to the Public Works department to better align with operations (ID# 13) and adjust two administrative positions to improve operational efficiency (ID# 14). These changes result in a decrease of 1.0 permanent FTE in the department in the General Fund.
• Human Resources: The cost of the following changes will be offset by the reallocation of funding within the department by bringing certain leave monitoring work in-house as opposed to being contracted out.
o Convert an existing position to a Human Resources Technician and add a second Human Resources Technician, to improve efficiencies and provide much needed technical and administrative support for critical HR functions across the department (ID# 15).

These changes result in an increase of 1.0 permanent FTE in the department in the General Fund.
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• Information Services: The department has identified one-time vacancy savings in FY 2024-25 and will implement future cost saving measures by identifying historically underutilized supplies and expenses line items to offset the ongoing cost of the following changes.
o Restoration of the Communications Systems Technician position by deletion of a vacant position, to provide support for critical public safety programs, focused on communication equipment and systems.

Additionally, two positions are being adjusted to improve department operations and succession planning while enhancing employee retention and professional development opportunities (ID# 16).
• Library: The following cost neutral changes result in a net increase of 0.4 FTE to streamline operations and to further address community needs. o Various positions are being adjusted to better align with the heightened responsibilities and work necessary to maintain efficient and effective library operations. The nominal cost of these changes will be funded through reallocation of funding within the department without impacting existing services (ID# 17).
o Restore the Branch and Neighborhood Services division, which had been eliminated during the restructure, to align priorities and staff resources focused on branch operations, services and programing. Eleven existing positions will be transferred into the reactivated division.

These changes result in an increase of 1.0 permanent FTE and the deletion of

0.6 as-needed FTE in the General Fund.
• Police: The nominal cost of the following changes are being offset by a minor reduction in contractual services that can be made without impacting existing services.
o Convert an existing position to a Parking Citation Review Officer position support the parking citation review process and complete a first level of adjudication for contested parking citations (ID# 18).
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o Addition of 0.5 FTE Traffic Services Officer to support the Department of Transportation Automated Bus Lane Enforcement (ABLE) project (detailed in the CIP section of this report) to improve safety and operational efficiencies in bus service. This position would be initially funded by the BBB Fund (ID# 19).

These changes result in an increase of 0.5 permanent FTE in the General Fund. • Public Works: Staff has identified various cost saving measures, including reducing the purchase of certain landscape materials, lower maintenance needs of electrical equipment, and eliminating a 0.5 FTE vacant position, which will offset the cost of several staffing adjustments. The adjustments would improve operational performance and service to the community, such as:
o Changes in the RRR Fund, the Cemetery Fund, and the General Fund to align position titles with responsibilities and industry best practice (ID# 20). o Various Public Landscape staffing changes would enhance customer service, provide adequate oversight, and improve operational efficiencies within the division (ID# 21).
o Transfer of the ADA Coordinator position from the Housing and Human Services department to integrate the ADA work plan into the projects, policies, and programs of the Public Works Department (ID# 13). o Various Engineering staffing changes to improve departmental performance while enhancing employee retention and professional development opportunities, partially funded by eliminating a vacant 0.5 FTE position (ID# 22).
o Increase of additional as-needed staffing in the Cemetery Fund to increase weekend and evening services for the community, the cost of which will be funded through an increase in fees for weekend and evening services (ID# 23).
o Addition of 4.0 FTE positions in the Water Fund to adequately staff new and expanded facilities, respond to emergencies, and maintain uninterrupted, essential water service for the community (ID# 24). 22 of 38
o Addition of a 1.0 FTE position jointly funded by the Water and Wastewater Funds to support day-to-day operations of the Advanced Metering Infrastructure Program, administer grants and bonds, and provide asset management of the water and wastewater infrastructure (ID# 25).

These changes result in a net increase of 4.5 permanent FTE in the department (0.5 FTE decrease in the General Fund and 5.0 FTE increase in other funds). • Recreation and Arts: The cost of the position changes below would be offset by additional revenues from event rentals and community programs, as well as reducing temporary staffing costs.
o Addition of 1.0 FTE Cultural Affairs Venue Supervisor in the Beach Fund to provide coordination and supervision of program delivery and event production and to assist the Cultural Affairs Venue Manager with facility operations and ongoing maintenance to provide greater activation and effective utilization of the Beach House complex. (ID# 26). o Addition of 0.5 FTE as-needed Community & Cultural Services Leader to bring back the very popular adult drop-in soccer program, as well as enable additional offerings of pickleball programming (ID# 27). o Addition of a 1.0 FTE Senior Administrative Analyst in the Recreation and Arts Department to increase capacity in the development of new community programming and provide high-level administrative work, including regular review and analysis of program data to identify opportunities for growth in existing, and in creation of innovative new, community programming (classes and camps) to respond to community need so that supervisors can focus on delivery of programs for the community (ID# 28).

These changes result in a net increase of 2.0 permanent FTE (1.0 FTE in the General Fund and 1.0 FTE in the Beach Recreation Fund) and a decrease of 1.2 as-needed FTE in the General Fund.

Attachment H details all staffing adjustments, including items that result in no additional costs.
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FY 2024-26 Proposed Capital Improvement Program (CIP) Biennial Budget Every two years, the City develops a five-year Capital Improvement Program (CIP) budget (Attachment B). Funds for the first year (FY 2024-25) are approved and appropriated as part of the budget process, and funds for the second year (FY 2025-26) are approved now and appropriated prior to the start of the second fiscal year. The budget plan numbers for FY 2026-27 through FY 2027-28 are included as a planning tool to demonstrate total anticipated capital funding needs. Project needs are reevaluated during each biennial budget cycle to ensure that project allocations are within available funding limits and best reflect current City and Council priorities.

It is important to note that prior to the pandemic, the General Fund allocated $21 million a year to the CIP Budget. Over the course of the last four years, the $21 million annual allocation was reduced by $41 million cumulatively. The reduction over the last four years has resulted in deferred infrastructure, technology and vehicle maintenance and replacement. Compounding the impact of the reduced allocation, prices have steadily increased nationwide due to inflation and price escalation. Consequently, over $450 million in citywide projects remain unfunded.

The FY 2024-25 proposed General Fund budget is $13 million. Of the $13 million, over ninety percent is budgeted for required ongoing maintenance, vehicle and technology replacements, and safety-related repairs. That means that less than ten percent ($1.2 million) is available for planning for future community amenities and enhanced services.

Staff projects that General Fund CIP funding at $21 million will not be possible until FY 2026-27.

More information on General Fund funded and unfunded projects is included in the Capital Improvement Section later in this report and in Attachment B, Proposed FY 2024-25 Biennial Capital Improvement Budget.
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CIP Budget Process
The CIP budget process is facilitated by a CIP Strategic Team comprised of the Director of Public Works, Director of Finance, the City Manager, the Assistant City Manager, the Assistant Director of Public Works, the Budget Manager, the Administrative Services Officer- PW and the Principal Administrative Analyst-PW. Departments prepare project application submittals for funding consideration with a priority ranking, and the CIP Strategic Team reviews and evaluates applications against the criteria outlined below.

Project applications are also evaluated within the context of available funding limits to ensure that extremely limited resources fund priority projects while maintaining the City’s existing infrastructure and minimizing future replacement costs.

Project application budget requests, particularly for unrestricted General Fund dollars, have significantly exceeded available funding. This requires creative strategies to leverage enterprise funds, grant funds, developer impact fees, and other funding sources to fund priority capital projects. The CIP Team evaluates projects that are competing for limited funds according to three broad criteria, defined as follows:

Mandated Activities
• Projects necessary for health and safety reasons that cannot be deferred • Projects mandated by the Federal or State government
• Projects necessary to adequately maintain existing facilities, infrastructure, or equipment
• Projects underway that have unavoidable budget shortfalls and that cannot be modified
Council / Community Priorities
• Projects that address a Council/Community Priority
• Projects that respond to a Council action or directive • Projects identified in an adopted City planning document 25 of 38
Fiscal Responsibility
• Projects that will improve operational efficiencies and achieve ongoing cost savings
• Projects that generate revenue
• Projects where significant outside funding has been obtained to leverage City funding
Based on evaluation against these criteria, capital budget recommendations are presented to the City Council for consideration.

The Citywide CIP Proposed FY 2024-26 Biennial Budget funds 73 capital projects across 23 Funds. The total Proposed Budget is $91.8 million in FY 2024-25, and $102.7 million in FY 2025-26, excluding internal services transfers. The FY 2024-25 Proposed CIP Budget represents a decrease of $12.2 million or 11.7 percent compared to the FY 2023-24 Adopted CIP Budget of $104 million. The prior year budget included an increase in funds programmed due to the receipt of grant funding for Big Blue Bus capital projects. Staff anticipates rolling over funds for projects that remain in progress, and thus have adjusted the FY 2024-25 requests accordingly.

General Fund - Capital Budget
The General Fund represents 13 percent of the total CIP Budget over the biennial period. The FY 2024-25 proposed General Fund budget is $13 million, which continues to reflect a net reduction of $8 million from the annual $21 million General Fund CIP allocation. In FY 2025-26, the proposed General Fund budget is $15.3 million, which reflects an additional $5.7 million net decrease, as compared to prior funding levels.

Funding for the biennial cycle continues to be lower than prior years due to contingent liabilities. The Proposed General Fund budget for FY 2024-26 reflects the deferral of eight projects totaling $2.9 million for FY 2024-25 and 12 projects (new and on-going) totaling $4.6 million in FY 2025-26. These projects were placed on a Held CIP projects 26 of 38
list (Attachment B) and prioritized on the Unfunded List. Initially, the projects were included in the list of projects recommended for approval but were later deferred as a strategy to create a flexible reserve to address contingent legal liabilities. The criteria used for selecting the projects to defer (Held CIP projects list) included new one-time project requests, projects that potentially qualify for outside funding, and projects that could be phased over multiple years. If resources become available as we gain clarity on the impact of legal liabilities, staff would return to City Council and recommend that projects on the Held CIP project list be considered and approved prior to any other projects on the unfunded list. In addition, the Pier fire sprinkler project was originally included in the proposed budget for FY 2024-26 but due to the unfunded liabilities and the Pier fund requiring General Fund subsidy, the project was pushed to FY 2026-27 and only included in the budget plan for year 3. Projects included in the budget plan will be re-evaluated in the next biennial budget cycle to ensure that funding is available.

Considering the decrease in General Fund baseline funding, the limited number of projects recommended in the proposed budget continue to largely represent critical infrastructure needs and projects that cannot be deferred without compromising essential operations or public health and safety. More than ever, the General Fund allocation prioritizes ongoing infrastructure maintenance projects that keep our neighborhoods and open spaces clean and safe. As a result, alternative funding sources and capital financing solutions will need to be employed to provide additional resources for any future large projects.

Beginning in FY 2026-27, the forecast assumes that the $21 million General Fund allocation would resume. However, even if the $21 million General Fund allocation resumes, the City would still be faced with having to navigate the various challenges resulting from inflation, from having deferred replacements and maintenance over the past few years, from a Held Project list that may or may not be funded at a later time during the upcoming fiscal year, as well as an unfunded list that has grown exponentially. In order to advance the implementation of the increasing number of unfunded projects and curtail the accelerated deterioration of city facilities and infrastructure, the City will have to continue its persistent pursuit of grant funds as well as consider new funding options such as a general obligation bond, which is a common 27 of 38
tool for local government agencies and school districts to fund their capital improvement programs.

Non-General Funds - Capital Budget
The non-General Fund portion of the CIP represents eighty seven percent of the total CIP Budget over the biennial period. The total non-General Fund Proposed Budget is $93.1 million in FY 2024-25, and $102.2 million in FY 2025-26, including internal service transfers. The non-General Funds included in the CIP budget can support their respective capital improvement budgets. These resources are mostly restricted and can only be used for projects within their fund. The Pier and Beach Recreation Funds are projected to require General Fund assistance due to continued revenue constraints. As a result, several infrastructure projects for the Pier and Beach have been added to the Unfunded Projects list (Attachment B) until additional resources are available to proceed with the projects.

The Capital Improvement Program Areas of Focus
The FY 2024-26 CIP Biennial Budget and the FY 2026-29 Budget Plan continue to advance Council’s adopted priorities by recommending critical ongoing infrastructure maintenance activities and initiatives that provide clean and safe neighborhoods and open spaces. In addition, the five-year capital plan strategizes to advance work in several key focus areas related to parks, safety, water and wastewater projects, and the upgrade of critical City infrastructure.

Maintaining Clean and Safe Public Spaces
The FY 2024-26 CIP budget strategically recommends funding key investments to protect the City’s existing capital investments and minimize future maintenance and replacement costs. These investments include facility improvements, repaving streets, renewing sidewalks, maintaining parking structures and lots, urban forest renewal, modernizing streetlights, maintaining bus components, replacing aging water and sewer mains, and purchasing necessary trash collection equipment which are key to the foundation of supporting a clean and safe Santa Monica. In addition, the Biennial CIP Budget addresses clean and safe through updating, replacing, and expanding the City’s 28 of 38
cybersecurity infrastructure and replacing and updating the facilities maintenance management system.

Park Improvements and Planning
The proposed CIP Biennial Budget focuses largely on two important park-related areas:
repairing existing park infrastructure and planning for the future. Funding for playground replacements were prioritized to ensure the City’s current park assets remain operational and safe. Leveraging development impact fees allows improvements to the existing park system without tapping into the extremely limited General Fund resources.

While previously planned projects like the Airport Park Expansion and the Memorial Park Masterplan await construction funding opportunities that would allow them to move forward, it is crucial that initial planning, design, and site preparation efforts continue for both projects. The proposed budget allows for the robust community engagement efforts at the airport to proceed and transition into the next phase of environmental analysis. Funding is also proposed to move forward with the necessary site preparation work in anticipation of the first phase of the Memorial Park Improvements to begin in 2026.

Water & Stormwater Projects
The FY 2024-26 Biennial CIP Budget advances the City’s efforts to achieve Council’s goal of reducing our reliance on imported water supplies and provide a climate resilient water supply for the community. The proposed capital projects also focus on protecting and rehabilitating existing water/wastewater infrastructure, replacing aging assets, continue to enhance water supply resiliency (e.g., expanding the City’s recycled water network and groundwater recharge capacity), improve the efficiency and reliability of our water treatment and wastewater collection infrastructure (e.g., replacement of groundwater production wells and upgrades at the Moss Avenue Pump Station), and upgrade/rehabilitate all of the City’s water storage reservoirs. 29 of 38
Modernization of Critical City Infrastructure
During the FY 2024-26 biennial period, work will continue on critical City infrastructure projects that received funding for their planning phase in previous CIP budget cycles such as the Pier Bridge Replacement. The Pier Bridge Replacement Project would replace the existing, outdated structure with a wider structure providing one vehicular traffic lane in each direction with wider sidewalks. This project is being funded with a combination of restricted grant funds and restricted local return funds.

Impacts to the Ongoing Operating Budget
Capital projects that increase the number of facilities or expand existing infrastructure can impact ongoing operating costs for the city. The projects proposed in the FY 2024- 26 biennial cycle do not request net new General Fund operating budget in FY 2024-26.

Unfunded Capital Projects
This biennial budget continues to focus the limited resources available on the highest City Council priorities and planning of the Airport Conversion Project. As a result, funding is not sufficient to address all deferred infrastructure improvements, equipment maintenance/replacement, price escalation on existing projects, and the addition of new amenities desired by the community. Projects that were eliminated or reduced to help close the City’s funding gap resulting from the global COVID-19 crisis or did not receive funding due to very limited General Fund resources, are listed in the Unfunded Projects table (Attachment B). These projects are tracked for consideration in future funding cycles. In many cases, these are still high priority projects, however, they were deferred given the very limited resources and the fact that staff have yet to identify new funding sources. To move them forward, City staff will need to explore opportunities to leverage future City funds with external grant funding opportunities or receive direction to look into new revenue sources.

The Unfunded Project table includes projects which were previously unfunded and some which were added to the unfunded list as part of the biennial FY 2024-26 Capital Improvement Program Budget process. These projects total $458 million. A few of the largest projects include:
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• Replacement of fire station facilities,
• Pier infrastructure and railing upgrades,
• Parking Structure 1
• Memorial Park and Airport Park Expansion
• Parking Access and Revenue Control System replacement.

Many of these projects would create ongoing maintenance budget needs that would need to be accounted for when recommended for funding.

City Fees, Fines and Rates
As part of the annual budget adoption process, staff presents master fee, fine, and parking resolutions to Council for approval. Most fees are administratively adjusted by a factor equal to the net change in City salaries and benefits costs for that fiscal year. The administrative adjustment for FY 2024-25 is 3.7%. Proposed changes to fees and rates with financial impacts are discussed below and listed in Attachments C and D. The final proposed resolutions will be presented for adoption with the Proposed Budget on June 25, 2024.

Community Development Fees
City Planning
City Planning is proposing the addition of four new fees (Attachment D, page D-1), and the reduction of one fee (Attachment D, page D-4) as described below. • Administrative Approval (multi-unit dwelling project up to 10,000 sf in multi-unit and Ocean Park districts): Santa Monica Municipal Code Section 9.39.020(B)(2) does not require an Administrative Approval for housing projects consisting of new multi-unit dwelling construction or additions to existing multi-unit dwelling units in the Multi-Unit Residential Districts or Ocean Park Neighborhood Districts.

As a result, such projects only need to obtain design review approval and a building permit. However, this causes confusion since the design review process only reviews the building design and is not a land use entitlement. Staff only conducts a cursory code compliance review. In cases where such projects may 31 of 38
seek a density bonus or use other aspects of State law, it is necessary to document the land use approval before the design review approval. As a result, a new Administrative Approval fee is being created for this class of projects and a corresponding reduction in the Architectural Review Board – Administrative Design Approval (New Construction) fee to remove the staff time for code compliance that was included in setting the Architectural Review Board fee.

Proposed Fee: $3,498.04
• Historic Resource Designation Assessment: When a Landmark designation application is filed, applicants are currently charged an application fee for staff time spent processing the application. In addition, applicants are charged the actual historic consultant cost for preparation of an historic assessment to evaluate the application. Staff is proposing a new flat rate fee structure to simplify the administrative process for applicants and staff, reduce delays in processing designation applications, and reduce barriers to filing Landmark designation applications by potentially subsidizing the cost of historic preservation assessments through a flat-rate fee structure.

Proposed Fee: $6,400
• SB35 Application Fee: The City did not issue sufficient building permits for lower income housing units in the 5th Cycle Housing Element. Therefore, the City is now subject to SB35 for housing projects that include at least 50% of units as affordable to lower income households. The staff hours for processing an SB35 application would be the same as processing an Administrative Approval housing project so the proposed new fee would be the same.

Proposed Fee: $10,719.70 (Same as Administrative Approval Housing Project). • Zoning Conformance Review: Applicants are being charged the “Zoning Compliance Letter” fee when miscellaneous zoning reviews are done per the zoning ordinance. Adding a new Zoning Conformance Review fee line item reflects work that staff is already doing, providing transparency to the customer regarding fees for service received. Staff spends the same amount of time for zoning conformance reviews as preparing zoning compliance letters as both involve compliance checks and permit research.
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Proposed Fee: $1,391.50 (This is the same as the Zoning Compliance Letter). • Architectural Review Board – Administrative Design Approval (New Construction): Revised fee to remove code compliance review component.

Proposed Fee: $3,201.64 (Current Fee: $5,125.43)
Building and Safety
Staff recommends implementing ten new grading permit fees (Attachment D, pages D-1 through D-3) as authorized by Santa Monica Municipal Code 8.08.050. These fees would create fee items that are directly applicable to any requests received for grading and excavation. Currently, fee items for this specific work activity do not exist in the fee schedule. In addition, one fee for factory-built housing is being added to comply with new state law.

Code Enforcement
Medicinal cannabis fees are being revised to note that they are subject to the City’s annual administrative revision and increase (Attachment D, page D-4).

Fire
The Fire Department proposes several fee changes that are not anticipated to significantly impact revenue.

First, staff recommends the addition of a Meeting Room Rental Fee and Kitchen Use Fee to manage the use of the Community Room at Fire Station 1 and cover expenses related to maintaining or cleaning the room after use (Attachment D, page D-3). Use of the Community Room is intended for the following groups: Santa Monica Fire Department, City of Santa Monica divisions/departments, City of Santa Monica Boards and Commissions, and City of Santa Monica neighborhood groups. The fee noted applies to use of the facility by Santa Monica neighborhood groups only.

Second, the Certified Unified Program Agency (CUPA) fees are set by Los Angeles County and staff updated the City’s fee schedule to reflect the current rates (Attachment D, page D-4).
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Lastly, staff recommends the addition of four fees for the EMS program, including two transport fees for Advanced Life Support (ALS) and Basic Life Support (BLS) informed by a fee study completed by MGT of America Consulting (Attachment C) earlier this month. These new fees will allow the City to recover some of the costs associated with providing ambulance transport services (Attachment D, page D-3). Currently, when the City’s ambulance provider is unable to respond, the Fire Department responds but is unable to bill patients. With these fees, which are set by Los Angeles County, the City will be able to bill patients who require transport.

Library
Staff is recommending the deletion of the following fees (Attachment D, page D-8):
• Technology Package fee: This fee was never utilized due to the complications when it was created. It was meant to provide IT support to meeting room renters with more complicated needs. However, none opted for it claiming their needs were minimal. Additionally, because this service requires staff support, it was not something that the Library could offer after the 2020 staff cuts. Current Fee:
$38.00
• Internet session for extra time or those without library cards: Internet sessions were discontinued when the libraries were closed for the pandemic. Due to mandated restrictions and significant reductions, Library operations and logistics were altered in compliance and there was no longer capacity for this service.

Current Fee: $2.00
Police
Staff is increasing the CCW (Carry Concealed Weapons) Renewal Application fee from $25 to $457 (Attachment D, page D-5). State law has been updated through PC26190(b)(1) and removed the $25 renewal cap. The new update allows cities to charge a reasonable fee for new licenses and renewals. On March 14, 2023, Council approved the $457 fee if State law removed or modified the existing cap on renewal applications.
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Public Works
Airport
In 2017, by way of a Consent Decree with the Federal Government, the City agreed, among other things, to comply with certain federal standards regarding aeronautical rates and charges at the Santa Monica Airport. In 2019, as part of a preliminary decision in an enforcement proceeding over the reasonableness of the City’s aeronautical rates and charges, the Federal Aviation Administration advised the City to update its landing fee and other aeronautical charges to take into account the then-current conditions at the Airport, including the recently shortened runway. In 2022, the FAA issued its final decision in its enforcement proceeding regarding the City’s Airport fees and directed the City to update its rates and charges to comply with federal standards. Then, in 2023, the FAA threatened future enforcement action if the City did not take account of the Airport's surplus and immediately lower its hangar rates, landing fees and other aeronautical fees. In response to these federal directives, the City has updated and recalculated its aeronautical rates and charges. The result of this process is that the rates and charges for landing fees, aircraft tie-down fees, fuel flowage fees and aircraft hangar leases will be substantially reduced to ensure the City’s compliance with applicable federal standards as required by the Consent Decree.

The adjusted rates and charges will remain in effect until at least December 31, 2028.

The fee changes are listed in Attachment D on pages D-5 through D-7.

Office of Sustainability and the Environment
Staff is recommending the elimination of the EV User Fee (Winter: October 1-May 31) and establishing one EV User Fee at $0.35 per kWh that applies to all seasons. (Attachment D, pages D-6 and D-8)
Cemetery:

Staff is recommending the following fee changes due to increased demand for these optional services. The proposed increases will cover the increase in expenses related to staff overtime and as-needed hours (Attachment D, page D-7). 35 of 38
• Additional evening service: Fee increase accounts for staff overtime and overhead to accommodate additional evening service requests. • Charge for any ceremony held on weekend: Fee increase accounts for staff overtime and overhead to accommodate additional evening service requests.

Public Landscape
Certain landscape services are provided by outside vendors. Staff is recommending increases to tree planting, pruning and restitution fees (Attachment D, page D-7) to match the rate that the City is being charged by the current vendor and to account for full cost recovery.

Recreation and Arts
Staff is recommending the addition of one fee to cover the cost of the materials that are provided for the Junior Lifeguard Program (Attachment D, page D-3).

Proposed Fee: $32.00
Council Discretionary Funds
Each year, Council allocates discretionary funds to assist the community in special projects or support important but otherwise unfunded priorities. Traditionally, Council has supported community partners like the Business Improvement Districts, Santa Monica traditions like the Fourth of July Parade, one-time programs, and local students through science or music grants that allow Santa Monica youth to participate in special events. Projects and programs supported by Council discretionary funds for the past three years are detailed in Attachment J.

Council allocated the remaining FY 2023-24 discretionary funds during the April 23, 2024 Council meeting. As such, there are no unprogrammed FY 2023-24 discretionary funds remaining.
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The FY 2024-25 proposed budget for Council discretionary funds is $127,653.

Allocation of the funds may occur along with Budget Adoption in June or throughout the year. No action is required by Council at this time.

Past Council Actions
Meeting Date Description
06/27/23
(Attachment E)
Adoption of the First Year and Approval of the Second Year of the FY 2023-25 Biennial Budget, Adoption of the Second Year of the FY 2022-24 Biennial Capital Improvement
Program Budget
03/11/23
(Attachment F)
2023 Council Workshop to Select Council Priorities and
Provide Direction on the Fiscal Year 2023-2025 Budget
02/27/24
(Attachment G)
Adoption of the FY 2023-24 midyear revenue and
expenditure budget adjustments and approval of the
corresponding adjustments to the FY 2024-25 budget plan Environmental Review
The FY 2024-25 Proposed Budget is exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines. The Proposed 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.” This report provides a programmatic overview of the City’s budget. The implementation of capital projects or programs would be subject to future CEQA review as applicable. Therefore, it can be seen with certainty that actions would not result in adverse physical impacts on the environment, and as such, is exempt from CEQA.

Financial Impacts and Budget Actions
Recommended FY 2024-25 proposed budget adjustments result in:
• FY 2024-25 Proposed Operating Budget
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o Revenues: Approximately $0.3 million increase in the General Fund and $3.9 million increases in all Other Funds, for a combined $4.2 million net increase over the revised FY 2024-25 Budget Plan.
o Operating Expenditures: Approximately $1.0 million increase in the General Fund and approximately $3.8 million increase in all Other Funds, for a net combined $4.8 million increase throughout the citywide operating expenditure budget.
o FTEs: Increase of 6.3 FTE permanent positions and reduction of 2.3 asneeded FTE positions in the General Fund. Increase of 8.0 FTE permanent positions and a minor increase in as-needed positions in All Other Funds.
• FY 2024-26 Proposed Biennial Capital Improvement Program (CIP) Budget:
o The FY 2024-25 Proposed Capital Improvement Program (CIP) Budget is approximately $91.8 million in FY 2024-25 (a $5.3 million change from the FY 2024-25 CIP budget plan), net of reimbursements and transfers. ▪ $13.0 million in the General Fund and $93.1 million in the Other Funds, before adjustment for reimbursements and transfers. o The FY 2025-26 Proposed Plan is $102.7 million, net of reimbursements and transfers.
▪ $15.3 million in the General Fund and $102.2 million in the Other Funds, before adjustments for reimbursements and transfers.

Details of FY 2024-25 Proposed Budget adjustments are in Attachment A. The FY 2024-26 Capital Improvement Program (CIP) Budget is included in Attachment B. 38 of 38
Prepared By: Jennifer Young, Budget Manager
Approved Forwarded to Council
Attachments:

A. Attachment A - Budget Adjustments for FY 2024-25
B. Attachment B - FY 2024-26 Proposed Biennial CIP Budget C. Attachment C - Emergency Medical Services (EMS) Fees Cost Analysis D. Attachment D - Revisions to Fee Schedules for FY 2024-25 E. Attachment E - June 27, 2023 Staff Report (Web Link) F. Attachment F - March 11, 2023 Staff Report (Web Link) G. Attachment G - February 27, 2024 Staff Report (Web Link) H. Attachment H - Position and Classification Changes
I. Attachment I - Classifications Impacted by Equity Adjustments J. Attachment J - Council Discretionary Funds
K. Attachment K - March 23, 2021 Staff Report (Web Link) L. Attachment L - October 11, 2022 Staff Report (Web Link) M. Written Comments
N. PowerPoint Presentation
O. PowerPoint Presentation
P. PowerPoint Presentation