City Council
Housing Authority
Parking Authority
Report
City Council Meeting: June 25, 2024
Agenda Item: 12.A
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To: Housing Authority, Parking Authority, Mayor and City Council From: Oscar Santiago, Director, Finance Department, Budget Subject: Adoption of the Second Year of the FY 2023-25 Biennial Budget, Adoption of the First Year and Approval of the Second Year of the FY 2024-26 Biennial Capital Improvement Program Budget
Recommended Action
Staff recommends that the City Council, Housing Authority and Parking Authority:
1. Adopt a Resolution of the City Council of the City of Santa Monica adopting the FY 2024-25 Operating Budget and adopting the first year and approving the second year of the FY 2024-26 Biennial Capital Improvement Program Budget at Attachment A, as amended by Attachment D;
2. Adopt a Resolution of the Housing Authority of the City of Santa Monica adopting the FY 2024-25 Operating Budget and adopting the first year and approving the second year of the FY 2024-26 Biennial Capital Improvement Program Budget at Attachment B, as amended by Attachment D; and
3. Adopt a Resolution of the Parking Authority of the City of Santa Monica adopting the FY 2024-25 Operating Budget and adopting the first year and approving the second year of the FY 2024-26 Biennial Capital Improvement Program Budget at Attachment C, as amended by Attachment D.
Staff also recommends that the City Council:
4. Adopt a Resolution of the City Council of the City of Santa Monica revising the City’s master fee schedule to establish and revise certain permit and user fees and charges (Attachment E);
5. Adopt a Resolution of the City Council of the City of Santa Monica revising the City’s master fine schedule to establish and revise the administrative citation schedule of fines for certain violations of the Santa Monica Municipal Code (Attachment F);
6. Adopt a Resolution of the City Council of the City of Santa Monica establishing parking rates and permit fees for all City parking facilities and resources (Attachment G);
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7. Adopt a Resolution of the City Council of the City of Santa Monica temporarily waiving and reducing outdoor dining license fees for third street promenade to stimulate economic recovery (Attachment H);
8. Adopt a Resolution of the City of Santa Monica establishing new classifications and adopting salary rates for various listed positions (Attachment I) and approve the position and classification changes (Attachment J);
9. Adopt a Resolution of the City of Santa Monica establishing the Gann appropriations limit for FY 2024-25 (Attachment K);
10.Adopt a Resolution incorporating a project funded by SB1: The Road Repair and Accountability Act (Attachment L);
11.Adopt a Resolution authorizing the City Manager to revise the Confidential Unrepresented Employee (CUE) Pay Plan (Attachment M)
12.Maintain existing adult-use and medicinal cannabis tax rates or provide direction to staff on the desired adult-use and medicinal tax rate increases and adopt a resolution increasing the adult-use and medicinal cannabis tax rates as directed effective January 1, 2025 (Attachment N);
13.Authorize the City Manager to accept a discretionary grant award in the amount of $50,000 from the Los Angeles Homeless Services Authority and approved by Supervisorial District 3 to support the City Attorney’s Office Shelter, Treatment, and Empowerment Program (STEP) Court;
14.Authorize the City Manager to accept a grant award of $4,822,406 from the U.S.
Department of Housing and Urban Development’s Continuum of Care Program to provide housing subsidies for the homeless and disabled population and to execute all necessary documents to accept the grant and any subsequent renewals;
15.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; and
16.Adopt a finding that the proposed landing fee reduction project, which includes reduced rates for tie-downs, transient tie-downs, hangars, landing fees, and fuel flowage fees (Reduced Airport Fees), exempt from the California Environmental Quality Act (“CEQA”) pursuant to Public Resources Code section 21080(b)(1) and CEQA Guidelines sections 15061(b)(3), and 15369.
Summary
As presented to City Council on May 28, 2024 (Attachment O), the FY 2024-25 Proposed Operating Budget and the FY 2024-26 Proposed Biennial Capital Improvement Program (CIP) Budget is a balanced budget. The attached changes to the proposed budget reflect direction given by Council at that time following public input and Council discussion, including the addition of four Police Officers, and the funding of two CIP projects - the CCTV Security Camera Program and the Quick Build Enhancements at Unsignalized Intersections.
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The overall FY 2024-25 Proposed Budget as revised is $765.3 million, net of reimbursements and transfers. This is a difference of approximately $1.8 million over what was presented in the initial proposed budget on May 28, 2024. Of this amount, approximately $0.8 million is in the General Fund, $0.9 million is in the Housing Authority Fund, and $50,000 is in the Miscellaneous Grants Fund.
Building on efforts made since the COVID-19 pandemic, the FY 2023-25 budget restores many services and investments to maintain progress towards addressing community needs. Given the current level of economic uncertainty, the FY 2024-25 Proposed Operating Budget is focused on no-cost operational adjustments to improve service delivery for the community, required budget corrections, and adjustments required in accordance with collective bargaining agreements.
The first year (FY 2024-25) of the FY 2024-26 Proposed Biennial CIP Budget makes strategic investments to maintain and enhance critical infrastructure to protect the City’s existing capital investments and minimize future maintenance and replacement costs.
However, as discussed at the May 28, 2024 study session, a conservative approach is being taken as a result of resource constraints and as a strategy to safeguard our fiscal stability, at a time when much uncertainty remains around contingent legal liabilities.
This report presents information and requests actions necessary to adopt the FY 2024- 25 Operating Budget and adopt the first year (FY 2024-25) of the FY 2024-26 Biennial CIP Budget for the City of Santa Monica, the Santa Monica Housing Authority, and the Santa Monica Parking Authority. Staff also requests that Council approve the second year (FY 2025-26) of the FY 2024-26 Biennial CIP Budget. Since the City Charter requires Council to adopt a budget annually, staff will submit the second year of the CIP Budget to Council for formal adoption, with any necessary revisions, in June 2025.
The report also provides information on cannabis tax rates, outdoor dining rates, and the updated balance of available Council Discretionary Funds. Finally, this report includes actions necessary to revise certain fees and fines, establish parking rates, set the annual Gann appropriations limit, approve the allocation of SB-1 Gas Tax funding to 4 of 21
eligible projects, revise the Confidential Unit Employees (CUE) Pay Plan; and accept grant awards and renewals.
Background
The FY 2023-25 Biennial Operating 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 restore City programs and services to the community through strategic investments informed by Council’s five priority areas. The restorations were 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. The investments incorporated in the biennial budget continue through this second budget year (FY 2024-25). All restorations and new investments funded in the biennial budget are detailed in the adopted budget book. Some of the key investments in the priority areas include:
• addressing homelessness – preparation of a Homelessness Strategic Plan; expanded outreach teams, including Multi-Disciplinary Teams consisting of mental health professionals who deliver immediate and intensive services to people experiencing homelessness, the Homeless Liaison Program (HLP) to expand operating hours, partnerships with outside agencies to provide greater resources to work with clients and connect them immediately to available services, and redesign of the SAMOSHEL interim housing program to accommodate 24/7 intakes.
• clean and safe programs – implementation of the Santa Monica Analytical Real Time Center (S.M.A.R.T Center) to gather and synthesize real time data from an array of technologies to aid police resources, expanded security services at Downtown parking structures and the Pier, maintenance of water features at Ken Genser and Tongva Parks, increased frequency of tree pruning in high-traffic areas to ensure safer conditions for the public and improve the aesthetics of our public spaces, specialized public space maintenance team focusing on waste and debris generated by people experiencing homelessness, enhanced 5 of 21
monitoring and enforcement of the City’s home-sharing ordinance, enhanced parking structure and lot maintenance program, enhanced community response unit capabilities, and implementation of a Transit Safety Program on buses and at bus stops.
• community & cultural offerings – increased service hours at libraries and the Memorial Park gym and fitness room, enhanced direct service youth programs like CREST, PAL and VAP, including the Summer Lunch Program, continued financial support for the school district’s playground club offering supervised afterschool play time on elementary schoolyards, continuation of the Art of Recovery program which supports production of free public art and cultural programming and events, and creation of a new Pickleball Program. • economic recovery – creation of a small business assistance and tenant improvement fund to provide revolving loans or grants and technical assistance to highest need businesses, advancement in streamlining the City’s permitting processes with the added Senior Planner and restoration of the Neighborhood Grant Program, and modernization of the City’s Business License Tax program.
Likewise, the Council’s five priorities guided investments in the City’s capital improvement program, in particular the General Fund projects, once the most critical maintenance needs and other obligations were addressed. Because the City’s CIP budget has remained underfunded since the COVID-19 pandemic and the need to continue reduced funding to address uncertainty over city liabilities, the CIP unfunded project list has grown to $460.0 million.
The proposed FY 2024-25 Capital Improvement Program budget is strategically allocating its very limited General Fund resources to on-going facility and infrastructure maintenance, and technology upgrades to ensure that projects most closely addressing City Council priorities rise to the top.
The majority of the CIP portfolio is funded by non-General Fund funding sources that are mostly restricted and must fund projects within their enterprise or follow grant 6 of 21
guidelines. Staff have proactively identified multiple grants and outside resources in order to implement innovative projects that support attainment of various sustainability goals. Below are highlights of some of the larger projects that reflect a commitment to maintaining and enhancing the City’s infrastructure and that focus on a Clean and Safe Santa Monica, a Sustainable and Connected Community and aligned with City Council priorities.
Project Fund Amount
Memorial Park PLD Relocation – relocation of Public
Landscape Division to implement the first phase of the
Memorial Park Expansion
General Fund 1,000,000
Cybersecurity – upgrade and replace system that has
reached end of life
General Fund 612,096
Annual Paving – paving of 2-3 miles of road along California Avenue, Broadway, and Pico Blvd.
Gas Tax,
Local Return
1,700,000
Park Improvement Program – address maintenance issues
identified at Virginia Avenue Park, Tongva Park, Reed Park, Clover Park and Airport Park
Special
Revenue
Fund
250,000
Water Main Replacements – replace approximately 2 miles of water mains in the following areas: 7th St, 11th Ct, 22nd Ct, 24th Ct, Euclid Ct, Michigan Ave, Ocean Ave,
Washington Ave.
Water Fund 7,737,500
Wastewater Main Replacements – replace approximately
1.5 miles of wastewater collection pipes in the following areas: 4th St, 5th Ct, 9th Ct, 24th Ct, 26th Ct, Centinela Ave, Chelsea Ave, Frank Ct, Georgina Pl N, Harvard Ct, Hill Pl N, Maple St, Pico Pl S, Raymond Ave, Raymond Pl N, Santa
Monica Pl S, Stanford St, Washington Pl N, Washington Pl S.
Wastewater
Fund
3,477,800
Urban Forest and Planting Renewal – planting and
removal of approximately 300 trees citywide aiming for a net public tree gain in every neighborhood of 5-10% more trees are planted than removed.
General Fund 250,000
Groundwater Recharge Well – part of the City’s overall goal to be water self-sufficient and reduce reliance on imported water supplies, would fund design and construction of
groundwater recharge well SM-11i to replenish the City’s groundwater aquifers.
Water Fund 2,000,000
Discussion
The Citywide FY 2024-25 Proposed Budget has been revised from the budget presented to Council on May 28, 2024 to reflect final changes primarily based on Council direction. The overall FY 2024-25 Proposed Budget as revised is $765.3 million, net of reimbursements and transfers, and is summarized in the following table. 7 of 21
FY 2024-25 Citywide Budget
Proposed
Budget
(May 28)
Final
Changes
Proposed
Budget for
Adoption
Citywide Budget before adjustment for reimbursements
& transfers $859.2 $1.8 $861.0
Less reimbursements & transfers 1($95.7) 0.0 ($95.7)
Citywide Budget net of reimbursement & transfers $763.5 $1.8 $765.3 Citywide FTE Permanent Positions 2,032.6 4.0 2,036.6
Citywide FTE As-needed Positions 85.0 0.0 85.0
Total FTEs 2,117.6 4.0 2,121.6
1 These are technical adjustments to eliminate double counting of certain expenditures appearing in two funds.
Final changes to Proposed Budget
Revenues
The citywide FY 2024-25 revenue budget is being adjusted for final changes to include:
• Decrease of $189,760 in the General Fund, reflecting a reduced fee for outdoor dining on the Third Street Promenade to support the City’s economic recovery; • Increase of $907,850 in the Housing Authority Fund to reflect the higher than anticipated award amount of Continuum of Care (CoC) grant funds. This adjustment is required to align the full grant amount with the amount included in the proposed budget presented to Council on May 28th;
• Increase of $50,000 in the Miscellaneous Grants Fund, reflecting a grant award for the City Attorney’s STEP Court program; and
• Increase of approximately $195,000 in the Pier Fund, reflecting the anticipated lease revenue for the approved lease agreement with Pacific Park, as presented to Council on May 28, 2024 (Attachment P).
Operating Expenditures
The modifications to the Proposed Operating Budget, known as final changes, increase the operating expenditure budget by approximately $1.4 million in FY 2024-25. The changes are listed below.
Fund Description
FY2024-25
Proposed
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Budget
General Fund 4.0 Police Officers ($849,840 annually) pro-rated based on estimated timing of when positions would be filled. $424,920 Housing
Authority
Fund
Increase in CoC expenses to align with higher than
anticipated grant award amount as described in the
corresponding revenue change above. This adjustment
is required to align the full grant amount with the
amount included in the proposed budget presented to
Council on May 28th.
$907,850
Miscellaneous
Grants Fund
New grant to support the STEP Court program
described above. $50,000
General Fund $424,920
Other Funds $957,850
Total Final Changes All Funds $1,382,770
Capital Improvement Program Expenditures
The modifications to the Proposed CIP Budget, known as final changes, increase the capital expenditure budget by $370,000 in FY 2024-25 and decrease it by $150,000 in FY 2025-26. Additionally, the allocation to the Citywide Facilities Renewal Program as reflected in the budget plan for FY 2026-27 through FY 2028-29 is being reduced by $500,000 annually.
Fund Description
FY 2024-25
Proposed
Budget
FY 2025-26
Budget
Plan
General Fund Quick Build Enhancements at
Unsignalized Intersections 120,000 100,000
General Fund CCTV Security Camera Program 250,000 250,000 General Fund Alley Renewal Program (500,000)
Total Final Changes 370,000 (150,000)
Personnel Changes
Personnel changes are included in Attachment J. The following are new changes that were not included in the budget presented to Council on May 28, 2024:
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• Add 4.0 Police Officer positions in the Police Department, per Council direction at the May 28th budget study session.
• Delete 1.0 Consumer Affairs Specialist / Add 1.0 Senior Legal Analyst – CAO in the City Attorney’s Office. The change reflects the department’s intent to appropriately classify the position to better reflect the increased, higher-level legal duties this employee is performing, including litigation-related work, community outreach, and strategic analysis. The department will absorb the nominal cost within its budget.
• Delete 1.0 Senior Grants Analyst / Add 1.0 Senior Accountant in the Finance Department. This no-cost staffing adjustment is recommended to better align with scope of responsibilities.
• Delete 1.0 Housing Program Manager / Add 1.0 Housing Administrator – Production in the Housing and Human Services Department (HHS). This no cost staffing adjustment will allow HHS to recruit a subject matter expert to support key City initiatives including the development of City-owned sites identified in the Housing Element, implementation of renter protection programs, and administration of Measure GS funds.
Also included in Attachment I are required adjustments to employee classifications, compensation and position adjustments, resulting from classification and compensation studies conducted by the Human Resources Department, as presented to Council at the budget study session. The budget impact associated with these adjustments was included in the proposed budget presented to Council on May 28.
Budget Resolutions
Adopting the resolutions in Attachments A, B, and C would:
• Adopt the FY 2024-25 budget revenues at the account level, with operating expenditure appropriations for the Salaries and Wages and Supplies and Expenses major expenditure categories within a fund for each department, and capital improvement program budget within a fund;
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• Authorize staff to roll over unspent appropriations for multi-year operating grants not completed at the end of the fiscal year, including federal recovery funding, unspent donations dedicated to programs, and funds for the encumbrances of goods and services ordered and contracted for by FY 2023-24 year-end but not delivered or provided until FY 2024-25;
• Authorize staff to roll over appropriations for Measure CS and Council discretionary unencumbered balances and unexpended encumbrances of the FY 2023-24 Budget for the City’s General Fund; and
• Authorize staff to roll over appropriations for the General Fund and all other NonGeneral Fund unencumbered balances and unexpended encumbrances for the FY 2024-25 CIP budget.
Gann Appropriations Limit
The State Constitution requires state and local governments to adopt an annual appropriation limit. This limit is commonly known as the “Gann Limit.” Under the Gann Limit, a maximum amount is established for annual tax-funded government services.
That amount is to be adjusted each year depending on changes in state population, inflation and the transfer of financial responsibility for various government activities from one level of government to another. Any significant amount of state tax revenue received above that Gann Limit is to lead to future tax rebates or tax cuts. Every June, along with budget adoption, City Council adopts a resolution establishing the Gann appropriations limit for the City of Santa Monica.
The proposed Gann appropriations limit for FY 2024-25 is calculated by applying annual adjustment factors provided by the California Department of Finance to the FY 2023-24 Gann Limit.
Adjustment Factors:
State Per Capita Personal Income . 1.03620
City Population Growth x 1.00340
Adjustment to current year = 1.03972
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FY 2023-24 (current year) Gann Limit x $ 2,947,395,776
Proposed FY 2024-25 Gann Limit = $ 3,064,466,336
Appropriations Subject to Gann Limit 328,015,760
Net Under / (Over) Limit $ 2,736,450,576
Appropriations subject to the Gann Appropriations Limit, primarily in the General Fund, are $2,736,450,576 below the limit. Examples of tax revenues governed by the Gann Appropriations Limit are property taxes, sales tax, transaction and use tax, transient occupancy tax, utility tax, parking facility tax, and the business license tax. These revenues subject to the limit are reduced by any refunds, certain benefits payments, qualified capital projects, and court or federal mandates.
A resolution to establish the City’s FY 2024-25 Gann Appropriations Limit is included in Attachment K.
Fees/Fines/Rates
Master fee, fine, and parking rate resolutions are annually presented to Council as part of the budget adoption process.
Citywide Fee Updates
The master fee resolution (Attachment E) contains user fees and rates charged by the City, which are designed to recover the City’s costs, including staff time. Per previous Council actions, most City user fees will increase administratively by 3.7% on July 1, 2024, reflecting the FY 2024-25 increase in total City compensation (which includes salary, healthcare, retirement, and workers’ compensation costs) projected at the time of preparation of the Proposed FY 2024-25 Budget. Also included in the resolution are new fees and modifications to existing fees, as presented to Council during the budget study session, including 23 new fees related to Emergency Medical Services (EMS), facility rentals and use, Certified Unified Program Agency fees (CUPA), grading review permit fees, factory-built housing, and City Planning fees; revisions to 48 fees related to CUPA, fire permits, airport fees, landscape services, taxicab, medicinal cannabis, 12 of 21
Concealed Carry Firearm permit (CCW) renewal application, mortuary services; and the deletion of five fees related to library fees, taxicab fees, and EV user fees.
Most of the fines included in the Master Fine resolution (Attachment F) have remained unchanged from the previous fiscal year with the following exceptions:
• The Library is requesting the deletion of the one remaining overdue fine, Collection Agency Referral, from the master fine resolution to align with the elimination of other overdue fines for adult cardholders. • The Code Enforcement Division is recommending increases to three existing fines to deter the public from violating Chapter 13.06.050, Public Nuisances, of the City’s Municipal Code and the impact caused to the community. Additionally, six fines are recommended for deletion from the fine schedule because they are not used for citation purposes.
• The Resource Recovery and Recycling Division is recommending three fines related to mandatory recycling be incorporated into the Master Fine Schedule.
These fines were authorized by Ordinance No. 2685 (CCS) and codified in section 5.46.130 of the Santa Monica Municipal Code.
Promenade Outdoor Dining
On June 11, 2024, Council directed staff to evaluate a request from Downtown Santa Monica, Inc. and return with recommendations to reduce the per square foot monthly fees associated with the use of sidewalks for outdoor dining on the Third Street Promenade to support the City’s economic recovery. In addition, the City Manager and City Attorney were asked to evaluate and return to City Council with recommendations for incentives such as waiving fees for a period of time to help support and attract restaurants and entertainment uses to the Promenade and lend to the vibrancy of the area. In response to this direction, staff is proposing to waive the Outdoor Dining Fee on the Third Street Promenade for one fiscal year and charge a reduced fee of $1 per square foot per month for the second fiscal year pursuant to the attached resolution (Attachment H). While the impact to the General Fund will be $189,760 in FY 2024-25 and $149,423 in FY 2025-26, staff agrees that implementing a temporary fee reduction 13 of 21
could enhance the appeal of the Promenade for prospective businesses. Outdoor dining rates on the Promenade are currently among the highest in the region at $4.09 per square foot per month, and they are also the highest tier compared to the City’s other business districts. A temporary reduction in fees on the Promenade could help to further activate the Promenade with more outdoor activity and it will provide much-needed support to the local restaurants that continue to be heavily impacted by the loss in tourism and the slow return of daytime workers to the District, coupled with the recent zoning changes to help support the conversion of vacant retail spaces to entertainment and dining uses, the decision to reduce fees seeks to help incentivize new businesses to open on the Promenade. A citywide Outdoor Dining fee study will be conducted by staff during FY 2024-25 with the goal of including any proposed rate changes for Council consideration at the City’s May 2025 budget study session.
Parking
There are no proposed rate changes to transient and permit parking lots/structures at this time. A comprehensive parking rates resolution (Attachment G) states all the parking fees and rates and provides for Council to affirmatively approve them. The resolution provides for the following changes: 1) Extend the downtown discount validation program through June 30, 2025; 2) Extend the bulk parking fee agreement for the State of California Judicial Council through June 30, 2025; 3) Increase preferential parking permit fees by 3.7%, reflecting the FY 2024-25 increase in total City compensation; 4) Continue the Pilot Electric Vehicle Parking Permit for Lots 7, 8, 9, and 11; 5) Make plug-in hybrids eligible for the Pilot Electric Vehicle Parking Permit; and 6) Establish a fee for overnight parking permits for oversized vehicles.
SB-1 Gas Tax Revenues
In April 2017, SB 1, formally known as the Road Repair and Accountability Act (RMRA) of 2017, was signed into law. SB1 establishes the Road Maintenance and Rehabilitation Program (RMRP) to address deferred maintenance on the state highway and local street and road systems. Current fund estimates provided by the League of California Cities indicate that the City of Santa Monica will be eligible to receive approximately $2.4 million in SB1 funding in FY 2024-25, in addition to the City’s existing annual gas 14 of 21
tax revenues of approximately $2.6 Million. Staff recommends approving the attached resolution (Attachment L) identifying the use of FY 2024-25 SB1 estimated allocation of $2.4 million for the Annual Paving and Sidewalk Repair Program capital improvement project, which was already included in the FY 2024-26 Proposed CIP Budget that was presented to Council on May 28.
Confidential Unrepresented Employee (CUE) Pay Plan
The City Manager proposes a revision to the Confidential Unrepresented Employees (CUE) Pay Plan to add the following classifications: Administrative Services Officer (assigned to Human Resources only), Principal Budget Analyst, Senior Budget Analyst, Budget Analyst, Financial Systems and Reporting Administrator, Payroll Administrator, Payroll Analyst I and Payroll Analyst II. The CUE Pay Plan includes job classifications in the Finance and Human Resources Departments; employees who are participants of the CUE Pay Plan are confidential employees who, in the course of their job duties, have regular access to confidential information relating to the City’s administration of employer-employee relations. As such, these job classifications are not represented by any recognized bargaining unit in the City, but whose benefits of employment are set forth in the CUE Pay Plan. Staff recommends approving the attached resolution (Attachment M) to revise the Confidential Unrepresented Employees Pay Plan (FY 2022-25) to add job classifications listed above.
Cannabis Tax
The City’s cannabis business tax rate rates are currently set at 2% for medicinal sales and 3% for adult-use sales with a maximum tax rate of 10% that can be adjusted by resolution. Per SMMC 6.204.060(a), cannabis retailers must report gross receipts and remit cannabis taxes on or before June 30th. Cannabis business tax data is limited as neither permitted retailer has been in operations a full reporting period. Based on both operators’ start dates in Santa Monica, complete cannabis tax data will not exist for the two operators until FY 2026-27.
The table below shows the current and maximum tax rates for cannabis retailers in several jurisdictions within Los Angeles County and includes the population and number 15 of 21
of retailers in each jurisdiction and the population. Adult-use cannabis business tax rates range from 4% up to 10%. A number of cities have separate rates for medicinal cannabis with rates as low as 0.5%. The average adult use rate amongst the jurisdiction listed below is 6.3%.
City Retail
Maximum
Retail
Current
Retail
Allowed
Population # of
Retailers
Los Angeles County 6% 4% N 1,012,265 0
Los Angeles City 5%-10% 5%-10% Y 3,855,122 554
Long Beach 8%-12% 6%-8% Y 469,893 38
Pasadena 4% 4% Y 139,382 3
Baldwin Park 0.5%-4% 0.5%-4% N 76,644 0
Commerce 5% + $52K 5% + $52K Y 13,035 6
Montebello Varies Varies Y 63,538 14
Maywood 10% 10% Y 27,850 6
El Monte 9% 5% Y 115,356 6
Pomona 6% 6% Y 151,511 4
West Hollywood 7.5% 7.5% Y 34,971 15
Culver City 8%-10% 5%-6% Y 39,528 10
Inglewood N/A N/A N 107,762 0
El Segundo N/A N/A N 16,931 0
Hawthorne N/A N/A N 85,692 0
Manhattan Beach N/A N/A N 35,719 0
Beverly Hills N/A N/A N 34,677 0
Average or Total 7.2% 6.3%
On April 23, 2024, Council held a study session on cannabis social equity where direction was given on the framework of an equity program. During that study session, staff outlined the overall schedule for the development of the adult-use cannabis program. Staff expects to return with the draft adult-use ordinance along with results from the equity assessment, which will inform the equity component of the Santa Monica’s cannabis program. Even after the adoption of an adult-use ordinance, it seems unlikely that any other cannabis retailers will open until mid- to late-2025 at the earliest due to the application and permitting requirements at the local and State level. As a result, from an economic development perspective, it may be advisable for Council to 16 of 21
wait to raise cannabis business taxes until the City has a sense of the demand for cannabis businesses to open in Santa Monica.
There is currently one cannabis retailer open in Santa Monica with one other permitted retailer that is anticipated to open in June 2024. Both retailers were selected as a result of the City’s medicinal cannabis selection process, have obtained the required state and local permits, and were authorized to sell adult-use cannabis with the Council adoption of Interim Zoning Ordinance 2764.
The barriers to entry to the cannabis industry are already high and tax rates may be a deciding factor in whether businesses choose to locate in Santa Monica. Because the cannabis industry is relatively new in Santa Monica, Council should consider that aligning the City's tax rate with neighboring jurisdictions at this time may disincentivize new cannabis businesses from locating in Santa Monica. Analysis by the City’s consultant HdL Companies (HDL) indicates that there are a number of retailers located immediately adjacent to Santa Monica’s borders with Los Angeles. HDL indicates that it is likely that these retailers capture a significant percentage of sales from walk-in customers that live in Santa Monica. Further, there are also more than 50 retailers and non-storefront cannabis delivery services within a 15-to-20-minute driving distance of Santa Monica, which most likely conduct delivery sales into Santa Monica.
Staff recommends that Council not raise the cannabis tax rate at this time and instead wait until the adult use cannabis program is more formed so that taxes can be set with a more comprehensive understanding of the cannabis market, wait until we have more revenue data from the two existing operators, and also have an opportunity to discuss tax rate changes with existing and future operators.
Acceptance of Grant Awards
Acceptance of Discretionary Grant from Supervisorial District 3 The Criminal Prosecution Unit of the City Attorney’s office has been awarded $50,000 from Supervisor Horvath’s Office. This grant money will be used to support the STEP 17 of 21
program that is currently running in the City. STEP Court brings a criminal court to Santa Monica once a month to hold court proceedings. It is a collaborative court that brings together those who are experiencing homelessness, drug, or mental health issues with a service provider to help address the underlying issues that brought them in contact with the criminal justice system. Currently there are about 30 participants in the program, and it has already seen two successful graduations. Staff is requesting authorization to accept these grant funds and to appropriate the funds (as reflected in final changes).
Acceptance of Federal CoC Renewal Grants
The CoC Program is a federally funded competitive grant program designed to provide housing subsidies (supportive housing) to homeless, disabled households. For FY 2024-25, the U.S. Department of Housing and Urban Development (HUD) awarded a CoC grant in the amount of $4,822,406. Staff is requesting authorization to accept these grant funds from HUD.
These funds will support the City's CoC Program, which aids both sheltered and unsheltered individuals experiencing homelessness by providing the housing and services needed to facilitate their transition into supportive permanent housing, with the objective of achieving long-term stability. The funding for this grant is allocated in the Housing Authority Fund. The majority of the grant funds were included in the FY 2024- 25 Proposed Budget presented to Council on May 28, 2024. That amount, in addition to the final change of $907,850, reflected in the Final Changes section of this report, results in the full appropriation of the $4,822,406 grant award.
Council Discretionary Funds Updated Balance
As discussed at the Budget Study Session, Council allocates discretionary funds to assist the community in special projects or support important but otherwise unfunded priorities. Projects and programs supported by Council discretionary funds for the past three years, as well as funds allocated this fiscal year (FY 2023-24) are detailed in Attachment Q.
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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. The FY 2024-25 proposed budget for Council discretionary funds is $127,653, which can be programmed at Council’s direction at any time. Council may direct staff tonight to allocate any portion of the available funds and adopt those as part of budget adoption.
Additionally, the unused balance of Council travel funds in FY 2023-24 will be determined once the City’s books close for the fiscal year. The balance will be shared with Council at that time and staff will seek direction on next steps.
Past Council Actions
Meeting Date Description
06/27/23
(Attachment R)
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
02/27/24
(Attachment S)
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
05/28/24
(Attachment O)
Fiscal Year 2024-25 Proposed Budget and Fiscal Year 2024-26 Biennial Capital Improvement Program Budget
Environmental Review
The FY 2024-25 Proposed Budget is exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines (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. 19 of 21
The Reduced Airport Fees are exempt from CEQA pursuant to Public Resources Code section 21080(b)(1) and CEQA Guidelines sections 15061(b)(3), 15369, and 15273.
The reduction is a ministerial project to comply with the City’s 2017 Consent Decree with the Federal Aviation Administration and with certain federal grant assurances, which does not require discretionary approval. Pub. Resources Code § 21080, subd. (b)(1); CEQA Guidelines § 15369. Additionally, the Reduced Airport Fees are exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines (common sense exemption), which applies when “it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” The Reduced Airport Fees will not result in any significant impact on the environment from increased operations. Lastly, there is no reasonable probability that the Reduced Airport Fee will have a significant effect on the environment due to unusual circumstances.
Financial Impacts and Budget Actions
The FY 2024-25 Citywide Budget as revised, including operating and capital budgets, is $765.3 million, net of reimbursements and transfers, as described below:
Revenues (in millions, rounded)
FY 2024-25
Proposed
Budget
General Fund 458.8
All Other Funds 421.5
Total, before adjustment for reimbursements & transfers 880.3 less reimbursements & transfers (95.7)
Total, net of reimbursements & transfers 784.6
Operating Expenditures (in millions, rounded)
FY 2024-25
Proposed
Budget
General Fund 449.9
All Other Funds 304.6
Total, before adjustment for reimbursements & transfers 754.5 less reimbursements & transfers (81.4)
Total, net of reimbursements & transfers 673.1
20 of 21
Capital Expenditures (in millions, rounded)
FY 2024-25
Proposed
Budget
FY 2025-26
Budget
Plan
General Fund 13.4 15.2
All Other Funds 93.1 102.2
Total, before adjustment for reimbursements & transfers 106.5 117.4 less reimbursements & transfers (14.3) (14.8)
Total, net of reimbursements & transfers 92.2 102.5
Full Time Equivalent (FTE) Positions
FY 2024-25
Proposed Budget
Permanent Temporary
General Fund 1,280.3 76.0
All Other Funds 756.3 9.0
Total Citywide FTEs 2,036.6 85.0
Adoption of the Proposed Budget as amended by Attachment D would formally adopt the FY 2024-25 Operating and CIP budget and approve the second year of the City’s FY 2024-26 Capital Improvement Program Budget.
Prepared By: Jennifer Young, Budget Manager
Approved Forwarded to Council
Attachments:
A. Attachment A - Budget Resolution (City Council)
B. Attachment B - Budget Resolution (Housing Authority) C. Attachment C - Budget Resolution (Parking Authority) D. Attachment D - Final Budget Adjustments for FY 2024-25 E. Attachment E - Master User Fee Resolution
F. Attachment F - Master Fine Resolution
G. Attachment G - Parking Rates Resolution
H. Attachment H - Resolution Waiving Outdoor Dining Fees 21 of 21
I. Attachment I - General Salary Resolution
J. Attachment J - Position and Classification Changes
K. Attachment K - Gann Appropriations Limit Resolution
L. Attachment L - RMRA Resolution
M. Attachment M - CUE Pay Plan Resolution
N. Attachment N - Cannabis Tax Rate Resolution
O. Attachment O - May 28, 2024 Staff Report
P. Attachment P - May 28, 2024, item 5-E Staff Report
Q. Attachment Q - Council Discretionary Funds
R. Attachment R - June 27, 2023 Staff Report
S. Attachment S - February 27, 2024 Staff Report
T. Written Comments
U. PowerPoint Presentation