Council Workshop
March 8, 2025
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March 8, 2025
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OVERVIEW
WELCOME
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Foundation Setting
3 Creating alignment between City Council
and the organization to serve Santa Monica
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OVERVIEW
Five-year Forecast
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General Fund Financial Update – May 2024
5 Three Year Gap of $27.6M
(expenditures exceed revenues)
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General Fund Financial Update – May 2024
6 Budget balanced
using Fund Balance:
$27.6M one-time funds
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General Fund Financial Update – March 2025
7 $59.6 M in new costs
• $15.6 M General Liability and
Workers Compensation Insurance
(average $7.8 M each of two years)
• $12.4 M Pension Costs – CALPERs
Unfunded Accrued Liability
($2.5 M average annual)
• $18.4 M POA MOU obligation: 5%
salary raise effective January 2025
($3.4 M average annual)
• $7.2 M County Lifeguard Services
(Phased $1.5 M average annual)
• $6.0 M Legal Costs – CVRA
(over two years)
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General Fund Financial Update – March 2025
8 $38.5 M in Adjustments related to
Revenue Reductions
• $51.1 M in decreased revenue from
tourism, visitor and consumer
spending
• $4.2 M decrease in Fees & Charges
for Service (timing of digital kiosk
program revenue, Fire Inspection
Fees, EMS charges, Broadband
Services)
Reductions mitigated by increases in:
• $10.9 M BLT & PFT base
• $5.9 M in other revenues,
including UUT, Property &
Other Local Tax and
reimbursement for indirect
administrative costs
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General Fund Financial Update – March 2025
9 • $11.9 M Measure F (BLT)
• $3 M annual – 3 year phased
• $36.2 M Measure K (PFT)
• $6.7 M annual
• Extraordinary times - these
revenues are critical to
addressing the deficit
• Staff acknowledges the will of
the voters around the advisory
measure and strives to
address as the financials
improve
$48.1 M in new revenue from
Tax Measures approved
November 2024
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General Fund Financial Update – March 2025
10 $18.9 M in savings implemented
• $11.3 M - No S&E Inflator for
2025-26 and 2026-27; limited
to 2% increase thereafter
• $7.6 M - Increase vacancy
savings by 0.5% to 1.5%
throughout
Applying budget management
strategies
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General Fund Financial Update – March 2025
11 • $60.8 M total used over three
years
• $27.6 million working
capital
• $33.2 million additional
Fund Balance needed
Balancing the budget requires
using additional reserves
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General Fund – Increasing Deficit without Reserves
12 May 2024
Deficit: $27.6 million
over three years
February 2025
$119 million over
forecast period
(before applying the tax
measure revenues and
cost reduction
strategies)
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• Think of Reserves as INSURANCE,
providing financial stability and
a cushion against financial
shocks, revenue losses
• Unrestricted reserves are 61%
below pre-COVID levels
• Reserves are needed for
contingent liabilities and working
capital
• Increase in FY 23-24, primarily
from $16.5 M one-time insurance
proceeds, lower unrealized
investment losses
General Fund Reserve Levels - Fund Balance
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$157 M Fund Balance
• $100.6 M Assigned: set aside for
contingent liabilities, other
identified/anticipated cost increases,
the cost of accrued employee vacation
time, prior year funded capital projects,
and service contract obligations
encumbered from prior year budgets
• $57.1 M Rainy Day Fund/Contingency:
13.5% of operating costs
• Equivalent to approximately two and a half
months of compensation/benefit expenses
• Should be 15% of operating costs
2023-24 General Fund Reserve - Fund Balance Funds Assigned Total $157.7
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Other Financial Considerations
Liabilities • Uller/Condon claims
CVRA legal costs
• LA28 Olympics
Lifeguard services
• Impacts of wildfires on tourism & consumer spending
• Impacts of wildfires on overtime - unplanned
Restoring
Services
• Library & youth services
• Community programming
• Deferred infrastructure maintenance
• Capital Improvement Program
Financial
Stewardship
• Rebuild reserves
• Repay other funds, including Housing Trust Fund
• Labor negotiations in a competitive labor market
Future
Considerations
• Fiscal impacts of federal changes
• Unfunded CIP projects
• Equity Plan and reparations
• Homelessness, Police & Fire Strategic Plans
• Behavioral Health Study
• Renters’ Right to Counsel
• Airport Conversion Project 15
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• Lost $195 M in
revenues through
June 2024 -
reflected by gap
between the two
lines
General Fund Revenues Still Lagging
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FY 2024-25 - $458.8M
33.4%
Tourism &
Consumer
Parking
revenue is
7.3%
With parking
40.7%
Tourism &
Consumer
17 General Fund Revenues
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% cumulative growth
(FY 18-19 through FY 23-24)
Costs
CPI (Inflation) 25.3%
Revenues
Sales & TUT
TOT (Hotel Tax)
Parking Revenue
Property Tax
-1.2%
8.4%
-18.6%
37.0%
18 General Fund Revenue Trends
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Year over year comparison through September 2024
19 General Fund Sales Tax
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FY 2024-25
Adopted Budget
$79.3 million
General Fund Revenue Trends
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FY 2024-25
Adopted Budget
$73.7 million
21 General Fund Revenue Trends
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Capital Improvement Program - Underfunded
Capital needs unmet
• FY24-25 at 61% of pre-COVID level
• Costs with inflation outpace annual
funding
• Continued deferred maintenance
is not sustainable
• No additional investments through
forecast period
• $459.6 M in projects unfunded
across all funds – not including
outcome of Airport Conversion
Project
Adjusted for Inflation
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Capital Improvement Program
Unfunded Projects (Not Comprehensive)
• Parking Structure 1 seismic
retrofit
• Memorial Park Expansion
• Lincoln Neighborhood Corridor
Streetscape
• Street light upgrades
• Vehicle and computer
replacement
• Gandara Park Restoration
• Airport Park Expansion
• Memorial ParkPhases 2-3
• Fire Station facilities
• City Hall North Wing building
system upgrade
• Pier Deck upgrades
• Pier West End upgrade
• Public Landscape relocation
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Right of way maintenance Streetlight maintenance Copper wire theft Capital Improvement Program – Deferred Maintenance
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$68.7 Million
Funds Borrowed from Other Funds
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Uller • 28 Active Cases: 157 Plaintiffs
Condon • 1 Active Case: 4 Plaintiffs
• Significant expense defending and CVRA fees may be owed if Plaintiffs prevail Magnitude of Legal Liabilities
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One-time, short-term
• Continue to litigate with insurance providers demanding compensation for prior settlement payments
• Land sales
• Parking rates
• Water and Wastewater rates
• General obligation bond
Focused, Sustainable, Strategic
• Partnership/sponsorships/events
• Renewed, reinvigorated focus on economic development
Strategies to address fiscal challenges
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Self-Sustaining: Airport, Big Blue Bus (BBB), Resource Recovery & Recycling (RRR), Housing Authority and Cemetery
Water & Wastewater: 5-year rate study to keep pace with costs Requiring Attention: Housing Trust Fund, Information Technology, Vehicle Management - future year repayments of suspended contributions General Fund Impact: Beach and Pier subsidies to offset revenue losses and support critical capital expenditures
Measure GS: $46.3 million as of February 2025 to support SMMUSD, homelessness prevention and affordable housing efforts
Other Funds
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OVERVIEW
FY 2024-25 Midyear Changes
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General Fund
Total $2,815,864
• Decrease in Sales and Use Tax,
Transient Occupancy (Hotel)
Tax, and Other Misc. Revenues
• Increase in Business License
Tax, Parking Facility Tax,
Property tax, and ParkingRelated charges
FY 2024-25 Midyear Revenue Adjustments
30 Other Funds
Total $12,486,984
• Decrease in Airport, BBB,
Housing Authority,
Wastewater and Water Funds
• Increase in Beach, Gas Tax,
Misc. Grants, Pier, and Special
Revenue Source Funds
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General Fund
Operating Budget Changes
Total $2,183,860
• Anticipated legal costs -
ongoing litigation CVRA
• Equity adjustments POA
• Reduction of Measure GSH
allocations to school districts
and the Housing Trust Fund
FY 2024-25 Midyear Expenditure Adjustments
31 Other Funds
Capital & Operating Changes
Total $544,242
• Increase in CalTrans-funded Pier
Bridge Replacement Project
(Capital)
• Decrease in Housing Authority
Fund (Operating)
• Increase in Misc. Grants and
Special Revenue Source Funds
(Operating)
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City Council and Housing Authority
9. Appropriate FY 2024-25 midyear expenditure and revenue budget adjustments.
City Council
1. Receive the FY 2025-26 through FY 2029-30 Five Year Financial Forecast.
7. Authorize the City Manager to accept a grant award in the amount of $19,155 from the U.S. Department of Transportation and to accept all renewals.
8. Adopt a finding that the actions are not a “project” subject to the California Environmental Quality Act (CEQA) and a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the CEQA Guidelines.
Recommended Actions
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OVERVIEW
Council Priorities +
Legislative Platform
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1. Clean & Safe Santa Monica
2. Sustainable & Connected Community
3. Addressing Homelessness
4. Racial Justice, Equity & Social Diversity
5. Cultivate Economic Recovery & Expand Community & Cultural Offerings
34 Adopted Council Priorities
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35 Organization Roadmap
• Outlines 23 city initiatives and 94
milestones advancing City Council and
organizational priorities
• Incorporates major planning efforts for
safety, homelessness, behavioral health
and equity
• Serves as a dashboard for department
workplans that features 302 department
work plan projects and services and 91
budget performance metrics
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• Used for federal and state lobbying of City positions and priorities • Statement of Council legislative priorities
• Includes specific and broad statements that enable staff to rapidly weigh in on legislation
• Used with City lobbyists and in partnership with national advocacy organizations
• Can be amended at any time
Council Legislative Platform
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OVERVIEW
Community Impacts from
Presidential Transition
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Local Response
• Immigrant rights
• LGBTQ+ support
• Rapid response coordination with City departments
• Fiscal impact analysis
• Connecting with community through new partnerships and engagement events • Know Your Rights Event Series
• Next Event: March 10 - LAFLA Clinic
• Dedicated website for resources:
• Santamonica.gov/SafeAtHome
• Santamonica.gov/lgbtqia-inclusion
38 Federal Changes
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Local Response - Grantees
• Agencies concerned about protecting clients, employees from immigration raids • Agency with two satellite facilities outside of Santa Monica had been visited by ICE • Many clients, including minors that are seen by youth and family providers, are frightened
• Employment agencies are concerned that workers with green cards will have not work certifications approved
• Participation in programs down for some youth that identify as non-binary or trans • One agency’s operational budget is made up of 85% federal funds 39 Federal Changes
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Fiscal Impacts for Santa Monica
• Funding in question for key projects, including Pier Bridge Replacement • Transportation and Housing receive federal funding
• Public Safety receives federal grants
• Broader concerns from nonprofits and other partners about economic disruptions and tariffs driving up project costs
40 Federal Changes
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OVERVIEW
Economic Growth & Cultural Vitality
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Four categories of actions to address current fiscal challenges Expenditure controls and cost shifts
Service delivery changes and efficiencies
Service reductions or eliminations
Revenue enhancements
Strategic Plan for Economic Development is needed!
Facing Financial Challenges
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• What is economic development?
• Land, labor, capital - all coupled with business growth • Why is it important?
• Nucleus of everything we do
Santa Monica's Economic Development Program
• Where are we headed?
• Council subcommittee on Economic Development
• Council & Interdepartmental Economic Development Task Force Reimagine, Reinvent, Reinvest
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OVERVIEW
Timeline + Recommended Actions
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May 27, 2025
Proposed FY 2025-27 Biennial
Operating Budget and second
year of the Biennial CIP Budget
Fall 2025
Staff reports on FY 2024-25
year-end budget performance
May 2026
Proposed FY 2026-27
Operating Budget and FY
2026-28 Biennial CIP Budget
presented to City Council
January-February 2025
Community Engagement for the
FY 2025-27 Biennial Operating
Budget and priorities
March 8, 2025
Council Priority setting for the
FY 2025-27 Biennial
Operating Budget and staff
reports on FY 2024-25
midyear budget
performance and updated
forecast
June 24, 2025
Public Hearing and adoption
of the firstyear of the Biennial
Operating Budget and
second year of the Biennial
CIP Budget
Winter 2026
Staff reports on midyear
budget performance,
updated forecast, proposes
adjustments
June 2026
Public Hearing and
Adoption of the 2nd
year of the Biennial
Operating Budget
and 1st year of the
Biennial CIP Budget
Fiscal Year 2025-27 Budget Process
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Appoint Ad Hoc Committee
5. Establish and appoint an Economic Development Ad Hoc Subcommittee focused on developing an economic development strategy.
Adopt Priorities & Legislative Platforms
3. Consider and affirm the Council priorities.
4. Adopt the Council federal and state legislative platforms.
Provide Direction
6. Provide direction on parking rate restructuring and components of the parking rates and fees to target.
2. Discuss and provide direction on items that will inform the preparation of the Fiscal Year 2025-27 Operating Budget.
46 Recommended Actions
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Recommended direction on parking rate restructuring
1. Advance scenarios that include the reduction or elimination of the 90- minute free parking period in downtown structures, which could allow for significant rate reductions for many customers in these structures while raising up to $2.2 million in revenue.
2. Target an additional $8.6 to $9.4 million annual revenue from a strategic rate restructuring of meter rates, parking permit costs, and rates and other off-street facilities.
3. Pursue passing along parking-related processing fees and charges to customers, consistent with Council action for all other credit/debit card payments in 2020.
Parking Rates
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