City Council – May 26, 2026
Budget Study Session for the FY 2026-27 Proposed Budget and FY 2026-28 Biennial Capital Improvement Program
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May 26, 2026
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May 26, 2026
1. Proposed FY 2026-27 Operating Budget and
adjustments
2. Proposed FY 2026-28 Biennial Capital Improvement
Program Budget
3. Fee Study Reports & Fee Revisions
4. Updates to Fiscal Policies – Incorporating the
modernized procurement policy
Agenda – Budget Study Session
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May 26, 2026
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May 26, 2026
The Budget is the result of collaboration between the community, City Departments led by the City Manager’s Office, and the City Council June 2025
Public Hearing and
Adoption of the 1st
year of the Biennial
Budget and 2nd year
of the Biennial CIP
Budget
October 2025
Santa Monica
Realignment Plan
March 2026
Santa Monica
Realignment Plan
Update
May 26, 2026
Proposed FY 2026-27
operating Budget and
FY 2026-28 biennial CIP
Budget presented to
City Council
June 23, 2026
Public Hearing and
Adoption of the 2nd
year of the Biennial
Budget and 1st year
of the Biennial CIP
Budget
Santa Monica's Budget Process
March 2025
Council Priority
Setting for the FY
2025-27 Biennial
Budget
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• FY 2025-26 General Fund operating budget is tracking to achieve a year-end surplus of $8.95 million when taking into account options related to the joint use agreement with the SMMUSD
• <$3 million> being set aside for the Economic Recovery Reserve • $5.95 million being carried forward.
Where We Are Today: A Stronger Fiscal Foundation
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• Joint Use Agreement —$12 million annually to SMMUSD for community use of District facilities; the Agreement is scheduled to expire in 2027 under the terms set in the April 2022 First Modification.
• Fiscal Impact in 2027 — When the Agreement sunsets, the $12 million annual obligation comes off the City’s books, contributing to the General Fund reaching structural balance by the end of FY 2026-27.
• Citizens’ Initiative — A proposed parcel-tax initiative, if qualified and approved by voters, would create a new revenue stream and could support renegotiating and extending the Joint Use Agreement, subject to Council direction. • Scenario Without New Revenue — If the measure does not qualify or is not approved, any Council-directed extension of the Agreement beyond 2027 would require continued General Fund support, necessitating identification of operational cost savings and potentially service-level reductions.
Joint Use Agreement with the SMMUSD
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$109.8 $19.9
$798.4
$525.2
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Citywide* General Fund
(in millions)
Operating
Capital
FY 2026-27 Proposed Budget
Citywide Expenditures - $908.1 million*
• FTE Net Change 7.0 FTE:
General Fund - $545.1 million
• FTE Net Change 7.0 FTE:
*Citywide expenditures are net of reimbursements and transfers between funds $908.1
$545.1
Budget Overview – FY 2026-27 Proposed Budget
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Federal Reserve
• Maintained the federal funds target range at 3.50% - 3.75% in April 2026 • National inflation was 3.3% year-over-year in March 2026 • Gross domestic product (GDP) grew at an annual rate of 2.0% in the first quarter of 2026
California’s Economic Growth
• Slower economic growth than the national average
• State’s unemployment rate was 5.5% in February 2026 compared with
4.3% nationally in March
Overview of Economic Conditions
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Santa Monica
• Downtown revitalization continues to be a priority
• Third Street Promenade recorded 346,147 visitors in March 2026 • Ground-floor retail occupancy was reported at 76% as of April 1, 2026 • Upcoming major regional events may boost visitor activity (2026 FIFA World Cup, etc.)
Overview of Economic Conditions
Property Tax- stable, with assessed valuation up 3.98%
Real Property Transfer Tax- variable but has averaged $10m annually.
Sales Tax- Growth 3.6% next year
Transient Occupancy Tax – Growth 6% this year and 9% next year Parking Revenues- Rate restructuring now fully implemented $40.6m next year December April
2024 2025 2025 2026
Occupancy: 62.1% 62.5% 74.59% 79.51%
ADR: $ 331.00 $ 328.28 $ 353.18 $ 376.45
Hotel Activity
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General Fund - Proposed Adjustments to the FY 2026-27
Total FTE Changes +7.0
Permanent +7.0
Expenditures
• Fire Department - Aqueous Film-Forming
Foam Removal and Disposal Project
• Staffing changes for various program
enhancements
• Contract services in support of the
Realignment Plan and Airport Conversion
Project
• Adjustments to more accurately reflect true
capital expenditures
• Reassessment of current operational needs,
spending trends, and refined cost estimates
Revenues
• Reduced hotel tax and parking revenue
• Partially offset by new revenues
associated with the completed fee
studies and greater than projected
revenues from business license tax and
investment earnings
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Non-General Fund –
Proposed Adjustments to the FY 2026-27 Revised Budget Plan Revenues
• Increases in the BBB Fund from project
drawdowns and reimbursements to align
with projected capital expenditures
• Decreases in the Airport, Local Return,
Miscellaneous Grants, and Internal Service
Funds
• Increases in the Self-Insurance, Bus (Transit
Liability) and Wastewater Funds
Expenditures
• Programming Measure GS funding for Santa
Monica Rent Aid Program, housing services,
and homelessness prevention programs
• Adjustment to more accurately reflect true
capital expenditures and program
contributions from all other funds
• Payment to the Self-Insurance, Bus (Transit
Liability) Fund from the Big Blue Bus Fund
• Increase for new grant awards
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Proposed FY 2026-28 Biennial
Capital Improvement Program Budget
Capital Improvement Program
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Capital Improvement Program
77 Projects in the Proposed Budget
(17 – General Fund, 60 – Other Funds)
All Funds
FY 2026-27: $109.8 million
FY 2027-28: $116.6 million
General Fund
FY 2026-27: $19.9 million
FY 2027-28: $17.6 million
General Fund
16.54%
Misc Grants
11.75%
Local Return &
Gas Tax
6.78%
Water, Wastewater,
Clean Beaches
30.47%
Resource Recovery &
Recycling
0.26%
Airport
5.49%
Big Blue Bus
14.88%
All Others
13.84%
Proposed Budget FY2026-28
(two year total by percentage)
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Signature Capital Investments
Preparing for Major Events & 2028 Olympic Games
• Major Event Infrastructure ($2M)
• Pier Infrastructure ($21.2M)
• Camera Obscura ($3M)
• Tongva Park Repairs & Improvements ($1.8M)
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Signature Capital Investments
Reinvesting in Parks & Open Space
• Memorial Park ($60M)
• Airport Park Sports Field Replacement ($2M)
• Virginia Ave. Park Playground Replacement ($700k)
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Signature Capital Investments
Citywide Infrastructure Recovery
• Facility Renewal Program ($20M)
• Main Library Renovations ($3.5M)
• Citywide Workspace Optimization ($3M)
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Signature Capital Investments
Modernizing Transportation & Mobility
• Annual Paving Program (Santa Monica Blvd. & Chelsea Intersection) ($30M)
• 14th St. Bike & Pedestrian Improvements ($12.5M)
• Smart Curb Management Program ($1.7M)
• Streetlight Modernization ($21.8M)
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What is a Fee Study?
• A study which calculates the true & full cost to deliver fee-for-service activities. Fee studies ensure fees are current, fair, defensible, and aligned with cost-recovery goals.
• Santa Monica conducts a comprehensive citywide User Fee/Cost of Service Study at least once every five years
2026 Fee Study Findings
• Over 800 individual fees across multiple City operations were analyzed, identifying $32.8 million in annual fee-supported service costs • Cost recovery revenue is projected to increase by $2.1 million across all Funds if the recommended fees are approved
City Fees, Fines, & Rates
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Citywide Fee Study
• 311 proposed fee increases, 180 proposed fee decreases, 71 new fees, and 29 fee deletions are being recommended to better align with current operations
Fire Department Fee Study
• 10 new fees are being proposed, and 5 existing fees will continue to align with the LA County Ambulance Rate Schedule for better cost recovery for the ambulance transport program
Other Fees
• Several new fees and fee updates are being proposed for the Cemetery to align pricing with comparable items, correct inconsistencies, and account for increased vendor costs City Fees, Fines, & Rates
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Modernized Procurement Policy, following Council’s adoption of the updated Purchasing System ordinance in March.
This modernization:
• Updates thresholds to reflect inflation and market conditions, • Clarifies competitive bidding and source selection requirements, and • Establishes consistent standards for cooperative purchasing, emergency procurement, and alternative delivery methods.
This is a major step toward a more efficient, transparent, and modern procurement system.
Fiscal Policy Updates
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Tonight’s Recommended Actions
1. Review and provide direction to staff regarding the FY 2026-27 Proposed Operating Budget Adjustments and FY 2026-28
Proposed Biennial Capital Improvement Program (CIP) Budget
2. Direct staff to proceed with setting the FY 2026-27 Operating and FY 2026-28 Biennial Capital Improvement Program (CIP) Budget Adoption hearing on June 23, 2026
3. Approve the position and classification changes
4. Review and comment on the recommendations of the Fee Study Report, Fire Fee Study Report, and Cemetery Fee revisions
5. Review and comment on the recommended updates to the Fiscal Policies
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June 23, 2026 – Public Hearing: Adoption of the FY 2026-27 Operating and FY 2026-28 Biennial Capital Improvement
Program (CIP) Budget
• Final Changes
• Changes from this evening
• Resolutions
Next Steps
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Questions?
Next Steps
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