Anticipating flattening revenues and possible recession, Santa Monica plans job and spending cuts to pay down its pension obligations

By Gary Walker

Santa Monica City Manager Rick Cole wants “a government that runs better but costs less.”

Santa Monica may be a progressive city in terms of environmental and housing policies, but its budget outlook leans conservative.

Foreseeing a potentially dangerous collision of shrinking tax revenues and staggering employee pension liabilities, the city’s financial officers want city council members to adopt a belt-tightening strategy that means cutting jobs and programming to reduce overall spending.

City Hall is proposing a 2019-21 biennial fiscal year budget that would eliminate 29 jobs (most of them unfilled), realign some city departments, restructure or eliminate the Breeze Bikeshare Program (facing stiff competition from electric scooters), end city subsidies for the Los Angeles Marathon and Twilight Concerts on Santa Monica Pier, and save $90,000 by ending radio broadcasts of council meetings on KCRW, among other cuts to save tens of millions of dollars.

Savings would be used to pay down a 30-year city pension liability, estimated at $448-million, on an accelerated 13-year cycle. The pension pay-down “would save the city $106 million,” said Santa Monica Finance Director Gigi Decavalles-Hughes.

The city’s budget proposal anticipates a flattening-out of city tax revenues as digital business models increasingly disrupt brick-and-mortar retail.

“The threat of a recession looms ahead after the longest sustained economic expansion in our nation’s modern history. Profound technological, economic and demographic changes are reshaping our lives, affecting both the public and private sectors and rendering old ways of doing businesses and delivering services increasingly obsolete,” reads a budget proposal report.

City officials aim to publish a final budget proposal on May 23 and expect the council to adopt a final budget by June 25, ahead of the July 1 start of the 2019-20 fiscal year.

Santa Monica is one of only a few municipalities in California with a Triple AAA rating by all three national credit agencies. City Manager Rick Cole emphasized during an April 24 budget briefing that the city is presently in very good fiscal condition due to decades of solid fiscal stewardship, and he hopes to continue that legacy.

“Our overriding goal is to operate a government that runs better but costs less. Our city has been managed very prudently over the last 30 years, and our job is to keep it that way,” Cole told reporters last week.

Decavalles-Hughes said the city sets aside $21 million from its capital budget for infrastructure maintenance for current and future facilities. This annual set-aside, Cole said, has helped Santa Monica remain a prosperous city.

“After all of our bills are paid our net worth is over $1.6 billion, which is the second-highest per capita in the Southern California. Contrast that with Inglewood, which has a net worth of minus $64 million. The difference is the over the last 30 years we have steadily been investing in our facilities and equipment and minimizing borrowing,” Cole said.

Last month the council indicated support for a local mental health facility as well as a new transitional homeless building with social services on site. Cole said the budget does not contain specific funding for either of those, but at council direction both remain very possible.

“We see them coming into fruition either with state, county or federal money, or local money if we’re able to secure matching funds. The goal is to put the resources together regionally,” he said.

The possibility of raising additional revenue through ballot measures during the 2020 is also a possibility, Cole said, but made clear that his office is not currently considering any new taxes, and that putting any such initiatives on the ballot would require city council approval.