Discussions at the City Council’s March 8th budget workshop reveal a determined push to run the municipality more like a business, focusing on well-defined priorities and bringing revenues more in sync with expenses. Economic development, housing, support for education, and safe streets all emerged as priorities for the new council.
I’ve been following Santa Monica politics for at least 15 years, and found previous rounds of these discussions typically focus on expenditures, such as an addition to City Hall with composting toilets or revitalizing a civic center decades past its prime. Such expenditures cost money, money that can fund basic city services.
The City Council affirmed its support for voter-approved revenue measures that included advice on expenditures: including funding for the Santa Monica public schools (which are facing a budget deficit) and safe streets, which was an emphasis of the recent Measure K parking facilities tax increase.
However, as Mayor Lana Negrete stated in her remarks, the city needs to get back to basics: focus on doing fewer things well rather than the status quo, which is that the city is spread too thin to keep up with basic service requests.
Council members are also keenly interested in performance metrics and understanding year-over-year trends. After pausing performance measurement during the COVID-19 pandemic, the city is now working to resume it to allow for better tracking and analysis. Transparent performance measurement will enable the city to identify areas for improvement and ensure that resources are used effectively.
Prioritizing priorities
The council noted that citywide priorities can be intentionally vague for different stakeholder groups, both within city staff and outside in the community, can argue that their pet project is a priority. Therefore, having fewer priorities (three rather than five) and tighter definitions would help staff with budget choices that support these priorities. Councilmembers Zwick proposed a set of priorities with definitions, as a baseline for council discussion:
Safe Streets and Public Spaces Prioritize investments in “Eyes on the Street” to promote a sense of safety in public spaces—including activations, officer foot and bike patrols, street lighting infrastructure, camera technology, and behavioral health services—and reduce deaths and severe injuries on our streets through robust traffic engineering and enforcement.
Economic Growth and Stability Foster a “Culture of Yes” within the city by speeding the permit approval process for new homes and businesses, reducing taxes and fees on vital economic activity, streamlining internal decision making processes, relaxing zoning restrictions, and expanding public-private partnerships that leverage the city’s public resources.
Housing and Homelessness Ensure Santa Monica remains a welcoming and safe “City for All” by reducing the time and cost of building new homes, subsidizing affordable, permanent supportive, and workforce housing, and bestowing renters with tenure security, economic assistance, and the right to peaceful enjoyment of their homes.
Councilmember Hall also proposed a set of 3 priorities: unleashing economic opportunity and growth, clean streets and safe neighborhoods, and affordable, livable, and secure homes for all. Council members discussed their priorities for priorities and gave additional direction to staff, who will review notes and come back with proposed priorities at the city budget study session in May.
During later discussions of expenditures, the council also requested that staff come back with a list of open requests from council to staff, so that they could consider eliminating some of the requests that do not align with these priorities.
A keen awareness of the city’s financial health is at the heart of this shift towards well-defined priorities and a balanced budget. As I shared in the budget primer last week, the city faces both a structural deficit and a significant, ongoing legal settlement liability due to a police department employee who abused children enrolled in Police Activities League services.
Show me the Money: Revenues
Councilmembers are examining various avenues to bring in new revenues. In general, there are ongoing revenues and one-time revenues. Ongoing revenues are primarily taxes deposited into the general fund. One-time revenues can come from issuing bonds and increasing property taxes or selling city-owned assets, like real estate.
Discussions of ongoing revenue opportunities focused on those supporting economic development in Santa Monica. Chief among these was the idea that city staff should do what they could to demonstrate that the city is open for business: processing permits and assisting with return to office. Businesses thrive when workers and visitors come to Santa Monica to spend money, and the city gets a share (2% of taxable sales).
Public events that use city facilities, such as the art market Frieze at the Santa Monica Airport or events on the Pier, bring direct revenue to the city from facility use agreements and additional revenues from visitor expenditures. However, councilmembers remarked that the rates the city charges for facility use are lower than in nearby cities and should be market rate. Additionally, with the recent Frieze event, the city failed to secure sales taxes from the transactions occurring on city property, which, based on sales data for the event, would have generated over $50,000 in sales taxes for the weekend. Staff assured that they would structure future deals to ensure the city does not miss revenue opportunities.
Another idea to support clean public spaces and economic development is moving nuisance property abatement from a less effective cost-center approach to the revenue-positive approach authorized by the city’s municipal code. Some commercial property owners in the city do nothing to keep up their property and the surrounding sidewalks, which are subject to fines under the city’s code. Some on the council directed the city to develop a more effective and financially sustainable code enforcement program that penalizes negligent property owners and ensures that penalties offset the costs of code enforcement. The status quo approach, which relies more on warnings than fines, means that some property owners are repeatedly issued warnings and do not correct the violation.
Mayor Lana Negrete even suggested a vacancy tax requiring a public vote. However, fees to cover the vacant property registration and to fund quick and thorough abatement of nuisances do not need a citywide vote. This initiative will improve the city’s appearance, reduce some of the blight from vacant property near active businesses, and potentially free up properties for redevelopment.
Additionally, Councilmember Dan Hall suggested expanding digital advertising in the downtown area, citing West Hollywood’s success in generating substantial revenue from such programs. West Hollywood generates over $11 million annually from advertising on city property. This move promises a new source of income for the general fund and aims to create a more dynamic and energetic downtown atmosphere, attracting businesses and visitors alike.
In reviewing a staff proposal to generate around $8 million annually in new revenue by eliminating 90 minutes of free parking at the downtown parking structures, Councilmember Hall noted that this short time window discourages visitors from staying downtown longer.
City staff also proposed a general obligation bond. This one-time revenue source could fund delayed capital and maintenance projects by authorizing the city to issue a bond and collect additional property taxes from property owners.
Additionally, because of the city’s deep legal liabilities, the council is considering property sales to produce one-time revenues and repay the Housing Trust Fund, which has been tapped to cover legal liabilities. Replenishing the trust fund would allow it to be used for its originally intended purpose: supporting affordable housing initiatives.
City staff will consider these new revenue sources when preparing the 2025-27 biennial operating budget.
Watching Expenses
Mayor Negrete emphasized the importance of getting back to basics and ensuring that the city provides excellent basic services. The council asked staff to come back with proposals to cut at least $6.7 million from planned expenditures, as staff originally planned to use the new Measure K revenues to plug existing budget holes.
As of the snapshot in the staff report for the budget workshop, the city has 136.5 vacancies, mostly in public works, the Big Blue Bus, and the Police Department. The council asked for additional information on these vacancies and the services they provide.
Mayor Lana Negrete noted that technology, including AI, could help boost productivity for some positions, and that the city should invest in technology to ensure that staff have the best available tools for their jobs. The city cut technology staff in the information services department during Covid and has deferred some technology upgrades. She also suggested using technology and AI to improve efficiency and effectiveness, which could involve automating tasks, streamlining processes, and freeing staff to focus on more complex issues.
Overall, I thought the council met the city’s challenging budget situation head on, with appropriate deliberation and clear direction to staff on how to help turn the city’s budget around in a way that will support economic activity and the people who live here. I do think the use of technology and AI can help augment the work of staff and enhance outcomes, rather than being used to replace existing staff. However, I am not optimistic that others in Santa Monica will feel similarly if the federal Department of Government Efficiency (DOGE) uses AI like a destructive chainsaw rather than something more constructive like a 3D printer.
