The following is from a special edition of the Councilmember’s Newsletter. It is reprinted with permission. Interested in more? Subscribe here.
| A “Plain English” Guide to the Fiscal Year 2024-2025 Annual Comprehensive Financial Report |
Here is the BLUF (Bottom Line, Up Front):The City received a perfectly clean audit with zero compliance findings, zero misstatements, and zero disagreements with staff for the 41st consecutive yearThe City’s total net position grew by $30.2 million to $1.5 billion, long-term debt fell by $9.7 million, and the pension liability declined by $19.0 millionThe General Fund balance declined $6.5 million to $168.1 million, driven primarily by tourism revenue losses from the Palisades fire and national policy impacts on international tourismEven as revenues softened, actual operating expenditures came in $11.5 million under budget, reflecting disciplined financial managementSanta Monica maintained its AAA/Aaa credit ratings from Fitch and Moody’s, though both agencies issued negative outlooks citing litigation exposure and projected near-term deficits (pre-Realignment Plan)This report covers the fiscal year that ended before the Realignment Plan was adopted; the structural budget fixes the Council approved are not yet reflected in this report card and will show in next year’s |
Every summer, the City closes its books on the prior fiscal year. Then the accountants come in, review everything, and produce what is called the Annual Comprehensive Financial Report, or ACFR — think of it as the city’s official financial report card. The one we are discussing today covers the year that ended June 30, 2025, and it was formally presented to the Audit Subcommittee — of which I am a member — last week. The full City Council will receive and discuss the report at Tuesday’s Council meeting.
The good news: the audit of the ACFR was as clean as it gets! Our independent auditors found zero problems with how the City keeps its books. Zero misstatements, zero compliance findings, and zero disagreements with staff. That matters because it means the numbers you are reading are trustworthy. We have maintained that standard for 41 consecutive years!
The harder news: the City’s General Fund, which is essentially our main operating checkbook, took a $6.5 million hit in 2024-2025. Tourism revenue fell because of the Palisades fire, federal immigration and tariff policies that reduced international tourism, and weak consumer spending. You can see exactly where the money came from and where it went in the chart I had Claude build below.
What the chart makes clear is that our revenue base is still heavily dependent on tourism and visitor activity. When visitors stay away, we feel it. That is a structural challenge the City has faced for years and one our Realignment Plan was designed to address directly.
Here is what I also want to make clear: the ACFR — this report card — is a snapshot of where we were on June 30, 2025, not where we are going. Since this fiscal year ended last summer, the Council hired a new City Manager and City Attorney who have built new executive teams. We approved and funded the Realignment Plan. We directed the policy changes. We are making bold bets that are unpopular in certain corners of the community because we believe they are necessary to fix our structural deficit. We are not leaders that sit back hoping for good things to happen to the city. We are actively pursuing a turnaround strategy and you will see that reflected in next year’s ACFR. You can also tune in to Tuesday night’s Council meeting to see how much progress has been made since last year — or read about it in my newsletter next week!
I hope this special edition helps you understand what the ACFR says, why it matters, and what we are doing about it! It was fun to deep dive and write this for you… I’m still a government nerd at heart.
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