Image via Caroline Torosis/Instagram
While multiple challenges remain, the city council and staff sound upbeat about Santa Monica’s financial prospects turning in a positive direction.
On Tuesday night, the council was presented with an update on the city’s financial picture and proposed adjustments to the fiscal ’26-’27 operating budget.
But also a centerpiece of the presentation and discussion was the city’s Capital Improvement Program (CIP), particularly given that for the better part of the last decade – and certainly through the pandemic period – “the CIP budget had functioned less like a true capital budget and more like a second operating account, absorbing recurring maintenance, fleet replacement, and technology costs that crowded out the delivery of meaningful public improvements,” according to a staff report.
Now, the city will be activating “a strategic evolution from reactive maintenance toward true capital reinvestment,” stated the report.
What’s changed? The city’s Realignment Plan, adopted in October 2025, returned recurring costs to their rightful place in the operating budget. This allowed the CIP budget to rebuild and refocus on several priority projects, some of which had been deferred. A new capital improvements budget now promises $109.8 million for fiscal ‘26-‘27 and a $116.6 million for fiscal ’27-’28.
Deferred investments that will now be attended to include:
- Memorial Park Redevelopment and Expansion
- Downtown Maintenance Service Enhancements
- Pier Railing and Lighting Renewal Project
- Pier Fire Sprinkler Replacement
- Renewal of the Camera Obscura building in Palisades Park
- Main Library improvements
- Parks investments at Tongva Park and Airport Park
- Streetlight modernization on Montana Avenue and in Mid-City
- A slate of mobility and Vision Zero improvements
- Upgrades at the Annenberg Community Beach House
As for the general operating budget, the Realignment Plan organized a series of interwoven programs across five strategic priorities:
- Achieving safe neighborhoods and clean streets
- Activating economic opportunity and growth
- Developing affordable, livable, and secure housing
- Creating organizational capacity
- Building organizational health
In so doing, according to the report, the city “deployed $60 million in previously allocated reserves to stabilize operations, rebuild capacity, and catalyze private sector reinvestment.”
In March, the council approved narrow operational adjustments to further extend Realignment service levels citywide. As a result, the city claims:
- Part 1 crime is down 12.5% (homicide, rape, robbery, physical assault)
- Full sworn police staffing for the first time in over 20 years
- The filing rate increased to approximately 88% of all legally fileable cases by the city attorney’s criminal division
- 92.5% on-time, first-round plan checks
- All library branches reopened
- Significant progress on Downtown capital improvements
- An expanded Homeless Support Team and maintenance operations
In addition, Third Street Promenade ground-floor occupancy is at 75%, and hotels are reporting improving occupancy rates of 79.5% in April.
Before the adoption of Realignment, the ‘26’27 General Fund (GF) was expecting an estimated $29.6 million operating deficit and a depleted cash position. But now, with the advent of new internal expenditure controls, secure new programmatic revenues, and the scheduled expiration of the Joint Use Agreement with the Santa Monica-Malibu Unified School District (SMMUSD) in 2027, the General Fund is expected to be structurally balanced by the end of fiscal ’26-’27.
A parcel tax measure will be put before the voters in November and could return the $12 million lost from the Joint Use Agreement. However, that $12 million does not reflect the millions of additional dollars the city commits to the school district every year.
There are other contributing factors to the expected General Fund turnaround. They include revenues from:
- A new digital signage program expected to raise $4.5 million annually when fully realized
- An Ambulance Operator program run through the fire department that is projecting $5.5 million this year, and $7 million annually once fully developed
- Parking rate restructuring that’s expected to generate $7.2 million in additional revenues annually
- A stronger cash-on-hand position of $94 million in unobligated funds
- An improvement in the city’s liability position due to the city attorney’s office making moves to reduce the city’s exposure to contingent liabilities
- Major events from the World Cup, Super Bowl, and Olympic and Paralympic Games that are expected to bring visitors to the city who will spend and stay in our hotels
The report does state, however, that the city will have to keep an eye on key sources of revenue, including property and documents transfer taxes (20.4% of GF), sales and use tax (15% of GF), hotel tax (14.3% of GF), business license tax (8.3% of GF), and parking revenue (8% of GF).
The health of other standing funds is also a factor, including Wastewater, Big Blue Bus, Airport, Resource Recovery & Recycling, the Cemetery, Pier, and Housing Authority. The Big Blue Bus fund is expecting a net increase of $53.1 million, while the Airport Fund anticipates a decrease of $4.5 million.
Operating expenditure adjustments for fiscal ’26-’27 in other funds will result in a $44.0 million (12.7%) net increase from the Approved Budget Plan. This will include $16.9 million in voter-approved uses from Measure GS, including for the Santa Monica Rent Aid Program and other housing services and homeless prevention.
Specifically, $6 million was approved Tuesday night to fund the Renter Aid Program.
“Santa Monica renters are the backbone of our community, and this program is about making sure they can stay here,” Mayor Caroline Torosis said. “Santa Monica Renter Aid puts Measure GS dollars to work exactly as voters intended, keeping working families housed before a crisis becomes a catastrophe. This is homelessness prevention that is a smart investment for our city.”
This city is also conducting a citywide fee study to determine which of approximately 800 fees should be increased, decreased, or eliminated, and which new fees to add.
Recreation and Parks Commission Chair Steven Johnson was on hand to speak particularly in support of the CIP budget enhancements for Memorial Park and the Airport Park sports field replacement.
“Memorial Park expansion is more than 20 years in the making,” he said. “In 2004, that’s when the city bought Fisher Lumber Company, and we have been trying to get this expansion plan done ever since.” He affirmed that city staff has a great plan that includes all the necessary elements and a mix of funding sources.
Concerning the Airport Park athletic field, Johnson pointed out that the field has maintained the same surface since 2000 and that the surface has been a danger since 2019.
Mayor Pro Tem Jesse Zwick, a big mobility proponent, posed several questions regarding greenway installations and Vision Zero safety improvements. Staff seemed to clarify that several of the project locations Zwick was asking about were underway, already completed, or can now be completed with the new CIP budget.
Among her questions, Councilmember Natalya Zernitskaya inquired about a few fees as they pertain to the effects on the health of small businesses, and asked that a few more obscure fees be defined.
Councilmember Ellis Raskin asked whether the staff was considering planning and budget measures to prepare for a time when departments outgrow their current bases of operations. Staff said they are in the process of doing so.
“I’m very impressed with what you all have managed to do with still less resources than we’ve been accustomed to,” said Torosis. “And we’re making big moves on some of the capital projects that were deferred,” she added in appreciation.
She, along with Councilmember Lana Negrete, also asked for clarification on the end of the Joint Use Agreement between the city and school district, and its overall effect on schools. Torosis asked City Manager Oliver Chi if the end of the agreement would mean the city would no longer allow the schools to utilize city-owned facilities and fields. He said they want to fashion a system where schools would not be shut out.
The item was moved by Councilmember Barry Snell and seconded by Negrete. Before voting, Raskin asked his colleagues if they were willing to come back and revisit certain fees and advise staff on those fees. Consensus was that they were.
The item passed, 6-0. Councilmember Dan Hall was absent.
The city council will ultimately vote on a final budget package on June 23.
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