CITY HALL — A three-year extension for a funding agreement funneling more than $7 million annually to the school district was approved by the City Council on Tuesday but the decision wasn’t made without concerns about the possible financial impact to city services.

Before a unanimous decision was made to extend the Master Facilities Use Agreement and increase its base payment from $7.2 to $7.5 million starting next fiscal year, several councilmembers expressed reservations about the hit that City Hall would take, noting that the city manager has already requested department heads to propose cuts in their budget for 5 percent next year.

The contract, which was first entered into five years ago, provides a regular stream of revenue to the Santa Monica-Malibu Unified School District in exchange for public use of its facilities.

Both parties have been affected by the recession — the SMMUSD faces up to $10 million in state funding cuts over the next year while City Hall is battling drops in revenue from sources such as transient occupancy taxes, sales and property taxes.

“Even in the best of times economically speaking we can never fund everything that is needed and so it’s a question of priorities,” City Manager Lamont Ewell said. “When you set priorities for the city, there were two common things that came up — public safety and several comments were made about the school district.”

Ewell added that City Hall will fund public safety first at the highest level possible because it has been set as a priority, acknowledging that “there will be some things that will have to fall off.”

Councilman Bob Holbrook said he was concerned about approving a contract before knowing what the budget situation would be for City Hall, questioning why the terms are three-years long.

“Nobody knows how long this thing is going to last, nobody knows how deep it is going to be, can we afford to make a three-year agreement now?” Holbrook said.

The possible impact, according to several councilmembers, could be that some of the older city vehicles remain on the road for longer and buildings due for a new paint job stay unmaintained as City Hall weathers the storm.

Councilwoman Gleam Davis, a known district advocate, said that as difficult as the situation is for City Hall, it’s minimal compared to the damage inflicted by the state to the school district.

She said that education is a public safety issue.

“It’s common sense that when we have good schools, we produce better citizens and more well-rounded people and more successful people,” she said. “The kind of community we want here in Santa Monica absolutely mandates we continue to support schools.”

The Master Facilities Use Agreement came in response to the state budget cuts to education in 2003 that resulted in about 200 layoffs in SMMUSD alone, prompting parents to begin seeking a more consistent stream of funding from City Hall.

Parents eventually launched a campaign to push a controversial charter amendment that would have specifically identified ongoing revenue for the schools, eventually gathering more than 15,000 signatures. Just as organizers were about to submit the petitions, the council narrowly agreed to a compromise in May 2004.

District officials and school advocates said the continuation of the contract will provide much needed funding during a fiscally challenging time.

“This kind of funding helps us keep an array of programs in our school district that we wouldn’t be able to maintain without this funding,” Barry Snell, the Board of Education vice president, said. “Going into this financially difficult time, we appreciate knowing we have consistent commitment from our city government.”

The contract gained more attention in 2007 when the council decided to withhold more than half a million dollars from the district — representing the increase in base pay the SMMUSD was set to receive starting that year — because of issues in the special education program involving transparency and distrust by parents. The money was not released until earlier this year after district officials demonstrated that changes have been made, promising more for the future.

The contract includes a provision requiring that the district maintain its Special Education District Advisory Committee (SEDAC) and for the Board of Education to hold at least two meetings every year regarding special education policies and programs. The amendment came in response to concerns expressed by parents that the district would pull back on special education reform since it had met the requirements imposed by the council to receive the money.

Several special education parents, while pleased with the proposed changes, asked that the contract be further amended to require that any changes to the district’s policy concerning SEDAC be approved by the majority members of the district advisory committee or the council.

Tricia Crane, who has been one of the most outspoken critics of the district in the special education controversy, pointed out to the council that school officials are in the process of reviewing and revising all board policies.

“In light of the foregoing, I am concerned that in the future, changes could be made to SEDAC that would undermine the committee’s ability to provide the oversight that the council and city desire,” she said.

Parents who once spoke before the council with trepidation, fearing that they or their child would face consequences by the district, returned with renewed confidence.

Claudia Landis, who has a child in special education, said that she is able to speak to the council without fear because of the help of city officials. She said that positive changes have been made for her child’s situation.

“I think that something good happened at least for one citizen of this city,” she said.

melodyh@smdp.com

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