Santa Monica City Hall (File photo)

The state of Santa Monica’s local economy remains strong, but shows signs the growth of recent years may be tapering off, according to a new analysis from the City’s Finance Department.   The City’s General Fund forecast shows modest revenue growth amid a changing retail landscape and decreased demand for parking. Average annual growth over the last three years has been less than four percent.

Hotel tax remains reliable revenue for City Hall, as Transient Occupancy Taxes continue to increase about 9 percent a year. The city recently added two hotels with 260 rooms and a third under construction will bring 271 more.

City sales tax growth is expected to be modest, as fewer shoppers visit brick-and-mortar stores and auto sales slow. Parking revenue from structures and lots are expected to decrease 7 percent this fiscal year.

“This is primarily a result of EXPO light rail and ridesharing services providing alternative modes of transportation for visitors and community members,” the report said. “However, recent Council-approved rate revisions should restore parking revenues to previous levels.”

The proposed budget for the fiscal year 2018-19 is $732.5 million.

The weakest spot in the City’s financial health is a $461 million unfunded pension liability. The City made an advanced payment of $45 million to CalPERS in 2017.

“The magnitude of the remaining shortfall, however, will require additional tangible and likely painful diversion of funding to address this threat to our fiscal health,” the report said. “The year ahead will provide the opportunity for dialogue with our community and our workforce about how together we address this need and set the bases for Council to establish specific and measurable policy goals to ensure our pension obligations are adequately funded.”

In order to offset rising costs, most City fees will increase by 4.4 percent July 1. In addition to the increases, staff proposes five new fees, including a $361 Address Assignment Fee and a $95 Mobility Impound Fee for electric scooters and bikes left in the public right of way, among others.

Several of the city’s funds are struggling. The Big Blue Bus’s revenue from passengers has declined three straight years. The Housing Authority Fund has a projected operational deficit of about a million dollars. It will require a subsidy from affordable housing funds this year. The Cemetery Fund will likely need a loan from the General Fund to continue to operate. Finally, the Pier Fund faces decreasing lease revenue because of upcoming construction.

The City Council will review the report at their May 22 public meeting. The Council will meet at 5:30 p.m. in Council Chambers at City Hall, 1685 Main Street, Room 213. Public items will be heard no earlier than 6:30 p.m.

Kate Cagle

Senior reporter for the Santa Monica Daily Press