Cities across California are facing a budget crisis unlike anything in the state’s history. The economic tides have gone out and left Santa Monica looking embarrassingly naked with its epically large budget.

All residents, staff and officials should understand this reality: Everyone is going to lose something they love.

Years of infilling our eight square miles produced plentiful buckets of revenue for the city (and more than a few big developers). Rapid growth of tourism to a peak of $2 billion further added to the coffers.

Going forward, cuts are mandatory because the city has allowed programs to bloat when times were unusually good, and even prior to COVID-19 City Council was struggling to adapt to a more subdued economic landscape.

Without question, Santa Monica has spent years developing vastly more programs and services (with their corresponding staff) than similar sized cities. Whether the motivation was vanity, politics or economics doesn’t matter now. Santa Monica spends more per capita on its government than nearly anyone else and that has to be cut back down to size for the money just isn’t going to be there.

Numerous retailers were already in a death spiral prompted by a deathly cocktail of greedy landlords, burdensome regulation and changing consumer tastes.

The Third Street Promenade and other shopping districts were littered with empty storefronts and this will only worsen until landlords finally adjust rents to the new normal. Even that may not be enough for the most vulnerable businesses who may close permanently post-coronavirus.

It’s easy to pin our hopes on a revived hospitality industry but food and hotels are no safe bet. Restaurants will always be relevant, but the double whammy of rising rents and increasing minimum wages have permanently eaten away at margins and so they too will struggle to come back.

We just don’t know how many people will want to spend overnight vacations in hotels going forward. Probably a lot fewer from international markets and even domestic visitors will likely spend less on shorter stays, further slowing Santa Monica’s long-term economic recovery.

Our City Council is going to have to unwind this mess they’ve created and the process is going to be nothing short of brutal. And they’ll be doing it without an experienced city manager, now that Rick Cole is gone.

Now our situation is truly disastrous and we simply don’t know when it will get better. No matter how creative we get with revenue and efficiency, cuts are now inevitable and they will hit everyone somewhere.

Whether you value pool hours, library programs, school subsidies, bike lanes, senior art classes, park concerts or short lines to renew your parking permit; everything is going to take a hit and right now everyone is scrambling to secure their piece of the shrinking pie. We will all be hurt by this and everyone needs to come to grips with the new reality sooner rather than later.

Interim City Manager Lane Dilg has an unenviable job ahead of her. She will be bombarded by special interest groups of every kind, but at the end of the day she must look out for the long-term viability of our city and the citizens who pay the bills. However, she isn’t actually the decider here.

It’s up to the elected council to make the tough call. This is a true crisis and it’s time for us to realize we outgrew our britches a long time ago and we are really just a city of 93,000 people.

SMDP Editorial Board

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7 Comments

  1. Matt and Team, Well stated and yet I have hope that the 93,000 will have their needs prioritized over the tourists and commuting workers who haven’t been here during these COVID-19 days.

  2. Residents have long complained about the bloated budget of this small city for many years! The former City Manager, Rick Cole, was part of the problem in growing government excess spending. Additionally, government worker salaries have been ridiculously high compared to other coastal cities in California. Also, i have long mentioned concerns about Santa Monica relying on tourism to bring in money to support the bloated city budget. And as for the greedy storefront landlords, karma!

  3. Dear commenter, I’m assuming that “commuting workers who haven’t been here during these COVID-19 days” refers to the committed city employees who are still working around the clock to provide services to those 93,000 residents while simultaneously managing COVID-19 in their own lives and worrying themselves sick about losing their jobs with no severance or benefits in the next month.

  4. As the comment implies it would have been helpful to have the source and the year for the data used. More to the point though the two cities chosen for comparison are not really comparable as they have nowhere near the daily total of tourists, non-resident workers and beach visitors from the larger LA metropolitan area. While not perfect, a much more valid comparison would be with Beverly Hills whose per capita general fund spending in 2018/19 was $6,532 – roughly $2,000 per capita more than what you show for Santa Monica. Overall, though, your discussion of SM’s budget problem is good but would have benefited from indicating that we are not alone, that virtually every city of significant size in America is facing a major budget problem today and it isn’t because of it’s city manager or city council. It’s just a harder problem for SM because it is so dependent on hotel and sales tax revenues that have fallen off a cliff.

    1. Source is California State Controller which requires cities to report in a uniform manner. Your number for Beverly Hills is for the total budget not General Fund. Santa Monica equivalent would be $7,700. You cannot compare total budgets across cities as some cities have utilities and others don’t, for instance. General Funds are a more direct comparison.

      Re choice of cities, all are similar size, i.e. 87,000 to 93,000. All are beach cities with large tourist component, i.e. $1.2B to $2.0B. Newport Beach has up to 100,000 beach visitors a day during summer and a large amount of non-resident workers.

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