Downtown Santa Monica, Inc. (DTSM) approved its 2025–26 fiscal budget recently, defying the City of Santa Monica by rejecting a key funding provision and asserting its autonomy over how services are prioritized in the downtown district.
At the center of the clash was DTSM’s decision to eliminate $1.2 million in funding for enhanced cleaning and maintenance of city-owned parking structures, a responsibility the nonprofit had taken on for years through a negotiated trade-off with the City. DTSM board members argue the deal is lopsided, unsustainable and no longer reflective of the organization’s priorities.
“This has never been an equal exchange,” said Treasurer Eric Sedman. “We cannot keep allocating more than a million dollars a year to a responsibility that doesn’t belong to us.”
Assistant City Manager Susan Cline, attending the meeting on behalf of the City, responded forcefully. She insisted that DTSM cannot unilaterally withdraw from the agreement and warned that the decision could carry serious consequences, including City Council rejecting the budget outright.
“We are taking cuts across every department,” Cline said. “This cannot be misrepresented as a simple line-item adjustment. DTSM does not have the authority to make this decision on its own.”
Despite Cline’s warning and a proposed compromise to partially restore funding by reallocating $400,000 from another maintenance line, the board voted to pass the budget as presented by staff. A substitute motion to amend the budget failed by a narrow margin.
The vote sets up a likely confrontation with the City Council, which must still approve DTSM’s annual operating plan under the terms of its services agreement.
DTSM is funded by taxes paid by participating businesses. It manages parts of Downtown Santa Monica under an agreement with City Hall that requires DTSM to oversee cleaning of the parking structures and provide a level of maintenance above the City’s minimum standards. In exchange, the City is supposed to make additional efforts to clean adjacent streets.
The approved $9.39 million budget reflects DTSM’s first balanced budget in several years. It forecasts a modest surplus of roughly $4,500 and avoids tapping into the organization’s reserves, which currently stand at $1.7 million. Staff attributed the improved financial outlook to a combination of cost-cutting and conservative revenue forecasting. Notably, savings were realized this year due to staff vacancies, reduced lighting expenditures and trimmed event production costs.
“We came into this fiscal year expecting to draw nearly a million dollars from reserves,” said CEO Andrew Thomas. “Instead, we’re closing the year having used just over half that amount, a $370,000 savings.”
But Thomas didn’t sugarcoat the pressure DTSM remains under. “Last year, we went down to the fat,” he said, adding, “This year, we’re eating the bone.”
Looking ahead to 2025–26, DTSM projects mostly flat revenue, with minor increases expected from business license taxes and event rentals. The organization opted for conservative forecasting given recent business closures and the impact of fires in the area, though a full-year lease from a new pickleball venue is expected to provide a modest revenue boost.
Among the biggest changes in this year’s budget is a reclassification of security services. Although the budget line for “Downtown Security” appears to drop 31%, the cut is largely symbolic: one-third of the cost has been reassigned to the “Downtown Outreach” category in recognition of the team’s growing role in engaging with the unhoused population and facilitating service referrals.
“They’re not just providing a security presence,” Thomas explained. “They’re actively coordinating with service providers. That’s a substantial part of their job now and our budget needed to reflect that.”
The board also discussed event funding at length, with several members questioning the return on investment for large-scale productions. DTSM has cut its “Community Events & Activations” line from $580,000 to $440,000, while introducing a $250,000 allocation for “Promenade Micro Activations,” which are smaller, more frequent installations like musicians, artists and interactive displays designed to animate the public space without the overhead of full-scale events.
Signature events such as Día de los Muertos and Pride on the Promenade remain intact, both of which staff described as culturally significant and among the district’s highest drivers of foot traffic. However, some long-standing events, including Cinco de Mayo and the 150th anniversary celebration, have been removed from DTSM’s funding list in the hopes of securing outside sponsorships.
There was some push from board members to further diversify event offerings, with suggestions including Oktoberfest, Valentine’s Day celebrations and a renewed July 4 presence.
“We keep doing the same things and expecting different results,” said board member Luke Cain. “Let’s light up the promenade year-round, not just for pride or Halloween.”
Staff noted the logistical challenges involved, pointing out that even smaller activations are labor-intensive and would likely require additional personnel or third-party management. Despite the internal approval, the fate of the budget is far from settled. Cline made it clear that City staff are not prepared to assume the additional burden of parking structure maintenance, citing higher municipal labor costs and equipment needs.
“It’s not a one-to-one swap,” she said. “This creates a major gap in our operating plan and we’ll have to address that.”
The conversation now heads to Santa Monica City Council, which has final authority to approve or reject DTSM’s budget and operational plan. If the two sides cannot come to an agreement, DTSM may be forced to revise its budget before the July 1 start of the new fiscal year.
“We’re not in fun times for anyone,” Board Chair Michele Aronson said. “But we’ve done the work, made the hard choices and we believe this budget reflects our mission and the needs of our stakeholders.”
City officials, meanwhile, signaled they would continue working toward a solution, but cautioned that shared pain does not mean shared capacity.
“We’re all taking hits,” Cline said. “But we’re also all still responsible for the work that needs to be done.”
scott.snowden@smdp.com
