By Ted Winterer
The economic crisis wrought by the Coronavirus pandemic is unlike anything we’ve seen in our lifetimes and has impacted the fiscal health of the City of Santa Monica in ways previously unimagined.
Our City weathered the Great Recession with minimal cuts to services thanks to prudent planning, “rainy day” reserves and voter approval of the sales tax measures Y and YY in 2010. The challenges we face today are an order of magnitude more dire.
For instance, during the Great Recession the occupancy rate at the Fairmont Miramar Hotel bottomed out at 60%. Today that hotel and about three quarters of our other lodging facilities are closed, with the remainder reporting occupancy rates around 5%. So hotel bed taxes, a significant portion of the City’s revenues, have disappeared almost overnight, along with ancillary funds from local spending by visitors, and appear unlikely to rebound any time soon. Likewise, parking fees, sales tax and other revenues have fallen off a cliff due to the shutdown of businesses and the Safer at Home order.
There have been rumors circulating around town that budget cuts have already been implemented, without public input from residents, businesses and the City staff whose lives may be impacted. These rumors are unfounded.
Instead, at a May 5 public meeting the City Council will evaluate a staff proposal to restructure City Hall operations and balance the budget, projected to see shortfalls of up to $72M in the current fiscal year and up to $154M in the next. Those are staggering sums which will require a major reduction of the programs Santa Monicans have enjoyed over the years, especially if we are to preserve the most essential services such as police, fire, waste hauling and water delivery.
The short term deficit can be covered by postponing certain capital improvement projects, cancellation of contracts, reserve funds and other one-time savings. However, producing a budget which balances in the next fiscal year will require substantial cuts to staffing and programs, along with additional one-time savings. These will be painful decisions for both the Council and the community, but we must plan for the worst case scenario of a tepid recovery of the local and national economy. The recent Federal stimulus bill provided direct financial aid only to cities with populations of 500,000 or more and we cannot be optimistic that assistance for smaller cities will be include in subsequent bills approved by Congress. Likewise, our State legislators have advised us not to count on any assistance from Sacramento. Nor are we alone in this predicament: California’s 482 cities expect a collective loss of $6.7 billion over the next two years.
Here’s the process, which will be protracted and iterative:
1. City staff have been offered the opportunity to voluntarily separate from their employment. By May 1 we will have an idea of the savings realized from this effort which will inform the decisions on May 5.
2. Then on May 5 the Council will review and possibly modify proposed reductions and cuts to services and to the staff who have delivered them. Due to various labor laws, the Council will have to approve layoffs of City employees, but it’s important to note this is only a first step. And of course public input will be part of this process and we anticipate it will be robust. In fact, Council has already heard from advocates for youth programs such as CREST and Homework Club, recreational facilities, sustainability efforts and our libraries. The sad reality is that change is likely coming to all these, but Council is committed to preserve as much as possible of services which will assist those most profoundly impacted by the recession and which will fuel our local economic recovery. It’s important to note that in many instance we will be merely pushing the pause button on some of our goals while we see how long recovery takes and what changes to our economy have been either temporary or permanent. Those who are interested will be able to find the staff report for the May 5 meeting by May 1 at smgov.net/council.
3. Once layoffs are announced, our partners in our labor bargaining units will then have to opportunity to propose alternatives for cost savings and to negotiate the impacts of those layoffs. Likewise, the community will be able to offer options such as private-public partnerships and volunteer efforts to fill voids in program reductions.
4. As a result, there will be ongoing negotiations, discussions and more decisions, but by the end of June we must finalize a balanced budget for this fiscal year and adopt a projected budget for the next fiscal year which doesn’t run in the red, as the City unlike the Federal government cannot run deficits.
These are turbulent times for all of us. I’ve been unable to sleep well in anticipation of the difficult decisions we face next week and my Council colleagues have been equally distressed. Please know that during this pandemic the Council and City Hall are focused on protecting the public health, expediting the local economic recovery and assuring the City’s long term fiscal health. Together we will emerge from these enormous challenges battle-scarred but stronger and more resilient.
Ted Winterer is a Santa Monica Councilmember
