Plan addresses immediate and long-term impacts caused by the novel coronavirus and closes $224 million budget gap through 2022
On May 1, the City of Santa Monica posted its staff report outlining a proposed plan for restructuring City operations in response to the public health emergency and related economic impacts caused by COVID-19. The plan will be considered by the City Council at a special meeting on Tuesday, May 5 at 3 p.m.
Santa Monica’s economy has ground to a halt as a result of public health orders implemented to save lives and slow the spread of COVID-19. The restructuring plan anticipates a phased reopening strategy and anticipates adjustments to City programming and operations to match changed community needs. Under the proposed plan, the City will realign its operations to focus on core priorities of:
- Providing foundational services for a clean and safe Santa Monica
- Responding to the public health emergency
- Promoting a broad and inclusive economic recovery
“As City staff, we are public servants, charged with responding to community needs and safeguarding the public good. In the wake of the unprecedented impacts of the COVID-19 pandemic, that means making difficult budgetary decisions that prioritize public safety, protect our most vulnerable populations, and maintain our vibrant public spaces, while setting our sights on supporting our economic recovery,” said Interim City Manager Lane Dilg. “The path ahead will be painful, and fraught with shared sacrifices to stop cuts in services and prevent further layoffs. We grieve with our colleagues who have dedicated themselves to this work whose jobs will be lost. In the coming days and weeks, I look forward to hearing from our broad City community to ensure that we implement a plan that leads with our values.”
Proposed changes to City programs and services reflect the post-COVID environment. Reductions to public safety are comparatively limited. Supports for vulnerable residents are preserved, including social services, affordable housing, and aid to seniors enrolled in the Preserving Our Diversity Program. Maintenance of Santa Monica’s well-known public spaces – including our City parks, beach, and Pier – is prioritized. Events, in-person programming, and facility access and hours are reduced.
Departmental administrative functions are consolidated across the board, including the restructuring of three departments into two: Community and Cultural Services becomes Community Services; Planning and Community Development becomes Community Development; and the Housing Division and Economic Development Division of the prior Housing and Economic Development Department are integrated into these new departments respectively.
Initiatives that have defined the City’s forward-thinking approach will be embedded throughout operations, but their staffing will be eliminated or reduced, including performance management, wellbeing, and sustainability programming.
There will be an overall reduction in frequency of in-person services, including at the public counter and in libraries. Efforts to continue to digitize City operations for expedited online service delivery will continue.
With a local economy strongly based in tourism, sales, and parking revenues, the City is facing a $224 million deficit through the next two fiscal years. The City’s updated financial forecast reflects a projected deficit of $48 million at the end of this fiscal year, $102 million in FY20/21 and $74 million in FY 21/22. While this shows a modestly improved deficit as compared to prior projections issued last month, the long-term state of the City budget remains dire. The proposed plan preserves more programs and services as well as associated positions than anticipated but nonetheless reflects significant cuts to address the projected $224 million shortfall over the next two years. Additionally, City staff is recommending creating a $20 million Shutdown Fund to shoulder a two-month loss in revenue if COVID-19 resurges in the fall or winter, requiring a second wave of stay at home orders and associated impacts.
The City’s immediate measures to close the deficit include leveraging reserves, cutting capital projects, and recalling water settlement funds and Measure GSH funds. Combined, these one-time funds total $117 million. While the City is able to use one-time money to bridge short-term budget gaps, major long-term measures are required for the organization’s financial sustainability and to close the additional $107 million deficit through 2022.
“Like most cities in the nation, Santa Monica is in uncharted territory. The impact of this pandemic on our economy is unlike any other natural or man-made disaster,” said Finance Director Gigi Decavalles-Hughes. “This situation is unique because the deficit is immediate and deep as well as long-term, with only modest projected gains after 2022. We focused on closing the deficit first with one-time funds. While these one-time funds help bridge the gap, reorganization that includes long-term measures is required for the organization’s financial sustainability.”
To further its three core missions and close the budget gap, the City is proposing citywide reductions of $86.2 million in net on-going costs, including 337.2 permanent and 143.9 temporary positions overall. The number of permanent positions from the general fund is 258.6.
The Interim City Manager and Interim City Attorney have taken 20% reductions in pay. Department Heads and other executive staff will take cuts up to 15%.
The City has taken and will continue to take steps to mitigate the impact of layoffs on valued City staff. The City previously initiated a Voluntary Early Separation Incentive Program to identify staff members who wished for their own reasons to separate from the City. The VESIP program is expected to identify approximately 100+ individuals across the organization who wish to separate from City employment. This will avoid layoffs of other employees and may open still-needed positions to be filled by City staff. When the City does issue layoff notices, 30-days notice will be provided and the City will seek to support separating staff with employment training and services.
The City Council meeting will be held via teleconference on Tuesday, May 5 at 3 p.m. Information is available at smgov.net/council. New interim public comment rules will be implemented for this meeting. You can now provide written or oral public comment in advance of or during the meeting. To learn more about how that works, visit santamonica.gov.