The Southern California coastal city of Santa Monica is expected to decide whether to declare a fiscal emergency on Sept. 9 as revenues continue to drop and sexual abuse payouts grow.
City council members will consider a resolution to declare a fiscal emergency, allowing the city manager to take steps to address the crisis.
“In an effort to better articulate the current fiscal distress faced by the City, and to provide staff with an additional tool as we continue to pursue various budgetary and legislative strategies to address the City’s current financial situation, the attached Resolution has been prepared for city council consideration,” acting City Attorney Heidi Von Tongeln wrote in a staff report.
Located about 20 miles west of Los Angeles, Santa Monica is facing a variety of struggles, including a growing homeless population, recent business closures, and a rise in violent crime, particularly in the city’s Third Street Promenade area.
City leaders in May took steps aimed at revitalizing the city by creating a downtown “entertainment zone” to lure residents and tourists back to shop, drink, and eat. The new plan allows the public to drink alcohol outside in plastic cups.
However, John Alle, co-founder of the Santa Monica Coalition, a group of locals addressing the crisis in the downtown area, told The Epoch Times at the time that the group surveyed residents and found that 86 percent of them don’t visit the restaurants or shops because they don’t feel safe strolling the streets or parking.
Fiscal Emergency
The city has faced funding problems since the COVID-19 pandemic, according to Von Tongeln’s report.
California Gov. Gavin Newsom’s stay-at-home order in March 2020 required the closure of all nonessential businesses, churches, parks, playgrounds, and beaches. In-person school was also halted for most public schools, with restrictions lasting for nearly a year.
The effects on Santa Monica included a 27 percent decline in revenue for fiscal year 2020–2021. The city reduced its budget by about 24 percent in response and eliminated nearly 300 permanent jobs and more than 120 temporary positions.
“The recent financial forecasts anticipate that the City will continue to operate a structural deficit for several years, and the City faces ongoing uncertainty that revenue projections may come in lower than expected,” Von Tongeln wrote in the report.
City services have not been restored to pre-pandemic levels, and many capital projects are still unfunded, according to the report.
Beachgoers in Santa Monica, Calif., on Dec. 8, 2023. (John Fredricks/The Epoch Times)
The city also adopted a budget that is $10.8 million above what it received in revenue for the fiscal year that started July 1.
The city’s uncertain future revenue is made worse by possible increased expenditures.
The city has paid more than $229 million in settlements arising from alleged sexual abuse by a former city employee from 20 to 30 years ago. The settlements have been funded largely by reserves in the general fund and by borrowing more than $52 million from various city funds, staff reported.
This followed changes to California law starting in 2019 that “effectively eliminated the statute of limitations for sexual abuse claims,” according to the report.
The city faces more abuse claims relating to the same former employee from more than 180 claimants who are seeking several million dollars in damages, the payment of which will be due in full when the case is resolved in court or settled, according to staff.
The revenue drop from the pandemic and court settlements has drained the city’s general fund reserves to 61 percent of their pre-pandemic levels.
