The Santa Monica City Council Tuesday is expected to consider declaring a fiscal emergency in the city — with officials saying the move is necessary to address financial strains from a reduction in tourism tax revenue and an increase in liability costs.
On Tuesday’s agenda, council members are scheduled to discuss and vote on a resolution to declare the fiscal emergency. A report noted that the resolution would provide Santa Monica with an official document that would better position the city for future grant funding and interactions with regulatory and governmental entities.
In June, the City Council approved the budget for fiscal year 2025-26 with adjusted expenditures estimated at $484.3 million and $473.5 million in expected revenue. Financial forecasts anticipate the city will continue to operate at a deficit for several years.
Part of the financial strain stems from impacts of the coronavirus pandemic, which resulted in a sudden 26.8% decline in General Fund Revenue in fiscal year 2020-21, city officials say. The city reduced spending by 23.9%, and that decision also resulted in 299 permanent and 122 temporary positions being eliminated.
City services have not been restored to the level before COVID-19.
An increase in liabilities is also exacerbating the city’s financial issues.
In recent years, state legislators approved new legislation that effectively eliminated the statue of limitations for sexual abuse claims.
Santa Monica has paid more than $229 million in settlements related to sexual abuse claims against Eric Uller, a former city police dispatcher. The city is expected to face an additional 180 claimants.
Uller worked with boys and girls at a police nonprofit’s after-school program.
“The settlements have been funded largely by reserves in the general fund and by borrowing more than $52 million from various city funds,” a report from the city reads. “Currently, the city faces additional abuse claims related to the former employee from over 180 claimants that are seeking several million dollars for their alleged damages, the payment of which will be due in full upon order of the court/and or approval of the settlement.”
City officials also cite tariffs, deportations, tax cuts and deregulation as additional fiscal challenges.