June 2, 2023 Breaking News, Latest News, and Videos

Council Hears Financial Forecast:

The City’s new Finance Director, Carol O. Swindell, told the City Council Tuesday that the economy-both nationally and statewide – “is giving mixed signals.”

On the positive side, the Gross Domestic Product (GDP) is up, unemployment is low, inflation is easing and the stock market is booming. However, the housing market is in a slump, though “Santa Monica is somewhat insulated from what’s happening in the Los Angeles area and nationally…but we are seeing some impact from that. There are also concerns about inflation and a possible recession.”

The City staff report states, “Although economic signals on a national level are mixed, the economic forecast for Santa Monica is positive due to the strength of tourism and commercial real estate.” Revenue from the City’s Transient Occupancy Tax (TOT) is up $1.8 million more than predicted for this fiscal year, and commercial rents are up 20 percent over a year ago. Extra revenues have resulted in a $3 million surplus in the General Fund in the current fiscal year. “The City also benefits from a diversified tax base which lowers its vulnerability during economic downturns and provides quicker recovery following those downturns.”

Swindell also presented two scenarios to predict baseline expenditures from the labor-cost-driven General Fund over the next five years. The difference in the scenarios is due to different figures for labor costs, with the first being higher than the second. She stressed that General Fund baseline “revenues are predicted to be the same under both scenarios.” These revenues are expected to grow from $233 million this year to $273 million in 2011-2012.

In the first scenario, General Fund baseline expenditures over the next five years are expected to grow from $250 million this year to $291 million in 2011-2012. In the alternative scenario, the $250 million will only grow to $283 million. Therefore, the City is predicting expenditures will outpace revenue growth in 2009-2010. In the alternative scenario, this will occur in 2010-2011.

The forecast also pointed out significant deficits in City funds that are supported by user fees over the next five years, so fee increases may be necessary. These funds include solid waste, wastewater and water. Other funds with a projected deficit are the Civic Auditorium, the cemetery, the Pier, the beach, the Big Blue Bus and the Earthquake Recovery Redevelopment Project.

Swindell noted, “The purpose of the forecast is to serve as a tool for the Council and other stakeholders to identify warning signs where we may want to take some corrective action or begin preparing for any threats to our revenues or any expenditures that we may need to prepare for as well.”

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