On December 10, the new City council will be seated fresh from their dominant win in the recent elections. There are surprising parallels between the national elections where MAGA swept the board and the Santa Monica elections where a coalition of SMRR/Forward/CEPS/Dem Club/some unions/Abundant LA/ Next among others also swept our local chess board. Although there are many salient explanations, this article will not delve into exactly why those two elections went the way they did, because it is a larger discussion that won’t be fully understood until all the election dissection is complete. However, we do know the new City Council faces immense challenges because the City is simply broke.
The City is broke because our cumulative expenses have climbed faster than our income in the last decades. We have not recovered yet from the cash flow collapse caused by our approximately $230M pedophilia legal siege which is still unfolding and expanding. Another ticking time bomb is the City’s open voting rights suit which seems to by continuing forever running up tens of millions of dollars of legal fees. The tourist hotel room taxes have not yet recovered from the Covid depression, nor from our negative reputation for crime and for homelessness which are still unfolding and impacting tourism. Our City is subjected to the same inflation for materials and services in the last few years that have been eating your paycheck. This results in a loss of service to citizens in countless ways: but to name just one, two of our libraries are still closed 4 years after Covid. You could fantasize that these are just temporary conditions, some kind of perverse perfect storm, and that we should just hold our fiscal breath and tough them out?
However, the long-term financial picture is even grimmer. The City’s unfunded pension overhang is about $700M+ and climbing while the School Board pension overhang is about $100M+. To give you an idea of the scale of the problem, this obligation is about the size of the City’s entire operating budget of $765M for 2024-24. Our public obligations have escalated to the point that our credit rating has already been lowered, and the City has no credible recovery strategy while its cost to borrow money is increasing. In the past it has been essentially paying just the interest and not the principal on these obligations. Passing more bonds or the recently approved parking fee increase is not an exit strategy, but simply a way of encumbering our future hoping something, anything, will eventually bail you out. If you tried this with your credit cards you would not survive for long. Likewise, our School Board keeps running up the tab on huge unnecessary school bonds, $500M in the latest version, as its resident student population keeps declining. Again there is no exit strategy here. Finally, the worst near-term hazard to the City is that it has no defense against Sacramento’s order that we build 9000 new units. This unfunded mandate by the State will grind down both our fiscal health and our quality of life while simultaneously failing to deliver the promised 6000 affordable units. The cost of residential units to a City budget typically do not pay for themselves. The increase in water, trash, fire/police services, public works, parks, libraries, etc., etc., etc. usually exceeds the potential income from increased sales and property taxes derived from that residential construction. Unless your city is populated by just the upper 1%, you need a mix of commercial, retail, industry and office construction income to help pay for the residential component of a typical City budget. Needless to say our 10%-20% vacancy in those sectors does not auger well for the future, as online ordering continues to crush the retail sector.
These are just the known clouds on our fiscal horizon. Deeper forces are also at work over which we have no real control, but we will nonetheless suffer from their impact. It’s unclear if the inflation and interest rates will go up or down during a Trump administration. If mass deportations do occur, they will severely increase the cost of the agriculture, construction, and restaurant businesses. It’s also unclear if mass deportations and a collapsing birth rate and household formation rate plus Santa Monica’s unaffordability for families will directly effect Santa Monica’s population growth? As the seven-state Colorado River watershed dries out, when will we run out of water for the 18000 new wealthy residents who will magically show up to populate the supposed 9000 new units? Long overdue for a 6.5+ magnitude earthquake (last one was in 1994), we do not have the reserves needed to face successfully such a tragedy. Finally, while lower on the probability scale, we must also consider the reaction or even better the preparation for, tsunamis which can effect any Pacific coastal city but are especially critical to our City famed for its pier and beaches.
But there must be some rays of civic sunshine ahead? Well, let’s see, what about the PR buzz and income from the 150th-year recognition of our City’s founding? What about the 2026 World Cup or the 2028 Olympics: won’t the City get a cash bonanza from those events? Unfortunately, because we cannot afford to host any of those events or their PR buildup, other cities, who are not broke, are taking those events from us. In other words, it takes money to make money and a City that is broke cannot even invest in its future. Investing in these low-hanging fruit would be a no-brainer, but they are simply out of our reach. Finally building out the Airport Park in 2028 is just another mirage the City cannot afford. In fact, it is already over budget with the originally planned feasibility/community input study by Sasaki which was supposed to cost $1,000,000, has already ballooned to $2,000,000 before even a single spade of earth has been turned.
Now these problems were not created overnight. They have been festering for the last 20 years and have now turned into a full-blown crisis. For the last 4 decades, SMRR as a legacy political organization and its multiple supporters have dominated the successive City Councils, which cumulatively did not act in a prudent manner to protect our City from this fiscal paralysis. During the last 4 years, another slate briefly contested SMRR, etc’s dominance, but because they were not a majority, having only three members, in spite of their strenuous efforts, they were not able to chart a different path. It also goes without saying, that had the recent contesting slate (Brock, De La Torre, Roknian, and Putnam) been elected this November 5th, they would face the exact same monumental cash shortage that the City, its residents, and the new SMRR etc. Council super majority faces today.
So what will the new City Council of our hollowed-out City do for the next 4 years? First, there will be a massive performative issuance of plaques, certificates, ribbon cuttings, days honoring various feel-good causes etc. etc. These are cheap showy things all cities do, but in our case, it may be the only thing our City can afford to do. Then there will by the austerity budgets, the loss of services, and the avalanche of deferred maintenance followed by a spectacular increase in City fees (water fees have already been increasing 20% per year). Then there will be the outsourcing of jobs and normal City activities that will have to be done either by lower-paid non-city workers or by volunteers in non-profit organizations. Finally, we will start balancing the City budget by selling off City lands or buildings to developers (e.g. the airport lands). This is like selling off one kidney at a time to pay for your groceries. Hopefully, the City can hold on to its public land rights and lease just the air rights to developers, thus retaining a modicum of future control. But it is not going to be an easy ride to stop the City’s accelerating slide toward bankruptcy.
We know two things that can help us through this trying time. First, we must immediately start living within our means in all areas: fiscally, socially, and environmentally (our water sustainability plan and recycling plan are a shambles). In other words do not spend any more money, water, etc. faster than we can actually replenish them. Second to avoid or mitigate this inevitable service reduction, we have to do more with less. Those assets we still retain should be studied and improved to increase their efficiency in delivering positive outcomes. These two principles are always easier said than done but can be a useful guide in selecting among the few fiscal options the City has.
S.M.a.r.t. looks forward to see what the City Council will do now that they have total unitary control. Incidentally, the School Board also has re-elected the same decades-old board members, so it’s unclear where its better management and transparency will come from. Finally S.M.a.r.t. hopes the new Council super majority can rise to the occasion and reverse the fatal path of their predecessors.
By Mario Fonda-Bonardi AIA
S.M.a.r.t Santa Monica Architects for a Responsible Tomorrow
Mario Fonda-Bonardi AIA, Robert H. Taylor AIA, Architect, Dan Jansenson, Architect & Building and Fire-Life Safety Commission, Samuel Tolkin Architect & Planning Commissioner, Michael Jolly, AIR-CRE, Marie Standing. Jack Hillbrand AIA Landmark Commissioner
For previous articles see www.santamonicaarch.wordpress.com/writing
