The city is facing a financial crisis, the roots of which stretch back decades but have been made worse by the pandemic’s budgetary strains. Years of mismanagement, skyrocketing pension obligations, and over $220 million in settlements tied to the Police Activities League sex abuse scandals, along with a $70 million vanity addition to City Hall, have drained resources. As a result, the city is struggling to fund crucial capital projects, especially those involving infrastructure and maintenance.
A recent report by the consulting firm Moss Adams shared with the city’s Audit Subcommittee, detailed deep systemic issues in how the city manages these projects. The findings point to significant dysfunction: outdated technology, workflows that don’t account for financial limitations, overburdened staff, and archaic procedures that cause delays and make it hard to track or understand costs. Essentially, the city has been operating with tools and strategies more suited to the past century than the present day.
The impact is clear. Maintenance that should have been completed years ago has been deferred, creating a growing backlog of repairs and upgrades. Many city projects remain unfunded or underfunded, and the costs of catching up are compounding at an estimated 7% annually. To put this into perspective, the city is now nearly $460 million behind in addressing both deferred maintenance and necessary new infrastructure.
So where does the city go from here? One proposal from the City Manager is to issue new municipal bonds to cover these costs. On the surface, bonds can seem like an easy solution—they bring in immediate funding for big-ticket items. But bonds are essentially loans, and by the time interest is added, the city could be looking at close to $1 billion in new debt. That’s a significant burden for a city already stretched thin to the point of snapping. Critics, including members of the Audit Subcommittee, argue that taking on more debt without fixing the underlying financial management issues is like putting a bandage on an open wound that’s still bleeding.
This financial juggling act is further complicated by the city’s decision to sell off income-generating assets, such as Main Street parking lots and the now-demolished Third Street parking structure. Parts of the airport could even be on the chopping block, according to a presentation by a city planner two years ago. These spaces are likely to be replaced with housing projects, which not only generate little revenue but add further strain to the city’s resources. Selling off revenue-generating properties for short-term cash will leave the city with fewer ways to support itself long-term.
The Moss Adams report didn’t just outline the problems; it also offered solutions. It called for better coordination across projects, greater transparency in costs, and a clear prioritization of what needs to be addressed first. These changes could help the City Council make more informed decisions and focus on the most pressing issues. But implementing such reforms requires leadership—and that’s another challenge the city faces.
The incoming City Council includes a majority of new members, many of whom will be learning the ropes of municipal governance. Imagine starting a new job with little to no training and being expected to make multimillion-dollar decisions on day one. Terms like “bond ratings,” “municipal debt obligations,” and “compounding interest” can be daunting for anyone without a background in finance, and these new council members are expected to grapple with these concepts immediately.
At a recent Wilshire Montana Neighborhood Association meeting, some of these new Council members were asked about their plans to address the financial crisis. Their responses revealed more curiosity than strategy–—they expressed enthusiasm about learning what those problems actually are. One member stated that she was eager to “really dig into the numbers.” While enthusiasm is important, for these new Council members, the so-called “learning curve” might feel less like a curve and more like a sheer vertical climb up a greasy pole—an uphill struggle that could delay critical decisions at a time when the city can’t afford to waste a moment.
It’s important to understand that the city didn’t arrive at this crisis overnight. The issues—declining tax revenues, rising employee benefit costs, aging infrastructure, and fiscal mismanagement—have been building for years. It’s like inheriting an old house where the original owner had been ignoring maintenance for decades. Now the roof is leaking, the foundation is cracking, and you’re scrambling to figure out which problem to address first.
The decisions the council makes now will shape the city’s future for decades. Should they raise taxes? Cut services? Sell more assets? Take on even more debt? File for bankruptcy? Each option has consequences that could severely affect the city’s financial health and the quality of life for its residents and businesses. These are not easy choices, especially for leaders who are still learning the intricacies of the city’s finances.
The next few years will be pivotal. Residents are watching closely, waiting to see if the new council majority can rise to the occasion and take decisive action. The stakes are high, and the city’s ability to navigate these challenges will determine not only its financial stability but also the well-being of its community for years to come.
Daniel Jansenson, Architect, Building & Fire-Life Safety Commission
Santa Monica Architects for a Responsible Tomorrow
Robert H. Taylor AIA, Architect; Dan Jansenson, Architect & Building and Fire-Life Safety Commission; Thane Roberts, Architect; Mario Fonda-Bonardi AIA, Architect; Samuel Tolkin Architect & Planning Commissioner; Michael Jolly, AIR-CRE; Marie Standing, Jack Hillbrand AIA, Architect & Landmarks Commissioner
