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Investing in the City of the future

February 25, 2020
by Rick Cole

Investing in the City of the future

The imminent completion of the City Services Building (which we are renaming City Hall East when it opens in April), the new Fire Station 1 Downtown and the Civic Center Multipurpose Sports Field highlight the tremendous investment Santa Monica has made to benefit our community and future generations.

Even after ten years of economic expansion, most California cities are still so cash-strapped that they can barely balance their annual budgets, let alone keep up with repairing and replacing their vital infrastructure of streets, parks, buildings and utilities.  In fact, a number of cities have recently gone to voters to enact tax increases, just to keep up with rising pension costs while continuing to skimp on investing in maintaining and expanding their key facilities.

Santa Monica’s historic record of making smart capital investments is part of why we are one of less than a dozen California cities with a AAA credit rating from all three national agencies.  Over the past sixty years, the investments Santa Monica has made in building and maintaining our infrastructure means that our net assets of $1.6 billion rank among the highest per capita among all Southern California cities. 

The City Services Building (soon to be renamed City Hall East) is just two months from opening to the public.

Every city has essentially “three baskets” of financial accounts.  The first holds the annual operating revenue and expenses to operate the city.  That basket not only includes the General Fund, but whatever public enterprises a city operates (Santa Monica’s include water, wastewater, Airport, Pier, beach, trash and cemetery enterprises).

The second basket holds the capital accounts.  This covers all the hard investments in streets, parks, buildings, facilities, equipment and technology systems.  It is always possible (although bad practice) to put off repairing, replacing or upgrading capital assets – and unfortunately to maintain daily services, too many cities historically have done exactly that.  Until a street crumbles, a water main breaks or a roof leaks, capital investment can be deferred.  The same goes for keeping a fire truck, police car or financial software system going another year and then another year.  But that ends up costing more in the long run. 

The third basket holds long-term liabilities and reserves.  Every city makes long-term commitments, the most significant being pension promises.  Failure to put funds aside for those obligations eventually brings a painful day of reckoning.

Most citizens and media focus only on the first basket – the here and now of operating budgets.  That’s why decision-makers, elected and staff, have fiduciary responsibilities to deal with the long-term realities of the second and third baskets.  It may not be popular, but ensuring fiscal sustainability requires being just as focused on capital investment and managing long-term liabilities as one the operating budgets.  Cities that don’t eventually end up in fiscal crisis or even bankruptcy.

Over the past five fiscal years, the City of Santa Monica has invested $750 million in capital projects.  That covers everything from the new facilities now coming on line now to replacing obsolete radios for Fire and Police, restoring the California Incline, replacing failing street lights on Montana, expanding stormwater treatment capacity and paving streets and alleys.  Most of the achievements are not glamorous – or even noticed by local residents.  But residents sure notice when things break or don’t work.

This video highlights the "topping out" celebration last summer for Fire Station 1 which will open this spring.

Santa Monica’s robust capital investment effort is a true team effort.  Every department submits requests (we adjust the capital budgets for the General Fund and enterprise functions every year, but give primary focus in the second year of our two-year budgets.)  We are coming up on that “exception year” of our biennial budget, so capital investment will be the primary focus of this year’s budget cycle.

As with the operating budget, times are tighter as we look ahead.  Departments submitted 103 projects this year, but realistically, only about 60 can receive even partial funding.  This is a shift – and will require prudent decisions.  It’s vital we continue to maintain what we have – and don’t take on new projects we can’t afford.
Managing this process is a partnership spearheaded by the Finance Department.  Public Works also plays a central role since they oversee the design, construction and delivery of most capital projects as well as the purchase of vehicles and equipment.  Information Services plays a key role in the acquisition and implementation of hardware and software.  The City Manager’s Office, the City Attorney’s Office and the City Clerk all perform important roles as well.  Finally, it is ultimately the City Council who make the final decisions on capital investment.  They bear the ultimate responsibility for the fiscal sustainability of the city government and the health, safety, and wellbeing of the community.

The Alley Renewal Program, construction from 2018 shown in the video above, is an annual project focused on improving the condition and functionality of the City’s most worn alleys. 

Often as I enter City Hall I think about the generation responsible for this historic landmark.  Yesterday at a Lunch and Learn at the Library, I learned more of the backstory of our Civic Center. Dr. Alison Rose Jefferson, who is working with artist April Banks to illuminate the neglected trials and triumphs of the African Americans who populated the historic Belmar neighborhood as part of the Civic Field project, shared that Santa Monica voters actually turned down a proposal in 1931 to expand their overcrowded City Hall built in 1903 at 4th and Santa Monica Blvd.  It wasn’t until that structure was damaged by an earthquake and Federal Depression funding became available that Santa Monica decided to build what we now know as our City Hall. 

Future generations will look back on what our generation did (or failed to do) to provide long-term investment in our community.  On Earth Day (April 22) we open City Hall East, a landmark investment in 21st Century government.  I trust whoever follows us eighty years from now will recognize the sacrifices and trade-offs made by our generation so they can prosper and live well in the city of the future.

See you on Earth Day for the City Hall East opening!

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