City Council Receives Year-End Financial Update

October 27, 2021 10:17 AM

SANTA MONICA, Calif. — Last night, the Santa Monica City Council received an update on the City of Santa Monica’s fiscal health, closed out the fiscal year 2020-2021 budget, and made small revisions to the 2021-2022 fiscal year budget through the year-end budget report.

“Our financial outlook continues to be positive thanks to prudent financial management and the hard decisions this Council made over the last two years to see us through the pandemic,” said Mayor Sue Himmelrich. “The much-needed federal aid that makes up 15% of our total projected revenue loss and better than anticipated revenue returns are helping to slowly put us back on track as we continue to provide meaningful community services with fewer resources while making a difference in our priority areas.”

The City’s budget remains in active recovery with reserves helping fill the gap for a balanced budget. Fewer reserves will need to be leveraged due to revenues coming in six percent higher than anticipated as a result of the active housing market; higher sales, hotel tax and parking receipts; and the positive impact of the recently passed Measure SM Real Property Transfer Tax increase. This means that the City will conserve the $20 million Shutdown Reserve that was originally needed to balance the 2020-2021 budget. However, the General Fund will still require the use of $22 million in one-time reserve funds, as had been planned, because revenues continue to be deeply impacted by the ongoing COVID-19 pandemic.

To support emergency response, affordable housing, and the community priorities of homelessness, clean and safe spaces and services, and economic recovery, American Rescue Plan Act (ARPA) federal stimulus funds that were unspent in the 2020-2021 budget due to their receipt at the end of the fiscal year will be reappropriated for the fiscal year 2021-2022. In the next three years, staff will continue to use ARPA funds and evaluate the need to shift funds that would historically have gone towards capital improvements, to bolster operating programs and cover unanticipated cost increases until revenues reach pre-pandemic levels.

To further efforts around a clean and safe Santa Monica, Council directed the immediate use of $1 million in existing funds. Staff will prioritize these funds now through February 2022 in the areas of greatest community need.

Council made modest budget adjustments that total approximately $0.6 million for fiscal year 2020-2021 and approximately $2 million for fiscal year 2021-2022, $1.1 million of which is in the General Fund.

Outside the General Fund, the majority of the City’s other funds met revenue projections or had nominal variances and forecasts are positive.

The fee for utility payments was revised from $2.95 per transaction to 2.95% of the transaction amount to be consistent with the charge for other transactions. There will continue to be no fee for the use of paper checks, electronic checks, and cash. For a complete list of fee adjustments, see the staff report.

Staff will return to Council with the Midyear Budget Report on February 8, 2022 to provide a more complete assessment of the City’s finances and progress towards recovery, including an updated five-year financial forecast.

 

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