City of Santa Monica
California

Staff Report
3435

Strategic Budget Direction for the FY 2019-21 Proposed Biennial Budget

Information

Department:Finance Department, Budget DivisionSponsors:
Category:04. Study Sessions

Recommended Action

Recommended Action

Staff recommends that the City Council receive a three-part presentation on the strategy to achieve fiscal sustainability for the FY 2019-21 Proposed Biennial Budget and the following two biennial budget cycles, as follows:

1.              Review the background for a long-term strategy for maintaining fiscal balance over the next six years in the face of flattening traditional revenues and sharply rising costs, including a plan to eliminate the City’s unfunded pension liability in 13 years;

2.              Review the outline of the FY 2019-21 Budget, including proposed efficiencies and program changes and mid-term proposals for making an additional $1.5 million in savings in the second year; and

3.              Review the strategy for reshaping traditional government services to create a government that works better and costs less to maintain fiscal sustainability over the next six years and beyond

Staff Report Body

Executive Summary

While every budget cycle represents an important opportunity to preserve our City fiscal sustainability by thinking long-term and making prudent choices about our investments in our community, the next three biennial budgets represent an important inflection point for Santa Monica’s future.

 

While Santa Monica’s financial health remains strong after decades of prudent fiscal leadership by the Council and careful monitoring and course adjustments by staff, traditional revenue streams are growing at a slower rate due to changes in the modern economy.  Pension costs are projected to increase significantly to address statewide unfunded public pension liabilities.  The threat of a recession looms ahead after the longest sustained economic expansion in our nation’s modern history. Finally, profound technological, economic and demographic changes are reshaping our lives, affecting both the public and private sectors and rendering old ways of doing business and delivering services increasingly obsolete. 

 

These challenges are the impetus for our goal to create a 21st Century government that works better and costs less.  That goal has been the basis for the FY 2019-21 Biennial Budget process and a six-year transition to performance-based budgeting based on the Framework for a Sustainable City of Wellbeing.

 

This budget plan for FY 2019-21 and beyond is designed to:

·         Ensure continuing excellent service and safety to our community

·         Maintain fiscal balance in a changing economy

·         Eliminate the threat of our unfunded pension liability

·         Sustain our ability to recruit and retain the best available talent

·         Invest in a 21st Century government, including the new City Hall extension, new Fire Station and City Yards project, revamping our work processes to be more efficient and better serve customers, and developing a digital City Hall using a new website to deliver 24/7 responsiveness to our community members. 

 

The April 30 Budget Study Session provides an opportunity for Council and the community to consider the fiscal choices that must be made in this new environment, as well as the overarching strategy and principles staff is recommending in order to achieve fiscal sustainability. For the first time, a public “preview” of the logic behind the City Manager’s Proposed Budget is being provided to the Council, community and staff ahead of the May 23 release date. Specifically, this budget preview is an opportunity to lay out:

 

1.     The context, rationale and design for the six-year plan to maintain fiscal sustainability.

 

2.     A review of the process and highlighting of the key elements of the FY 2019-21 Proposed Budget, including plans of action and investments toward the Framework Priorities identified by Council at its January 26 retreat.

 

3.     The longer-term plan for creating a government that works better and costs less through both a responsible analysis and implementation of future programmatic and service delivery changes and an exploration of alternatives for augmenting revenues.  A key element of that plan is to fully pay off the City’s current $448 million unfunded pension liability over the next 13 years.

 

Preserving our Fiscal Sustainability

Over the next ten years, as shown in the chart below, we forecast our budget shortfall to grow to between $34 and $47 million, driven largely by sharply rising pension costs and flattening revenues (we use the term “shortfall” instead of “deficit” because it is based on projections – and our commitment is to take effective steps to eliminate any future shortfall so that the City continues to live within its means).  The proposals we are recommending in this budget would reduce that projected budget shortfall to $14 million a decade from now (with future action needed in later years to eliminate it altogether).  Moreover, the paydown of the unfunded pension liability in 13 years would provide strong support for maintaining the City’s long-standing AAA bond rating by all three national credit agencies.

 

To be successful, it is necessary to find efficiencies, restructure or phase out low impact activities, and think boldly about long term changes that will help us plan ahead for the tougher times we know are coming. Taking these steps now and over the next six years will ensure that future Councils and staff leaders will be able to take additional steps in later years to maintain a balanced budget for the next decade and beyond.

 

 

The FY 2019-21 Biennial Budget includes the following elements:

·         The first step in the transition to a performance-based budget built on a new Framework, where staff has broken down the City’s work into over 660 activities that map to one of seven outcomes and 20 sub-outcomes. Over the next two years, these activities will each be measured in terms of how they contribute to the outcome, and the resources they require, to determine their value.

 

·         Taking an important step to proactively manage the repayment of the Citys existing unfunded pension liability, estimated at $448 million.  As recommended by the Pension Advisory Committee and directed by City Council on January 22, 2019), staff is proposing an accelerated 13-year pay down of the unfunded liability.  This would result in $106 million in savings over 30 years and better position the City to weather significant upcoming pension contribution increases and other fiscal challenges. A comprehensive discussion of the pension challenges and analysis leading up to staffs upcoming proposal are included in Attachment A.

 

·         A longer-term effort to reduce the budget in order to close the projected shortfalls that begin in FY 2020-21 and to reallocate limited resources to outcome areas that may require greater investment. Departments have compiled a list of programs to be considered for either restructuring, discontinuation or shifting to another public, non-profit or private entity for service delivery. Each concept would be analyzed to improve both efficiency and effectiveness of outcomes and provide flexibility to minimize impacts on existing staff.  In this report, staff is providing Council with a high-level preview of the proposed potential changes for FY 2019-21 as well as a proposed plan for assessing and implementing longer-range potential changes to provide efficiencies and position us as a 21st Century government in the second year of the biennial and the next biennial budget.   

 

·         A strategy to look at potential new revenue sources as we see traditional revenue streams wane in a modern economy.  Staff will research and recommend options for new or enhanced revenue sources, including a revenue measure to be included on the 2020 ballot and new revenue streams that Council could adopt in the next budget cycle.

 

From a practical perspective staff believes the following impacts will be felt in the coming two-year budget cycle:

·         Programs and services will be realigned to current industry standards, community usage and anticipated future needs – (e.g., the library may no longer purchase as many copies of best sellers given the option of e-book lending or the City might renew parking permits every two years instead of annually);

 

·         Some reductions will require departments to share responsibilities, such as counter service or answering telephones;

 

·         Incremental changes will be made to programs and/or services which may be the first phase of transition to a more efficient, cost-efficient option over the long term (Out of School Time youth programs such as PAL, CREST, VAP);

 

·         The cost of doing business will be fully recovered in instances such as building in the cost of credit card transactions into our fee structure or full cost recovery for events such as the LA Marathon; and

 

·         Legacy costs will be reduced while in investing in new ways to maintain service to the community (e.g., eliminating KCRW coverage of City Council meetings while investing in web-based coverage or investing in materials handlers at the Library to more efficiently process over 1 million items circulated annually).

 

While no decisions will be made prior to the scheduled budget hearings that begin on June 4, staff seeks Council input on the following elements of the overall fiscal sustainability plan and outline of the FY 2019-21:

·         Updated Framework (with our Values woven into the Framework) and the associated actions plans for Framework Priorities selected by the Council in January;

 

·         Funding proposals for Council’s Framework Priorities;

 

·         Budget adjustment through efficiencies; and

 

·         Options and process for longer-term change.

 

Applying Performance Management and the Framework

The journey to reimagine the budget process is well underway. We are committed to create a fiscal future that reflects our values and focuses our resources on what will help achieve our mission as outlined in the Framework for a Sustainable City of Wellbeing (Framework). Beginning with the development of the FY 2017-19 Biennial Budget, the City of Santa Monica began organizing work efforts around the Framework. The Framework is the City of Santa Monica’s strategic direction, connecting organizational purpose and day-to-day functions.  The Framework organizes work around the achievement of seven outcomes:

·         Connected and Engaged Community;

·         Inclusive, Affordable, and Diverse Local Economy;

·         Lifelong Opportunities for Personal Growth;

·         Physical, Mental, and Environmental Health;

·         Resilient Built and Natural Environment;

·         A Safe Place for All; and

·         Reliable, Effective, and Efficient Government

 

Each outcome is further organized around sub-outcomes, dedicated work streams which define success in specific sub-sets of each outcome area.  Finally, outcomes also include outcome metrics, high-level indicators designed to help us understand whether the city’s actions are driving towards improved outcomes for the members of our community.

 

Important mile markers have been passed to date:

·         We have a refined Framework to measure and use data to help align resources needed to help the City achieve this objective;

 

·         We have clearly articulated values that drive our decisions;

 

·         The City has mapped out more than 660 activities and linked those activities to the Framework outcomes and sub-outcomes we are trying to achieve in an effort to be a Sustainable City of Wellbeing;

 

·         Staff has estimated costs associated with each activity; and

 

·         By the time the Council adopts the budget in June there will be metrics associated with each activity that will allow us to better use data to make decisions in the future.

 

The Framework is now reported on through the new Citywide Dashboard (http://www.santamonica.gov/dashboard), a performance portal on the City’s website which includes up to date data related to the metrics included in the Framework.  The dashboard provides contextual information on each metric, explaining the story behind the numbers.

 

The Framework is one of the three components of the City’s performance management program:

·         Internally, departments and divisions will continually track input metrics to monitor how much and how often we are doing key activities;

 

·         As part of the budget process, departments will report annually on output metrics;

 

·         Based on the Framework, these outputs will be correlated to the communitywide outcomes and to show whether community members are better off as a result of the activities we conduct.

 

The purpose of our performance management program is to understand and gauge the connection between the work we do, the level of resources we dedicate to doing that work, and the impact that the work has on achieving the goals of our Framework outcomes. This data will assist Council in making budget decisions.  For the first time, the City’s budget is mapped into activities, each of which is then mapped to a Framework outcome and sub-outcome and a metric.

Revised Framework for a Sustainable City of Wellbeing

 

 

This year, the City convened a Performance Advisory Group to provide advice on modifications to the Framework to ensure that definitions were clear and understandable, the organization of the document made sense, and metrics were actionable, reportable, and meaningful.  Comprised of department heads, division managers, and analysts, the Performance Advisory Group met on a regular basis in March and April and consulted with subject matter experts across the City.  While several small revisions including definitions and word choice were made, the Performance Advisory Group carried out changes provided by Council at their January 26th retreat:

·         Development of Mobility and Access as a new sub-outcome under Place and Planet.  Voted on by Council in January of 2019, the Performance Advisory Group worked with the Mobility and Access Framework Priority Team to build out this new sub-outcome.

 

·         Values. Council identified six values to serve as guideposts for all of the work of the City.  The Performance Advisory Group worked to develop definitions for each of these values, and to develop metrics for each.  An additional value, Innovation, has been added.

 

As a result of the Council’s decision to add values to the Framework, the sub-outcomes in Governing have been revised to reflect those values.  This approach was taken to more fully reflect this City’s government’s comprehensive range of services and policies and connection to community outcomes.  A draft of the revised Framework, as well as a chart showing Framework revisions, is included in Attachment B.

 

Applying the Budget to the Framework

As part of the mapping of the City’s activities to the Framework, staff also estimated the costs associated with each activity.  This cost includes staffing, capital, and supplies and expenses costs.  The cost of all of the Framework activities equates to the total City budget – all costs are accounted for within the Framework.  This allows us to see how our investments are allocated to the various outcome and sub-outcome areas, including the Framework Priorities. 

For example, in FY 2018-19, the City has allocated over one third of its $734 million total annual budget to the Place and Planet outcome area.  This area captures the investments the City makes to our City mobility, sustainability and climate change, infrastructure, water, trash and recycling and other core services. 

 

The Framework further allows us to view our investments by sub-outcome area.  This allows us to see the investments made in more specific areas, including the Framework Priorities.  For example, within Place and Planet, the City spends over $80 million on mobility, including operating the Big Blue Bus, streets, bike lanes, and commuter programs.  Likewise, within Place and Planet, this shows us we invest over $50 million each year on sustainability and climate programs, projects and services. 

 

Framework Priority Plans of Action

At its retreat on January 26th, 2019, the Santa Monica City Council identified six Framework Priorities, which are also sub-outcomes in the Framework structure:

·         Affordability;

·         Climate Change;

·         Engaged and Thriving Community;

·         Keeping Neighborhoods Safe;

·         Mobility and Access; and

·         Reduce Homelessness

 

In the Framework, Framework Priorities are shaded in with the color of the outcome they are associated with.  Staff have developed a Plan of Action for five of the six Priorities, which contains currently funded budget activities as well as project investments.   The team for Engaged and Thriving Community, one of the newest priorities, continues to develop a draft plan that will be presented to Council at its Budget Study Session in June. Additional time provides the team with the opportunity to assess current activities and projects to determine which map best to the area and to develop a comprehensive definition for “Engaged and Thriving” in the context of the Framework. In three cases (Climate Change, Keeping Neighborhoods Safe, and Mobility and Access), significant Capital Improvement Program (CIP) dollars are used to support capital projects as articulated in the plans.   As shown in the section on “Funding Proposals” additional one-time and ongoing operating budget investments are proposed to make further progress on a number of Framework Priorities, some additional Framework sub-outcome areas, and towards several of the values identified by Council. Over the course of the two-year budget cycle, teams will monitor progress, as part of the SaMoStat process, in implementing projects and achieving targets associated with metrics tied to each activity.  Our progress in achieving Framework Priorities will be reported on through the budget process.

 

As noted above, the Council voted to include six values (Equity, Inclusion Accountability, Stewardship, Resilience and Safety) that guide the City’s governance.  Later the Council took no action on a staff recommendation to eliminate “safety” as a value as it was also an outcome.  The Council did not object, however, to the suggestion of adding innovation as the seventh value.  Staff is proposing to reallocate funds to further steps the City is taking in the areas of resilience, accountability and stewardship.

 

Funding Proposals

Staff is proposing to make additional investments using one-time savings and reallocated funds made available through budget efficiencies.  These one-time and ongoing investments would cover program extensions and enhancements that further the Framework Priorities and Values shown below. These proposals result in a net decrease of 0.5 FTE citywide.

 

·         Framework Priority: Reduce Homelessness ($1.4mn FY 2019-20, $1.6mn FY 2020-21, General Fund)

This funding will maintain the Homeless Multidisciplinary Street Team (HMST) and C3 (City + County + Community) homeless engagement team at their current levels for two additional years, and extend the limited-term Senior Advisor to the City Manager on Homelessness position, Library Services Officers at the Library and as-needed social worker for the same period of two years, while enhancing the C3 team presence during this time to engage about 20% of the City’s homeless population by expanding the team’s coverage to other impacted areas, such as the beach and parks outside of the Downtown area.  It is anticipated that the upcoming reimagining of the Human Services Grants Program will be in line with the City’s Framework and will consider the need to focus efforts on Reducing Homelessness in the years following the FY 2019-21 Biennial Budget. There will be continued work to identify and leverage non-City resources and partnerships to support ongoing costs.

 

·         Framework Priority: Affordability ($0.2mn FY 2019-20 one time, General Fund, $2mn per year for two years, Housing Trust Fund)

A reallocation of funding from the Housing Opportunities Utilizing Subsidy Enhancements (HOUSE) pilot program, which was intended to help Section 8 voucher-holders secure housing, to a new pilot program that is intended to help people who live or work in Santa Monica to meet credit requirements for City-funded affordable housing.  An expansion of the Preserving Our Diversity (POD) pilot program, which provides low-income seniors with cash-based financial assistance, benefits assessment and enrollment, and care management that assesses the physical, emotional and financial needs of the participant and then connects the participant to needed services. The additional funding will expand the pilot program funding from $300,000 to $2,000,000, and the number of residents served from 22 households to a range of 200 to 400 households. This expansion was recommended by the Housing Commission and approved by Council through the Housing Trust Fund Plan. Housing Trust Fund-funded positions would assist in administering this program.

 

·         Framework Priority: Mobility and Access ($0.08mn ongoing, General Fund; $0.25mn BBB Fund Gas Tax Funding)

Changes to two existing positions in the Mobility Division will further the City’s Framework Priority of Mobility and Access and facilitate more effective inter-departmental collaboration and strategic project implementation, as well as provide divisional leadership and supervision.

The BBB proposes to conduct a study focused on traffic engineering, traffic management and curb management to improve bus travel time and reduce delays for buses travelling in the city, with a goal of making the bus service more attractive and useful.

 

·         Framework Priority: Climate Change ($0.25mn ongoing General Fund, $0.2mn ongoing beginning FY 2020-21 Water/Wastewater Funds)

Operations and maintenance costs associated with new City Services Building, resulting in a 0.5 FTE staffing increase. These costs were anticipated and included in the City’s forecasting and are now being appropriated.

In addition, funds to restructure Water Resources staffing and add one engineering position that would help implement and maintain new and existing infrastructure (such as the Olympic Well Field Restoration and the Arcadia Water Treatment Plan expansion) that is helping the City reach water self-sufficiency by 2023.

 

·         Framework Priority: Engaged and Thriving Community ($0.4mn FY 2019-21, decreasing to $0.2mn in future years, General Fund)

Staff is proposing to reallocate funding to the ongoing maintenance of the City’s new website. This funding will support content production; software, domain registration and hosting; and content management in lieu of hiring a new webmaster or web team.

 

·         Framework Value: Resilience/Accountability ($1.2mn FY 2019-20, $1.6mn FY 2020-21, General Fund)

Operations and maintenance costs related to new capital projects, almost all of which are related to software maintenance, including contract management software, cyber security systems, and process automation.

Additionally, a new position in the Human Resources Department to facilitate the shift from transactional to strategic and value-added customer service.  This position will be the designated administrator responsible for key strategic administrative initiatives as well as special projects such as Civil Service, Municipal Code and classification reform. 

 

·         Framework Value: Stewardship ($6.4mn FY 2019-20, $4.6mn FY 2020-21 General Fund; $1.6mn FY 2019-20, $1.3mn FY 2020-21 all other funds)

Addressing the Governance outcome, and specifically the Stewardship value, staff is proposing to allocate an additional $3.2 million beyond the $1 million already budgeted for additional paydowns to make the first accelerated payment of the unfunded pension liability for the General Fund, along with an equivalent use of one-time savings.  Other funds would contribute an additional $1.6 million to the accelerated pay down.  In the second year, reallocated budget and one-time savings would be used to pay down $4.6 million, and other funds would pay down $1.3 million. For more information on the accelerated paydown of the unfunded pension liability, please see the April 22, 2019 Information Item, shown in Attachment A.

 

In addition, funds are reallocated to programs and activities supporting the Connected Community, Physical Health, and Built Environment sub-outcomes.  These investments total up to $280,000 in ongoing costs by the second year of the biennial budget.

 

Budget Reductions, Efficiencies and Rethinking Government Service Delivery

Without a course adjustment it is anticipated that the General Fund would begin to see progressively increasing annual shortfalls between revenues and expenditures in FY 2020-21—the second year of the upcoming Biennial Budget.  These shortfalls are anticipated to be just over $1 million in the beginning, but would quickly escalate to over $7.5 million the following year and reach over $20 million after 6 years. In other funds, similar to the General Fund, the impact of increasing pensions, the cost of significant initiatives such as water self-sufficiency and zero waste (in the Water and RRR Funds, respectively), capital costs (in the Pier and Beach Funds) and flattening revenues (as is the case with Big Blue Bus) are also putting greater stress on fund balances and/or will drive greater rate increases.

 

To address this challenge, significant changes need to take place in the way that the City uses its limited resources to conduct business, and difficult decisions will need to be made to change the way we do things.  Staff is proposing incremental changes to reduce the budget and increase cost recovery, allocate resources to expedite the paydown of our current unfunded pension liability in order to realize savings of over $100 million over 30 years, and think carefully about what services we provide and how we deliver those services in the most effective and efficient way, in order to maximize the allocation of the resources we have on the most important outcomes.

 

Reducing expenditures and increasing cost recovery

For the first biennial budget, staff is proposing a slate of budget reductions based on more streamlined and efficient practices that are allowing us to reduce contract costs, adjust staffing assignments and eliminate 28.3 full time equivalent positions; (including the staffing decrease reflected in the funding proposals, the total decrease would be 28.8 positions.)  Also proposed are slight program reductions and/or reduced service frequencies and greater cost recovery and leveraging of other funding sources The following is a summary of the changes by year in which we expect them to be implemented:


Budget Efficiency Areas

Savings in FY 2019-20

Additional savings in FY 2020-21

Efficiencies based on streamlined business practices, from combining similar work and programs across divisions, taking a hard look at existing contract scopes and staff work assignments to more accurately reflect priority workload, and rethinking past practices for delivering services

·         $4.0 million and 5.2 FTEs in the General Fund

·         $5.6 million and 18 FTEs in all other funds

·         Includes foregoing a consumer price index adjustment, a decrease in resources committed to leaf blower enforcement and freeing up funds previously committed to operation of the Mountain View Mobile Home Park.

·         $0.3 million in the General Fund

·         $0.5 million and 1.0 FTE in all other funds

 

Additional opportunities to leverage funding from other sources to support services.

·         $0.5 million of savings in the General Fund

 

Adjustments to fully capture the cost of doing business, including charging non-City entities (i.e., the L.A. Marathon) and enterprise funds for the full cost of staff work; adjusting parking rates within the limits allowed by the parking ordinance to reflect changes in parking use; and capturing the cost of non-parking credit card fees.

·         $2.8 million in revenues in the General Fund

·         $0.2 million in all other funds

 

·         $3.0 million in the General Fund

·         $0.05 in all other funds

A realignment of programs and services to follow industry standards, reflect community usage and anticipate future needs will have some impact on services currently provided to the community. 

·         $0.2 million and 3.6 FTE in savings to the General Fund

·         Changes include reductions in operating hours for recreational facilities and Out of School Time youth programming and elimination of the broadcast of Council meetings on KCRW.

·         $0.06 million and 0.5 FTE in the General Fund

·         Changes include scaling down Seascape publication from 10 issues to 6 issues per year and reductions in operating hours for recreational facilities and Out of School Time youth programming.

Total General Fund

$7.5 million and 8.8 FTEs

$3.4 million and 0.5 FTE

Total All Other Funds

$5.8 million and 18 FTEs

$0.55 million and 1.0 FTE


 

Exploring Longer-Term Program Changes

It is important to understand that we are no longer able to simply rely on minor tweaks to our budget to meet the upcoming challenge.  While the service reductions are not large now, we must expect to see more significant reductions in future years.  The key is to make sure that, through evidence-based decision-making using data and our willingness to look at alternative methods of delivering services, we will minimize the impact on our highest-value services. Additional savings are necessary in the first and future biennial periods to ensure that the City, and particularly the General Fund, are in good position to withstand the fiscal challenge of upcoming biennial periods, as the initial reductions will not suffice.  The initial changes will have limited impacts on the community, are within our current contractual obligations, and require little or no policy change. Staff has identified more impactful and broader changes that will require additional analysis and outreach to determine feasibility and plan of action and impacts to the community, our partners, or specific vulnerable populations.  There are two timelines for these changes.  The first is to assess and plan for the implementation during the upcoming year, with changes to be incorporated into the FY 2020-21 approved budget.  The second timeframe will involve an assessment of more significant efforts to shift the City towards 21st Century governance. These changes would be incorporated into the FY 2021-23 biennial budget.

 

Task Force

As the goal of these changes is to make the City more focused on the ultimate needs of the community with limited resources, staff is recommending a Task Force that will oversee the feasibility assessment and plan for the potential implementation of each of these initiatives. The Task Force would bring its recommendations to the City Manager, in a similar method as was used by the Pension Advisory Committee, who would then review the recommendations with staff and then incorporate them as appropriate in recommendations to the City Council.  The proposed make-up of the Task Force would be similar to the Pension Advisory Committee, including community members with relevant experience in program management and business practice innovation and members of the workforce through bargaining unit representation.  The City Manager would finalize the structure of the Task Force, oversee its appointment and work with Finance, Human Resources and the rest of City departments, including the offices of the City Attorney and City Clerk, to support and staff the Task Force deliberations.  The focus of their work would be to explore the feasibility of program and service changes that would cut costs and/or improve performance and results – and to assess realistic implementation schedules that would provide the smooth transitions to the community and affected workers.  The Task Force phase one would assess the FY 2019-21 proposed list and following the adoption of the second year of that biennial budget next June, would reconvene for a second phase for consideration and recommendations on the longer-term proposals for inclusion and implementation in the second and third biennial budget cycles.

 

Potential Program Impacts

The proposed areas for change are included in Attachments C and D.  Attachment C includes items to be considered by the Task Force for incorporation into the FY 2020-21 approved budget plan. Staff is proposing to decrease the General Fund budget plan for FY 2020-21 by an additional $1.5 million, to be met through a subset of these more difficult changes. 

 

Among the changes to be considered, with the potential to yield from below $100,000 a year in savings to over $500,000 a year, would be proposals to:

·         Eliminate City subsidies for events such as the LA Marathon and Twilight on the Pier; for COAST, identify outside support for the program

·         Shift to two-year residential parking permits

·         Eliminate the discretionary permit requirement for mixed-use housing projects

·         Re-envision Public Wi-Fi model to focus specifically on City parks and large congregation/high usage public areas only

·         Civilianize Fire inspection services and reassign sworn personnel to emergency response duties

·         Reduce the parking grace period at the Downtown parking structures from 90 minutes to 60 minutes

 

Items that might be considered by the Task Force for implementation beginning in year 3, shown in Attachment D, will require at least one to two years of analysis to determine feasibility or to adjust activities and staffing to put the change in place.  The Task Force would identify another $2.5 million in additional savings in this second round. A selection from the more comprehensive list is shown below.

·         Extend salary steps to slow salary progression

·         Expand developer mitigation fees to include Fire service and other City services that are impacted by additional visitors and workers

·         Review the Miles Playhouse and Camera Obscura business models and explore possible options for operating the facilities in the context of the Cultural Plan update

·         Reduce operating costs of CityTV through partnerships and use fees generated to support CityTV

·         Evaluate the possibility of using third party contracts to more effectively and efficiently provide administrative and transactional services

·         Negotiate with SMMUSD on cost sharing for crossing guards

·         Consider efficient, cost-effective options for Out of School Time youth programs (PAL, CREST, VAP) including co-location, consolidation, and partnerships with other institutions and private/non-profit organizations

·         Consider alternative approaches to Animal Control Unit and Shelter

·         Explore seeking sponsorships and naming rights to City events and facilities

·         Explore models for public safety dispatching to ensure effective and efficient services

·         Pilot autonomous vehicle deployment

 

At the same time, departments would continue to work on ongoing efficiency measures that are anticipated to generate another $2 million in savings before the third budget cycle. Other funds will also be required to make adjustments.  Finally, any additional reallocation to new efforts will require budget adjustments beyond these amounts, and future year fiscal sustainability will also require additional savings to be identified

 

Staff believes the ideas presented are worthy of further exploration. There is no certainty that they will ultimately be pursued, either in the form they are presented or at all. Yet, it seems prudent to have many ideas to be evaluated so that when the time comes to again adjust the budget for the next two-year budget cycle (FY 2021-23) staff, the community and other stakeholders will have had plenty of time to assess the pros and cons as well of the costs and benefits of each idea. At the budget study sessions, staff will ask Council to provide input and guidance on the proposed changes – it would be helpful to know if the Council believes any of the ideas presented should not be studied.  Additional ideas could be added by the Council as appropriate as the work of the Task Force gets underway for phase one in September 2019 and for phase two in July 2020.

 

Revenue Measure

As we see traditional revenue streams wane in a changing economy, it is prudent to consider potential new revenue sources. Staff will research and recommend options for new or enhanced revenue sources, including a potential revenue measure to be included on the 2020 ballot and new revenue streams that Council could adopt in the next budget cycle.

 

While Santa Monica can commit to operating an efficient government, traditional revenue sources that we have relied upon are eroding and it is crucial that the City identify areas for which we do not currently recover the cost of doing business.  In the past year, cities such as New York have increased the mansion tax (essentially the documentary transfer tax on high end properties), San Francisco has pursued a rideshare service tax and Oakland has passed a vacant property tax.  Within the tax revenue sources that we control, such as business license tax, documentary transfer tax and hotel tax, staff has identified potential areas that could be assessed for increases.  Staff may also research opportunities related to sponsorships, naming rights, and facilitating zoning-compliant businesses that significantly increase City revenues.  Staff will undertake a process to review the implications of various revenue streams and tax measures in terms of community impact, fiscal impact, and administration and enforcement effort on behalf of the City.

 

Next Steps

Staff believes that the plan set forth in this report, including the continued transition to performance management, investments in our Framework Priorities and Values, and the incremental approach to shifting the way we do business, will provide for analysis and an orderly transition for the reshaping of City government over the next six years.  Following this plan, we can achieve success in delivering the outcomes that make Santa Monica a Sustainable City of Wellbeing while living within our means so that we may be able to withstand an economic downturn or any other future fiscal challenges.  As much as possible we will make smart, informed decisions using performance data and metrics.  Finally, we will have a smaller City workforce, working closely with non-profits and through public-private partnerships to leverage talent, innovation and capacity to provide 21st century services.

 

The Proposed Biennial Budget will be published on May 23, and staff will return to Council for Budget Study Sessions on June 4th and 5th. Staff will return to Council for a public hearing and Budget Adoption on June 25, 2019.