Comprehensive Annual Financial Report - City of Santa Monica

directors are appointed by the City Manager.
The City provides a full range of services, including police and fire protection, water and wastewater utilities,
street maintenance, public transportation, parking, parks and recreation, planning, and building and safety.
Elementary and secondary education is provided by the Santa Monica Malibu Unified School District, and
community college education is provided by the Santa Monica College District. Courts, health and social
services are provided by the County of Los Angeles. Gas, electric and telephone services are provided by
private utility companies.
Financial data for all funds through which services are provided by the City have been included in this report
based on the criteria adopted by GASB.
FINANCIAL CONDITION AND OUTLOOK
Despite a normally resilient economy, Santa Monica has not been immune to the economic factors at play at
the national and state level. Property transfers have declined to record lows and the local tourism industry has
been impacted. While our sources of revenue are diversified, most major tax revenues have declined and are
predicted to decline further in the coming fiscal year. The recession that began in December 2007 has
subsided but economists remain uncertain about the nature and length of the recovery.
In spite of revenue declines, the City ended the fiscal year with a positive operating balance and a record
General Fund Balance of nearly $200 million. Proactive fiscal management demonstrated by close
monitoring of revenues and mid-year adjustments contributed to this positive result, as well as a transfer of
unrestricted proceeds from a legal settlement with certain oil companies over MTBE contamination. Large
designated reserves provide flexibility and resources for capital projects, future expenditures, retirement
contribution increases and economic uncertainty; and Santa Monica continues to be a top destination for
visitors and a high demand location for employers.
In November 2008, Santa Monica voters affirmed the City’s Utility Users Tax ordinance and eliminated the
need for an $8.2 million portion of the General Fund balance previously designated as a contingency for the
potential loss of the telecommunications portion of the tax. This $8.2 million was in turn set aside by the
City Council to fund an economic uncertainty reserve to allow the city to respond to the impacts of the current
economic turmoil. The adopted Budget for FY 2009-10 anticipates using this reserve as a bridge for the next
two years in order to allow the City to make necessary budget adjustments in order to respond to a downturn
in the economy. This bridge provides for a more measured and strategic approach to closing the ongoing
structural shortfall and also allows the City to better assess expected ongoing revenue streams as the economy
recovers. As part of the FY 2009-10 budget development, departments proposed reductions that will help the
City to weather the current economic crisis while mitigating potential service impacts to the community. The
greatest budget reduction was in staffing with the remainder a reduction costs for vehicle replacement,
departmental supplies and contractual and professional services. The plan for FY 2010 -11 assumes these
savings will continue. Additionally, a Citywide hiring freeze will remain in effect until longer term budget
adjustments are implemented.
California’s budget deficit continues to present challenges for the City. The FY 2009-10 State budget
included two especially significant revenue provisions affecting the City, a $1.9 billion borrowing of property
tax funds from local governments under the provisions of Proposition 1A and a $2.05 billion seizure of local
redevelopment funds. The City’s share of the property tax borrowing, which would have resulted in reduced
revenues to the City’s General Fund, was $3.1 million. However, by reason of the City’s participation in the
State-sponsored securitization of the City’s Proposition 1A receivable, the City will receive an equivalent
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