Best Case City Budget Forecast: $15 Million Deficit

The city might try to limit salaries and lower benefits in future talks with its employees as it wrestles with a budget forecast to be in the red by as much as $15 million in the 2017-18 fiscal year.

And that is the best case scenario.

In a budget update to the City Council, finance staffers said this week the deficit could soar to $29 million if labor costs—which account for three-quarters of the budget—grow and if the city has to take on more costs once absorbed by the now-defunct community Redevelopment Agency.

But, they said, with "controlled spending and budget adjustments" they will keep the budget "balanced and also allow the maintenance of healthy reserve."

In addition to negotiating down salary and benefit packages, the staffers said the city needs to decrease expenditures and/or grow its revenues by 5 percent.

"Considering the city’s need to make due with limited resources," the report says, "departments would undertake a thoughtful review of their current operations and refocus attention and funding on core and priority programs."

In the last fiscal year, Santa Monica's pensions costs grew "dramatically" by $6.4 million or 16 percent, to almost $38 million because of "severe" investment losses in the 2008-09 fiscal year, longer life expectancy, and "enhanced" pension benefits doled out a decade earlier "when plans appeared to be superfunded."

Healthcare costs are forecast to rise 14 percent through through the next fiscal year, then by 12 percent starting in 2015-16.

To the tune of about $2 million per year, the city will also start paying to maintain and operate some major projects under construction now: the Palisades Garden Walk, Pico Library, Colorado Esplanade, Expo Buffer, and Expo Bikeway.

In the next five years, it's forecast to spend $6.6 million to subsidize low-income housing, the Santa Monica Airport, Woodlawn Cemetery, the Civic Auditorium, and the Santa Monica Pier. An additional $21 million is projected for new capital projects, such as the Lincoln Boulevard Streetscape and the redevelopment of the city’s Corporation Yards.

The forced dissolution of redevelopment agencies was a major blow to city coffers. In addition to paying for employees whose salaries were previously funded by the agency, Santa Monica owes the county about $42 million in redevelopment money that will go mostly to local schools. The city is protesting the payment; it has so fair paid $12.6 million.