Santa Monica finished its last fiscal year $7.3 million better than projected and is on track to balance its general fund operating budget by July 2027, city officials told the City Council on Tuesday in a one-year review of the city's Realignment Plan.
The council took three separate votes on the item. It first voted 7-0 to approve a package of related actions, including a vendor contract and fee to launch a rent registry for about 15,000 apartments not covered by rent control and guidelines for a $3 million program meant to fill vacant storefronts downtown.
City Manager Oliver Chi said the plan's first year was about stabilizing city operations. The next phase, he said, will focus on revitalizing the local economy and drawing private investment back to Santa Monica.
"I think certainly we've achieved a measure of stability the last year," Chi said. He added that "there is a ton to be proud of in terms of the work that we've done, and there's so much more work to do moving ahead."
The council adopted the plan Oct. 28, 2025. At the time, the city faced a projected structural deficit of about $30 million, and its unobligated cash reserves had fallen from $436 million to $98 million, much of that because of childhood sexual abuse settlements. The plan compressed $60 million in reserve spending, originally planned over four to five years, into 24 months, organized around five priorities including public safety, clean streets, economic growth and housing.
For the fiscal year that ended June 30, the city used $26.7 million of those reserves to balance its budget instead of the $34 million it had planned. Excluding $22.5 million in general fund transfers to capital projects, the operating budget ran a $4.3 million deficit.
Chi said the results came even though most of the plan's new revenue sources, including a city-run ambulance program, higher parking rates and a credit card convenience fee, were in effect for only part of the year. Officials project those measures and other changes will add about $28.8 million a year in recurring revenue and savings, beating the plan's $24 million target.
General fund revenue reached $483.3 million, up 8.6% from the prior year. Hotel tax collections rose 8.5% to $68.7 million, property taxes grew $5 million and sales tax grew $1.8 million.
Chi said the visitor economy is recovering, with hotel occupancy near 80% this spring compared with about 75% a year earlier. "There's still a long way to go," he said.
Police Chief Darrick Jacob said the department, fully staffed for the first time in more than two decades, has shifted to more proactive policing. From January through September, violent crimes and burglaries fell 11.2%, to 751 from 846 in the same period last year. That followed a 12.5% drop in Part I crimes in 2025.
Over the same nine months, officer-initiated activity rose 21% and total arrests rose 62%, to 4,097. Traffic citations more than doubled. Drug-related arrests rose about 119%, which Jacob attributed to officers being present to see offenses rather than to more drug activity.
"Santa Monica is a welcoming community, but crime and unlawful behavior will not be tolerated," Jacob said. "If you come to Santa Monica to commit a crime, our officers are looking for you."
He acknowledged that statistics alone do not ease residents' concerns. "Knowing that crime is down doesn't automatically take away that fear," he said.
Mayor Caroline Torosis asked how many unhoused people who are arrested are diverted to services such as the SaMo Bridge program or the city's STEP Court. Deputy City Attorney Jenna Grigsby-Taggart said prosecutors do not track housing status. Torosis asked for clearer reporting on diversion outcomes. "How do we evaluate whether this is working?" she said.
The city's path to a balanced budget assumes the end of its roughly $12 million annual payment to the Santa Monica-Malibu Unified School District under a facilities use agreement that expires June 30, 2027. The city and district agreed to that expiration in 2022.
City contributions to the district total about $40 million a year across several agreements. Chi said the two sides are discussing an extension, and the outcome of Measure ES, a school parcel tax on the Nov. 3 ballot, will shape those talks. If voters approve it, staff expects to return with a new agreement reflecting that revenue. If it fails, staff plans to let the payment lapse, though the council could keep it and identify cuts elsewhere.
Chi said the district has indicated it would like the payment to continue. Options will go to the council at a budget study session in March, ahead of a two-year budget that takes effect July 1, 2027.
Looking ahead, officials outlined three efforts aimed at downtown. The council approved guidelines for a Downtown Catalyst Incentive Program that would offer forgivable loans of up to $1.5 million for two or three high-visibility projects, favoring restaurants and entertainment that draw people on evenings and weekends. Each award would require a separate public hearing.
A design team is also preparing concepts for a refresh of the Third Street Promenade, with a plan due to the council in early 2027 and a first phase planned before the 2028 Olympics.
In a second vote, 6-0, the council authorized pilot programs with parking operator Metropolis Inc. to upgrade three downtown garages and launch curbside valet service near the Promenade by Black Friday, at no cost to the city. In a third vote, also 6-0, it cleared staff to pursue a license letting Zoox, the Amazon-owned robotaxi company, stage up to 150 electric vehicles in the underused Main Library garage. Chi said the deal could bring in about $500,000 a year.
Councilmember Barry Snell sat out the Metropolis vote, citing a nonprofit he leads that receives Metropolis funding. Councilmember Dan Hall sat out the Zoox vote because he owns Amazon stock.
The rent registry, set to open in January, will charge $52.35 per unit a year, and landlords may pass up to half of that on to tenants. Officials said the first phase will stress registration over penalties.
Officials cited an independent RAND Corp. report released Oct. 1 that called the city's reforms "a meaningful break with the past." They noted that RAND recommended restarting a homeless court the city has already run as STEP Court since 2024. "Maybe RAND should have decided to talk to any of us before publishing what they publish," Torosis said.
The city's first employee survey found 74% of respondents proud to work for the city, but only 39% agreed management is transparent about decisions. "You don't ask employees how they feel unless you're going to do something about it," Human Resources Director Dana Brown said.
Not everyone was satisfied with the accounting. In a written comment to the council, resident Karen Melick asked for a detailed breakdown of how the $60 million in reserves has been spent. She argued that much of the plan's new revenue comes from fees on residents rather than economic growth.
"Where's our return on our investment?" she wrote. Melick also said the city denied her public records request for the estimated cost of a city winter closure. "We need more financial transparency," she wrote.