Santa Monica's general fund is on track to achieve structural balance for the first time in years, city finance officials told the City Council at their last meeting, presenting a proposed $908.1 million budget for fiscal year 2026-27 that pairs a financially stable operating plan with the city's most ambitious capital investment program since the pandemic.
Finance Director Oscar Santiago told council members the current fiscal year is projected to close with an $8.95 million surplus — a dramatic turnaround from October 2025, when the city was staring down a projected $29.6 million deficit for the coming year.
"The general fund is structurally balanced," Santiago said during the May 26 study session. "We remain on track to maintain that balance into the next biannual budget."
The reversal was driven by the Realignment Plan adopted by council in October 2025, which deployed $60 million in reserves to stabilize operations while simultaneously launching new revenue streams. The ambulance operator program, fully operational since February, is processing roughly 650 transports per month and is projected to generate $5.5 million in fiscal year 2026-27, growing to $7 million annually once collections stabilize. A new digital signage program along the Third Street Promenade, originally expected to go live in early 2027, is now targeted for installation by the end of this summer and is projected to generate $4.5 million per year once stabilized. Parking rate restructuring is expected to push parking revenues from $33.3 million to $40.6 million — a 22% increase.
The city is also carrying roughly $94 million in unobligated general fund cash, providing what Santiago described as a stable operating foundation.
Of the $8.95 million surplus, $3 million will be set aside for the council-approved Economic Recovery Reserve, leaving $5.95 million to carry forward into fiscal year 2026-27.
Notably, the budget does not account for revenues from major event licensing agreements already in place, which are expected to generate approximately $6.8 million from FIFA World Cup activations, a Goldenvoice beachfront music festival, an ESPN broadcasting partnership, and a slate of Olympic hospitality agreements for 2028.
A Capital Program Reborn
The centerpiece of the presentation was the proposed fiscal year 2026-28 biennial Capital Improvement Program, totaling $109.8 million in the first year and $116.6 million in the second — a figure that Public Works Director Christopher Dishlip said represents a fundamental shift in how the city invests in itself.
"Prior to the pandemic, Santa Monica designed and delivered remarkable infrastructure projects," Dishlip said. "With the uncertainty of the last five years, the city understandably shifted into a preservation and stabilization mode. The proposed budget in front of you is the product of a shift in mindset from reactive maintenance back to strategic capital investment."
The 77-project program is organized around four priorities: preparing for the 2028 Olympic and Paralympic Games and other major events; reinvesting in parks and open space; a citywide infrastructure recovery initiative; and modernizing transportation and mobility.
Event-readiness investments totaling approximately $14.4 million in the first year include $21.2 million across pier infrastructure projects over the biennial period, a $3 million Camera Obscura redesign, $2 million in major event electrical infrastructure and $1.8 million in Tongva Park improvements.
The return of the long-delayed Memorial Park Redevelopment and Expansion — a project Dishlip described as more than 20 years in the making — was highlighted as a major milestone. The project carries a $60 million price tag over the biennial period, drawing on funding from a Santa Monica College bond measure, a planned $7 million contribution from the Santa Monica-Malibu Unified School District, various grants, and general fund support in the second year. Other parks investments include a $2 million synthetic turf replacement at Airport Park and a $700,000 playground replacement at Virginia Avenue Park.
Transportation and mobility investments include a $30 million annual paving program covering Santa Monica Boulevard Phase 1 and Chelsea intersection improvements, $12.5 million for 14th Street bike and pedestrian improvements, $21.8 million for citywide streetlight modernization and a $1.7 million smart curb management program.
Budget Adjustments and the School District Question
The proposed operating budget includes modest revenue adjustments, with projected general fund revenues declining by 0.4%, or $1.9 million, from earlier projections. The reduction is primarily attributed to lower-than-anticipated parking revenues stemming from the delayed rollout of downtown parking rate changes and operational challenges with the transition to text-to-pay parking meters. Those decreases are partially offset by revenues from a newly completed citywide fee study and stronger-than-expected business license tax collections.
On the expenditure side, the budget adds seven full-time equivalent positions citywide in housing and human services, communications, human resources and transportation planning, with a nominal net general fund impact of approximately $9,000 after a full departmental reassessment.
The budget also includes a one-time drawdown of $4.67 million in reserves for three deferred needs: the Camera Obscura redesign, replacement of fire department self-contained breathing apparatus, and the disposal of legacy firefighting foam from fire apparatus.
A looming fiscal variable involves the Joint Use Agreement with the Santa Monica-Malibu Unified School District, under which the city currently pays approximately $12 million annually for community access to district facilities. The agreement is set to expire in 2027 under terms established in 2022. That expiration is factored into the city's structural balance projections.
Council member Lana Negrete asked for clarification on the total amounts being transferred to SMMUSD by the city.
City Manager Oliver Chi said that the city approved an extension to Measure YGS earlier this year allocating about $18 million a year to the district that is independent from the $12 million under discussion.
“There's an additional $12 million a year through the joint use agreement. That agreement was modified in 2022 by both the school district and the city such that the agreement and that funding allocation expires in 2027,” he said. “So we have projected in ‘27 that expense comes off the books and that is obviously a significant financial cost to the city right now that helps us achieve our balanced budget as Oscar mentioned in his presentation.”
A separate citizens' initiative seeking to establish a parcel tax is currently being circulated. If it qualifies for the ballot and is approved by voters, Chi said staff would return to negotiate an extension of the joint use agreement under a new funding framework. Without it, extending the agreement would require identifying offsetting cuts elsewhere.
Council Voices, Next Steps
Council member Jesse Zwick pushed for faster action on neighborhood greenways and traffic calming infrastructure, displaying photographs of quick-build diverters installed on Michigan Avenue in 2014 and questioning why similar low-cost interventions couldn't be deployed immediately. Dishlip acknowledged the grant funding structure for the current greenway project limits the city's flexibility but said a diversion pilot project and neighborhood traffic calming toolkit would be presented to council in August.
Zwick also raised concerns about a smart curbside management RFP currently out to bid, pressing staff on whether the city intended merely to monitor curb usage or actually charge for it. Chi said the full package would come back to council in August.
The council voted 6-0 to direct staff to proceed with setting a budget adoption hearing for June 23.