Santa Monica is Broke. 28% of sales tax is generated downtown, an area with a now-45% vacancy rate

Tuesday evening February 20th I attended the Santa Monica City Council's Audit Sub-Committee Meeting.

The Audit Subcommittee is not a City commission or board. It is supposed to provide an alternative way for employees, taxpayers or other citizens to confidentially report suspected illegal, improper, wasteful or fraudulent activity and provide periodic review and selection of external auditors.

It is supposed to act in an 'advisory' capacity and review all City audit reports, analyze their findings and consult with internal and external auditors on any irregularities and deficiencies contained in their reports. The Subcommittee is supposed to determine what corrective action should be recommended to the City Council, and report on the outcome of all audits and make recommendations. Two residents and three (3) Councilmembers, including Councilmember Christine Parra, former Mayor Gleam Davis and current Mayor Phil Brock, comprise the Audit Sub-Committee. City Manager David White and City Treasurer Oscar Santiago are supposed to be present and provide information on request.

What I saw and heard (and conversed about later with a few of the residents who were present) was astonishing. City Manager David White arrived late during Public Comment. Sub-committee Member Gleam Davis also arrived late, and avoided listening to any Public Comment.

STAGGERING Findings:

Within the Santa Monica Human Services Grant Program during the past year -

1) Over $2 million of City-granted funds to The People Concern remain unaccounted for. $600,000 from their budget in Santa Monica operations was used for "travel," and food for the homeless was paid for by donations. The outside accounting firm the City of Santa Monica hired to conduct the overall audit, Moss Adams, was unable to reconcile their various budgets with their General Ledger.

In one case, $809,000 of grant-related expenditures could not be reconciled between their Fiscal Report and their General Ledger. Moss Adams was unable to reconcile The People Concern's Travel Budget and Fiscal Reporting with their General Ledger. John Maceri, the Executive Director of The People Concern, has not publicly commented on Santa Monica's Recommended Corrective Action made over a year ago.

2) Saint Joseph's Center (SJC) was unable to provide any documented support for 8 of 16 expenditures, and in another spot check, did not provide their methods for 3 of 14 allocated amounts, and was unable to provide any documented support for 9 of 13 expenditures (no timesheet, invoice, PO, or proof of payment).

3) CLARE Foundation was unable to provide any documented support for expenditures for grant-related operations.

4) Hospitality Training Academy (HTA) did not have documented approval for expenditures prior to disbursement for 4 of 15 items inspected.

5) Family Services of Santa Monica (FSSM) did not provide documented support indicating timesheet approvals for 5 of 10 samples collected by the City. In one instance, there was no supporting documentation provided (no PO, invoice, timesheet, proof of payment, etc.)

The controversial Moss Adams Report was reviewed and edited FIRST by CITY MANAGER DAVID WHITE and his STAFF, BEFORE being submitted to the Audit Sub-Committee, the City Council and the Public. Why?

6) The Fiscal Year 2023-24 approximate budget for Santa Monica is approximately $745 million, and the proposed budget for 2024-25 is $750.6 million.

There are + - 570 businesses in Santa Monica, employing + - 7,300 people in the retail sector, with an average quarterly payroll of $118.8 million (4% of the City's total). And 28% of sales were generated in Downtown Santa Monica, but that revenue has significantly decreased during the last 2 years with a continued 45% vacancy factor.

7) The General Fund decreased last year by $63 million, the most important fund for Santa Monica, as it serves public safety salaries and services, including Police, Fire, Paramedics, and miscellaneous expenses. Safety concerns are at an all time high, as crime and open drug use, sales and assaults are on the rise.

Yet our City Council most recently decreased the annual allotment for Police by some $40,000. Just 13% of the total budget is allocated for Police and Public Safety. Police funding is typically the largest spending area for cities. According to the California Department of Justice's Law Enforcement Personnel Survey, and the California Department of Finance Population Data through 2022, spending on Police usually accounts for over 15% of all city spending statewide. But not in Santa Monica.

8) Santa Monica's unfunded Pension Liability in 2022 was an alarming $265 million, expected to have increased by $8 million in 2023. This amount equals about 115% of the General Fund. The unfunded Pension Liability is growing at a faster rate than our City's General Fund. In 2005, the unfunded Pension Liability was 45% of the General Fund.

City Manager David White, whose annual salary increased several months ago to over $400,000, commented that, "It will get worse in terms of payments the City needs to make for unfunded pensions."

9) The City's investments are managed by CALPERS, an agency in the California executive branch that manages pension and health benefits for California public employees and their families. Interest from a wide array of investments vary, and immediate past Mayor, now City Councilmember Gleam Davis stated, "There's nothing we can do about it."

Gleam Davis stated that the last presentation to the City Council on how CALPERS manages the City's funds and the allocation of interest, was in 2015. Nobody on the current City Council, except Gleam Davis, was on the Council in 2015. Yet there was no agreement from the Audit Sub-committee to recommend that Santa Monica's elected City Council listen to a presentation and possible dire effects, any time in the foreseeable future.

10) The City of Santa Monica has about 1,118 employees, and the revenue per employee ratio is $23,256. City of Santa Monica total annual employee revenue was $26 million in 2023.

11) Santa Monica has an approximate $265 million unfunded pension liability (2022) that has been unaddressed for years, and continues to grow. There was significant discussion over the issue with mention that CALPERS controls the City's investments. Annual returns vary. City Manager David White said he hoped it would be manageable in 20 or 30 years, with a "better" economy.

12) The payments and legal fees for two of Santa Monica's ongoing lawsuits regarding District Based Voting, and the sexual abuse case related to an employee of the Police Activities League, have passed over $300 million.

CONCLUSION: Santa Monica is BROKE; near financial insolvency because of wrong policies.

The point isn't that Santa Monica's City Manager, current Mayor and City Council Members involved are clueless. The point is that playing whack-a-mole with a bunch of competing interests and non-profits comes at the expense of our City, which is what should be most important.

There's been little evidence to suggest that our City Manager and new City Treasurer are committed to prioritizing the wellbeing of its residents. The City Council and its rotating Mayor need to shift their mindset. The City needs more bona fide sworn police officers; so called because such officers have arrest powers and are required to take an oath to defend the Constitution, carry out the law, maintain public order and ensure the safety and quality of life in our City.

The City's parks are full of drug dealers and users. More assaults, theft overdoses and deaths are occurring in Santa Monica's Parks, 3rd Street Promenade and Downtown, than being reported. This is because all parties are not always present when Police arrive, and businesses are afraid of becoming uninsurable if they report the rising theft in their stores.

Our City Manager, Mayor and City Council do not care, and do not pay attention to us residents and business owners. They do not care if their actions, or lack of, compromise the integrity of our product and brand. There's always an explanation.

There's also been little evidence to suggest that the Mayor, who sets the agenda for the City Council, and the City Council, are committed to prioritizing residents and businesses.

Our current leaders need to shift their mindset. Our City Manager and Mayor continue to recommend funding self-serving nonprofits and their executives and staff, without constraints or consequences, even when they see misappropriate expenditures and lost funds. Excuses continue to be made even when their product and ideas fail to meet City expectations.

Unfortunately, the Audit Sub-Committee Meeting, was not widely publicized, and meets infrequently. So very few people outside the Audit Sub-Committee, City Manager, City Staff and Mayor know or can possibly care about the continued negative behavior and impacts, and that's kind of the point.

Sadly, just two days later in the February 27th City Council Meeting, the City Budget items were approved unanimously by Council. The same non-profit agencies were again granted more funds. Nobody, including our City Treasurer in his report, addressed any of the discrepancies. City Council Members who attended the Audit Subcommittee Meeting ignored these issues, as did the remaining Council Members who cited the late hour, and voted in favor.

Our current City Manager, City Treasurer, Mayor and Councilmembers will transition and move on. But our children will be left with a huge deficit, funding their retirement.

Here is a link to Santa Monica's Audit Sub-committee.

https://santamonica.granicus.com/boards/w/6ff37e3e6f3d5678/boards/14397