How Santa Monica can Save $384 Million and Avert a Fiscal Crisis

Dear Mayor Negrete, City Manager Chi, and Members of the Santa Monica City Council,

I am a longtime resident of Santa Monica, homeowner, taxpayer, father, and owner of a small business here in our community. I am writing to you today not as an adversary, but as a concerned citizen deeply invested in the future of our city. Like many of my fellow residents, I have witnessed the gradual erosion of Santa Monica's vibrancy-a place once renowned globally for its beaches, innovation, and quality of life-due to fiscal challenges that now threaten our very solvency and have left us on the doorstep of bankruptcy.

Over the past several days, I have (at my own expense) conducted an exhaustive analysis of the FY 2025-27 Adopted Biennial Operating Budget, cross-referencing it with city reports, news coverage, and financial disclosures. This effort has led me to develop a comprehensive, rock-solid plan to save hundreds of millions of dollars without compromising essential city services that residents rely on, such as road maintenance, public parks, and core public safety operations. My only financial interest in this matter is as a stakeholder in Santa Monica's success; I want nothing more than for our city to thrive, for our families to feel secure, and for our businesses to prosper. We are on the same team, united in our commitment to a brighter future, and I believe that with bold, decisive action, we can reclaim our city's promise.

The current fiscal emergency facing Santa Monica is dire and demands immediate attention. As reported recently, the city is poised to declare a fiscal emergency, driven in large part by over $229 million (soon to reach $400 million) in payouts related to sexual abuse claims against a former city employee-a tragedy compounded by years of overlooked warnings. This comes amid a structural deficit where General Fund expenditures for FY 2025-26 are projected at $478.6 million against revenues of just $473.5 million, forcing reliance on dwindling reserves. Revenues continue to lag due to slower-than-expected recovery in tourism, sales taxes, and parking fees, with commercial vacancies persisting and the daytime population at only 60% of pre-2019 levels. Compounding these issues are policies that have inadvertently attracted transients and criminal elements through lax enforcement and generous services, further deterring visitors and residents alike. The recent resignation of Police Chief Ramón Batista, our city's first Latino chief who served with distinction for four years, amid reported clashes with city leadership, underscores a troubling shift away from effective crime-fighting strategies.

Even in prosperous times, certain expenditures were excessive; now, with bankruptcy a genuine risk if we do not act, they are unsustainable. We can no longer afford programs that drain resources without delivering commensurate benefits, especially when they exacerbate our challenges rather than resolve them. COVID-19 cannot serve as a perpetual excuse-it has been years since the height of the pandemic, and other cities have recovered more robustly through prudent management.

My proposed plan focuses on eliminating nonessential, excessive, or counterproductive programs, many of which overlap and could be streamlined without impacting the daily lives of hardworking taxpayers. By redirecting these funds, we not only achieve immediate savings but also foster conditions for revenue growth through enhanced safety and economic vitality. Based on my detailed review, the following measures would yield approximately $234 million in savings over the biennial period, with potential for more through generated revenues:

1. Eliminate all programs related to diversity, equity, and inclusion (DEI): These initiatives, while well-intentioned, have allocated an estimated $1 million annually, or $2 million biennially, to dedicated teams and activities. Redirecting these funds would allow reinvestment in universal community benefits without division.

2. Cease all reparations-related spending: This includes approximately $27,500 for task force stipends, a modest but symbolic amount that could be better used elsewhere.

3. End all homelessness services and programs: Currently budgeted at about $8 million annually (including mobile care units and outreach funded partly by Measure K), this totals $16 million biennially. Shifting away from these attractants would reduce the influx of out-of-town individuals, allowing resources to focus on local residents.

4. Dissolve the Housing Authority and terminate all subsidized housing operations: With $31.4 million allocated per year, this represents $62.8 million in biennial savings. This includes administration of vouchers and related services that have not stemmed broader affordability issues.

5. Halt repayments to the Housing Trust Fund: The planned $47.2 million repayment could be deferred or eliminated, freeing up these funds for immediate fiscal relief.

6. Stop all payments to the Community Corporation of Santa Monica and other housing providers: This encompasses $34.8 million in loans for apartment rehabilitation and similar subsidies.

communitycorp.org

Typical Community Corp "Affordable housing" that is basically paid for by your tax dollars with extremely long-term "loans" and high-paid "non-profit" staff

7. Retain and monetize surplus properties instead of donating them for housing: Properties such as Parking Structure 1 (valued at approximately $6.5 million, with 327 spaces for ongoing revenue), Bergamot Station ($24.4 million, currently leased to businesses), and the 4th/5th/Arizona parking lot ($22.4 million) total about $53.3 million if sold or retained for income generation under the Surplus Land Act.

8. Abandon plans to convert the airport to a park and preserve its revenues: The airport generates approximately $15 million in gross annual revenue (net $7 million after costs), yielding $14 million net biennially, plus $4 million in avoided planning expenses.

These cuts target areas of overlap and inefficiency, sparing essential services while eliminating programs that have, in some cases, contributed to our challenges by drawing external burdens to our city.

To further bolster savings, I recommend implementing temporary pay reductions across city staff, reflecting the shared sacrifice needed in this crisis. With approximately 2,000 employees and total personnel costs around $300 million annually, a 25% across-the-board cut would save $75 million per year, or $150 million biennially. For City Manager Chi, whose annual salary is $410,640, a 50% reduction would save an additional $205,320 per year, or $410,640 biennially. This would make the City Manager salary more reasonable in the face of severe fiscal pain. Promise a raise to $750,000 a year upon achieving a balanced budget and cash flow-positive milestone for each of the next 4 years.

Incorporating these measures brings total savings to approximately $384 million over the two-year period-enough to close the deficit, rebuild reserves, and invest in growth.

Beyond savings, this plan paves the way for an economic renaissance. By hiring 100 additional armed police officers to enforce laws rigorously, relocating transients out of the city, and refusing to provide ongoing services or housing that serve as magnets, we can restore safety and cleanliness. This will catalyze a tourism boom, revitalizing hotel occupancy, sales tax revenues, and property values in our globally iconic beachfront community. Events like the upcoming FIFA World Cup, Super Bowl, and LA28 Olympics present opportunities we must seize, unhindered by current deterrents. Moreover, ending policies that inadvertently enable risks-such as those under the guise of DEI that may overlook safeguards-will protect our families and rebuild trust.

Santa Monica stands at a crossroads. By adopting this plan, we can avert bankruptcy, ensure fiscal solvency, and emerge stronger than ever. Imagine a city where streets are safe, businesses flourish, and residents take pride in our shared home-a vision within reach if we act with courage and unity. I urge you to consider these recommendations at your earliest opportunity and am available to discuss them further. Please do not automatically dismiss my evidence-based recommendations for hypothetical "partisan" reasons. These are nonpartisan recommendations rooted in common sense and fiscal discipline, something I am internationally recognized for.

Together, we can secure a prosperous future for generations to come.

Sincerely,

Houman David Hemmati, MD, PhD

Santa Monica Resident, Homeowner, Taxpayer, Father, and Small Business Owner