By Jason Islas
Lookout Staff

January 11, 2012 -- The Santa Monica City Council got a mixed report on the status of the budget over the next two years, with good news about cost cuts tampered by the looming loss of redevelopment funds.

After reducing City expenditures, notably by renegotiating benefits for City workers, among other measures, a structural deficit for Fiscal Year 2012-2013 has been postponed until 2015, City Manager Rod Gould informed the council.

However, the recent California Supreme Court decision to eliminate redevelopment agencies (RDA) will mean the loss of millions of dollars earmarked for major capital projects, making the City's financial future less certain.

“There may be general fund impacts that need to be taken into consideration,” Gould said. “We are looking for other sources of funding to supplant the RDA funds.”

It is clear that the General Fund won't be able to make up for the loss of redevelopment agency money, City officials said. In Santa Monica, that amounts to as much as $300 million worth of capital projects, including those related to the Expo Light Rail line.

“Staff is in the process of conducting a deep survey of redevelopment agency funded projects in order to gauge the impacts of the redevelopment decision,” said Gigi Decavalles-Hughes, acting director of finance, adding that the extent of the California Supreme Court's decision may not be known for years.

One of the jeopardized programs is a housing voucher program for seniors. “The loss of redevelopment is a serious blow... to maintain our housing programs,” Gould said.

If the voucher program were to be absorbed by the General Fund, Decavalles-Hughes said, it would move up the projected date of the structural deficit by about a year.

There also are several members of the City staff whose salaries come from RDA funds, Decavalles-Hughes added.

Staff will return to the council in two weeks with specific strategies to deal with the loss of RDA funds, which have provided tens of millions of dollars a year since the council declared most of Santa Monica an earthquake redevelopment zone in the wake of the 1994 Northridge earthquake.

Aside from the looming challenge of funding former RDA projects and programs, staff noted several positive trends in the City budget.

“Santa Monica has benefited from faster recovery than most cities in California,” said Gould.

According to Decavalles-Hughes, “Our diverse revenue base and mixed industries makes us more resilient in hard times.”

She pointed out that revenue from the hotel bed tax remains strong and is expected to increase by 10 percent in the coming year.

She added that the housing market also is recovering, with house and apartment vacancies in Santa Monica among the lowest in the region.