Economy “Fragile” but in the Black
By Lookout Staff
October 29 – Santa Monica’s recently booming
economy is in an “incredibly fragile state” and could
fail to meet revenue projections beyond the current fiscal year,
City officials warned.
Still, despite the “turmoil in global financial markets,” the City
could meet current budget projects, “assuming no further State takeaways,”
according to City finance officials.
“The national, State, and local economies all continue to be in an incredibly
fragile state,” Finance Director Carol Swindell wrote in
her report to the council.
“We are experiencing unprecedented turmoil in global financial markets,
and most economists believe we are undergoing a recession that is expected to
be prolonged and deep,” Swindell wrote.
While Santa Monica’s diverse revenue stream has cushioned it from economic
shocks, the current national recession could have a bigger impact
“Since many of those sources are economy-driver, the local economy could
be impacted by amy of the same challenges as the state and nation,” Swindell
“In Southern California, the housing market has deteriorated,”
she wrote. “The housing crisis is further aggravated by tightening credit,
which has left businesses and individuals struggling to meet short-term obligations.”
While property values in Santa Monica have “weathered the storm”
better than in most other cities, with the total assessed valuation rising by
some 10 percent, there are “troubling signs.”
The number of property transfers in the city in the last fiscal year was the
lowest in at least 15 years,finance officials noted.
What’s more, local sales taxes for the first two quarters of 2008 have
declined in recent years and are expected to drop even more. In
addition, tourism cannot be counted on to buoy a weakening local
“Economic activity from tourism was strong during the summer, but the
global economic slowdown is expected to hinder local tourism,”
Officials cautioned that the State budget crisis could impact Santa Monica’s
current budget by reducing funding from its redevelopment agencies (RDA) by
$4.3 million. State funding for the Big Blue bus also could be slashed by $3.5
“While these actions do not affect the General Fund, potential local
impacts of the ongoing state budget crisis could increase the
RDA takeaways and make them permanent,” according to Swindell’s
Still, the City is on track to meet its current fiscal budget,
“If there are no further State takeaways this fiscal year,
Staff believes that. . . revenues will end the year in line with
budget projections,” Swindell wrote.