Santa Monica faces dire financial crisis

Business is down, but city officials also point to sex abuse scandal

- By Salvador Hernandez and Richard Winton

A FORMER MAYOR says Santa Monica's financial issues go beyond legal claims and had been taking shape years ago.

Santa Monica, long a beacon of economic strength in Southern California, has endured its share of struggles in recent years.

Its once-bustling downtown shopping district has taken a post-pandemic hit, with the Third Street Promenade in need of reinvention and the upscale Santa Monica Place mall about to lose its anchor Nordstrom. Other factors include post-pandemic shifts in the entertainment industry and new tariffs.

But Santa Monica finds itself on the brink of a financial crisis for another, less expected reason as well: Hundreds of millions of dollars in sex abuse settlements.

The city still faces 180 claims of sexual abuse by a former Santa Monica police dispatcher, a scandal that has already cost the city $229 million in settlement payouts. On Tuesday, the city declared itself in fiscal distress, a move that raised concerns among city workers that cuts, and perhaps layoffs, were coming.

"The financial situation the city is dealing with is certainly serious," said Oliver Chi, city manager for the city, during Tuesday's City Council meeting.

The worries among city workers reached such a peak that before Tuesday’s meeting Chi sent out an email to all city employees, trying to reassure them no layoffs were being planned.

“Let me be clear,” the email, reviewed by The Times, read. “This action is not about layoffs or staff reductions.”

Santa Monica’s recently approved budget for 2025-2026 expects $473.5 million in revenue, but $484.3 million in costs, and city officials worry that the sexual abuse scandal could continue to put a drain on city coffers that are already reeling from an economic downturn.

Many cities are reeling from declining tax revenues and struggling businesses.