Santa Monica city officials are considering a resolution that would declare the city in fiscal distress as it wrestles with rising costs from sexual abuse settlements that have shaken its budget. This move reflects a growing financial strain seen in other local governments facing similar settlement payouts.
The trouble stems from settlements exceeding $229 million paid to victims of alleged abuse by former police dispatcher Eric Uller, with claims dating back 20 to 30 years. The city has already borrowed $52 million from its internal funds to cover these costs and still faces around 180 claims pending in court. These payouts have drained city reserves to just 61% of what they were before the pandemic.
Santa Monica also carries about $269 million in debt, including $147 million in lease revenue bonds. While the resolution itself does not require spending cuts or expand the city manager’s authority, it is meant to send a message to regulators and lenders that Santa Monica is facing a serious financial situation.
Lauren Howland, the city’s public information manager, said the city’s funds have been heavily impacted and they are now entering a fifth round of settlement talks related to the Uller case. City leaders are working on a budget stabilization and realignment plan, expected to be presented by late October. They are also weighing a $460 million bond to finance capital projects that normally rely on tax revenue.
Santa Monica’s financial woes are part of a larger challenge across California, triggered in part by a 2019 law extending the statute of limitations for sexual abuse claims against public agencies. For example, Los Angeles Unified School District issued $308 million in bonds recently to pay settlements and may issue more debt, while Los Angeles County agreed to a $4 billion settlement for former juvenile detainees earlier this year.
The city’s economy has also struggled beyond these settlements. The pandemic hit tourism and sales tax revenue hard, with general fund income dropping nearly 27% in 2020-2021. Other factors include federal policy changes during the previous administration, such as tariffs and immigration enforcement, which may have slowed economic growth locally.
To manage costs, Santa Monica has cut back on city services, cultural programs, and capital spending. Staffing remains below pre-pandemic levels after nearly 300 jobs were eliminated in 2020. Meanwhile, the city’s housing market remains tough, with a median home price reaching $2.1 million—about 20 times the median household income.
Santa Monica is home to major companies like Activision Blizzard and has seen challenges in retail as well, with the local mall operator handing over the Santa Monica Place shopping center to lenders last year.
“There’s no question the city is in a tight spot financially,” said Howland, “and this resolution is one tool to help create a broader plan for stable finances going forward.”
As Santa Monica looks ahead, the city faces tough decisions to keep its finances on track while addressing the lasting impact of decades-old abuse claims.