1. FY2004/05 PROPOSED BUDGET & FY2005/06 BUDGET PLAN Peer into the Future Cautious Optimism

2. ECONOMIC OUTLOOK FY2004/05 and Beyond

3. National Economy  Gross Domestic Product up 4.2%  Unemployment Rate is dropping - new jobs coming on line in 2004  Energy costs continue to climb  Inflation creeping up

4. State Economy  Unemployment rate decreasing  Jobs being created  Consumer prices still stable  Overall tourism rates increasing  Energy prices rising

5. State Uncertainties  Governor proposes to reduce State revenues to cities by $350 million for the next two years. Santa Monica’s share: $3.5 – $3.8 million  Effects of revenue “triple flip” reduce financial flexibility  No long-term solution to the State budget deficit per State Legislative Analyst

6. Local Economy  Retail Sales on the upswing Sales Taxes for fourth quarter 2003 up 6.7% over prior year fourth quarter  Tourism Improving Hotel Occupancy up 9.12% in the first quarter as compared to same quarter last year  Home Sales Strong Assessed Property Valuation up 7.6% from FY2002/03

7. Local Revenues *Sales tax does not include “Triple Flip” ** TOT includes a 2% increase in rate effective 1/1/05

8. City of Santa Monica Proposed Budget  All Funds: FY2004/05 – $376.9 million FY2005/06 – $369.2 million

9. PROPOSED BUDGET General Fund

10. Revenues – $192.5 Million

11. Local Taxes – $135.3 Million

12. Revenue Measures  New Revenues: $1.4 million Ambulance Service Fees: $0.9 m. Recreation & Facility Use Fees: $0.4 m. Valet & Preferential Parking Fees: $0.1 m.  Transient Occupancy Tax: $3.5 million Increase from 12% to 14% effective 1/1/05 FY2004/05: $1.6 m. FY2005/06: $3.5 m. (full year)  Reimbursements – $2.4 million

13. Expenditures – $180.9 Million

14. Expenditure Reductions  Programs Landscape Maintenance Services CCS – Program hours & Community Grant reductions  CIP Projects $3.6 million  Personnel Reorganizations & redeployment of personnel in EPWM, CCS and Library – Six full-time positions cut – No layoffs Vacant civilian Police position eliminated (4) Selective hiring controls in all departments for salary savings

15. Major Budget Enhancements  Virginia Avenue Park: $200,000  Skate Park: $51,074  Additional Park Ranger Coverage: $18,382 Virginia Avenue Park & Skate Park  Community Classes: $112,000  Parking Operations: $104,912

16. Fund Balance  Loans to Cemetery & Airport: $3.2 m.  As-Needed Employee Conversion: $0.3 m.  Permit, Plan Check, Inspection & Code Enforcement Improvements: $0.5 m.  Destination Promotion: $0.5 m.  Worker Compensation Contribution: $5.0 m.  State Funding Uncertainties: $4.2 m.  10% Reserve: $18.1 m.

17. Changes for FY2005/06 Plan  Virginia Avenue Park full year funding  Community & Cultural Services – Virginia Avenue Park Creative Partnership Programs  Additional Park Ranger coverage  Main Library opening (partial year)

18. Questions?