Santa Monica cuts 400 jobs, eyes recovery after $230M settlement crisis

Santa Monica declared fiscal distress in September after $230 million in settlements and 20% retail vacancy forced 400 job cuts, but crime has since dropped.

Santa Monica declared fiscal distress in September after $230 million in settlements and 20 percent retail vacancy forced 400 job cuts, but crime has since dropped and the budget is balanced.

"There was a real sense a year ago that maybe Santa Monica's best days were behind it," City Manager Oliver Chi said. "But it can still be one of the coolest places on the planet."

The city of roughly 90,700 residents faces downtown retail and restaurant vacancy rates around 20 percent, among the highest in Los Angeles County, according to CoStar. Santa Monica Place, an open-air mall two blocks from the beach, went into receivership last year after its owner defaulted on a $300 million loan. Nordstrom closed its doors there in August after 15 years. The city laid off more than 400 employees, roughly a fifth of its workforce, as hotel and sales tax revenue collapsed during the pandemic.

The recovery remains fragile. International tourism has declined as a result of President Trump's policies, Chi said, while January's Pacific Palisades wildfires displaced thousands of affluent shoppers. The city balanced its budget by tapping reserves and raising parking fees, but the real test will come as it courts new investment ahead of the 2028 Olympics, where it has already signed hospitality deals with France, Switzerland and England.

The compounding crises became visible on the Third Street Promenade, a famed pedestrian mall where roughly one in four storefronts now sit empty. Business operators reported multiple overnight break-ins in 2020 and 2021. "Santa Monica is hyperdependent on tourism and hospitality, and so if it's not a nice and safe place to be, they're going to have major problems," said A.J. Sacher, operations manager at Barney's Beanery, a popular sports bar on the Promenade. Michael Mandel, co-owner of Pier Pizza & Subs on the Santa Monica Pier, said mental-health crises and drug use in public spaces scared away families and shoppers. "The open consumption of drugs in public is absurd," Mandel said.

The city's response, approved late last year as a "realignment plan," targets public safety, economic rebuilding and financial stabilization. Police patrols have increased in the downtown core, and the city is moving its downtown homeless shelter further from the Promenade. Santa Monica also created an entertainment zone allowing open alcohol containers Friday through Sunday and slashed outdoor-dining fees for restaurants. An AI-based software system now speeds processing of building and business permits.

The interventions are showing early results. Property crime has dropped, city statistics show, and the police department is projected to be fully staffed for the first time in two decades. At the pier, foot traffic is nearing pre-pandemic levels of roughly 12 million to 14 million visitors annually, said Jim Harris, executive director at the Santa Monica Pier Corp. The World Cup provided a boost, with the pier hosting a Michelob Ultra-sponsored watch party during the opening round that boosted revenue at nearby businesses.

Santa Monica is also trying to become more business-friendly after years of resistance. The City Council voted in 2023 to allow fast-food chains, reversing a 2018 ban on restaurants with more than 100 locations. Raising Cane's Chicken Fingers recently opened on the Promenade, and Taco Bell Cantina announced plans to do so. The Gap at 1931 Wilshire Boulevard, a neighborhood staple for more than 50 years, is set to close this month so the building can be torn down and rebuilt as an eight-story apartment complex with 260 units, part of a wave of density-bonus-backed developments reshaping the city's commercial corridors.

The last time Santa Monica faced a comparable fiscal squeeze was during the 2008 financial crisis, when the city cut services and deferred maintenance. This time, the scale is larger: the $230 million in settlements alone equals nearly 30 percent of the city's annual budget, according to Chi. The 2028 Olympics represents the next big opportunity to draw visitors and investment. Santa Monica has already signed hospitality deals with national delegations from France, Switzerland and England and is pursuing more. "The real way to get back to prosperity is we need the local economy to thrive again," Chi said. "What we can do is create an environment in the city that's investable."

This article is for informational purposes only and does not constitute investment advice.