Santa Monica, California, once renowned for its pier, beaches, and vibrant shopping, has experienced a notable economic downturn over the past few years, including a declaration of "fiscal distress." This decline is attributed to a slow recovery from the COVID-19 pandemic, falling tax revenues, a significant number of empty storefronts on the Third Street Promenade, and challenges related to its unhoused population. Additionally, the city faces substantial financial Strain from over $229 million in settlement payouts and ongoing claims related to sexual abuse by a former police dispatcher, with 180 claims still pending. Moody's revised the city's outlook to negative from stable, citing the tepid tourism recovery and liabilities from child sexual abuse claims as factors contributing to projected budget shortfalls of $60 million over the next five years if no action is taken.
In response, Santa Monica leaders are implementing a multi-faceted revival plan, moving away from past assumptions that visitors would come simply because it was Santa Monica. The city is investing $3 million into the Third Street Promenade and is banking on a series of events to draw people back. Key initiatives include partnering with FIFA for an interactive fan zone and watch parties at the pier for the World Cup, working with Goldenvoice for a two-day music festival in the fall, and collaborating with ESPN for an event tied to the 2027 Super Bowl. The city also hopes to leverage its reputation for upcoming major events like the Super Bowl and Olympics to increase foot traffic and shopping.
A central component of this strategy involves alcohol: an "entertainment zone" was approved last year for the Third Street Promenade, allowing people to walk with open alcoholic drinks. This zone is planned to expand to the entire downtown area during special events. Public safety is also a priority, with the police department projected to be fully staffed for the first time in 20 years, contributing to a reported 12.5% drop in violent and property crimes this year compared to the same period in 2025. The city is also seeing signs of economic stabilization, with restaurants that were previously near closure signing new leases and seven housing projects moving forward. While some, like property owner John Alle, remain skeptical, city officials expect a balanced budget this year and a $5.4 million surplus by the end of 2026-27 if these revival efforts prove successful. The city has also launched a "business concierge" program to support local establishments and approved measures to ease fees for restaurants.
