Santa Monica, the sun-kissed city famed for its iconic pier and bustling downtown, now finds itself at a crossroads few would have predicted just a decade ago. On September 9, 2025, the city officially declared itself in “fiscal distress,” a move that sent ripples of anxiety through city hall and the broader community. While the aftershocks of the pandemic and shifting retail landscapes have certainly battered Santa Monica’s finances, it’s the fallout from a devastating sexual abuse scandal that has pushed this Southern California gem to the brink of a full-blown financial crisis.
City officials laid out the grim reality during a tense City Council meeting. Santa Monica faces $229.285 million in settlement payouts tied to hundreds of sexual abuse claims against Eric Uller, a former police dispatcher whose crimes spanned decades and preyed on more than 200 children—mostly in predominantly Latino neighborhoods. Uller, who died by suicide in 2018, had been hired and allowed to work with children despite a 1991 background check that flagged a prior arrest for molestation. According to Los Angeles Times reporting, the city’s payouts represent the most costly single-perpetrator sexual abuse disbursement for any municipality in California’s history.
“The financial situation the city is dealing with is certainly serious,” said City Manager Oliver Chi during the council meeting. The city’s 2025-2026 budget projects $473.5 million in revenue but $484.3 million in costs, with the abuse settlements and an economic downturn creating a perfect storm for city finances. The city has already endured rounds of layoffs—about 400 employees lost their jobs in 2020—and now, with roughly 2,000 workers remaining, concerns about further layoffs or pay cuts are widespread. Teamsters representative Judith Serling summed up the mood: “People are scared of losing their jobs. People were scared of having their wages cut.”
But it isn’t just the settlements themselves causing headaches. In 2019, California passed AB 218, a law that extended the statute of limitations for childhood sexual abuse claims. Victims now have until age 40, or five years after discovering the abuse, to file claims. The new law unleashed a wave of litigation against school districts, counties, and cities across the state—including Santa Monica. In April, Los Angeles County agreed to a $4-billion tentative settlement involving 6,800 abuse claims, some dating back to the 1980s. For Santa Monica, the extended window for claims means the financial pain could drag on, with 180 additional claimants still awaiting negotiation.
The city has tried to soften the blow by suing some of its insurers to recover funds related to the settlements, which have ranged from $700,000 to just under $1 million per claim. With a $1-million deductible on some insurance policies, much of the financial burden has landed squarely on the city’s budget. Mayor Pro Tem Caroline Torosis acknowledged the weight of the crisis: “We are carrying the weight of more than $229 million in sexual abuse allegations. We owe it to survivors to properly address this, but we owe it to Santa Monicans to protect our city’s financial stability.”
Santa Monica’s woes don’t end with the legal settlements. The city’s once-vibrant downtown shopping district has suffered a post-pandemic slump. The Third Street Promenade, once a bustling hub for tourists and locals alike, is in need of reinvention. The upscale Santa Monica Place mall is about to lose its anchor store, Nordstrom, as the retail giant restructures to adapt to the rise of online shopping. “Santa Monica business has been down,” said Jon Farzan, a hotel owner and former board member of Downtown Santa Monica Inc., who is among those suing the city over management of downtown services. The economic downturn has been compounded by declining tourism, shifting consumer habits, and a perception among some visitors that the city is less safe than it once was.
Former Mayor Phil Brock, who lost his seat in the last election, argued that the city’s predicament was years in the making. “The city of Santa Monica has failed to reign in unnecessary spending for a number of years, and we’ve known this financial crisis has been looming for a while,” he said. Brock pointed to a steep downturn in tourism and retail revenues, coupled with the exodus of businesses from downtown, as early warning signs. He also suggested the city may need to “right side services, and look at areas where [the city] might be overstaffed.”
City officials, for their part, are scrambling to find solutions. The fiscal distress declaration, approved unanimously by the seven-member City Council, is intended to help Santa Monica communicate its financial situation to other agencies, seek grants, and realign city operations. City Manager Chi emphasized in an email to employees that “this action is not about layoffs or staff reductions.” Instead, the declaration is meant to signal the seriousness of the situation and provide the city with tools to pursue outside funding and legislative relief.
Mayor Lana Negrete expressed hope that the declaration could help Santa Monica apply for grants, work with the California Coastal Commission to expedite changes to parking rates, and lobby for state legislation to provide relief from the avalanche of claims triggered by AB 218. City officials are closely monitoring bills in Sacramento that could limit future claims and ease the burden on local governments.
Still, uncertainty hangs over the city. A concrete financial realignment plan is expected to be presented to the City Council in late October 2025, but for now, the path forward remains murky. One city official, speaking anonymously, said employees are skeptical about what steps the city might take and whether it could mean cuts to pay or benefits. Earlier this year, the city reached an agreement with about 10 employee unions, but the specter of further belt-tightening looms.
Residents are caught in the middle, urging city leaders to avoid service cuts even as finances tighten. “I’ve heard a lot of people saying we need more staff, we need more police officers and all of that is true,” Chi said at the meeting. “But the reality is no matter how many resources we have, no matter how many police officers we have, no matter how much we have here in the city, there’s always going to be a need for more. What we need to do is try to figure out how do we utilize the resources that we do have in the best way possible.”
As Santa Monica stares down an uncertain future, the city’s leaders, workers, and residents alike are left hoping that a blend of prudent management, outside assistance, and legislative relief will be enough to weather this unprecedented financial storm. The coming months will test whether the city can reinvent itself once again—or whether the weight of past failures will prove too much to overcome.
