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Deep Coronavirus-Caused Budget Cuts Lead to Resignation of Santa Monica City Manager Rick Cole

With projected shortfalls of $300 million over the next 26 months, Cole may have become a canary in a coal mine for all city executives in the high stakes world of leading after COVID-19.

Former Santa Monica City Manager Rick Cole. (David Kidd/Governing)
Former Santa Monica City Manager Rick Cole. (David Kidd/Governing)
David Kidd/Governing
Editor's Note: The Los Angeles Times reports that Santa Monica City Manager Rick Cole resigned on Friday, April 18, 2020, amid a fierce controversy over drastic budget cuts that drained the technology-rich Silicon Beach city's revenues. Officials project the city will need $72 million by the end of the fiscal year in June and another $154 million to overcome shortfalls the following year. At issue is the cost of Santa Monica's efforts to prevent the spread of the novel coronavirus. In a message to city staff, Cole wrote that the pandemic changed the city's prospects. "The challenges before us are starkly different: how to retool to deliver essential services; how to mitigate the disastrous economic impact on our residents and businesses; how to jumpstart a robust recovery; and how to cope with a dire fiscal emergency on top of the public health crisis." He gave a parting interview to The Planning Report:

You were quoted in the Los Angeles Times story on your departure as City Manager of Santa Monica that “If I have to be the scapegoat for this, if I have to be the teller of bad news, I am prepared to do that, because that’s my job under the charter. That’s what you hired me to do.” How will courageous leaders be able to navigate the coming crippling impacts to local government budgets?

Rick Cole: First, those crippling impacts are already here. Santa Monica will fall $72 million short of our revenue estimates this fiscal year, with no time to make it up. Our Chief Financial Officer’s best projection was a $154 million shortfall in the new fiscal year starting July 1. That’s a 38 percent hit. No amount of State or Federal aid can solve that gap -- and they have their own problems. While Santa Monica’s drop is greater because our sales, business and hotel revenues were stronger than most cities, all cites were already struggling with pension obligations. More than a quarter of LA County cities asked for tax increases in the March election. Many of them fell short. Long Beach won by just 16 votes out of 100,000 cast. This pandemic exponentially compounds the existing crisis in local government finance.

Second, this is a time when we actually need an expanded and more dynamic role for local government. For years, we’ve seen ourselves as the provider of a set of legacy services: police, fire, libraries, parks, land use planning etc. We forgot that all those services were actually invented to respond to the challenge of industrializing America a century ago. We continue to provide them without adequately re-examining their fit for the world we live in today. If we were starting from scratch today, we would design a government that looked more like the I-Phone than the rotary phone. But of course we can’t start from scratch – we have tens of thousands of dedicated people in public service trying to use rotary phone government to meet 21st Century needs.

So, what does that mean for courageous leaders? I think it means doing what courageous leaders did a century ago. In the face of the disorder, disease, illiteracy and land use chaos of America’s cities, the Progressive Era ushered in a period of historic reform, innovation and institutional change. It sure wasn’t easy then. It sure won’t be easy now. But I can’t believe we are any less far-sighted or courageous than the leaders of 100 years ago.

What does 21st Century government look like – besides an iPhone?

First, it is focused not around providing services, but around producing outcomes. Let’s take homelessness. The 20th Century response would be to create a Homelessness Department to battle homelessness, just like we created Fire Departments to battle fires. But here’s what we learned from history about fires. It’s not because firefighters got really good at responding to fires that today we have only a fraction of the fires we did 100 years ago. It’s because we got really good at preventing them --with rigorous building codes that require sprinklers and firewalls enforced with annual inspections. It also helps that people no longer smoke in bed. A couple of years ago, we had exactly 47 structure fires in Santa Monica. That’s less than one a week. That’s a spectacular public policy success. But it came from mobilizing intelligent, long-term preventative strategies while continuing to have top-notch response capability for the few fires that still break out. We need to apply that lesson to homelessness and get really smart about preventing it, not only responding to it.

Second, we can learn from the private sector without copying the private sector. People who say government can – or should – be run like a business are delusional. But market competition has produced some valuable lessons from the best companies – and those are the ones we should pay attention to. First, the supreme value of talent.

Our human resources model in Santa Monica is embedded in a charter adopted in 1947. Back then, the criteria for being a clerk typist was how fast you could type. A 21st Century government focuses more on attracting people with potential, not screening for credentials – and develops them to be nimble, creative, independent thinkers to collaborate with the community, non-profits and the private sector to solve problems.

We need to be smarter about using data to measure and improve our performance just as businesses use metrics to sharpen their competitive edge. Another best practice is the smart use of technology. Every day in Santa Monica, we encountered homeless people in the course of our duties. At dawn, a public works crew might encounter someone sleeping in the park. Later, a fire engine or police car might be summoned because that person is now sleeping on a sidewalk. Meanwhile, our homeless outreach team might make contact. Later, they might be sleeping in our library, which is against the rules. But none of those contacts was known or shared across our departments.

We partnered with a start-up out of the Digital Health Lab at USC to develop a phone app that could securely record those encounters with appropriate privacy constraints. It also links our data with the system social service agencies use to share information on their clients. So a police officer could text a social worker about a client that missed their last appointment. That’s what I mean by the comparison to the I-Phone.

Will this crisis hasten or delay a shift to 21st Century government?

Well, that’s in our hands. As Cassius told Brutus in another memorable crisis, if we don’t act, “the fault is not in our stars, but in ourselves.” As Rahm Emmanuel famously said, “never let a good crisis go to waste.” That is not an invitation to opportunism, that is a call to be equal to the challenge. We are hunkered down in our homes now. But when we emerge from them, we can’t hunker down in obsolete formulas of outmoded government bureaucracy. No one knows when or how this will end, but it will end. Our job in the public sector is to lay the foundation for a more equitable, more sustainable and more resilient life in the cities of the future. For the last five thousand years, despite periodic plagues and pestilences, cities have been the source of our civilization and extraordinary economic progress. I heard recently that it took 400 years for the population of Europe to recover from the Black Plague. Yet because of that catastrophic disruption of feudal stagnation, the plague opened the path to the Renaissance. I’m not saying the plague created the Renaissance, I’m saying visionaries seized the opportunity for change. They created vibrant new ways of living as the old ways were dying.

In just eight years, Los Angeles will welcome the world with the Olympics. We won’t be able to hide our problems away for two weeks. We will have to use this time to solve them. Let’s remember and act on the words of Lincoln: “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, we must think and act anew. We must disenthrall ourselves and then we shall save our country.”

This interview and the full text of Rick Cole's resignation letter is available at The Planning Report, April 19, 2020.
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