Monthly Archives: May 2021

A birds eye view of Bhadla Solar Park, Rajasthan. Source: Google Earth

This article was first published on theLights On newsletter and has been republished here with permission.

Despite what we often hear, the energy transition is not as simple as building solar panels and wind turbines everywhere. It requires an overhaul of some of the key systems underpinning our economy, minerals being one of them.

In a new report, the International Energy Agency (IEA) takes stock of which and how much mineral resources well need as we decarbonise the worlds energy architecture. I spoke with Jagabanta Ningthoujam, manager with RMI-India, who specialises on electricity, batteries and hydrogen. Formerly associated with the World Banks Climate Smart Mining Facility, he discusses the global race for mineral access through an Indian perspective.

Why does the energy transition need minerals? What minerals in particular?

Jagabanta Ningthoujam: Building anything requires materials. Energy infrastructure is not unique this was true for fossil fuel technologies and it is true for clean technologies. What is different though are the kind of metals and minerals required and the impact this transition will have.

Traditional fossil fuel technologies for electricity generation require mostly metals like iron and steel, copper, aluminum and chromium. While clean energy technologies like solar, wind and energy storage need these metals too, they also require many more technology specific metals and minerals. Depending on the sub-technology, solar PV needs metals and minerals like cadmium, indium, selenium, silicon, tellurium and tin. Making wind turbines requires dysprosium and neodymium for the turbine magnets. These are some of what we call rare-earth metals not because they are rare on Earth but because it is very unusual to find them in pure form. Rare-earth metals are also used in magnets for electric vehicle motors.

The second aspect is to do with the volume of materials required for clean energy transition. To generate the same GWh of electricity, solar or wind need a much higher installed capacity than comparable coal or gas plants, plainly because of the low utilisation rate of variable renewable energy. Solar and wind can only generate during certain times of the day wind doesnt blow all the time; the sun doesnt shine all the time. Coal and gas could be burnt all day. Thus, the material intensity of generating the same amount of energy is higher.

If you combine both aspects to the scale required for a successful clean energy transition, in line with the 1.5 degree Celsius target, you are looking at a tremendous demand for all sorts of metals and minerals, not just rare-earths.

India is undergoing a fast paced shift towards renewables, and other countries such as Pakistan and Bangladesh are also looking to decarbonise their energy systems. Does South Asia have enough minerals? And if not, how can they procure them?

When it comes to base metals like iron and steel, lead, aluminum (bauxite), cadmium, chromium, manganese and zinc, India does have ample resources, capability and history of mining. But Indias rare-earth deposits remain unexploited, we depend mostly on China for imports. Few would know that India actually has the fifth largest deposit of rare-earth in the world, higher than even Australia, the traditional mining nation. India and South Asia, however, lack other critical metals like nickel, cobalt, and lithium (crucial for batteries).

Where a country doesnt have the resources needed for the transition, it becomes inevitably dependent on international trade.

But there are ways to reduce risks. The obvious strategy, and a lesson from the oil and gas industry, is to do with asset and equity ownership in mines in producing countries. Another way is to become part of the metal refining and processing value chain. Many resource rich countries may not actually have the right industrial base to process the ores. Lastly, India must play its part in ensuring a transparent, rule-based global environment for international trade.

Also read: $500 Billion Awaits Clean Energy Sector if India Isnt Penny Wise, Pound Foolish

India doesnt currently have the capacity to procure all the minerals it needs to meet its renewable goals. It currently imports most from China because its manufacturing sector is not developed. But what happens when domestic manufacturing starts to ramp up?

If you are an importing nation, of course there are inevitable energy security and supply chain risks. The main difference between fossil fuel and clean energy is that the risk is not to the operation and operating cost of the asset (for example oil and gas which are fuel), but to the manufacturing, installation, ownership and capital cost of the asset and infrastructure (such as EVs, batteries and plant equipment). This means that the price impact of renewables on the value chain and the economy is less volatile than that of oil. But it is more concentrated, which means that the impact on individual industry is higher.

Among other mitigation strategies, efficiency and circular economy are key. If we reduce car ownership and move to public transportation, even with the EV transition, the impact on upstream metal will also be reduced. Similarly, recycling also ensures that many of these metals are recovered and reused, in essence creating an alternate domestic source of supply for some of these metals.

Lets talk about the race to secure supply chains across the world. Which countries have the upper hand here? And what are the challenges involved in this new order?

The usual suspects, namely China, the US and the EU, with strategic and industrial interest in the energy transition story, are all involved in the race to secure metals and minerals. This is not a surprise. And to everyones common knowledge and as highlighted in the IEA report too, China has the upper hand.

The challenge, of course, is to ensure that a monopolistic control over the metals and its value chain doesnt happen. This is particularly important for metals that are highly concentrated and in politically challenging geographies. Cobalt, for example, is highly concentrated in the Democratic Republic of Congo, a country not known for good governance. Countries must try to avoid the mistakes of the oil age.

Does the future of the energy transition lie squarely in more mining? Or will new technology use alternative materials?

Mining is inevitable. Alternate material only means alternate, doesnt mean less. For example, one could transition from say NMC batteries, which are cobalt intensive, to non-cobalt chemistries like LTO, or LFP. But that only drives up the demand for other metals and minerals, in place of cobalt. It really doesnt mean any less need for mining, just less need for cobalt mining.

The real focus must be placed on alternatives to increasing consumptions efficiency, optimisation, mode-shifts which can help tamper the growth in demand, and to a circular economy approach that ensures recyclability of the materials. Its also critical that where mining is happening it is climate-smart. I am borrowing this phrase from my previous short stint with the World Banks Climate-Smart Mining initiative. This includes, out of many things, making mining less carbon intensive and efficient, ensuring adequate environmental governance and regulatory framework, low-carbon supply chain management, de-risking investment in low carbon mining and more.

And what about recycling? Can some of these materials be recovered and is India equipped to do so?

Yes, recycling will need to form a big part of metal recovery, especially for countries like India. But it doesnt close the loop completely. Recycling can only recover a limited portion of a metal and mineral and that too at a cost. More metals and minerals will still be required.

India is very cognizant of the need for recycling. Government interest and institutional knowledge is clearly there and there are private entities embarking on becoming part of the recycling industry. Given the lack of certain metals, India also sees this more from a supply security play. There is this concept of urban-mining as opposed to recycling, whereby recycling is seen as an alternate resource.

Also read: The Idea That Green Technology Can Help Save the Environment Is Dangerous

What are the opportunities for India in this changing scenario? Or would you say the country is in a weak spot and is most likely bound to stay at the bottom of this race?

Of course, if you dont have resources within your borders you will have to depend on international trade; thats inevitable. That always carries energy security and price risks. But that doesnt mean that buyers do not dictate terms. Given the scale of its energy and transportation sector, India will always remain a major buyer of resources whether it is manufacturing the products or whether its just using them. Indian government and Indian firms need to leverage that scale.

Second, lessons from our own journey with oil refining we can still be part of a global value chain even where we dont have the resource. Third, we should not forget that we have resources and strategic ones too, like rare earths which can definitely help us become part of the value chain and strike better negotiating terms in the global trade. The challenge of course is to make sure we enable our mining sector to get those resources off the ground economically.

Lights Onis a newsletter that brings you the key stories and exclusive intel on energy and climate change in South Asia.Lou Del Bellois a climate and energy journalist currently living in New Delhi. She has previously lived in, and reported from Italy, the UK, and Kenya. She tweets at @loudelbello.

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What Impact Will India's 'Clean Energy' Shift Have on Its Minerals Economy? - The Wire Science

Newswise Texas Tech University has long been a leader in wind energy. Thanks to a newly expanded partnership, the university will soon play a larger role in the future of energy overall.

American Resources Corporation, a next-generation and socially responsible supplier of raw materials to the new infrastructure and electrification marketplace, today (May 11) announced it has secured a project manager to oversee the construction and implementation of its 2kW mobile electrolytic cell rare earth element (REE) processing plant.

The move represents another step forward in the commercialization of its acquired technology and patents from Ohio University and its partnership with Texas Tech, which includes sponsored research programs alongside Gerardine Gerri Botte, an international leader in electrocatalysis and electrochemical engineering.

The goal is to take a transformational technology that enables the extraction of high-value, critical materials, such as rare earth elements, from coal and coal byproducts, said Botte, a professor and Whitacre Department Chair in the Department of Chemical Engineering within the Edward E. Whitacre Jr. College of Engineering. It is an opportunity to translate university research into the real world, supporting the U.S. economy and sustainability of critical resources for our nation.

American Resources Corporation is a partner committed to investing resources to advance the U.S. infrastructure by supporting the next generation of advanced materials. They are supporting research and technology commercialization.

To bolster the companys technology and operating wherewithal, American Resources also entered into a sponsored research program with Texas Tech regarding the implementation and cell development of its electrolysis facility. The sponsored research program is focused on not only building an electrolysis facility, but also maximizing the scalability and efficiency of the REE electrolysis processing facility. The sponsored research program is currently focused on cell development and expanding the size of the electrolytic cells to approximately one cubic meter, which will enable operating scalability and functionality of feedstocks.

As part of its expansion, American Resources has secured office space at Texas Techs Innovation Hub at Research Park, a facility that nurtures smart ideas and entrepreneurs to create a social or commercial value resulting in impact. The project manager, whose identity has not yet been announced, will work directly with Botte at the Innovation Hub and in conjunction with the companys sponsored research program at Texas Tech.

We are excited to have secured a great project manager to oversee the buildout and implementation of our mobile REE electrolysis processing facility and advance our sponsored research program with Texas Tech University, said Mark Jensen, CEO of American Resources Corporation. Our project manager has a lot of familiarity and experience working with Dr. Botte and her team. Over the last five years, he has had very relevant experience in Colombia working on two small chemical engineering scale facilities and one commercial facility.

Additionally, procuring office space at Texas Techs Innovation Hub was obviously important for us to create a strong workflow as we remain committed to being efficient and effective in driving this groundbreaking technology, and its application with REEs, to commercialization. We are excited to complete this stage and now turn to further execution of building our mobile facility to begin full-scale expansion and development of fly ash sites in the U.S.

The facility is expected to be built over the next six months with the goal of deploying into the field in the fourth quarter of 2021.

About American Resources Corporation

American Resources Corporation is a next-generation, environmentally and socially responsible supplier of high-quality raw materials to the new infrastructure market. The company is focused on the extraction and processing of metallurgical carbon, an essential ingredient used in steelmaking; critical and rare earth minerals for the electrification market; and reprocessed metal to be recycled. American Resources has a growing portfolio of operations located in the Central Appalachian basin of eastern Kentucky and southern West Virginia where premium quality metallurgical carbon and rare earth mineral deposits are concentrated.

American Resources has established a nimble, low-cost business model centered on growth, which provides a significant opportunity to scale its portfolio of assets to meet the growing global infrastructure and electrification markets while also continuing to acquire operations and significantly reduce their legacy industry risks. Its streamlined and efficient operations are able to maximize margins while reducing costs. For more information visit americanresourcescorp.com or connect with the company on Facebook, Twitter and LinkedIn.

About the Innovation Hub at Research Park

This 40,000-square-foot facility is designed to be a resource for the faculty and students of both Texas Tech and the Texas Tech University Health Sciences Center as well as community members interested in launching new ventures. Texas Tech is a national research university, and the Innovation Hub at Research Park is critical to building the knowledge-based economy of West Texas through the development of innovators and entrepreneurs who solve societys problems and develop innovations to make impact.

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Expanded Partnership Helps Secure Texas Techs Place in Energy Industrys Future - Newswise

By David Duval

Once an almost obscure commodity, demand for natural graphite the single largest component in lithium-ion batteries is feeling the impact of the rapidly accelerating expansion of the electric vehicle and renewable energy sectors.

Nonetheless, broader demand still remains heavily aligned with the steel industry where graphite is used in heat resistant fire brick in blast furnaces, as a liner for ladles and crucibles, and as an agent to increase the carbon content of steel.

Graphite is one of only two naturally occurring forms of pure carbon, the other being diamonds which are a three dimensional crystal structure of carbon atoms whereas graphite is a two dimensional or flake structure. However, both are strong, durable and resistant to heat and corrosion.

Both occur naturally and are produced in the earth via geothermal processes. They are normally solids, highly stable, and can be made artificially.

Over the near term, the major factors driving the growth in the graphite market are burgeoning demand from the lithium-ion (Li-ion) battery industry and the rise in steel production in Asia and the Middle East.

The World Bank forecasts that low-carbon energy technologies, primarily lithium-ion batteries, will require 4.5 million tonnes of graphite per year by 2050, a 500% increase over 2018 levels and a 318% increase over the total graphite produced in 2019. Alongside demand from energy storage applications, the battery industry is expected to become the largest sector of demand for the graphite supply chain.

China is the largest player globally in terms of consumption and production capacity for graphite. Of note, electrodes are made of synthetic graphite.

Demand for lithium-ion batteries in China is expected to grow rapidly owing to manufacturing growth in the electric vehicle sector and for on-grid and off-grid energy storage applications.

As one might expect, the primary driver for graphite demand today has been economic growth within China in addition to emerging economies including India. Prices rose from about US$700/tonne for large flake graphite to almost US$3,000/tonne in 2012, highlighting global dependence on China which accounts for 70-80% of world production

Graphite prices, which are a function of two factors, flake size and purity, pulled back following the COVID-19-based economic slowdown but appear set to rise again following the global economic recovery.

New applications such as lithium-ion batteries, fuel cells, and nuclear power have the potential to create significant incremental demand growth for graphite in the future. For example, it takes 20 to 30 times more graphite than lithium to make lithium-ion batteries; and demand is growing rapidly in consumer electronics, power tools, and electric vehicles. Growth will continue to rise with the increased use of hybrid and fully electric vehicles. In fact, each hybrid electric car uses about 22 pounds of graphite, while a fully electric auto uses about 110 pounds.

Market confidence has been boosted this year by continued demand recovery for graphite which has served to increase prices and reduce market uncertainty. The re-establishment of supply chains and a large number of government stimulus packages has also fueled market demand for EVs and higher price expectations.

Demand recovery has been underpinned by growth in the Chinese EV/battery sector but also by higher-than-expected crude steel production and refractory demand since the second half of last year. Many mine developers have started to progress projects downstream, with a particular focus on battery grades to take advantage of rising demand. In the meantime, prices for graphite and other refractory raw materials have risen as a result of Chinese environmental closures and logistical disruptions post-COVID-19, according to Roskill, a materials supply intelligence service consultancy.

The consultancy says that while flake prices showed initial signs of stabilizing in early March, suggesting an easing of some of the supply and logistical disruptions, market tightness may remain due to lags in supply ramp-up. Any battery-grade producers still off-line are now rushing to bring back production to meet the rapid demand increases predicted for 2021.

Demand for graphite has also been growing at over 20% per year due to the proliferation of cell phones, cameras, lap tops, power tools and other hand-held devices.Graphite is the anode material in the battery and there are no substitutes at the present time. More recently, the growth in hybrid and all electric vehicles and grid storage have contributed to continued strong demand growth.

Lithium-ion battery demand already consumes 25% of graphite production from very little a few years ago and this market segment is still in its infancy. It is estimated that new manufacturing capacity will require annual flake graphite production to double over the next three years.

Lomiko Metals Inc. [LMR-TSXV; LMRMF-OTCQX; DH8B-FSE] is a Canadian exploration company that is engaged in the acquisition and development of resource properties containing minerals that will drive the new green economy. Its key assets include a 100% interest in the La Loutre graphite property in Quebec and an option to acquire 70% interest in the Bourier lithium Project from Critical Elements.

In addition, Lomiko Metals owns a 20% interest in Promethieus Technologies Plc, a company that is focused on future tech investing and has applied for a listing on the Dutch Caribbean Securities Exchange Europe. Promethieus owns 80% of Graphene ESD Corp, which was established in the United States to commercialize low-cost graphene-based supercapacitor technology developed by New York-based Stony Brook University. Supercapacitors are promising energy storage devices that are used in transportation, industrial and grid energy storage. Promethieus is also an 18.5% holder of SHD Smart Home Devices Ltd. a developer of energy-saving products for homes.

Lomiko aims to capitalize on growing demand for electric vehicles, a key driver of investor interest in Lithium and Graphite, two of the major components of a lithium-ion battery.

It hopes to achieve that aim by developing the La Loutre Property, which consists of one large block of 42 mineral claims covering 2,509 hectares. The property is located approximately 53 kilometres east of Imerys Graphite & Carbons graphite mine near Lac de Iles in southern Quebec. The Imerys mine is North Americas only operating graphite mine.

In February, 2016, Lomiko announced an indicated resource for the La Loutre property of 18.4 million tonnes of 3.19% and an inferred resource of 16.7 million tonnes at 3.75% Flake Graphite. The Resource is calculated on the Graphene-Battery zone only and does not include recent high-grade intercepts of 28.5 metres of 16.5% graphitic carbon and 21.5 metres of 11.53% graphitic carbon reported in January, 2016 and 9% over 90.75 metres reported in September, 2015 from the Electric Vehicle zone.

Based on the results of the 2016 mineral resource estimate, Lomiko was advised to advance the project to a preliminary economic assessment for the property. It is currently working towards a pre-economic assessment after being advised that some of the inferred resources on the Graphene-Battery Zone could be upgraded to the Indicated category through infill drilling.

One of Lomikos key goals is to become a supplier of value-added spherical graphite and graphite anodes to the electric vehicle market.

We are at the beginning of an electric vehicle (EV) revolution that will launch a battery materials bull market, said Lomiko CEO Paul Gill. More than 100 lithium-ion mega-factories will produce lithium-ion batteries worldwide, he said. Lomiko sees an opportunity to supply graphite under a Canada-U.S. agreement on critical metals, he said.

Readers should note that the price of 95% C (purity), 15-micron spherical graphite is US$2,700 to US$2,800 per tonne, far above the price of other forms of graphite. The World Bank has predicted that spherical graphite will increase by 500% by 2040 due to lithium-ion battery mega factories which will be built to supply electric vehicles.

Graphite demand is expected to increase exponentially for natural graphite material as more is used in the production of spherical graphite for the graphite anodes of electric vehicle lithium batteries.

Lomiko has said it expects to benefit from U.S. President Joe Bidens decision to invest $400 billion over the next 10 years as one part of a broad mobilization of public investment in clean energy and innovation. Those funds are expected to accelerate the deployment of clean technology throughout the U.S. with a target of reducing the carbon footprint of the U.S. building stock by 50% by 2035.

The newly-elected Biden administration will work with governors and mayors to support the deployment of more than 500,000 new public charging outlets by the end of 2030.

Meanwhile, Lomiko recently raised just over $4.7 million from a private placements. Net proceeds are earmarked for general working capital.

On May 10, 2021, Lomiko shares were trading at 12 cents in a 52-week range of 28 cents and $0.02, leaving the company with a market cap of $20.1 million, based on 210 million shares outstanding.

Green Battery Minerals Ltd.s [GEM-TSXV; GBMIF-OTCQB; BK2P-FSE; A2QENP-WKN] mission and strategy is to become one of North Americas largest producers of clean, environmentally-friendly, high-quality anode materials to be used in batteries for electric vehicles and renewable energy storage.

The company recently changed its name from Goldcore Resources to better reflect that strategic focus.

Green Batterys flagship Berkwood Project is located in northeastern Quebec, about 285 kilometres north of the main service centre of Baie-Comeau and about 660 kilometres from Montreal.

The electrification of the world is occurring, and the Quebec government is behind the process and wants to ensure Quebec is a global leader in the development of the strategic commodity supply chain, said Green Battery CEO Tom Yingling.

Berkwood is an advanced project in which the company has already invested over $6 million, proving out an indicated resource of 1.76 million tonnes of 17% graphitic carbon (Cgr) or 299,200 tonnes Cgr. On top of that is an inferred resource of 1.53 million tonnes of 16.4% Cgr or 250,200 tonnes of Cgr.

This pit constrained resource was announced on August, 19, 2019 and is based on 6,232 metres of drilling, work that was completed in 2017 and 2018.

It is worth noting that on an adjacent property, Mason Graphite Inc. [LLG-TSXV; MGPHF-OTCQX] has outlined a graphite deposit that could support annual concentrate production of 51,900 tonnes, according to a feasibility study, dated December, 2018.

Graphite is not a homogenous commodity. It occurs in three forms, including flake, amorphous and vein/lump. Flake graphite commands the highest prices and has the widest range of end uses, including battery production.

Graphite is an essential but often unrecognized material for modern life, with broad industrial applications due to its unique properties. The include high electrical and thermal conductivity, low frictionality and light weight, properties that make it ideal for industrial applications.

Traditional uses of graphite include steelmaking, electrodes in electric arc furnaces, brake linings, modern pebble bed nuclear reactors and dry lubricants.

Green Battery is aiming to capitalize on an escalation in the use of graphite in clean energies such as lithium ion-batteries and fuel cells, which power hybrid and electric vehicles.

The Berkwood Project is characterized by outcropping graphite that is expected to offer shallow development and ready remediation potential, in line with the companys values.

The existing resource material has shown that it can be readily purified to 99.95%, using a clean alkaline process and is expandable for industrial uses.

Green Battery said its first published resource is situated within a small portion of the Zone 1 anomaly, leaving plenty of room to explore. The company is pursuing a hub and spoke model where a number of near-surface, high-grade graphite showings are intended to be developed into satellite resources, and transported to a central processing facility.

Only 20% of Zone 1 has been drilled and there are 11 more zones on the property, all with surface graphite, the company has said.

Green Battery said the project benefits from excellent local infrastructure and proximity (60 kilometres) from a major hydroelectric generation facility. Berkwood is situated 300 kilometres from three deep sea ports on the St. Lawrence River, Sept Iles, Port Cartier and Baie- Comeau. It is thought that Baie-Comeau could be source of labour for the project.

The company recently announced that several tonnes of graphitic rock were shipped out to produce 1,000 kilograms of graphite concentrate. This is material that was collected over the past four years from the companys drill program as well as from surface. It will be used to produce battery anode material for the production of test batteries.

The concentrate will be sent to ProGraphite, a German company which has been contracted to build test batteries to prove that the Berkwood graphite can be used to make batteries.

Concentrates sent to ProGraphite will be purified to 99.95% and used to make spherical graphite and further to coat the graphite for application in the anode components of test batteries. Green Battery has said the size distribution of graphite in the concentrate shows a coarse flake size that is above average.

Spheroidization of natural graphite is important in a battery as it increases the availability of conductive surface area that improves battery efficiency owing to increased graphite packing intensity in the anode, while coating of the spherical graphite slows oxidation of the graphite to extend the number of recharging cycles and the life of the battery.

On May 10, 2021, Green Battery shares were trading at 22 cents in a 52-week range of 72 cents and $0.06. There are currently 48.1 million shares outstanding.

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Graphite demand to skyrocket with increased consumption from auto industry Resource World Magazine - Resource World Magazine

By May 11, Swiss residents had already consumed their theoretical annual quota of renewable natural resources.

Keystone-SDA/dos

This is according to the Global Footprint Network, an ecological think-tank based in the US, which calculates the dates at which national populations have consumed more resources than nature can regenerate in a single year.

The first country this year to overshoot the mark was Qatar, on February 9; Sao Tome and Principe is expected to reach its limit on December 27. By reaching its limit on May 11, Switzerland is within a week of Germany, France, Italy, Japan, and New Zealand reaching their overshoot day.

Last year, Switzerlands day fell a bit earlier, on May 8. The Global Footprint Network said it was still too difficult to say whether or how much the Covid-19 pandemic, and related restrictions, played a part in this years results.

According to the study methodology, theEcological Footprint is derived by tracking howmuch biologically productive area it takes to provide for all the competing demands of people. A countrys imports and exports are also factored into the final calculation.

The Network has not said when the global average overshoot day is set to fall in 2021. Last year, it was on August 22. The date has been creeping steadily backwards: in 1970 it fell in December but by 2000 it had regressed to September.

On June 13, Swiss voters will have their say on a new CO2 law ratified by parliament last year, which foresees various new rules on sustainability, including levies on fuel, taxes on airline tickets, and stricter standards for buildings.

The law, which is a key component of the countrys larger long-term climate strategy, was challenged to a referendum by an interparty committee representing economic sectors, including the petrol industry, transport and aviation, and construction.

Almost all political parties, as well as other segments of the economy, are in favour of the CO2 law, while initial polls have so far indicated broad public support.

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Switzerland has overshot its 2021 resource limit, study says - swissinfo.ch

May 10, 2021 2:24 PM by Lane Dilg

On Monday, May 10, 2021, the City of Santa Monica released its Proposed FY 2021-23 Biennial Budget to the Santa Monica community and City Council. The City Council will weigh in on the Proposed Budget during study sessions on May 25 and 26 and will adopt the Citys final budget on June 22. Here is Interim City Manager Lane Dilg's letter introducing the Proposed FY 2021-23 Biennial Budget. Here's the full budget >

Honorable Mayor, Mayor Pro Tem, and Members of the City Council:

It is my privilege to present the Fiscal Year (FY) 2021-23 Biennial Budget.

For more than three decades, prudent fiscal stewardship has provided the foundation for the Citys first-class municipal services and renowned innovation for the public good. In recent years, structural economic changes accelerated by a modern global pandemic have dramatically reduced City revenues. In response, the City took swift action in the Summer of 2020 to safeguard and preserve the Citys long-term financial health.

Today, the FY 2021-23 Biennial Budget reflects no deficit either now or in the associated five-year forecast. The City retains its rare AAA bond rating from all three national credit ratings agencies; its broad community partnerships; its dedicated and talented municipal workforce; and, of course, its envy-invoking location on the Pacific. Such key assets secure Santa Monicas full recovery and bright future ahead.

The FY 2021-23 Biennial Budget is not the budget of prior abundant years. The FY 2021-22 General Fund budget is $349.5 million; by way of comparison, the pre-pandemic FY 2018-19 General Fund adopted budget was $440.2 million. This decrease reflects not the strength of our local economy but the very nature of it. During the pandemic, we have seen changes to the way we live and work. As people have engaged in less retail shopping, less business travel, and less office work in key entertainment and technology sectors, City revenue streams across tourism occupancy tax, sales tax, and parking have been diminished. Our revenue streams will replenish. Santa Monica remains a highly-coveted location renowned for its quality of life, beloved local businesses, and vibrant public spaces. But, for this two-year budget cycle, we remain in our recovery stage: We exit the COVID-19 public health emergency not into the global economy of 2019 but into a new future we craft together.

Within its reduced footprint, the FY 2021-23 Biennial Budget supports a first-class local government capable of meeting essential community needs and providing a solid foundation for regrowth. During the two-year budget period, a disconnect will remain between City resources -- which have been reduced as a result of the pandemic -- and community expectations -- which have not. This gap between revenues and desired expenditures will require united leadership and communication to avert ongoing frustration.

Over the past year, City operations have been stabilized and streamlined to provide the core services on which our community relies clean and safe drinking water; public safety; accessible public transit; childcare and library services; recreation, arts, and cultural programming; economic development and community planning; and, safe, clean and enjoyable public spaces. Eleven prior operating departments have been consolidated into ten; the City Managers Office has been pared down to support organizational effectiveness and interdepartmental coordination; decades-old internal processes have been redesigned; and digital customer service tools including a new website and 311 system have been brought online to enhance responsiveness and reduce redundancies.

Ambition well beyond these core services remains. In 2020, the City was recognized by the Urban Land Institute for innovation in public spaces, by the International Code Council for National Leadership in Sustainability, and by the Center for Digital Government for digital service delivery. But just as we have been forced to improve our internal operations, we must also change our aspirations for the way we partner and collaborate with others. The federal government is now engaged in stimulus efforts of staggering size and scope. While the American Rescue Plan Act provided relatively minimal funds directly to our City government, funding opportunities to support our community recovery abound. City priorities must become community priorities; and we must work hand-in-hand with federal, state, local, and private partners to envision and achieve shared community results.

The FY 2021-23 budget reflects new revenue sources and partnership opportunities. Santa Monica voters recently adopted Measure SM a revenue measure that protects essential services by increasing the one-time real estate transfer tax on sales of property (other than in connection with affordable housing projects) of $5 million or more. The City has also established the SaMo Small Business Recovery Grant Program to support our smallest local businesses, and the Citys new We Are Santa Monica Fund offers a way for neighbors to support neighbors through efforts ranging from the newly established Virginia Avenue Park food pantry to racial equity initiatives across the community. We have only begun to realize the value that public-private partnerships can hold, if always carefully designed to maximize not financial value but public good. Projects currently underway include exploration of revenue-producing digital wayfinding kiosks and a partnership with the Los Angeles Cleantech Incubator to pilot the nations first Zero-Emissions Delivery Zone to support our local restaurants.

Finally, the FY 2021-23 budget recognizes our interconnectedness as a community. As one of the most desirable residential communities in the nation, we have long sought to model new ways to live sustainably and care for one another. As we recover from the pandemic, we seek rebirth as a more equitable, more inclusive community, with an economic recovery that lives up to our values by keeping our most vulnerable residents in their homes, supporting development of affordable housing to invite others to join us, celebrating our local artists, preserving our small businesses, and bolstering commercial districts that speak with authenticity from and of the passions of our neighborhoods. These goals, while ambitious, remain achievable in Santa Monica.

Fiscal Context

The overall budget for the City of Santa Monica is $705.5 million in FY 2021-22 and $597.7 million in FY 2022-23. This budget reflects the operating and capital activities of 31 funds across 14 departments and approximately 1,923 permanent and temporary full-time equivalent positions.

The largest component of the budget is the General Fund. The General Fund budget is $349.5 million in FY 2021-22 and $375.3 million in FY 2022-23.

The Citywide budget also includes a number of enterprise and special revenue funds that operate with sufficient revenues to sustain necessary operating and capital needs, and others that have a structural deficit where ongoing revenues are not sufficient to cover ongoing expenditures. Among the larger funds contributing to operations, the Resource Recovery and Recycling (RRR), Water, Wastewater, Big Blue Bus (BBB), Airport and Cemetery funds have sufficient revenue to cover operational and capital needs during the biennial budget period.

The Pier and Beach Recreation Funds are projected to require subsidies and advances during the biennial budget period, totaling approximately $6.0 million.

The Citys two-year budget approach means that FY 2021-22 represents the exception-based year for our capital improvement program (CIP) biennial budget. The CIP budget for FY 2021-22 is $163.7 million, with $9.1 million representing the General Fund portion. In the face of the pandemics impact on capital project and construction programs, available capital funds were maximized to protect the Citys existing capital investments and minimize future maintenance and replacement cost. As a result, only a limited number of projects were approved in the FY 2020-22 Biennial CIP Budget cycle. These include projects to address critical infrastructure needs; projects that could not be deferred without compromising essential operations or public health and safety; and revenue-generating projects. From repaving streets to renewing alleys and sidewalks to maintaining parking structures and lots to purchasing necessary equipment to modernizing streetlights and replacing aging water and sewer mains, these capital projects prioritize a clean and safe Santa Monica. In addition, the Citys Water Fund will use bond financing to advance capital improvement projects to provide long-term cost benefits for ratepayers by achieving water self-sufficiency and a more sustainable, drought-resilient water supply.

Fiscal Sustainability

To understand the Citys current fiscal status, it is important to recall the path by which we arrived. In its FY 2017-2019 Biennial Budget, the City began fiscal planning for a transition on the horizon. As described at the time:

The economic, demographic and political landscape is changing in our region, in our state, in our nation and in the world. As Moodys also noted, our long-term pension liability stands at $387 million and growing. We cannot afford to be complacent. Our reliable economic engine needs an overhaul and rising costs (beyond our direct control) force us to re-evaluate how we work, how we deliver services and what matters most to our citizens. Santa Monicas exceptionally strong economy and tax base is nearing a point of diminishing returns. Despite our diverse tax revenue base, all our major sources of revenue are seeing either slowing growth or (in the case of utility taxes) an actual decline. This comes at a time when pressure on expenditures is accelerating. Workers compensation and medical benefits costs continue to outpace our revenue growth, and pension costs are scheduled to begin a dramatic rise in the second year of our two-year budget cycle.

Between 2017 and 2020, the City began designing and implementing a multi-year plan to address this reality.

In early 2020, the COVID-19 pandemic arrived. Amidst global economic disruption associated with the pandemic, local governments across the United States suffered revenue losses, but cities with strong tourism and hospitality sectors, like Santa Monica, experienced the most dramatic revenue decreases. The pandemic halted global tourism as well as non-essential air travel; it required people around the world to stay largely at home. This impacted virtually all of the Citys revenue streams and drastically accelerated projected trends away from in-person retail and toward online shopping. As a result of the pandemic, the City anticipated revenue shortfalls totaling $224 million over three fiscal years. The City further correctly predicted that, given its low residential population, the federal government would not provide meaningful aid in 2020 to cover this loss.

In the Summer of 2020, the City confronted this crisis by accessing $117 million in one-time funds and adopting a FY 2020-21 budget that reflected a 50% decrease in capital program funding and a 20% decrease in annual operating expenditures, as well as 299 fewer full-time equivalent (FTE) permanent positions and 122 fewer FTE as-needed positions than the FY 2019-20 budget.

Strong reserves allowed the use of contingency and economic uncertainty funds while the City retained a stable reserve level of 12.5% of ongoing expenditures in the event of a new emergency. Three long-term strategies for fiscal health were maintained but temporarily suspended or deferred to allow for continued provision of essential services. These included the one-year (FY 2020-21) suspension of one quarter of the Citys Transaction and Use Tax revenue to the Affordable Housing Trust Fund; the extension, in accordance with emergency provisions, of the Citys accelerated paydown of its unfunded pension liability from thirteen years to fifteen years; and the suspension of prefunding of the Citys Other Post Employment Benefits for two years.

These fiscal measures enabled the City to maintain essential and emergency operations during the pandemic while preserving the Citys financial resilience to the greatest extent possible. On March 11, 2021, the American Rescue Plan Act (ARP) was signed into law. This federal aid package provides $1.9 trillion to households, businesses, artists and nonprofits, schools, and government entities across the country. While local government stabilization funds were expressly included to remedy [the] mismatch between rising costs and falling revenues experienced during COVID, the allocation formula used means that Santa Monica receives $29.3 million in stabilization aid welcome funds, but in an amount that represents less than 15% of our estimated revenues lost and approximately 4% of our annual budget.

As the Citys recovery continues, care will need to be taken to continue to replenish reserves in order to ensure continued ability to withstand a future serious economic or physical disaster.

Community Priorities

On March 13, 2021, the City Council held a special retreat session to set community priorities for the Fiscal Year 2021-23 Biennial Budget process. The priorities set forth below reflect a desire of the majority of the Council to focus community attention and discretionary City resources in three specific areas.

Addressing Homelessness

Prevent housed Santa Monicans from becoming homeless; address the behavioral health needs of vulnerable individuals; and advocate for regional capacity to address homelessness.

Addressing homelessness in California today is both a moral imperative and a necessary aspect of the States overall economic recovery. Homelessness in Los Angeles County is widely recognized as a crisis demanding immediate attention, and the Santa Monica City community has continually expressed addressing homelessness as among its most urgent concerns. The Citys efforts to address homelessness span not only virtually every City Department but also our community partners ranging from service providers, grant recipients, affordable housing providers, local business leaders, and regional agencies at every level of government.

Notable annual expenditures in the Fiscal Year 2021-23 Biennial Budget that support direct services to address homelessness include but are not limited to:

These efforts supplement a previously-funded partnership with the Los Angeles County Department of Mental Health to pilot mobile mental health van services to offer direct, immediate, professional mental health intervention to those experiencing mental health crisis on our streets, as well as previously allocated one-time funds to advance non-congregate shelter and behavioral health priorities articulated by Council.

As the Council has repeatedly recognized, the homelessness crisis in our region requires urgent efforts to preserve and produce affordable housing. The FY 2021-23 Biennial Budget reflects Santa Monicas ongoing commitment to keep economically vulnerable Santa Monicans in their homes through allocations including ongoing staffing in the City Attorneys Office dedicated to ensuring that landlords and owners comply with the City's tenant protection, tenant harassment, and affordable housing ordinances, as well as the terms of development agreements and affordable housing deed restrictions; $240,000 over two years to support a right-to-counsel program to even the playing field for tenants who face eviction proceedings brought by landlords who are almost always represented by experienced counsel; $2 million in Housing Trust Fund funds to continue the Citys Preserving Our Diversity basic income program for low-income seniors in rent-controlled apartments; and one-time economic recovery funds to provide emergency assistance to economically vulnerable Santa Monicans.

The FY 2021-23 Biennial Budget also supports the ambitious direction articulated by the Council on March 30, 2021, that the City should meet its State-imposed obligation to plan for 6,168 new affordable housing units during the 2021-2029 Housing Element cycle by prioritizing 100% affordable housing projects on City-owned land while also pursuing 100% affordable housing overlay zoning throughout the City, with the exception of environmental justice and previously redlined areas. Of the Citys $29.3 million in American Rescue Plan stabilization funding, $6.3 million has been allocated in accordance with Council direction to enable the General Fund to transfer the annual allocation of Measure GSH funds in Fiscal Years 2021-23 to support affordable housing. These funds supplement affordable housing grants successfully received of over $5.5 million and an increase in the Citys federal lobbying contract to $45,000 per year to support continued pursuit of federal funds in this and other priority areas.

Clean and Safe Santa Monica

Create an atmosphere marked by clean and safe public spaces and neighborhoods.

As City resources, personnel, and services have been reduced to safeguard fiscal stability, maintaining our premier public spaces is a priority. In addressing this priority, we recognize Santa Monicas unique status as both a seaside town of 90,000 residents and a municipal government in Los Angeles County serving hundreds of thousands of visitors and with daily responsibility for maintaining globally recognized public spaces such as the Santa Monica Beach and Santa Monica Pier.

The FY 2021-23 Biennial Budget maintains prior support across core City departments that serve the Councils clean and safe priority (though departmental budgets reflect adjustments based on enhanced accuracy of the Citys personnel-related budget calculations). In addition to these foundational services, the Fiscal Year 2021-23 Biennial Budget provides targeted enhancements to achieve a clean and safe Santa Monica enjoyable for all. These include annual expenditures of:

Through these strategic allocations, the City will continue to care for and safeguard its prized public spaces for residents and visitors alike.

Equitable and Inclusive Economic Recovery

Cultivate equitable and inclusive economic opportunity and recovery, including access for all community members to educational, employment, and economic resources and opportunities, and create a community where differences in life outcomes cannot be predicted by race, class, gender, disability or other identities.

The Fiscal Year 2021-23 Biennial Budget period will be marked by civic and economic recovery from the pandemic. In this recovery, it is more important than ever that we support a thriving, more equitable and inclusive future. The Fiscal Year 2021-23 Biennial Budget includes the building blocks of our economic recovery for all. These include but are not limited to:

These funds support coordinated, collaborative work across multiple City departments and with our community partners to set a path toward economic recovery for all.

Finally, as our community moves into its recovery period, the Fiscal Year 2021-23 Biennial Budget restores a matching grant funding program for neighborhood organizations as they partner with the City to enhance community participation and support shared outcomes.

Looking Forward

As a community, we continually shape and reshape our collective future. The Fiscal Year 2021-23 Biennial Budget provides a solid fiscal foundation for a world-class local government. Our full recovery relies, however, not only on prudent financial planning but also on a culture of civic engagement that weaves together the efforts of all those who comprise our City government, who act as devoted community stakeholders, and who live and work in Santa Monica, so that we may together achieve shared community outcomes. With gratitude and respect for those who brought us through the most challenging days of the pandemic, we are today ready to step forward into our community recovery.

Respectfully submitted,

Lane DilgInterim City Manager

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Introducing the Proposed FY 2021-23 Biennial Budget - santamonica.gov - santamonica.gov