City Council
Report
City Council Meeting: October 11, 2022
Agenda Item: 5.A
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Approval of Downtown Santa Monica, Inc. FY2022-23 Budget and Work Plan Recommended Action
Staff recommends that the City Council:
1. Approve the Downtown Santa Monica, Inc. Fiscal Year 2022-23 Budget and Work Plan;
2. Authorize the City Manager to execute the Eleventh Modification of the Maintenance Services Agreement to extend the term of the Maintenance Services Agreement (Contract No. 9626) for an additional one-year period;
3. Authorize the City Manager to negotiate and execute a Memorandum of Understanding between the City and Downtown Santa Monica, Inc. for Fourth Court Alley improvements, in an amount not to exceed $110,000, over a threeyear term;
4. Authorize the City Manager to negotiate and execute an amended License Agreement to allow Downtown Santa Monica, Inc. (DTSM) to install and operate a temporary ice-skating rink and ancillary activities consistent with DTSM’s roles and responsibilities under the Services Agreement with four additional, one-year renewal options with an expiration date of 2026; and
5. Authorize the City Manager to negotiate and extend the Ocean Avenue Pilot License Agreement to allow DTSM to provide pedestrian-oriented services and amenities within a portion of the approximately 4,000 square feet of pedestrian right-of-way along the eastern side of Ocean Avenue, between Colorado Avenue and the northwest entrance of Tongva Park, for an initial term of one year with four, one-year renewal options.
Summary
Santa Monica's downtown area is a significant component to the City's commercial, cultural and tourism economy. Downtown Santa Monica, Inc., (“DTSM”) is a non-profit corporation organized under state law that currently administers the downtown Santa 2 of 10
Monica Property-Based Assessment District (“PBAD") that is comprised of commercial properties and businesses located in the downtown Santa Monica area, including the Third Street Promenade. The City contracts with DTSM through a Maintenance Services Agreement for DTSM to manage and provide a variety of programs and services related to the operation of the downtown district. The Maintenance Services Agreement may be extended annually for additional one-year periods for the duration of the PBAD if, in addition to other conditions described below, DTSM submits a budget and work plan that summarizes the activities, projects, and programs that they intend to carry out during the upcoming Fiscal Year that is approved by the City Council.
The Downtown Santa Monica PBAD continues to be the business district most heavily impacted by the COVID-19 pandemic, which curtailed tourism and accelerated global trends in the retail industry as more shoppers opted to shop online instead of visiting brick-and-mortar stores. The City and DTSM have a long-standing collaborative relationship and are currently working together to support the downtown district’s overall economic recovery, including addressing concerns of security, maintenance and homelessness. DTSM and the City continue to work together to identify the best strategies to address these issues, including adjusting services to prioritize “clean and safe” efforts throughout the downtown district. The current Maintenance Services Agreement expires on December 1, 2022. Therefore, staff recommends an extension of the current agreement and adoption of the proposed work plan and budget in order to authorize DTSM’s continued operations and the City’s quarterly revenue disbursement for services. DTSM is currently in the midst of significant changes in leadership. A new CEO started in September 2022, and a number of new Board members are currently being onboarded. Should DTSM’s Board adopt revisions to its budget, work plan, or agreements in the coming months based on the ongoing collaboration between DTSM and City personnel, staff may return to Council with recommended revisions to the Maintenance Services Agreement (#9626 (CCS)) at a later date. Until then, the budget and work plan as presented tonight remain unchanged from those adopted by the DTSM Board.
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Discussion
DTSM is a 501(c)(3) non-profit organization that is under contract with the City to administer business and property-based assessment districts, including the management of a variety of programs, services, and operations to support economic stability, growth, and community life in downtown Santa Monica. DTSM provides hospitality and maintenance services, programs a year-round calendar of community events, including the WinterLit Holiday Lights and Festivities, and promotes Downtown as a vibrant shopping, dining, and entertainment destination. Efforts this last fiscal year and into the current fiscal year (2022-23) prioritize the inclusive and equitable economic recovery of the district with emphasis on business retention and attraction, prioritization of clean and safe initiatives and an increase in community-serving events in accordance with ongoing COVID-19 safety precautions. The City and DTSM are looking forward to relaunching the beloved ICE skating rink in Lot 27 this holiday season for the first time since 2019. In addition, DTSM proposes to continue to assist the City with activating the ”gateway” corner of Colorado Esplanade at Ocean Avenue with public-serving amenities and art.
Currently, DTSM is experiencing major transitions in staffing and leadership. DTSM’s longtime CEO departed in January 2022, and after a nationwide search, the Board selected Andrew Thomas as its next CEO whose term began in early September. A number of longtime staff members have departed in the months since. In July 2022, five new members joined its Board of Directors—two elected by Downtown stakeholders and three appointed by the City Council. Given these changes, and the interim status of the executive leadership, in Spring 2022, the then-current Board adopted a budget and workplan that were largely consistent with existing organizational priorities and investments, with an overriding focus on clean and safe initiatives, and with the explicit understanding that once the new CEO and Board members were in place, the DTSM Board could opt to make revisions. Meanwhile, DTSM staff continue to work in close partnership with the City’s Promenade Maintenance Team and Parking Operations Office to monitor and enhance cleaning services throughout the downtown district. For FY 2022-23, DTSM has allocated funding for additional pressure washing services in the alleys. The DTSM budget also includes funds to hire a dedicated full- 4 of 10
time Outreach and Mental Health Coordinator to engage with people experiencing homelessness within the geographic boundaries of the downtown Santa Monica area.
This person will be collaborating with other advocacy and service providers in the downtown area, including City and County homeless outreach teams. To support safety priorities, DTSM is working closely with the Santa Monica Police Department to implement a mobile security camera program on the Third Street Promenade, utilizing dispatchers at the Downtown Community Safety Command Center to monitor the cameras on the Promenade and alleys 24 hours per day, 7 days per week.
Funding for the programs, services, and operations comes from revenue generated from two business-based assessment districts and three property-based assessment districts:
• The Central Business District (CBD), established in 1966, is funded by retail businesses in the CBD.
• The Operation and Maintenance Assessment (Bayside Assessment), established in 1986, is funded by all businesses within the Bayside District. • The Downtown Santa Monica Property-Based Assessment District (Downtown PBAD), established in 2008.
• The Lincoln Boulevard Property-Based Assessment District (Lincoln PBAD) established in 2015.
• The Colorado Avenue Overlay Zone (Colorado Overlay) established in 2015.
The Services Agreement between the City and DTSM, originally approved by Council on January 13, 2009, requires the annual preparation and approval of a budget and work plan. In accordance with this requirement, DTSM has submitted its FY 2022-23 budget and work plan for Council review and approval.
FY 2022-23 Budget
DTSM has prepared a budget for FY 2022-23 with anticipated revenues of $10,207,417 and anticipated expenditures of $10,170,036 (Attachment D). The DTSM Board of 5 of 10
Directors approved the work plan for FY 2022-23 on June 16, 2022 and adopted the annual budget on June 23, 2022.
In response to current economic uncertainty, DTSM did not increase the assessment rates. Overall projected revenues reflect a three percent decrease from DTSM’s FY 2021-22 budget.
Operational Work Plan for FY 2022-23
The proposed work plan details DTSM’s operational and programming initiatives for FY 2022-23 (Attachment E). The work plan’s six strategic areas are:
1. Organization Management – Maintain a strong and efficient organization with high standards of professional administration and customer service to effectively manage relationships and direct place-based initiatives.
2. Economic Development – Maximize the vitality of Downtown and promote community prosperity through a balanced, diverse, high-quality economic environment with a sustainable mix of uses. This year, the plan also focuses on the on-going partnership with the City to prioritize the Downtown’s on-going economic recovery and prosperity.
3. Marketing, Communication & Events – Protect and build upon Downtown’s reputation as an authentic, diverse, culturally significant and forward-thinking district, fostering its identity and brand through marketing, communication, partnerships and events.
4. Planning, Design & Infrastructure – Position Downtown as an engaging, accessible, thoughtfully-crafted destination through strategic ongoing investments in placemaking, urban planning, capital improvements, beautification, and development.
5. Policy & Advocacy – Research, interpret, and monitor the state of Downtown to proactively identify issues and advocate for solutions that best serve the interests of the Downtown community.
6. Public Space Management & Operations – Cultivate a vibrant, engaged community by serving as stewards for the quality and use of Downtown’s physical spaces. 6 of 10
Maintenance Activities and Extension of Annual Maintenance Agreement The annual work plan also establishes the responsibilities, maintenance levels, and performance schedules that the City and DTSM must provide to each district within Downtown. The respective responsibilities for maintenance activities between the City and DTSM are provided for in the Maintenance Services Agreement that is extended annually, but only if:
a) the City Council approves the corresponding year’s work plan; b) b) any changes in services are cost neutral to both parties; and c) c) DTSM is in compliance with the terms and conditions of the Maintenance Agreement.
The maintenance responsibilities outlined in the attached work plan for FY 2022-23 are cost-neutral between the parties. Therefore, if Council approves the FY 2022-23 work plan, the City Manager would be authorized to extend the term of the Maintenance Agreement by one year.
ICE License Agreement at Lot 27
On October 9, 2007 the Council authorized the City to enter into an agreement with DTSM to allow for the installation and operation of a temporary ice-skating ring and ancillary activities on Lot 27 (at the southwest corner of 5 th Street and Arizona Avenue)
consistent with DTSM’s roles and responsibilities under the Services Agreement. This activation is part of DTSM’s WinterLit holiday festivities. The prior agreement expired on February 28, 2021 due to COVID. Staff recommends entering into a new amended agreement to allow for the on-going ICE skating rink activation for a term of up to four years (expiring in 2026 concurrent with the adjacent bank leases on this larger redevelopment site). This year, DTSM is estimating total expenses for ICE to be $1.2 million with projected revenue of $1.3 million resulting in a total net revenue of $100,000. This net revenue amount has been included in the DTSM annual budget forecast to help fund on-going DTSM operating costs. The value associated with the City’s waiver of the daily site rental fees is $75,000 (based on a daily site rental rate of $1,000) for the duration of ICE, including set up and take down. To date, this agreement has not resulted in revenue loss to the City. The temporary closing of Lot 27 with attractions like ICE help to attract additional downtown visitors. Increasing the 7 of 10
duration and frequency of events also helps to boost other important City revenue streams, including sales tax and parking tax revenue, which are essential to the City’s fiscal health. As the ICE event continues to grow in popularity, staff recommend that the license agreement includes a revenue share agreement for future years (2024+) if DTSM’s net revenue from ICE exceeds $300,000, in which case the City would receive 50% of surplus revenue over $300,000.
Ocean Avenue Pilot License Agreement
On June 27, 2017, Council approved a pilot program to authorize DTSM to activate the public right of way located at the southeast corner of Colorado Esplanade and Ocean Avenue – which serves as a gateway to Santa Monica Pier and Tongva Park. This pilot program has allowed DTSM to provide pedestrian-oriented services and amenities within a portion of the approximately 4,000 square feet of pedestrian right-of-way along the eastern side of Ocean Avenue, between Colorado Avenue and the northwest entrance of Tongva Park.
Activation of the area with pedestrian-oriented amenities such as food service, retail, or other experiential uses or programming is intended to activate the space with items such as movable tables and chairs. The addition of services and amenities is designed to help create connections between Palisades and Tongva Parks, develop a sense of place, and build community. Under the pilot program, DTSM has been permitted to enter into sublicense agreements with operators selected through a competitive, public procurement process. Past operators have included “The Fry Guy”, a coffee cart and The Lobby Food Truck. The sublicense fees paid to DTSM by the operators would be required to support DTSM’s responsibilities of staffing and managing the license areas, and to fund any direct operating costs such as utilities. Once these expenses are deducted, the surplus net revenue would be shared in a 50/50 split between DTSM and the City to help support on-going economic recovery efforts. As a pilot program, DTSM would be provided flexibility and creativity to adjust the types of programs and uses within the license area that are most impactful at enhancing the public’s experience. 8 of 10
Pedestrian access through the license area would be permitted at all times, including hours of non-operation.
Memorandum of Understanding for 4th Court Alley Improvements In addition, City staff recommends entering into a Memorandum of Understanding (“MOU”) with DTSM to facilitate placemaking improvements to Fourth Court Alley at a total cost of $110,000. This project is a partnership between the City and DTSM to create a grant program to reimburse selected project participants along Fourth Court between Colorado Avenue and Broadway for certain costs to design, permit and install improvements to their buildings to enhance the Fourth Court alley public right-of-way.
The Project is intended to serve as a mobility connection linking the bicycle network between Colorado Avenue and Broadway and the downtown Expo Station and is limited to the Fourth Court alley area. This project is funded by transportation impact fees collected from a Development Agreement for the Courtyard Marriott. The City shall provide up to $110,000 (“Project Total”) to DTSM as reimbursement to Project Participants for the Placemaking Improvements. In 2019, Council authorized the City and DTSM to enter into a MOU for this project but the term expired during COVID and no expenditures have yet been made to date. DTSM will oversee the grant dispersal to the eligible property owners over the next two years.
Past Council Actions
Meeting Date Description
11/23/21 (Attachment A) DTSM FY 2021-22 Work Plan and
Budget
10/09.07 (Attachment B) ICE License Agreement
6/27/2017 (Attachment C) Ocean Avenue Pilot License Agreement Financial Impacts and Budget Actions
There are no immediate financial impacts or budget actions necessary as a result of the recommended action to approve DTSM’s FY 2022-23 work plan and budget or for 9 of 10
recommended actions , 2, 4 and 5. Staff will return to Council if specific budget actions are required in the future.
Staff seeks authority to approve available funding from the Special Revenue Source Fund to award a Memorandum of Understanding with Downtown Santa Monica, Inc. for Fourth Court Alley improvements.
Memorandum of Understanding
FY 2022-23 Request
Amount CIP Account # Total Agreement Amount
$110,000 C1005720.689000 $110,000
Potential Future Impacts
In future years, the ICE Agreement and Colorado Esplanade/Ocean Avenue License Pilot program are envisioned to generate a nominal amount of revenue, once operating expenses are deducted, for both the City and DTSM to help fund on-going economic recovery efforts. In the event that next year’s ICE activation is able to generate $400,000 in surplus revenue from sponsorships and increased ticket sales, then this event would result in $50,000 revenue for the City (based on a $300,000 baseline for DTSM operating costs with any additional revenue to be split 50/50 between the City and DTSM). The Ocean Avenue pilot program may also generate a nominal amount of revenue for the City. The most recent vending cart operator generated approximately $50,000 in annual revenue for DTSM. When taking into account operating expenses, including utilities, the proposed 50/50 revenue share may generate a small amount of revenue for the City projected at less than $10,000 per year. 10 of 10
Prepared By: Jennifer Taylor, Economic Development Adminstrator Approved Forwarded to Council
Attachments:
A. DTSM FY 21-22 Work Plan + Budget Staff Report (Web Link) B. ICE License Agreement (Web Link)
C. Ocean Avenue Pilot License Agreement Staff Report (Web Link) D. DTSM FY 2022-2023 Budget
E. DTSM FY22-23 Work Plan (update 9.23.22)