City Council
Report
City Council Meeting: July 25, 2023
Agenda Item: 11.A
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Approval of Downtown Santa Monica, Inc. (“DTSM”) FY2023-24 Budget and Work Plan and Authorization of Various Agreements Between City and DTSM Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of categorical exemption pursuant to Section 15301 of the California Environmental Quality Act (CEQA) Guidelines;
2. Approve the Downtown Santa Monica, Inc. (DTSM) Fiscal Year 2023-24 Budget and Work Plan;
3. Authorize the City Manager to execute proposed Master Services Agreement between DTSM and City to replace and supersede the Amended and Restated Services Agreement (CCS 9063) executed in 2019, (“Services Agreement”) to authorize DTSM to retain private security services for downtown Santa Monica for a one-year pilot program and also replace and supersede the existing Maintenance Services Agreement (CCS 9626), executed in 2012, by including in the Master Services Agreement the ongoing responsibilities of DTSM and City pertaining to custodial services for City’s parking structures and DTSM’s license to use a portion of parking structures 5 and 6;
4. Authorize the City Manager to negotiate and execute a First Modification to the Memorandum of Understanding with DTSM for community events at Lot 27 to extend the term for two additional years (to 2025) and expand the site area to authorize DTSM to temporarily activate the City-owned lot at 1318 4th Street for community events and activities consistent with DTSM’s roles and responsibilities under the proposed Master Services Agreement;
5. Authorize the City Manager to reinstate and amend the Third Street Promenade Public Services Program and Amenities License Agreement with DTSM to continue activation of the Promenade, including the addition of operating a Promenade vending cart program for four additional years, exercised by annual options (to 2027); and
6. Authorize the City Manager to negotiate and execute a Letter of Intent between the City, DTSM and Rooftop Cinema Club for the activation of the Parking Structure 6 rooftop space as an outdoor movie theater.
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Summary
Santa Monica's Downtown area is a significant driver of 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 Monica Property-Based Assessment District (“Santa Monica PBAD" or “Downtown”) that is comprised of commercial properties and businesses located in the downtown Santa Monica area, including the Third Street Promenade. For purposes of this staff report and proposed Master Services Agreement, the “Santa Monica PBAD” or “Downtown” also includes the Lincoln Boulevard Property Based Assessment District (“Lincoln PBAD”) and the Colorado Avenue Property Based Assessment District Overlay Zone (“Colorado Overlay Zone”). The mission of DTSM is to work with the City of Santa Monica to promote economic stability, growth and community life within Downtown Santa Monica. The roles and responsibilities of DTSM are defined in the Services Agreement (#9063 CCS) and annual DTSM Work Plan. Under this agreement, the City authorizes DTSM to manage and provide a variety of programs and services related to the operation of the Santa Monica PBAD. The Services Agreement requires DTSM to submit, and Council to approve, an annual budget and work plan that summarizes the activities, projects, and programs that DTSM intends to carry out during the upcoming Fiscal Year.
The Santa Monica PBAD is the business district that has been 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-andmortar stores. While tourism is rebounding and new businesses are opening, the lasting COVID impacts are especially noticeable on the Third Street Promenade. The City and DTSM have a long-standing collaborative relationship and are prioritizing resources to help expedite the downtown district’s overall economic recovery, including addressing concerns of security, safety, maintenance, and homelessness.
DTSM and the City continue to work closely together to identify the best strategies to address these issues, including adjusting services to prioritize “clean and safe” efforts 3 of 14
throughout the downtown district and identifying opportunities to leverage City-owned property to support Downtown’s economic recovery, including creative programs, events and activations on the Promenade, weekend activations of Lot 27 (452 Arizona Avenue) at the intersection of 5th Street and Arizona Avenue, for community events such as the 626 Night Market, and exploring opportunities to transform the upper deck of Parking Structure 6 to a rooftop cinema. There is focused effort on revitalizing the 1200 Block of the Third Street Promenade in accordance with Council direction and staff will also be presenting additional proposed zoning amendments at tonight’s Council meeting (July 25, 2023) that would help support new and expanded business operations on this block with focus on dining and entertainment.
The adoption of the proposed Work Plan and Budget for Fiscal Year 2023/24 authorizes DTSM’s continued operations and the City’s quarterly revenue disbursement for services, in accordance with the proposed Master Services Agreement. Proposed changes to DTSM responsibilities for Fiscal Year 2023/24 include private security services for the Santa Monica PBAD during a one-year pilot program (“Pilot Program”) which necessitate updates to the Services Agreement. For this reason, Council is being asked to adopt the proposed Master Services Agreement to authorize DTSM to directly retain and fund private security service(s) in Downtown during the one-year Pilot Program.
Finally, the proposed Master Services Agreement includes DTSM and the City’s ongoing responsibilities as specified in the Maintenance Services Agreement that will expire on December 2, 2023. DTSM’s responsibilities include delivery of custodial maintenance services in Parking Structures 1, 2, 4, 5 and 6 and restroom monitoring in Parking Structures 2, 4 and 5 in exchange for the City’s Promenade Maintenance Team assuming responsibility for certain enhanced levels of maintenance services for Ocean Avenue, Colorado Avenue, Broadway, Santa Monica Boulevard, Arizona Avenue, Wilshire Boulevard and 5th thru 7th Streets, in addition to the City providing on-going baseline custodial maintenance throughout the Downtown (e.g. sweeping, trash removal, graffiti removal and tree trimming). The Master Services Agreement also specifies that DTSM provides additional enhanced custodial services throughout the 4 of 14
Downtown to support a clean, active and well-managed Downtown. The base line custodial services are funded by the City and the enhanced levels of maintenance services are funded by PBAD assessment revenues. The attached Work Plan includes the operations matrix that lists both the City and DTSM’s roles and responsibilities for enhanced service delivery throughout the Downtown. The proposed Master Services Agreement will also replace and supersede the Maintenance Services Agreement.
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 the Santa Monica PBAD. DTSM provides hospitality and maintenance services, programs a year-round calendar of community events, including the SaMoPride Festival, the 626 Night Market, and ICE skating rink and promotes Downtown as a vibrant shopping, dining, and entertainment destination.
Efforts this last fiscal year and into the current fiscal year (2023-24) 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 to support Downtown’s ongoing economic recovery. Last year, the City and DTSM relaunched the beloved ICE rink in Lot 27 and DTSM introduced the 626 Night Market to this site. City and DTSM staff are now looking to expand activations across the street to 1318 4th Street (site of the former Parking Structure No. 3) in the interim period until construction commences for the new housing development.
On December 3, 2004, the City entered into a services agreement (“Original Services Agreement”) with Bayside District Corporation (“BDC” is the predecessor to DTSM) to establish the roles and obligations of BDC in the administration of certain functions and programs in the City’s downtown business area. On January 13, 2009, Council approved amendments to the Original Services Agreement to clarify and define the roles of BDC and the City and delineate the collection and disbursement of assessment fees generated from Downtown businesses and property owners. This new Services 5 of 14
Agreement (CCS 9063) replaced and superseded the Original Services Agreement. In 2011, the BDC Board of Directors approved a name change to Downtown Santa Monica, Inc. (“DTSM”).
Over the last six months, DTSM has been working closely with the City to review roles and responsibilities between DTSM and the City, as outlined in the Services Agreement. Since its approval by Council in 2009, the Services Agreement has been amended four times to reflect the name change from BDC to DTSM, adjust the disbursement schedule of annual assessment funds, expand the boundaries to include the Lincoln PBAD and Colorado Avenue Overlay Zone, and extend the term of the agreement for a twenty year period up through May 19, 2029. These amendments are included in the proposed Master Services Agreement along with proposed modifications to the roles and responsibilities of DTSM to reflect DTSM’s request to provide supplemental private security services for Downtown. The proposed Master Services Agreement will not change most of the existing terms, as specified in the Services Agreement, and will expire on May 19, 2029, unless earlier terminated or extended by the parties in writing pursuant to the proposed Master Services Agreement.
Earlier this year, the DTSM Board of Directors appointed an Ad Hoc Committee led by DTSM Board Member Michelle Aronson, a representative of Douglas Emmett, one of the largest property owners in the Downtown area. The purpose of this Committee was to review DTSM clean and safe priorities with the goal of making recommendations to the Board for potential changes to the FY2023/24 Work Plan and Budget to support enhanced safety in the Santa Monica PBAD. On May 3, 2023, DTSM held a Special Board Meeting where the Ad Hoc Committee recommended allocating up to $1.7 million from DTSM’s budget toward supplemental private security services in the Downtown.
The proposed daytime private security services for the one-year Pilot Program necessitate modifications to the Services Agreement. DTSM will evaluate the Pilot Program by reviewing crime statistics, surveying their stakeholders, and seeking input from the City.
On May 25, 2023, the DTSM Board adopted their annual budget and, on June 15, 2023, the Board adopted their annual Work Plan, both of which are consistent with existing 6 of 14
organizational priorities and investments, with an overriding focus on clean and safe initiatives. As stated above, a significant funding priority for DTSM is community safety.
The Ad Hoc Committee and DTSM staff reviewed community safety efforts of other BIDS with similar private security services as to what is being proposed. DTSM indicates that similar services exist in Downtown Los Angeles, Burbank, Lancaster, and Berkeley. For FY 2023-24, the proposed budget includes the funding for the private daytime security for the Promenade, which would be operated as a one-year Pilot Program. For this service, DTSM proposes to allocate approximately $1.7 million and would be funded primarily through reductions to DTSM Ambassador Services. DTSM has indicated that up to 16 full-time equivalent Ambassador position will be impacted.
In order for DTSM to use private security services for the Santa Monica PBAD after the Pilot Program expires, pursuant to the California Streets & Highways Code section 36636, DTSM will need to submit to the City a written request that the City modify the management district plans for the assessment districts located in the Santa Monica PBAD in which security personnel will be deployed to include private security services as an activity that will be funded from the revenue derived from the levy of assessments of these districts. Modifications to management district plans for assessment districts, including the activities that are funded by the assessments, require that the City comply with noticing requirements and hold a public hearing prior to modifying the plans as specified in California Streets & Highways Code section 36636.
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 2023-24, DTSM has allocated funding for enhanced custodial maintenance services including power washing and asneeded hot spot cleaning of key public spaces, along with graffiti removal.
As it is for the City, reactivating public spaces in Downtown through events and assisting businesses to quickly open and operate in the Downtown is a high priority for DTSM. To support safety priorities, in addition to the proposed private security services, DTSM actively supports the City in their efforts to keep Downtown safe, 7 of 14
advocates on behalf of DTSM with City, County and other government agencies to maintain regular service presence in the Downtown, and facilitates communication between partners engaged in preserving the safety of Downtown public spaces.
Funding for the programs, services, and operations comes from revenue generated from two business-based assessment districts:
• The Central Business District (CBD), established in 1966, is funded by retail businesses in the CBD, and
• The Operation and Maintenance Assessment (Bayside Assessment), established in 1986, is funded by all businesses within the Bayside District.
And three property-based assessment districts:
• 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, and
• The Colorado Avenue Overlay Zone (Colorado Overlay) established in 2015.
As required by the California Streets & Highways Code, the proposed Master Services Agreement between the City and DTSM, requires the annual preparation and approval of a budget and work plan. In accordance with this requirement, DTSM has submitted its FY 2023-24 Budget and Work Plan for Council review and approval. Staff also recommends that Council approve the Master Services Agreement (attached) to authorize DTSM to provide supplemental private security services, as proposed in DTSM’s FY 2023/24 Budget and Work Plan.
FY 2023-24 Budget
DTSM has prepared a budget for FY 2023-24 with anticipated revenues of $10,208,033 and anticipated expenditures of $10,629,733 . The deficit would be funded by DTSM cash reserves. The DTSM Board of Directors adopted the annual budget on May 25, 2023, and approved the work plan for FY 2023-24 on June 15, 2023. 8 of 14
In response to the current economic climate, DTSM did not increase the assessment rates. Overall projected revenues reflect no increase from DTSM’s FY 2022-23 budget.
Operational Work Plan for FY 2023-24
The proposed Work Plan details DTSM’s operational and programming initiatives for FY 2023-24 . The Work Plan’s three strategic areas are:
• Operations and Public Space Management: A clean, safe, and welcoming environment is the foundation for success in Downtown Santa Monica. DTSM provides enhanced services in the areas of public safety, custodial maintenance, outreach, and marketing, while also helping to monitor and coordinate City’s services. Together, DTSM and the City fulfill the responsibility of creating a thriving and inviting community space for everyone. Operations and Public Space Management services make up 70% of DTSM, Inc’s FY2023-24 budget. This priority area includes the following directives: Public Safety, Advocacy and Oversight, Parking Structure Custodial Maintenance, Enhanced Custodial Maintenance, Parks Attendant/Restroom Monitoring and Social Outreach, and Placemaking and Beautification.
• Communications, Events and Development: DTSM furthers the reputation and economic vitality of Downtown Santa Monica and the Third Street Promenade through consistent branded communications, hosted and facilitated events, and economic development. Communications, Events and Development services make up 23 % of the DTSM FY2023-24 Budget. This priority area includes the following directives: Community Events and Activations, Partnerships, Public Relations and Promotions, Economic Development and Advocacy, Data and Research, and Communications and Outreach.
• Organization Management: DTSM is an efficient and effective organization that employs a professional staff to manage relationships and services that support Downtown Santa Monica. These functions require centralized administrative support funded through revenues received by DTSM throughout the fiscal year. 9 of 14
Organizational Management services make up 7% of the DTSM FY2023-24 Budget. This priority area includes: Administrative Functions, Professional Services, and Board and Staff Education and Development.
License Agreements
The City and DTSM have a long history of partnering to support activations in Downtown to promote the economic vibrancy of the Promenade, through community events, pop-up vending activations, festivals and more, attracting visitors and locals alike. Staff is seeking Council authorization to extend and/or amend several existing agreements to help support this public-private partnership.
Lot 27 Community Events First Modification to Memorandum of Understanding On September 28, 2021, the Council authorized the City to enter into an agreement with DTSM to allow for the activation of the City-owned parking Lot 27 (at the southwest corner of 5th Street and Arizona Avenue) to support additional activities for the Downtown, including the 626 Night Market, as a means to support the area’s economic recovery, consistent with DTSM’s roles and responsibilities under the Services Agreement. The current agreement expires on December 31, 2023. In order to support continued community activations, City Council is being asked to modify the agreement to extend the term for two additional years (expiring in 2025) and to add a second location nearby – 1318 4th Street - to allow for additional short-term activations on this City-owned property until the site is redeveloped for affordable housing. The proposed amended license agreement also includes an increase in the daily parking rate for Lot 27 from $1,000 per day to $2,100, which is based on the actual daily parking rate that will be in effect as of January 1, 2024. Staff recommends increasing the community event fee for Lot 27 to reflect this actual rate effective for all events effective on January 1, 2024, and fees will increase annually thereafter to coincide with any increases in parking rates. Revenue share opportunities will also continue to be evaluated based on the level of demand for this space. This would apply to gross revenue receipts exceeding the minimum daily rental fee, minus DTSM administrative costs. Based on DTSM feedback, staff also recommend increasing the monthly event limit from six days to eight days per month (e.g. two weekends per month with ability for 10 of 14
operator to also lease the lot on a Friday and/or Monday for loading/unloading). The limit to event days is due to the fact that this surface parking lot is highly utilized by area employees, particularly on weekdays.
As there is not an established parking rate for 1318 4th Street site, staff proposes a revenue share agreement. Revenues generated from vending rentals minus DTSM operating costs would be split 50% with the City. DTSM typically charges a nominal rate for event coordination and uses this revenue to fund their operating expenses.
DTSM’s responsibilities including staffing and managing the license areas, and funding any direct operating costs such as utilities. To date, this agreement has been revenue neutral for the City. The temporary closing of Lot 27 with attractions like 626 Night Market and ICE (which is governed under a separate License Agreement) has helped to attract additional downtown visitors. Increasing the 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.
Third Street Promenade Public Services Program and Amenities License Agreement On September 10, 2018, Council authorized the Third Street Promenade Public Services Program and Amenities License Agreement between DTSM and the City. It expired on June 30, 2023. Staff requests that Council authorize the reinstatement and extension of this agreement so that DTSM may continue to program and activate the Promenade with public-serving programs and amenities, including outdoor board games, picnic tables, and 1200 Promenade Block Party events. This agreement would also authorize DTSM to bring back the Promenade Vending Cart Program, including the very popular Kona Ice Truck. Revenues generated from vending rentals minus DTSM operating costs would be split 50% with the City. DTSM would submit a quarterly report to the City with financial information and may be subject to annual audits. Staff recommend extending this license agreement for four additional years with an expiration on December 31, 2027.
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Rooftop Cinema Letter of Intent
Lastly, the DTSM Board has requested that Council authorize staff to proceed with negotiations with Rooftop Cinema Club to potentially activate the top level of Parking Structure 6 (1431 Second Street) as an outdoor cinema. This idea was initially explored in 2017 for another parking structure but it was deemed not feasible due to the operational needs of the cinema and parking structure configuration limitations. At that time, staff recommended that Parking Structure 6 be considered as a potential alternative site due to its size and relatively flat surface roof. Negotiations ceased due to the COVID-19 pandemic. To restart discussions, DTSM issued a Request for Proposals to seek interest for activating the Parking Structure 6 rooftop. Two proposals were received and the DTSM Board is recommending that the City proceed with exploring the feasibility with Rooftop Cinema Club for Parking Structure 6, utilizing approximately 80 parking spaces (the top level) for year-round outdoor cinema operations. DTSM and City staff are currently seeking additional information from Rooftop Cinema Club with the goal of entering into a Letter of Intent between the City, DTSM, and Rooftop Cinema Club for a potential five-to-ten-year license agreement.
Any further real estate negotiations would be brought back to Council for further direction and approvals. This operation would also require Coastal Commission approval due to the anticipated loss of parking.
Environmental Review
The proposed DTSM agreements with the City are categorically exempt from CEQA pursuant to Section 15301 (Existing Facilities) of the CEQA Guidelines. Section 15301 exempts Class 1 projects from CEQA, which include the “the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use”. The agreements would support operations, programming activities, and maintenance of the existing Downtown, and would not result in the expansion of land uses such that a physical impact would occur.
The utilization of Parking Structure 6 for use of cinema uses would not result in any new physical environmental impacts, including transportation-related impacts related to vehicles miles traveled (VMT) pursuant to the City’s adopted VMT thresholds. In 12 of 14
addition, none of the exceptions specified in Section 15300.2 of the CEQA Guidelines would apply that would preclude the use of these CEQA exemptions - The project site is not located in a sensitive environment, the project will not have a significant effect on the environment due to unusual circumstances, the project would not damage scenic resources, the project would not be located on a hazardous waste site; and the project would not cause a change to a historical resource. Therefore, this project is categorically exempt per Section 15301 of the CEQA Guidelines. The proposed agreements qualify for a Class 1 exemption.
Past Council Actions
Meeting Date Description
04/14/2009 DTSM Services Agreement Staff Report
04/24/2018 Third Street Promenade License Agreement Staff Report 08/28/2018 Rooftop Cinema Staff Report
09/10/2018 Third Street Promenade License Agreement
09/28/2021 Lot 27 Community Events MOU Staff Report
10/11/2022 DTSM FY 22-23 Work Plan + Budget Staff Report 02/28/2022 Lot 27 Community Events MOU
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended actions. Staff will return to Council if specific budget actions are required in the future.
Two of the License Agreements mentioned above are envisioned to generate a nominal amount of revenue after accounting for operating expenses. The Lot 27 Community Events MOU has resulted in revenues to date of $24,000 primarily from the 626 Night Market. Community event revenue generated from the Lot 27 rentals is deposited to the City’s Parking Operations revenue account 01600004.403330. In FY 2023-24, given the daily rental rate increase and expansion of event days, it is anticipated that Lot 27 Community Events MOU will generate at least $50,400 in revenue for the City. The City’s share of revenues generated from event activations at 1318 4th Street are 13 of 14
anticipated to be at least $50,000 and will be deposited into the City’s Housing Trust Fund Account 14420001.415000. Demand for this space is hard to estimate at this time. More accurate revenue calculations will be known once DTSM issues a Request for Proposals for activating this space, which could attract weekend markets as well as month-long activations such as roller skating. The space may be less appealing than Lot 27 due to lack of on-site infrastructure and utilities.
Reinstatement and extension of the Third Street Promenade Public Services Program and Amenities License Agreement is anticipated to generate a small amount of revenue for the City. Recent vending cart operations generated approximately $50,000 in annual revenue for DTSM. When taking into account operating expenses, including utilities, and a 50/50 revenue share, it is anticipated the revenue for the City would be less than $10,000 per year. Revenues will be deposited to revenue account 01700014.409810.
Prepared By: Jennifer Taylor, Economic Development Adminstrator Approved Forwarded to Council
Attachments:
A. DTSM Work Plan FY23-24
B. DTSM Budget FY23-24
C. DTSM Master Services Agreement - Final 2023 Draft with Exhibits D. Third Street Promenade Amenities License Agreement
E. Rooftop Cinema Staff Report
F. Third Street Promenade Amenities License Agreement Staff Report G. DTSM Lot 27 Community Events MOU
H. Lot 27 Community Events Staff Report (Web Link)
I. DTSM Work Plan FY 22-23
J. Written Comments
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K. PowerPoint Presentation