City Council
Report
City Council Meeting: July 9, 2024
Agenda Item: 5.A
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Approval of the Downtown Santa Monica, Inc. (DTSM) Fiscal Year 2024-25 Budget and Work Plan
Staff recommends that the City Council:
1. Adopt a finding of categorical exemption pursuant to Section 15061(b)(3) of the California Environmental Quality Act (CEQA) Guidelines; and
2. Approve the Downtown Santa Monica, Inc. (DTSM) Fiscal Year 2024-25 Budget and Work Plan.
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 (“PBAD") that is comprised of commercial properties and businesses located in the downtown Santa Monica area, including the Third Street Promenade. The mission of DTSM, Inc. 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 Master 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 PBAD.
The Downtown Santa Monica PBAD continues to be the business district that has been most heavily affected by the lasting impacts of the COVID-19 pandemic, which curtailed tourism and accelerated global trends in the retail industry as more shoppers opted to 2 of 7
shop online instead of visiting brick-and-mortar stores. While tourism is rebounding and new businesses are opening, the prolonged economic recovery is 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, while pursuing proactive, collaborative economic development efforts to retain and attract businesses and investment to the Downtown, as outlined in the FY 2024-25 Work Plan and Budget.
The adoption of the proposed Work Plan and Budget for Fiscal Year 2024-25 authorizes DTSM’s continued operations and the City’s quarterly revenue disbursement for services, in accordance with the Master 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 downtown Santa Monica. DTSM provides hospitality and maintenance services, programs a year-round calendar of community events, including the SaMoPride Festival, the upcoming roller skating and ICE skating rink activations on the City-owned Lot 27 parking lot (5 th Street at Arizona Avenue) and
continued efforts to promote Downtown as a vibrant shopping, dining, and entertainment destination.
Efforts this last fiscal year and into the current Fiscal Year 2024-25 prioritize the inclusive and equitable economic recovery of the district with emphasis on public safety, creating a clean and welcoming environment, activating a vibrant public space, and advocating for policies that support the business community as outlined in the DTSM Work Plan. Last year, the City and DTSM launched the Private Security Pilot Program – a one-year pilot program (December 1, 2023 to November 30, 2024) to authorize DTSM to fund and retain private security services for downtown SM at a cost of approximately $1.7 million. The Santa Monica Police Department and DTSM are 3 of 7
monitoring the pilot program to determine potential security options that continue to build upon SMPD’s Downtown Services Unit deployment of 15 officers and 2 sergeants contracted overnight security in the parking structures provided by Good Guard. DTSM annual budget includes funding for this program through December. Any additional enhanced daytime security beyond the Pilot Security Program would necessitate making changes to the Services Agreement. If the desire on all sides is to extend the Pilot, staff will return to Council with proposed changes and options for Council's consideration.
DTSM and the City also continue to work closely together to identify the best strategies to support the health and vitality of the Promenade and overall PBAD, including adjusting services to prioritize clean and safe efforts throughout the downtown district and identifying opportunities to leverage City-owned property to support Downtown’s economic recovery, including the upcoming seasonal roller skating and ICE holiday skating at Lot 27 (452 Arizona Avenue) and the transformation of the City-owned 1437 4 th St into the Haibu family attraction (opening this summer). There is focused effort on revitalizing the 1200 Block of the Third Street Promenade in accordance with Council direction and over the past two years, the City has implemented Downtown District zoning changes to support new and expanded business operations on this block with focus on dining and entertainment, along with allowing for more flexibility for new business uses throughout the Downtown core area. DTSM is instrumental in helping to market and promote these economic development tools to their members (businesses, property owners) and local real estate brokers.
On May 23, 2024, the DTSM Board adopted their annual budget and work plan, both of which are consistent with existing organizational priorities and investments, with significant funding priority for community safety and increased funding for Economic Development. In addition, DTSM staff also 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 2024-25, DTSM has allocated funding for enhanced custodial maintenance services including power washing and as-needed hot spot cleaning of key public spaces, including sidewalks, 4 of 7
crosswalks and alleys. Reactivating public spaces in Downtown through placemaking, beautification and events, is also a high priority for DTSM in this fiscal year with proposed changes to include funds to purchase more street furniture for the Promenade and new decorative lighting for the district. The community events and activations budget has also been increased to help fund a full calendar of events and programs to encourage visitors to the Downtown area year-round. Retaining and attracting businesses and investors to the Downtown is also a high priority for FY 2024-25 with DTSM allotting additional funds towards Economic Development and advertising to help fund positive news on new business openings, to help promote the ease of doing business in Santa Monica and earmarking funds for more business events such as quarterly Broker Happy Hours, all done in close partnership with City’s Community Development Department.
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
• 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.
• The Colorado Avenue Overlay Zone (Colorado Overlay) established in 2015.
The 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 2024-25 budget and work plan for Council review and approval.
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FY 2024-25 Budget
DTSM has prepared a budget for FY 2024-25 with anticipated revenues of $9,370,228 and anticipated expenditures of $9,436,809 (Attachment A). The deficit would be funded by DTSM cash reserves, however DTSM is optimistic that they may be able to secure more event sponsorship revenue than forecasted to cover this funding gap. The DTSM Board of Directors adopted the annual budget and work plan on May 23, 2024.
In response to the current economic climate, DTSM did not increase the assessment rates. Overall projected revenues reflect an 8% decrease from DTSM’s FY 2023-24 budget. The primary reason for the deficit is due to projected drop in ICE sponsorship and income revenue, compared to FY 2023-24 where DTSM was able to secure Netflix sponsorship.
Operational Work Plan for FY 2024-25
The proposed Work Plan details DTSM’s operational and programming initiatives for FY 2024-25 (Attachment B). The work plan’s three strategic areas are:
1. 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, and social outreach, while also providing oversight of City of Santa Monica 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 72% of the DTSM, Inc’s FY2024-25 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.
2. Communications, Events, & 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 21 % of the DTSM FY2024-25 Budget. This priority area includes the following directives:
Community Events and Activations, Partnerships, Public Relations and Promotions, 6 of 7
Economic Development and Advocacy, Data and Research, and Communications and Outreach.
3. 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. Organizational Management services make up 7% of the DTSM FY2024-25 Budget. This priority area includes: Administrative Functions, Professional Support, and Board and Staff Education and Development.
Past Council Actions
Meeting Date Description
07/25/23 (attachment
A)
DTSM FY23/24 Budget and Work Plan and Master Services
Agreement
Environmental Review
The proposed DTSM agreements with the City are exempt from CEQA pursuant to Section 15061(b)(3), which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” The agreements are administrative in nature, and would provide for continued operations and budgeting for DTSM services. Therefore, it can be seen with certainty that the recommended actions would not result in adverse physical impacts on the environment, and as such, is exempt from CEQA.
Financial Impacts and Budget Actions
There are no immediate financial impacts or budget actions necessary as a result of the recommended actions. Staff will return to Council if specific budget actions are required in the future.
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Prepared By: Jennifer Taylor, Economic Development Adminstrator Approved Forwarded to Council
Attachments:
A. DTSM Budget FY24-25 Draft
B. FY 24-25 DTSM Annual Work Plan
C. Written Comments