City Council
Report
City Council Meeting: June 10, 2025
Agenda Item: 7.B
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To: Mayor and City Council
From: Arminé Chaparyan, Director, Administration
Subject: Large Format Digital Signage Study Session
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding that this study session is not a project subject to the California Environmental Quality Act;
2. Authorize City staff to initiate negotiations with the applicant for the Development Agreements for new outdoor digital displays located at 301 Arizona Avenue and 1202 Third Street Promenade;
3. Provide direction to Staff regarding desired project parameters and approach to community benefits; and
4. Discuss the approach for future large-format digital signage with off-site advertising, including the adoption of an ordinance to establish a pilot program to limit this signage to the Third Street Promenade area.
Summary
The City has received two development agreement applications from UNITED XYZ LLC for the installation of new large format digital displays at two properties on the Third Street Promenade in the City’s Downtown. Since the City’s Municipal Code does not permit such large scale, digital billboards that displays off-site advertising, development agreements were submitted for the installation of these digital displays. The City first prohibited billboards and offsite advertising in 1985, and there are currently no static or digital billboards in the City. The proposed large scale, off-site digital displays would be a first for the City in many decades. Because of case law that has developed related to regulation of billboards and off-site advertising, approval of these digital displays will likely have broader policy implications with regard to future digital display applications that may be received by the City. Therefore, staff seeks Council direction on the 2 of 18
proposed development agreements with key considerations to the terms of the agreements, community benefits, and performance standards. As part of this discussion, staff also seeks feedback on a potential regulatory framework to inform staff’s preparation of more information about a large-scale digital signage program with legal and financial considerations and approaches for policy options, per Council’s October 22, 2024 direction. As the time of writing of this staff report, the City received a fourth development agreement (DA) application for a proposed large-format digital display at 1310 3rd St Promenade; this new application is in addition to the pending development agreement application for three digital displays at Santa Monica Place submitted in February 2024. Council’s direction at tonight’s study session will help inform processing of these proposed DAs.
Discussion
Signage in the City of Santa Monica is currently regulated under Chapter 9.61 of the Santa Monica Municipal Code. The City required the amortization of signs existing prior to April 11, 1985, that were not in conformance with the Sign Code, by April 11, 2000 including free-standing signs, and “off-premises” signs (i.e., off-site advertising) which would have included any billboards. As the end of the amortization period approached, the City created a Meritorious Sign program that allowed certain non-conforming signs to be preserved due to their historic, cultural, or aesthetic merit. In total, 115 signs were designated as meritorious signs by the City Council on March 22, 2000 and codified in SMMC Section 9.61.030.0280. The Sign Code continues to prohibit free-standing signs such as billboards and also prohibits offsite signage. In recent years, the signage regulations have been amended to accommodate advances in advertising technology, allow for flexibility and creativity in business signage on the Third Street Promenade, but did not expand to offsite advertising, and to support revenue opportunities for wayfinding signs in the public right-of-way, subject to a license agreement with the City.
On September 13, 2022, Council directed staff to explore establishing a large-format digital signage pilot program at Santa Monica Place that supports placemaking and stimulates economic recovery efforts in the Downtown. Council further directed that the pilot program include a public art component, community messaging and promotion of 3 of 18
Santa Monica, and be supported by a revenue-sharing content opportunity to support community programs and services. Subsequent to that direction, on February 7, 2024, Macerich submitted a DA application for digital displays at Santa Monica Place. Staff was in negotiations with Macerich on the DA until the application was paused in June 2024.
On January 10, 2023, Council adopted an Ordinance to award a franchise to BIG Outdoor for the installation, operation, and maintenance of a digital wayfinding and outof-home advertising kiosk network for a 20-year term, per the terms and conditions stated in the ordinance. The City initiated the Digital Wayfinding and Out-of-Home (OOH) Advertising Kiosk Program to provide interactive information to residents and visitors, enhance public safety via emergency capabilities, deliver community messaging, and generate revenue through advertising sales. The City and BIG Outdoor executed a franchise agreement, effective February 22, 2023 (the “Franchise Agreement”).
Additionally, on March 25, 2025, Council adopted an Emergency Ordinance amending Santa Monica Municipal Code Chapter 9.61 to increase flexibility for signage in the Bayside Conservation District and Third Street Promenade to promote economic recovery. With the adoption of the IZO, animated signs, including digital display signs, are now permitted on a façade facing the Third Street Promenade. These animated signs are permitted only if they are on-site signage (i.e., advertisement that pertains solely to goods or services that are produced or offered on the premises where the advertisement is displayed). Furthermore, animated signage is limited in size to the area above the storefront.
In its ongoing efforts to promote economic recovery and growth within the Downtown District, the Council adopted an emergency ordinance to establish the Third Street Promenade Entertainment Zone, on May 13, 2025. The establishment of this entertainment zone provides valuable opportunities for the City to also consider synergistic enhancements to its existing commercial signage on the Promenade. 4 of 18
Project Information
The first digital display (24ENT-0233) is proposed to be installed on the upper level façade of the existing commercial building at 301 Arizona Avenue/1253 3rd Street Promenade, at the northeast corner of 3rd Street and Arizona Avenue. This digital display would comprise approximately 820 sf of area, wrapping the corner of the building above the storefront. The display would be full motion, with LED and would provide for paid on-site and/or off-site advertising, curated art, and civic announcements.
Address 301 Arizona Avenue/1253 3rd Street Promenade
Parcel Size: 14,998 sf
Zoning District: Downtown – Bayside Conservation (BC)
Existing On-Site
Improvements:
31,560 sf four-story commercial building
Proposed Sign Type Attached corner wrap (southwest)
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Proposed Sign
Dimensions
Varies across signage face (~ max 59’ 1” width x 16’ 5” height) Figure 1: Proposed Rendering of Digital Display at 301 Arizona The second digital display (25ENT-0021) is proposed to be installed on the upper level façade of the existing commercial building at 1202 Third Street Promenade, at the southwest corner of 3rd Street and Wilshire Boulevard. The existing building is a City designated Landmark originally constructed in the Late Moderne style. The digital display would comprise approximately 800 sf of area, wrapping the corner of the building above the storefront with the building tower still prominently visible. The display would be full motion, with LED and would provide for paid on-site and/or off-site advertising, curated art, and civic announcements.
Address: 1202 Third Street Promenade
Parcel Size: 14,990 sf
Zoning District: Downtown – Bayside Conservation (BC)
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Existing On-Site
Improvements:
44,949 sf commercial building (City-designated Landmark) Proposed Sign Type Attached corner wrap (northeast)
Proposed Sign Dimensions ~ Max 56’ 4” width x 16’ height Figure 2: Proposed Rendering of Digital Display at 1202 3rd Street Staff seeks Council direction on the proposed development agreements with key considerations to the terms of the agreements, community benefits, and performance standards. Development Agreements are negotiated contracts between the City and an applicant that specify the design parameters, development standards, and requirements of a project. Development agreements provide some flexibility from the development standards of the Zoning Code in return for some level of public benefit. While a development agreement is an alternative to the standard development approval process; in practice, it is similar to other public review processes where Council makes the final decision. The Council has more discretion in imposing conditions and 7 of 18
requirements on the proposed project and since development agreements are negotiated contracts, both parties must agree to all terms. A development agreement is adopted by ordinance.
Financial Considerations
The installation of large format, digital displays on the Promenade provides a valuable opportunity to generate financial revenue for the City and to stimulate commercial activity in the City’s Downtown District. Other cities such as West Hollywood, the City of Los Angeles, and the City of San Jose have recently permitted digital displays within public rights-of-way and on private properties in exchange for financial benefits to the jurisdiction (see Attachment A of this report).
The City of West Hollywood, which currently allows for offsite signage and billboards, has a comprehensive off-site signage policy for Sunset Boulevard, with large digital signage permitted through development agreements. The development agreement grants the signage applicant the vested rights to construct and operate the digital billboard during the term of the agreement and in exchange, the City of West Hollywood receives a number of significant public benefits. Proposed billboards must demonstrate a high level of creativity and meet specific design excellence principles that are set forth in the Sunset Boulevard signage policy.
Similarly, on December 15, 2023, the City of Los Angeles adopted an ordinance to permit Metro’s Transportation Communication Network (TCN) digital display off-site signage project. The TCN project consists of digital displays on up to 49 Metro-owned sites. The TCN project is being implemented through an agreement between Metro and the City of Los Angeles that establishes revenue sharing on a 50/50 basis.
In San Jose, new digital displays are being implemented in a phased approach with the first phase focused on off-site signage on city-owned sites and the second phase directed at off-site signage that faces the freeway and in the downtown area. The first phase was approved on February 25, 2025, and would permit six digital displays on five 8 of 18
city-owned sites. In return, San Jose would receive between 30-33% of revenue with a minimum annual guarantee.
Digital billboard programs for signage that are located on public property generally generate more financial benefits due to site control by the public agency permitting the billboards. The applicant for the development agreements has proposed a 20% revenue-sharing structure along with a minimum annual guarantee to be paid according to a schedule:
Year(s) Min Annual
Guarantee
1 $500,000
2 $750,000
3-4 $850,000/yr
5-9 $935,000/yr
10-14 $1,028,500/yr
15-19 $1,131,350/yr
20-24 $1,244,485/yr
25-29 $1,368,933.50/yr
30-34 $1,505,826.85/yr
35-39 $1,656,409.54/yr
40-44 $1,822,050.49/yr
45-49 $2,004,255.54/yr
50-55 $2,204,681.09/yr
In addition to the revenue sharing and MAG, the applicant has proposed a one-time contribution ($500,000 per display) to be paid upon construction of the digital displays.
Staff seeks Council direction as to the financial benefits proposed by the project applicant.
Additionally, in reviewing the financial benefits of the proposed digital displays, Council should consider the potential for digital advertising oversaturation, particularly as it 9 of 18
relates to the Franchise Agreement between BIG Outdoor and the City. Under the Franchise Agreement, the City is entitled to a MAG of $5,000,000 per year during the 20-year term of the Franchise Agreement. The concept of advertising saturation implies that with increased investment in advertising, there will be a point where each additional dollar spent yields less return than the previous one. Therefore, the City is in the process of retaining a consultant to analyze the impacts, if any, on the digital kiosks.
Should Council direct staff to proceed with development agreement negotiations, Staff will engage an outside consultant with expertise in the digital signage market to conduct a valuation study of the proposed digital displays on the Third Street Promenade, including an analysis of their ability to generate a consistent revenue stream for the City.
Additionally, an assessment of the potential fiscal impact of new digital billboards on the City’s existing digital kiosk program will be conducted. The results of the valuation study and fiscal impact analysis will be utilized to inform the development agreement negotiations.
Community Content
Another community benefit for Council consideration is allocated display time for curated community content such as civic news, public service announcements, emergency notifications, Amber Alerts, community event updates, and/or cultural arts.
The City’s Arts Commission has expressed interest in utilizing the digital displays to showcase local artists and cultural programming. Although the City does not have the resources or dedicated staff for a digital arts program, Council could require that the digital billboard operator coordinate with the City for professionally curated art content as part of its responsibilities for ongoing programming and operation of signage.
The Council may also wish to consider allocating unsold ad time for the advertising of local businesses at a reduced cost. This provision would support the City’s Buy Local program to strengthen the local economy.
Other Considerations (Terms, Other Community Benefit Considerations) 10 of 18
Due to the high upfront cost associated with the installation of digital displays (minimum of $1,000,000 or more), digital display agreements from other cities typically have terms of 10 years or more. A longer-term agreement provides greater assurance of financial revenue for the City but commits the City to the digital billboard on the site(s) for the length of the agreement. The applicant has proposed a term of 55 years for both development agreements, which is the typical term required to ensure affordability for inclusionary units in new market rate development. The Franchise Agreement has a 20-year term.
As part of the agreements for digital billboards, cities have also required placemaking contributions and urban enhancements. For example, in the City of Santa Ana, operators of new digital billboards must provide landscaping to the property and removal of other static billboards to reduce visual clutter. Another option in lieu of physical improvements is funding for community beautification efforts such as open space or infrastructure improvements, or contributions to the Downtown Business Improvement District.
Furthermore, to ensure continued commercial vibrancy and presence on the site, a building occupancy threshold could be imposed to ensure that the building on which digital display is affixed will be predominantly occupied with tenants. The applicant for the proposed development agreement has proposed a ground floor occupancy of 50%.
Potential Issues or Concerns
Digital billboards are strictly regulated by other cities to address potential concerns associated with driver distraction and aesthetic impacts on nearby sensitive land uses.
Driver Distraction – One issue of concern regarding digital billboards is the potential for driver distraction, particularly for the portions of the displays that face cross streets to the Promenade (i.e. Wilshire Boulevard and Broadway). State law, through California Vehicle Code Section 21466.5, prohibits the display or maintenance of “any light of any color of such brilliance as to impair the vision of drivers upon the highway.” Excessive light, flashing/strobe effects, intense contrast, and scrolling text should be prohibited to minimize driver distraction. The applicant and City staff are aware of State law 11 of 18
requirements and would refine the proposal based on best practices employed by other examples of freeway-adjacent signage in the region.
Impacts on Sensitive Land Uses – While the Third Street Promenade is comprised of mostly commercial uses, there are some residential uses located on or near the Promenade that may have view of the proposed digital signage. Staff is commissioning a lighting study with a consultant to analyze the potential lighting impacts on these nearby sensitive uses. Nonetheless, it is anticipated that standards regulating illumination levels, contrast, and glare would be required to minimize potential effects.
First Amendment Considerations and Framework for Future Applications In 1985, the City Council adopted Ordinance Number 1333 (CCS), adopting the City’s Sign Code, which, in part, prohibited offsite advertising, including billboards. Offsite advertising existing at the time of the Sign Code’s adoption could remain in place for an additional 15 years, but was required to be removed by 2000. Since that time, the prohibition on offsite advertising and billboards has remained in place. While the City generally has discretion with respect to land use and contracting decisions, signs are a form of expression protected by the free expression clauses of the United States and California Constitutions, which generally results in a higher level of scrutiny by courts.
Because digital billboards that display offsite advertising are protected First Amendment expression as commercial speech, courts will review content-neutral regulations on such digital billboards under the intermediate scrutiny test for commercial speech set forth in Central Hudson Gas & Elec. Co. v. Pub. Serv. Comm’n (1980) 47 U.S. 557, 566.
This means that, upon legal challenge, a court will look to see whether: 1) the City has demonstrated a significant governmental interest in regulating digital billboards; 2) that the regulation directly advances the asserted government interest; and 3) the regulation is not more extensive than necessary. If the Council desires to move forward with permitting digital billboards that display offsite advertisements in the general Promenade area only, the Council could consider adopting an ordinance to create a pilot program that establishes a “sign district” delineating a geographical area around the Promenade that limit where digital billboards are allowed in the City. This would avoid potential citywide proliferation of digital signs while the City studies the effectiveness of digital billboards in the Promenade area. Should the Council not desire to limit the potential 12 of 18
locations of digital billboards that display offsite advertising, no such pilot program or sign district would be necessary.
Regulatory Framework
Interest in new digital billboards is particularly high on Santa Monica’s iconic Third Street Promenade. The high levels of visitor foot traffic associated with the Third Street Promenade provides valuable opportunities for digital marketing. In addition to Council direction on the two proposed development agreements, Staff is seeking direction from Council as to whether a broader regulatory program should be established to determine what areas of the City are appropriate for digital billboards, and under what conditions.
Should Council desire to limit the geographical areas of the City in which digital billboards are eligible, staff recommends that the program be limited to the Promenade area, with all digital billboards subject to execution of a development agreement in a form and content acceptable to the City.
The City could benefit from establishing program parameters as a pilot program through adoption of an ordinance that would guide the proposals for new digital displays. The two pending applications provide an appropriate basis and starting point for development of program parameters if Council supports establishment of such a program, including whether to adopt the program prior to initiation of negotiations of any development agreements for large format digital displays. Program requirements for consideration could relate to:
➢ Location: Where future digital displays would be allowed. Staff recommends that future digital displays be limited to the Promenade based on the following reasons:
General Plan/Downtown Community Plan Consistency: The installation of digital displays on the Promenade is supported by numerous DCP goals and policies, including but not limited to the following.
• Goal LU2: Downtown is a thriving creative and cultural center with a unique concentration of innovative businesses, performance spaces, museums and programmed events.
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• Goal LU3: Santa Monica’s Downtown continues to be the economic center for the City, providing a diverse and flexible mix of uses that can meet future resident, business and visitor demand.
• Goal CCP2: Downtown continues to be a thriving and diverse economic force that supports the city’s vitality, fiscal stability and high levels of community services.
o Policy CCP2.1 Strengthen the retail experience by supporting cultural and art uses, connections to the Expo Light Rail, and attractive streets and public spaces.
o Action CCP2.1A Partner with merchants, property owners, residents and community supporters of Downtown Santa Monica to share responsibility for implementing this Community Plan and achieving its goals. o Policy CCP2.3 Support Downtown’s role as a visitor destination by encouraging uses that appeal to both locals and tourists, including food, retail, entertainment and overnight accommodations.
• Goal CCP5: The Third Street Promenade continues to anchor the Downtown’s retail and public space experience with updated features and activities. o Policy CCP5.1 New public art should be encouraged and located to enhance the pedestrian experience and create an immersive arts experience.
o Action CCP5.1A Install Pathway Art, Banners and Urban Design Features to support the walking experience and to promote awareness of Downtown’s cultural offerings.
o Policy CCP5.2 Consider opportunity for negotiated development agreement art contributions to be aggregated in order to facilitate the acquisition of significant public art pieces.
• Goal PPS 4: Downtown’s public space network is operated, maintained, and managed well.
o Policy PPS4.3: Ensure that the Third Street Promenade is regularly updated to remain consistent with the surrounding areas in terms of infrastructure, landscaping, signage and aesthetic upgrades. 14 of 18
o Action AM1.3F Develop an improvement program for the Third Street Promenade that maintains its iconic role in the Downtown.
Unique Urban Character: The Promenade is the City’s only pedestrian-only outdoor shopping esplanade, lined with a diverse mix of retail, restaurant, bars, business, and entertainment uses. The Promenade is world-renowned for its vibrancy and lively street entertainment. Therefore, establishing a digital signage program on the Promenade would build on the success of this distinct activity area and would also be complementary to the Promenade’s recent designation as an entertainment zone.
Minimal Impacts on Sensitive Uses: While there are some very limited residential uses on the upper floors of existing commercial buildings, the Promenade is predominantly commercial and has historically been developed for commercial uses. As such, limiting future digital signage to the Promenade would minimize potential environmental effects on sensitive residential uses.
Economic Opportunity: The Promenade is considered the City’s economic engine, generating 15% of sales tax revenues citywide. The Promenade is one of the top destinations for Santa Monica tourists. In the month of April 2025, Downtown Santa Monica Inc, recorded a visitor count of approximately 351,282.
The high visitation levels of the Promenade create valuable and focused opportunities for the digital advertising market.
Consistency with the Third Street Promenade Stabilization and Economic Vitality Plan: Downtown Santa Monica, Inc. (DTSM) engaged in a series of conversations, workshops, interviews, and surveys and developed the Third Street Promenade Stabilization and Economic Vitality Plan. It recommends short- and medium-term policy and procedural changes to continue promoting the stabilization and economic vitality of the Third Street Promenade. Some of these proposed changes are to existing land use regulations, one of many 15 of 18
elements that can contribute to making the Promenade a successful, and economically sustainable retail environment of choice.
➢ Operational hours: Note that the proposed DA’s are for 24/7 operations with signage to be dimmed at night
➢ Size and Type: For example, freestanding vs building placement ➢ Design Standards: Brightness/illumination levels, display times, refresh rates, and other standards related to design approval by the City ➢ Proposed Community Benefits: Potential community benefits (e.g., upfront and ongoing revenue and allocation of funds, community content, associated off-site improvements, etc.)
Fiscal Impact Analysis
As indicated previously, West Hollywood’s Sunset Strip signage policy establishes comprehensive standards and guidelines for new digital displays. Through established uniform standards, the potential issues of driver distraction and aesthetic impacts can be minimized.
Public Outreach & Community Meeting
A community meeting was held on-line for the projects on April 3, 2025 via Zoom. The meeting was also noticed, including the meeting Zoom link, on the on-site signage, as well as on the home page of the website for the projects. There were 12 attendees outside of the development team. Comments from attendees included questions on pedestrian safety, energy usage of the digital signage, advertising rates, and operational standards.
Questions for Council
Terms 1. What terms and conditions should the agreements contain (length, options for extensions, etc.)?
Community Benefits
Financial 2. Is the proposed financial benefit structure 16 of 18
appropriate?
3. Other considerations in terms of payment timing
(e.g., timing of one-time contribution for each
digital signage)?
Community /Art Content 4. How should public art content be curated?
5. As part of the community content benefit, should
there be benefits for local businesses?
Other 6. What other community benefits should be
considered? (e.g., streetscape enhancements,
contributions to the Downtown Business
Improvement District, etc.)
7. What is an appropriate occupancy threshold for
the proposed buildings?
Location 8. Are the locations for the two proposed digital displays appropriate?
9. Should the City establish a guiding program/policy
for future applications of digital displays?
Performance Standards 10.What operating conditions should be applied to the proposed digital displays?
11.What other performance standards should be
established (other than brightness, refresh rates,
etc.)?
Next Steps
Council will need to provide direction on whether to pursue the development agreements for the proposed digital displays and whether a broader framework for a digital signage program is appropriate. If directed by Council, Staff will proceed with Development Agreement negotiations and conduct environmental review of the proposals in accordance with the California Environmental Quality Act (CEQA).
Environmental Review
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This study session is not a “project” subject to CEQA. Pursuant to CEQA Section 21065, the project does not meet the definition of a “project” subject to CEQA as it will not “cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment”. The purpose of this study session is to receive Council direction and comments. No actions are being undertaken that will result in direct or indirect physical changes in the environment. CEQA review will be undertaken if Council directs staff to proceed with the proposed development agreement applications.
Past Council Actions
Meeting Date Description
January 10, 2023 Council adopted an Ordinance to award a franchise to BIG Outdoor for the installation, operation, and maintenance of a digital wayfinding and out-of-home advertising kiosk network in the public right-of-way.
March 25, 2025 Council adopted an Interim Zoning Ordinance (IZO) amending Santa Monica Municipal Code Chapter 9.61 to increase flexibility for signage in the Bayside Conservation District and Third Street Promenade to promote economic recovery.
May 13, 2025 Council adopted an emergency ordinance to establish the Third Street Promenade Entertainment Zone Pilot program.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended actions in this report. Should the Council direct staff to proceed with the proposed development agreement applications, staff would return to Council with the negotiated development agreements which would include financial contributions to the City.
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Prepared By: Rachel Kwok, Environmental Planner
Approved Forwarded to Council
Attachments:
A. Attachment A - Digital Displays in Other Jurisdictions B. Written Comments
C. PowerPoint Presentation
D. PowerPoint Presentation