City Council
Report
City Council Meeting: July 14, 2026
Agenda Item: 4.D
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To: Mayor and City Council
From: Oliver Chi, City Manager, Office of Economic Development Subject: Approval of the Downtown Santa Monica Inc.'s Fiscal Year 2026 -27 Budget and Work Plan and Community Event License Agreement for Lot 27 Recommended Action
Staff recommend that the City Council:
1. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) and a finding of categorical exemption pursuant to Section 15301 of the California Environmental Quality Act (CEQA) Guidelines; and
2. Receive and approve the Downtown Santa Monica, Inc. (DTSM) Fiscal Year 2026-2027 Budget and Work Plan; and
3. Approve a Community Events License Agreement for Lot 27 (1325 5th Street) for a term of two years, with three annual options to renew (through July 1, 2031), to allow DTSM to continue operating events and activations on the City-owned parking lot.
Summary
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 35-block district is bounded by Ocean Avenue to the west, Wilshire Boulevard to the north, Lincoln Boulevard to the east and the Santa Monica Freeway to the south.
The roles and responsibilities of DTSM are defined in the Master Services Agreement (9063 CCS) and annual DTSM Work Plan. Under that Master Services Agreement, the 2 of 9
City authorizes DTSM to manage and provide a variety of programs and services related to the operation of the PBAD.
The City and DTSM have a long-standing relationship, through which our two agencies have leveraged resources to help enhance the downtown district, in an effort to attract visitors and investment to the Downtown, goals which DTSM have outlined in their FY 2026-27 Work Plan and Budget.
The receipt and approval of the proposed DTSM Work Plan and Budget for Fiscal Year 2026-27 would authorize DTSM’s continued operations, along with the City’s quarterly revenue disbursement to their organization for services, in accordance with the Master Services Agreement.
Discussion
DTSM is a 501(c)(3) non-profit organization that operates 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 is under contract with the City to provide a variety of enhanced hospitality and maintenance services, and supports the development of programs / events in the Downtown.
The work engaged by the City with DTSM to enhance Santa Monica’s Downtown is particularly important at this moment in time. Challenges exist in the Downtown, as retail and office vacancies have remained high, compounded by the fact that the city has seen a significant reduction in international tourists visiting Santa Monica during the past several years. To address these issues, the City Council in 2025 adopted the Realignment Plan, which advanced $60 million in City funding to support Santa Monica’s overall revitalization efforts. A key component of the Realignment Plan has been a focus on enhancing safety and cleanliness in the City’s commercial areas, with particular attention being paid to the Downtown. Those maintenance, public safety, and event programing efforts have been supported by the public-private partnership 3 of 9
between the City and DTSM, whereby the two organizations have leveraged resources to support the economic success of Downtown.
DTSM’s annual work plan and budget was adopted by the DTSM Board on May 28, 2026, after the documents were released on the evening of May 27, 2026. The workplan and budget are generally consistent with activities programed in prior years, with notable shifts being instituted by DTSM to enhance their staffing levels while reducing consultant spending. DTSM’s Downtown security budget also was reduced from around $1.7M down to around $1.25M, as the workplan developed by DTSM prioritizes brand management and outreach. Efforts are also being made by DTSM to further leverage the Promenade Entertainment Zone and activate it and align with the global sporting events coming to the Los Angeles region (World Cup ’26, Superbowl ’27, Olympics ’28). The work plan also acknowledges the City’s allocation of resources under the Santa Monica Realignment Plan to assist with strategic Promenade event activations, with the goal of developing more robust event programming to reinvigorate public space, increase foot traffic, and help attract new businesses downtown.
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.
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• 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 2026-27 budget and work plan for Council review, acceptance, and approval.
FY 2026-27 Budget
DTSM has prepared a balanced budget for FY 2026-27 of $9.5 million.
Operations & Public Space Management $7,421,543
Brand Management & Outreach $1,237,800
Organizational Management $794,604
Total $9,453,947
Anticipated revenue will come from property-based assessments ($5.4 million), business assessments ($1.3 million), and enterprise program income, including event fees, filming revenues, and Lot 27 activations, totaling $1.1 million. DTSM also holds a contract with the City to administer the Downtown Ambassador Program ($1.6 million).
Overall, projected revenues represent less than a one percent increase over DTSM's budget last year. DTSM anticipates securing additional event sponsorship revenue beyond what was forecasted in the budget.
The DTSM Board of Directors adopted the annual budget and work plan on May 28, 2026. In response to the current economic climate, DTSM did not increase assessment rates; annual assessments have not been raised by the Consumer Price Index (CPI) since 2020.
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Operational Work Plan for FY 2026-27
The proposed Work Plan details DTSM’s operational and programming initiatives for FY 2026-27 (attached). The work plan’s three strategic areas are:
1) A Clean Downtown
2) A Safe Downtown
3) Brand Management
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 78.5% of the DTSM, Inc’s FY 2026 -27 Budget. Within this category, DTSM has budgeted $1.25 million for private security and $1 million for Block by Block Management, the organization that provides the DT Ambassador and restroom monitoring staffing at the public parking structures.
To help achieve efficiencies, DTSM is proposing a pilot program to utilize restroom monitors to also undertake some pan and broom cleaning nearby, throughout the day in between the restroom monitoring shifts. DTSM will also continue to provide enhanced maintenance including pressure washing and deep cleaning services throughout the Downtown.
DTSM and City staff meet regularly to monitor and evaluate the overall service delivery as outlined in the Annual Work Plan (attached). Staff may be coming back to Council at a later date with proposed amendments to the DTSM Services Agreement based on ongoing operational discussions between the City’s Public Works team and DTSM staff.
Brand Management: Successful districts share several defining characteristics: they are culturally relevant, supported by a strong local user base, and sustain consistent activity throughout the day. DTSM will position itself not simply as a retail district, but as a place defined by experience. At the core of this identity is the concept of promenading.
The work plan includes updated signage and wayfinding, refreshed collateral to help 6 of 9
create a feeling of excitement and positive change in Downtown Santa Monica. Public space will be treated as a stage with activation sand installations reinforcing a sense of energy and excitement. The $1.2 million allocated to Brand Management (13% of total budget) will help fund a series of community events and activations strategy including weekly programming in partnership with the Farmers Markets and Promenade businesses, monthly and seasonal programming to provide greater variety, and high impact activations and co-branded events tied to cultural and regional moments that generate significant foot traffic, media attention and sponsorship opportunities (e.g.
World Cup “Watch Parties,” Superbowl activations and SM Blockfest).
Organizational Management comprises 8% of the budget including office rent, memberships, supplies and expenses. This year, the DTSM Board appointed a new executive director who has brought some of her strategic branding and public policy colleagues with her to the DTSM team to assist with the implementation. The DTSM Team is currently comprised of six full-time staff.
Community Events License Agreement – Lot 27 (1325 5th Street) Under the Master Services Agreement, between the City and DTSM, DTSM is responsible for promoting and continued economic revitalization of the Downtown Business District as well as providing programs, projects, and services that benefit Santa Monica residents, Downtown merchants, property owners, customers, and visitors.
On August 5, 2013, the City and DTSM entered into a License Agreement (CCS 9674) to allow DTSM to use City-owned property at Parking Lot 27 for the installation and operation of a temporary ice-skating rink. The initial Agreement was subsequently amended (CCS 11323) to extend term until February 2026 with updates to the minimum days and hours of operations, memorializing of DTSM’s continued commitment to make the annual ice-skating event as sustainable as practical, and inclusion of a revenue share component with the License Fee. The Agreement expired on February 28, 2026. 7 of 9
On September 28, 2021, the City Council authorized the City to negotiate fees and enter into an agreement with DTSM to allow for the expanded use of Lot 27 for community-serving events and activations that promote and revitalize the Downtown business district and/or provide programs, projects, and services that benefit the City residents, merchants, property owners, customers and visitors (collectively “Events”).
This included authorization for DTSM to produce and manage the 626 Night Market and other community events on the city-owned parking lot located at 1325 5th Street in Santa Monica (“Lot 27 License Area”). A subsequent amended agreement extended the term and frequency of events and aligned the site rental fee with the daily parking rate. It also included provisions for City and DTSM to share the revenues generated from these events. The Agreement expired on December 31, 2025.
Anticipated revenue will come from property-based assessments ($5.4 million), business assessments ($1.3 million), and enterprise program income, including event fees, filming revenues, and Lot 27 activations, totaling $1.1 million. DTSM also holds a contract with the City to administer the Downtown Ambassador Program ($1.6 million).
Overall, projected revenues represent less than a one percent increase over DTSM's budget last year. DTSM anticipates securing additional event sponsorship revenue beyond what was forecasted in the budget.
Council is being asked to authorize a new license agreement with DTSM for a term of two years, with three annual options to renew, extending through July 1, 2031. The agreement would authorize ongoing activations of Lot 27, including the holiday ice skating rink, which will be permitted for up to three months each year.
As part of the City's sponsorship, use of the parking lot will be donated to support the holiday activations (e.g. ice skating rink), reflecting the community benefit these bring to downtown. If DTSM generates a profit through the holiday activation, such as through increased sponsorships or ticket sales, the City and DTSM will share the net revenue.
The actual revenue share will be subject to further negotiations between City and DTSM staff, based on actual expenses and the type and duration of holiday activation. 8 of 9
For all other times of the year, the license agreement will authorize DTSM to activate the site up to 10 days per month, subject to a site rental fee equal to twice the daily parking rate, along with a 50% share of net revenues. The maximum daily parking rate at Lot 27 is currently $17.50 per parking space, adjusted annually by the Consumer Price Index and/or Council fee study adoption. For example, a site rental covering fifty parking spaces would incur a fee of $1,750 per day. The holiday ice rink is exempt from this site rental fee.
Council’s current adopted fee schedule for parking lot rentals is three times the daily parking rate but does not include a revenue share component. The lower rental rate proposed through this license agreement will help to attract extended community events (as opposed to one-off, single day activations) to the downtown district including sporting event “watch parties,” food markets, car shows and more. This will also help to generate additional funding for both DTSM and City in support of downtown strategic priorities, including further marketing, events, capital improvement projects and clean/safe efforts.
Environmental Review
The City approval of the proposed license agreement and Fiscal Year 2026-27 Budget and Work Plans are exempt from CEQA pursuant to Section 15061(b)(3), the common use exemption, 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 City’s approval of these documents are administrative in nature and provide for continued administration, funding, and operation of DTSM services. Therefore, it can be seen with certainty that the recommended actions would not result in a direct or reasonably foreseeable indirect physical change to the environment, and as such, are not subject to CEQA.
Furthermore, temporary use of the City parking lot is categorically exempt from CEQA pursuant to Section 15301 (Existing Facilities). Section 15301 of the CEQA State Guidelines provides a Class 1 (Existing Facilities) exemption for projects that consist of the operation, repair, maintenance, leasing, licensing, permitting, or minor alteration of 9 of 9
existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of the existing or former use. The proposed use of the parking lot for temporary community events would not involve any physical alteration of the site and would result in no more than a negligible expansion of its existing use. Therefore, the license agreement is categorically exempt pursuant to Section 15301 of the CEQA State Guidelines.
Past Council Actions
Meeting Date Description
Attachment A + B DTSM FY26/27 Budget and Work Plan
07/08/2025
(Attachment C)
Council Approval of DTSM FY25/26 Budget and Work Plan
Financial Impacts and Budget Actions
There are no immediate financial impacts or budget actions necessary as a result of the recommended actions. It is estimated that the license agreement will generate enough funding to cover any loss in parking revenue at Lot 27. Community event revenue generated from the Lot 27 rentals is deposited to the City’s Parking Operations revenue account 01600004.403330. Budget adjustments would be incorporated in the FY 2026- 27 Midyear Budget or FY 2026-27 Year-End Budget, if needed.
Prepared By: Jennifer Taylor, Economic Development Manager Approved Forwarded to Council
Attachments:
A. Downtown Santa Monica Work Plan (FY 2026–27)
B. DTSM FY 2026-7 Operational Budget
C. Council Approval of FY 25/26 Annual Work Plan + Budget