Attachment E
Downtown Catalyst Incentive Program – Program Guidelines Purpose
The Downtown Catalyst Incentive Program (the “Program”) uses the City’s $3 million Economic Development Fund, established by the City Council on March 24, 2026 as part of the Realignment Plan Update, to support a small number of high-visibility catalyst projects on and around the Third Street Promenade. The Program is designed to fill prominent vacancies, bring people Downtown in the evenings and on weekends, and draw additional private leasing and investment to the Downtown core. The Program is deliberately concentrated – rather than spreading limited funds across many small awards, it targets two to three projects with the greatest potential to change how the market sees Downtown Santa Monica. All assistance is provided as a forgivable loan earned through performance over five years.
Program Structure
Path Who Applies What It Funds Award
Operator Track A business signing a new
lease for eligible space in the
Program Area
Interior build-out, furniture,
fixtures and equipment, and other
pre-opening costs
Up to $1.5 million
Owner Track A property owner with a
signed letter of intent from a
priority-use tenant (a signed
lease is required before
disbursement)
Permanent building
improvements, including
restaurant infrastructure,
storefronts, and building systems
Up to $1.5 million
Anchor Award Operator, owner, or both, for
a project of exceptional
catalytic value
Projects that exceed the standard
tracks in size, scope, or funding
source
As approved by
Council
Program Area
Projects in Zone 1 receive priority. Projects in Zone 2 are eligible where the catalyst case demonstrates a direct benefit to the Promenade and the Downtown core. • Zone 1 (priority): Frontage on the Third Street Promenade between Wilshire Boulevard and Broadway.
• Zone 2: Frontage on the blocks surrounding the Third Street Promenade, bounded by Ocean Avenue, 5th Street, Wilshire Boulevard, and Colorado Avenue.
Eligible Space: Ground Floor Priority, Second Floor Considered Ground-floor space is the Program’s priority, because ground-floor uses activate the street directly. Second-floor space is also eligible and will be considered where the use has a visible street-level presence, including a dedicated ground-floor entry and signage, and contributes evening and weekend activity to the Promenade. Several of the Promenade’s most prominent vacancies are two-story spaces, and projects that activate both the ground and second floors of a building are particularly encouraged. Space above the second floor and basement-only space are not eligible.
Priority Uses
The Program supports uses that generate significant pedestrian activity, extend the hours of activity Downtown, and give people a reason to return. In order of priority:
1. Blended food, beverage, and entertainment concepts (highest priority). Projects that combine food and beverage with entertainment in a single venue such as a restaurant with live music or performance; a bar or lounge with games or interactive experiences; food hall with programmed entertainment; or a dinner-and-show or supper club concept. These uses are prioritized because they generate evening and weekend activity, longer stays, and repeat visits, and because they are the uses the Promenade most lacks today.
2. Food and beverage. Full-service restaurants, bars, and food halls, particularly those open evenings and weekends.
3. Entertainment and experiential uses. Entertainment venues, experiential retail, and destination retail that draw visitors from beyond the immediate area.
Office uses, and uses that do not generate significant pedestrian activity, are not eligible.
Threshold Requirements
Every project must:
• Be a priority use in eligible space within the Program Area. • Have an operator that qualifies under one of the three Operator Tiers described below and has the financial capacity to open and sustain the project. • Have a signed letter of intent or lease with a term of at least five years (for the Operator Track, a signed lease is required before disbursement; for the Owner Track, a signed lease with the priority-use tenant is required before disbursement).
• Demonstrate the need for City assistance, as described under Financial Submittals below.
• Be in good standing with the City and the State of California.
Operator Tiers
The Program is open to operators at different stages of experience. Rather than a single experience threshold, applicants are evaluated under one of three tiers. Operator strength remains a core element of the catalyst case for every project, and the tier determines the level of underwriting and the structure of disbursement rather than eligibility alone.
Operator Tier Who Qualifies Award and Underwriting
Tier 1 –
Established
Operator
An operator with five or more years of
successful experience running a comparable
business, or an operator of multiple
comparable locations.
Eligible for the full award amount
under the applicable track. Standard
underwriting.
Tier 2 –
Experienced
Operator or
Proven Concept
An operator with two to five years of
successful experience running a comparable
business; or an operator bringing a proven
concept with an existing successful location
to Santa Monica; in either case with an
experienced general manager, chef, or
operating partner on the team.
Eligible for the full award amount
under the applicable track. Enhanced
underwriting, including phased
disbursement tied to construction and
opening milestones.
Tier 3 – Emerging
Operator
A newer operator with fewer than two years of
experience, or a first venture, that presents a
strong concept; a signed letter of intent or
lease; demonstrated financial capacity,
including committed equity or financing; at
least one experienced hospitality or retail
professional on the management team, or an
industry mentor or partner; and a
commitment to participate in the City’s
Business Concierge Program.
Awards generally capped below the
full award amount under the Operator
Track, with milestone-based
disbursement and enhanced reporting
during the first two years of operation.
Tier 3 operators may also be supported
as the tenant in an Owner Track
project.
For Owner Track projects, the tier of the proposed tenant is considered as part of the catalyst case and the structure of the owner’s loan.
Financial Submittals
The Program is designed to respect the privacy of applicants’ financial information while giving the City the assurance it needs to make a public purpose finding. Financial submittals are handled in two stages:
• At application, applicants submit a summary project budget (sources and uses of funds), a description of the private investment committed to the project, and a brief written statement explaining why the project would not proceed, or would proceed
only at a materially reduced scale or on a materially delayed timeline, without City assistance. A full operating pro forma is not required at application. • During review, applicants selected for underwriting provide detailed financial information, including an operating pro forma, financial statements, and lease economics, directly to the City’s independent third-party financial reviewer under a confidentiality agreement. That information is used to confirm need, financial capacity, and the appropriate award amount and structure. Detailed financial information is treated as confidential financial information and will be withheld from public disclosure to the extent permitted by the California Public Records Act. • In the public record, staff’s recommendation to Council will summarize the independent reviewer’s conclusions at the level necessary to support the findings required by Government Code section 53083, including the amount of public assistance, the private investment committed, the jobs projected, and the basis for the finding that assistance is necessary, without disclosing the applicant’s proprietary financial details.
Catalyst Criteria
Projects are not scored by points. Instead, each recommended project is supported by a written catalyst case addressing the following:
• Catalytic effect on Downtown leasing and investment, including the prominence of the space and its likely influence on adjacent leasing decisions. • Activation, including hours of operation, evening and weekend programming, outdoor dining, entertainment components, and anticipated visitor volume. • Operator strength, evaluated under the applicable Operator Tier. • Speed and certainty of opening.
• Private investment above the minimum, and the number of jobs created. • Local roots and community support.
Key Loan Terms
Term Operator Track Owner Track
Interest 0% while in compliance 0% while in compliance
Forgiveness 20% per year over five years of
continuous operation
20% per year over five years while the
space is occupied by a priority use
Term Operator Track Owner Track
Owner match None City funds must be in addition to the
owner’s own contribution to the
improvement effort (additional tenant
improvement funding, tenant leasing
concessions, or other building owner
participation), and may not be passed
through to the tenant as rent
If the business
closes
Unforgiven balance due Nine months to re-tenant with an approved priority use before repayment
is required
Security Guaranty; security interest in equipment;
landlord recognition agreement
Recorded deed of trust and covenant on
the property
Owner
commitments
Not applicable Actively market other vacant eligible
spaces in the Program Area; maintain
building frontage and common areas
Not eligible Rent, refinancing, costs at other
locations, corporate overhead
Rent, refinancing, costs at other
locations, corporate overhead
Disbursement terms are tailored to each project and set in the loan agreement, with phased or milestone-based disbursement for Tier 2 and Tier 3 operators. Every agreement includes an opening deadline of no more than 12 months following disbursement of funds.
Funds must be repaid if the business does not open, and all disbursed funds, including amounts previously forgiven, are due upon misuse of funds or material misrepresentation.
Anchor Awards
Anchor Awards are available for a project of exceptional catalytic value that requires an award above $1.5 million; combines both the Owner and Operator Tracks for the same space; requires City assistance above the base Program guidelines; or requires funding beyond the Economic Development Fund. Each Anchor Award requires City Council approval supported by a written catalyst case, and any funding beyond the Economic Development Fund requires separate Council action.
Selection and Approval
Through an open and continuous application process, staff will build a curated pipeline through direct outreach to Downtown property owners, brokers, and operators, including newer and emerging operators. Each identified project will be reviewed and assessed by staff, with independent third-party financial review of selected projects to confirm need, capacity, and catalytic potential.
Every award requires City Council approval at a noticed public hearing. After Council approval, the City Manager’s Office, through the Economic Development Division, will administer approved agreements. The City Attorney approves all agreements as to form.
Measuring Results
A baseline of existing economic conditions is recorded for each project at approval.
Results are reported annually through the Realignment Plan Scorecard, with the City’s economic health database as the primary data source. Metrics include, but are not limited to:
• Jobs and sales at the project.
• Hours of operation and evening and weekend activity.
• Occupancy and leasing in adjacent buildings and on the surrounding blocks. • New private investment nearby.
• Visitor activity.
Scale and Evaluation
The Downtown Catalyst Incentive Program is a pilot and is expected to support two to three projects. Any repayments are returned to the Economic Development Fund. Staff will report to the City Council on results once the initial allocation is committed, with a recommendation on whether to continue, modify, or expand the Program at that time.