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Upscale changes talk of the town

Friday, February 24, 2006 (Santa Monica Daily Press)
By Carolyn Sackariason, Daily Press Staff Writer


SM PLACE — In order to remain competitive, business and city leaders are fairly certain they’re going to need to reinvent downtown Santa Monica. The issue of who will foot the bill remains a touch murkier.

About 40 high-profile community leaders, property owners and business representatives gathered in a vacant retail store in the struggling Santa Monica Place mall on Wednesday night, discussing the future of downtown Santa Monica, how to appropriately invest into its bread and butter — the Third Street Promenade — and more importantly, how to control the management of it.

Most likely, it’s going to require creating a new assessment district at the very least, if not an entirely new organization that isn’t as closely attached to City Hall as is the current structure. Right now, the Bayside District Corp., a nonprofit organization that is funded by City Hall through assessments paid by property and business owners, manages the downtown area. Bayside’s board is appointed by the City Council, which controls Bayside’s budget.

But to do anything above and beyond what’s already in place would require millions of more dollars.

Judging from Wednesday’s discussion, there remains plenty of work to be done. The meeting was led by Brad Segal, a Denver-based consultant who specializes in downtown planning, management organizations and creating business districts. He was paid $2,500 by City Hall to facilitate the meeting.

He asked the group — which included City Manager Lamont Ewell, Assistant City Manager Gordon Anderson, City Finance Director Steve Stark, three City Councilmembers, several city staff members, dozens of property and business owners, as well as Bayside Board members — to outline downtown Santa Monica’s strengths and weaknesses. Following the exercise, which generated more negatives than positives, Segal asked the group to list improvements that might embolden the downtown area. Then the group was asked how they would spend their money — if they had it — on those improvements. (See box on page 5).

Another consultant, Marco Li Mandri, president of New City America Inc., a San Diego-based urban planning firm, was on hand to offer ideas on how to form management entities that generate money for business districts and operate as umbrella organizations. For the past year, Li Mandri has been working with what is now called the Greater Promenade Association, a group of property owners, commercial real estate interests and business leaders in downtown Santa Monica. The coalition is currently awaiting its nonprofit status from the government.

The biggest frustration for property and business owners downtown is that the millions of dollars they pay in assessments annually isn’t enough to keep Santa Monica competitive with other regional destination downtowns: Maintenance on and off the Promenade is lacking, redevelopment is costly and City Hall’s funds are limited. In addition, they feel the revenue stream that’s channeled in the downtown area isn’t always transparent.

“We really just want to know where the money is going,” said Barbara Tenzer, who owns a commercial real estate company on the Promenade and is part owner of a restaurant there.

One idea is to create a “neighborhood improvement” or “community benefit” district in which not only business and property owners would pay, but so would residents who might stand to benefit from any capital investments made to the downtown area.

This fiscal year, Bayside’s annual budget is $900,000, with $620,000 of that coming directly from City Hall. Revenue collected from assessments goes into City Hall’s general fund, a portion of which is then dispersed out to Bayside. City Hall annually collects between $2.2 million and $2.7 million from four different fees assessed to property owners and tenants downtown:

Business owner assessments: $1 million

n The central business district — which is retail businesses between Ocean Avenue and Seventh Street, from Wilshire Boulevard to the 10 Freeway — pays $200,000 annually for Bayside’s promotional fees.

n Businesses between Second and Fourth streets, Wilshire Boulevard to Broadway, collectively pay nearly $800,000 a year, which pays for ongoing costs to maintain the Third Street Promenade.

Property owner assessments: $1.2 million to $1.7 million

n Property owners pay an assessment that goes toward the debt service on bonds issued to make the original improvements to the Promenade, which is about $1.2 million a year. The assessment ranges from 23 cents a square foot to 79 cents a square foot.

n Property owners who don’t provide on-site parking are collectively charged an in-lieu fee which brings in $550,000 annually. The money goes towards parking programs, like improvements to parking structures. However, that money has not yet been spent.

City Hall also funds other support services for Bayside such as $200,000 for special items like extra window washing or special events banners. The maintenance of the Promenade is funded entirely by City Hall, which is estimated to cost about $770,000 annually. City Hall also pays for a special policing district downtown.

The consultants agreed that Bayside’s revenue stream and the entity’s management of it isn’t as equitable as it could be. In addition, it doesn’t generate enough money for the area’s needs.

“You have an outdated, irrational funding mechanism,” Li Mandri said. “If you don’t control (your downtown) you will lose it ... you need money and not go to the city all of the time ...

“You can have the greatest revenue stream and you can screw it up because it’s not managed properly.”

Li Mandri and Segal pointed to several cities across the country that have vibrant downtown areas, most of which are operated by multi-layered organizations that all have separate revenue streams. They include inclusive membership organizations where groups pay dues and provide leadership and operate as advocates; development corporations that promote small business development by working with private developers and the city; business improvement districts that are quasi-governmental and function primarily to provide services; events corporations that operate in an entrepreneurial role, orchestrating events and creating production companies; and finally, a parking corporation which privatizes public parking and contracts it out.

“You start to diversify your income and develop a strong advocacy group,” Segal said, citing cities that have been successful in creating new management structures like Stockton, Calif., and Lincoln, Neb., both of which have extremely vibrant downtown districts. “In all of these examples, these are all public/private partnerships ... You have to provide accountability to the people who are paying the freight.”

The land and asset committee of the Bayside Board, which prompted Wednesday’s discussion, will form a special committee dedicated to the issue of creating a new management structure and then make a recommendation, which will ultimately land in front of the City Council.

It appears that many business leaders are excited about the prospect of expanding their horizons.

“It seems to me like a no-brainer ... we only have so much money and unlimited ways to generate revenues if we create a community benefit district,” said Janet Morris, a property owner on the Promenade. “I’m looking forward to the future.”

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