Item 9-C

City Council Meeting 8-17-99 Santa Monica, California

TO: Mayor and City Council

FROM: City Attorney

SUBJECT: Recommendation to Conduct a Public Hearing on the Need to Revise Bayside District Specific Plan to Protect and Foster Appropriate Mix of Retail, Restaurant and Other Uses on The Promenade and of the Need to Enact Interim Protections During the Amendment Process

Introduction

At its meeting of July 13, 1999, the City Council directed City staff to suggest alternatives for dealing with two concerns: an overall shift in the mix of uses on the Third Street Promenade in the direction of more retail outlets and fewer restaurants and the planned conversion of a particular food court on the Promenade into a retail outlet. This staff report responds to that direction.

Background

The Third Street Promenade is the heart of the City's downtown business district. Securing and maintaining the Promenade's economic viability has been a significant municipal goal for many years.

The former Third Street Mall never attained economic success. By the mid-1980's its long-standing physical and economic decline threatened the welfare of the entire business district. In 1986, the City Council responded to this threat by adopting the Third Street Mall Specific Plan. It provided a framework for revitalizing the mall and thereby enhancing economic activity throughout the downtown area.

Over the next couple of years, the City made substantial public improvements pursuant to the Plan. The pedestrian mall was redesigned and significantly enhanced through the addition of fountains, public art, landscaping, lighting and other improvements. This effort created The Third Street Promenade. In addition to the public improvements, significant private development also occurred. Entertainment and restaurant uses increased substantially, and the Promenade became an entertainment center. Overall, the general goal of revitalizing the old mall was attained. However, more work was necessary to maximize the area's economic success. Consequently, the City returned to the planning process.

In 1996, the City Council adopted the Bayside District Specific Plan which is a component of the City's General Plan. The specific plan establishes both goals and policies for the district, some general and others quite specific. For instance, the general goals include attracting and accommodating a mix of day time and evening uses serving both residents and visitors. Specific policies include adding retail uses to the Third Street Promenade to compliment the influx of restaurant and entertainment uses which had proliferated over the preceding decade.

Discussion

The Council requested staff input on two matters. First, the Council asked for suggestions for reassessing and ensuring the most desirable mix of retail and other uses on the Promenade.

Staff has begun amassing factual information relevant to this issue and will present currently available data at the Council meeting. Staff's preliminary assessment indicates that, since the adoption of the Bayside District Specific Plan, the ten year projection for retail growth to be achieved by 2006 has already been met. Today, the Bayside District Corporation reports that there are over 530,000 square feet in the Bayside District devoted to retail. The influx in retail establishments has substantially increased demands on City parking facilities. Moreover, it has significantly impacted the rental market on the Promenade because retail facilities command substantially higher rents than restaurant uses. This means the recent trend of increasing the concentration of retail uses and diminishing the concentration of restaurant uses will likely continue and probably escalate because property owners have a strong financial incentive to make the shift from restaurant to retail.

The continued expansion of retail uses has the potential to fundamentally change the character of The Promenade and its overall ambience. It could also undermine the long-term success of The Promenade which has as its foundation the availability of a wide mix of commercial establishments which serve both the local community and the region.

Based upon information available as of the writing of this report, staff believes that the Council should hold a public hearing and deliberate on the issue of whether changed circumstances warrant undertaking amendments to the Bayside District Specific Plan. Additionally, if the information presented to Council suggests that the mix of businesses on the Promenade is likely to change so substantially during the course of that process as to imperil the Promenade's ongoing economic vitality, the Council should also consider directing staff to propose interim measures which will afford protection during the amendment process, which could be fairly lengthy.

At the July 13^th meeting, the Council also directed staff to evaluate whether any action could or should be taken to protect existing tenants of a food court who are facing eviction because the owner has opted to change the property to a retail use. In response, staff obtained information about that situation. In 1997, pursuant to longstanding plans and based upon the experience of operating the food court, the owner gave the tenants one-year notice that their leases would be terminated. Litigation ensued, and the owner and tenants have stipulated to a judgment requiring the tenants to vacate by September of this year. The owner has also already entered into a long-term lease with a retail establishment. Based upon these facts and a review of applicable legal constraints, staff has concluded that the Council has no viable option for either protecting these tenancies or preserving the present use.

Recommendation

Staff recommends that the Council hold a public hearing on the issues of whether the Bayside District Specific Plan should be amended and whether circumstances warrant establishing interim protections for the period necessary to conclude the amendment process.

PREPARED BY:

Suzanne Frick, Director of Planning and Community Development

Marsha Jones Moutrie, City Attorney

Barry Rosenbaum, Senior Land Use Attorney