Date: September 11, 2001
Santa
Monica, California
From: City Staff
Subject: Recommendations by the Bayside District Corporation (BDC) Board of Directors to Protect and Foster the Appropriate Mix of Retail, Restaurant and Other Uses on the Third Street Promenade
At its meeting
held July 26, 2001, the BDC Board of Directors considered and adopted a
recommendation of its Land and Asset Committee to request City Council approval and direction that staff implement
eight recommended actions to protect the appropriate mix of retail, restaurant
and other uses on the Third Street Promenade.
Additional measures related to the retail/restaurant mix were
recommended by the Land and Asset Committee and adopted by the BDC Board of
Directors at its meeting held August 30, 2001.
This report summarizes these proposed actions, and suggests methods and
timing for their implementation if authorized by City Council.
In July of 1999 the City Council directed staff to provide
alternatives for dealing with a shift in the mix of uses on the Third Street
Promenade. The Council was concerned
with the shift towards retail and fewer restaurants and the loss of affordable
food service. Staff returned to Council
in August of 1999 with information and a recommendation to conduct a hearing to
determine if the Bayside District Specific Plan should be amended and if the
circumstances necessitated adoption of an interim ordinance. Based on public testimony, Council directed
staff to return with a work plan and monitor the activity in the Bayside
District to determine what actions the business community may take to resolve
the problem. This report provides
information on the efforts of the Bayside District Corporation and the current
status of the mix of uses.
Over the last fifteen years the City has maintained the
vitality of the Promenade and an appropriate mix of uses by enacting
regulations in response to market trends.
The first occurred when the City enacted regulations encouraging
theaters on the Promenade and prohibiting the use in other areas of the
City. Following these regulations, in
1991 the City enacted regulations encouraging outdoor dining along the
Promenade, in 1992 restrictions to limit the number of restaurants, alcohol
outlets, and game arcades were enacted to encourage more retail uses; and in
1994 fast food outlets were restricted to address their proliferation.
The Third Street Promenade currently offers a diverse and
unique blend of restaurants with outdoor dining and retail establishments that,
in combination with active and popular street performers, create a desirable
pedestrian-oriented commercial ambiance attracting large numbers of Santa Monica
residents and visitors. The outdoor
dining element and the mix of uses is regarded as a significant amenity of the
Bayside District, and serves to distinguish it from many other commercial
venues. As such, the general blend of
restaurants and retail activities that contribute to the popularity and
economic success of the Third Street Promenade warrants preservation and
protection.
As presented to Council
in August 1999, 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 of retail in the
Bayside District. With the influx of
retail comes increased demand on parking facilities. The City has established the Downtown Parking Task Force to
identify solutions, however, any recommendations will occur over a ten year
period. If retail growth continues to
occur, significant parking impacts may negatively impact the Bayside District.
It is also noted that, during the two-year period ending
July 1, 2001, six restaurants with outdoor dining have left and one restaurant
with outdoor dining has opened on the Third Street Promenade. The continued expansion of retail uses has
the potential to fundamentally change the character of the Promenade and it’s
desirability as a destination. This
could undermine the long term success of the Promenade which is designed to
offer a wide mix of commercial establishments which both serve the local community
and the region.
To address the problem, the Land and Asset Committee of BDC
together with The Fransen Company and Economic Development Division staff have
worked to quantify the amount of outdoor dining currently providing service to
the area, identify economic trends that may adversely affect the mix of uses,
and identify actions to maintain the approximate current blend of uses and
levels of outdoor dining.
Attached is a by-block summary of retail and restaurant uses on the Third Street Promenade as of July 31, 2001, inclusive of the number of businesses, comparative ground floor square footage and comparative front footage. The decline in the number of restaurants with outdoor dining and conversion of the vacated space to retail use is apparently a function of the difference in relative rent-paying capabilities of restaurants and retail establishments. Retailers, especially formula retailers attracted by high pedestrian counts and economic success of earlier retail tenancies, are willing and able to pay higher occupancy rates for frontage on the Third Street Promenade. Based upon surveys conducted by The Fransen Company and City staff, the gap between recent retail and restaurant rents is varying but substantial, although anticipated to decline as retail sales activity generally slows. The recent trend of increasing the concentration of retail uses and diminishing concentration of restaurant uses will likely continue and probably escalate because property owners have a strong financial interest in making a shift from restaurant to retail. In order to maintain a continuing balance between retail and restaurant activities, mechanisms needed to be identified to partially mitigate the rental gap that has emerged.
The Land and Asset Committee reviewed alternative means to
address the displacement of restaurants with outdoor dining by retailers and
concluded that only a combination of intervention actions would be
beneficial. The recommendations of the
Committee approved by the BDC Board on July 26, 2001, are feasible immediate
actions to be taken by the City to encourage and preserve restaurant uses. These proposals are an initial step in a
continuing process to maintain an appropriate mix of uses and to address preservation
of community-based retailing.
The BDC Board, in its capacity for promotion of the
continued economic revitalization of the Downtown area and advisory to the City
regarding planning, zoning and developmental strategies to enhance the Downtown
as a community resource, has transmitted eight recommended actions to City
Council by letter dated August 8, 2001, and requests that City staff be
authorized and directed to proceed with implementation of the actions. Both the BDC and City staff acknowledge that
these actions alone will not be sufficient to preserve restaurant uses and
maintain an appropriate mix on the Third Street Promenade. As an initial action
in combination with further strategies and actions to prospectively be taken by
Planning Commission, City Council, the BDC and private property owners, staff
concurs with the recommendations and notes the following:
Food vending cart operations on Third Street Promenade by Promenade Services, Inc. and its independent operators are constrained by limited adequate commissary space now available to the cart program operator. However, a number of prospective vendors are capable of meeting all County health and other permitting requirements by removal and proper maintenance of their privately-owned food carts at private commissaries outside the area.
Conversion of the City’s kiosks on the Third Street
Promenade to provide food and beverage service would be designated a preferred
use under the City’s Bayside District Leasing Guidelines and phased in over
time as the current leases to local retail businesses expire. Complete implementation of this
recommendation will require approximately five years.
Such
use of the Third Street right-of-way must be subject to review by the City
Attorney, Planning Commission, SMFD, SMPD and State ABC for consideration of
public safety, alcohol license restrictions and other special use conditions.
Such expansion would be implemented
with appropriate Architectural Review Board and Planning Commission review, and
implemented as part of new or renewed outdoor dining licenses subject to
Council approval.
As
above, implementation will require appropriate City reviews and outdoor dining
license approval.
6. Encourage design of restaurants on the Third Street
Promenade and the Transit Mall to incorporate outdoor dining as a featured
element.
As
above, implementation will require appropriate City reviews and outdoor dining
license approval. Outreach to
restaurants fronting on the Transit Mall to add outdoor dining as a featured
element consistent with the design standards adopted by City Council on August
14, 2001, has already commenced.
7. Promote retention of outdoor dining through price-supported
rental for any new or expanded outdoor dining license.
Current
outdoor dining licenses on the Third Street Promenade provide seating for 680
restaurant customers and will expire 12/31/01.
These licenses now generate rental revenue of $1.50 per square foot per
month for the dining areas, for an average of $400 per month per restaurant
with outdoor dining and an aggregate income to the City General Fund of
approximately $120,000 per year. A
reduction in the rental charge for outdoor dining may directly assist in
mitigating the rental rate gap between restaurants and retail
establishments. Council may consider
that a nominal charge ($0.50/s.f./month) be placed on new or expanded outdoor
dining licenses to at least recover part of the City’s cost of issuing and
administering the licenses.
8. Determine the feasibility of permitting installation of
weather protection within outdoor dining license areas.
Architectural
Review Board and Planning Commission have adopted design standards for
prospective outdoor dining license areas on the Transit Mall. These standards are pending Council review,
and the adopted standards should be also applied to the Third Street Promenade.
The
Land and Asset Committee continued to review additional public and private
mitigation or intervention measures to preserve a desired blend of restaurants
with outdoor dining and retail activities.
At its meeting held August 28, 2001, the Committee approved and referred
additional measures for adoption by the BDC Board of Directors. On August 30, 2001, the BDC Board of Directors
approved and transmitted to City Council the following actions:
1.
Allow any
existing restaurant within the Bayside District to transfer their existing
Conditional Use Permit (CUP) to a new location also within the Bayside
District, provided that there is no expansion of square footage and/or number
of seats and subject to administrative guidelines.
Several Board members expressed a
concern that this measure could inadvertently hasten the relocation of
restaurants from the Promenade to other sites within the District, and that
potential relocation sites could create conflict with proximate residential
uses. Staff believes that facilitating
relocation of restaurant establishments within the Bayside District will serve
to retain restaurants which may otherwise leave the District entirely and
thereby preserve the blend of
restaurant and retail uses on a district-wide basis.
2.
Waive
requirement for a CUP for a new restaurant on the Promenade serving beer and
wine if the establishment has less than 100 seats.
Ease of access to the Promenade by new,
small restaurants with limited alcoholic beverage sales will tend to promote
the Promenade as a preferred dining location.
3.
Waive City
fees and expedite permit approvals for new buildings within Bayside District
that have a restaurant use in the building including ground floor outdoor
dining.
Council should consider setting of a
reasonable size and duration of commitment threshold to trigger fee reductions
or expedited permit approvals and thereby
encourage innovative new restaurant development, and a reasonable limit
to avoid over-concentration of restaurants within the Bayside District.
4.
Consider
setting a per-block trigger for requiring a development review for any use
conversion from restaurant to retail at 90% of the current (as of 08/30/01)
outdoor dining lineal footage.
Property owner obligation to obtain a
CUP is a time and cost impediment that will encourage retention of restaurants
on the Promenade, and establishment of a 10% alteration from current conditions
as a trigger acknowledges that some minor change may occur without
necessitating the development review process.
Current mix of uses in the three blocks of the Promenade ranges from 22%
restaurant frontage in the 1200 Block, 30% restaurant frontage in the 1300
Block, and 24% restaurant frontage in the 1400 Block, with an aggregate 25%
restaurant frontage.
5.
As a general
policy statement, flexibility should be maintained throughout the CUP process
by allowing a change of use from restaurant to retail on the Promenade if an
adequate restaurant presence, including outdoor dining, is preserved within the
building.
Based
on the available information and the current use trend of restaurant to retail
conversion, staff believes the Council should conduct a public hearing and
determine if conditions warrant undertaking amendments to the Bayside District
Specific Plan. If the Council decides
the mix of businesses on the Promenade is likely to change so significantly
during the course of that process as to damage the economic vitality of the
Promenade, the Council should also consider directing staff to develop interim
measures which will protect the vitality of the Promenade during the study
process, which could be very lengthy.
These interim measures may include implementation of the recommendations
made by the BDC Board of Directors.
The
additional public measures will likely require Planning Commission action as
well as implementing ordinances by Council.
A companion trend observed in the Downtown area has been growth in
formula retail and restaurant establishments and the resultant loss of a
relatively unique and distinctive commercial environment. This separate but related issue will
necessitate further recommendations from the Land and Asset Committee to the
BDC Board, and from the Board to City Council.
Budget/Financial
Impact
The
Department does not expect any increase in expenditures as a result of the
implementation of the recommendations.
However, revenues would be affected.
Outdoor
dining licenses on the Third Street Promenade now produce approximately
$120,000 in revenue to the City General Fund under agreements that expire
12/31/01, based upon a license fee of $1.50 per square foot per month. Staff had anticipated increasing the license
fee to $2.00 per square foot per month commencing upon renewal of the expiring
agreements, thereby increasing General Fund revenue to approximately $160,000
per year. Reduction in outdoor dining
license fees to a nominal $0.50 per square foot per month would annually
produce approximately $40,000, a reduction of $120,000 per year from
anticipated revenues.
Recommendation
Staff
recommends that City Council approve the actions proposed by the Bayside
District Corporation as initial steps to protect and foster an appropriate mix
of retail, restaurant and other uses on the Third Street Promenade; authorize
staff to implement the approved actions; conduct a public hearing subsequently
to determine if the Bayside District Specific Plan should be amended and if
circumstances warrant the establishment of interim protections for the period
necessary to conclude the amendment process; and direct staff to continue its
work with Bayside District Corporation to identify and propose to City Council
additional strategies and actions to preserve a desired blend of restaurants
with outdoor dining and community-based retailing.
Prepared by:
Jeff Mathieu, Director of Resource Management
Mark Richter, Economic Development Manager
Suzanne Frick, Director
of Planning & Community Development
Attachments: A) Third Street
Promenade Restaurant/Retail Mix as of 07/31/01
B) Third Street Promenade Restaurant/Retail Lease Durations
(ATTACHMENT B IS NOT AVAILABLE ELECTRONICALLY. IT IS AVAILABLE IN THE CITY CLERK’S OFFICE
AND AT THE CITY’S PUBLIC LIBRARIES.)