CCSADMIN:\415PCH011006suppl.doc

Council Date: January 10, 2006 Santa Monica, California

Supplemental Staff Report

To: Mayor and City Council

From: City Staff

Subject: Transmittal of Information Regarding Operating Revenue and Expenditure Projections for 415 Pacific Coast Highway

Introduction

In response to a request by a Councilmember, the following provides the most recent projections for operating revenue and expenditures for 415 Pacific Coast Highway (415 PCH).

Background

The 415 PCH Reuse Plan, adopted by the City Council in 1999, outlined an economic model that would generate net operating revenue to offset, in part, the costs of maintaining the site for broad public access. Specific revenue-generating components included revenue from public parking, beach concessions and meeting room and special event facility rentals. The economic assumptions outlined in the Plan pointed to a goal of financial self-sufficiency, while acknowledging the possible need for a City subsidy to support the significant public benefits of the project. The attached preliminary projections are consistent with this model and based on general community use assumptions that will be refined as the project goes forward.

Discussion

The attached preliminary projections provide several options for Year 1 (start-up year) and Year 2 based on assumptions regarding seasonal schedule, the number of special events permitted, the rate structure (reduced versus standard rental rates), the mix of special events (meetings and social functions) and specialized community recreation programs offered. In all scenarios, general public use of the site and its facilities are predominant. The projected costs do not include a deferred maintenance or capital project reserve which will also be required and will be considered as project planning proceeds.

In Year 1, the primary operational focus is projected to be implementation of the public recreation program and visitor services. These components do not generate net operating revenues as is typical of the City’s recreational facilities. Accordingly, Year 1 requires a significant operating subsidy. The projections conservatively assume that Year 1 operations will include some special event rentals (an average of 4 events per week in the Event House and smaller events in the North House) but not at a level that provides revenue offsets for all fixed event management costs or overall site maintenance.

In Year 2, the projected subsidy is reduced under each of four scenarios. Option 4 presents a “break-even” scenario that provides for the highest level of public recreation programming while also assuming the highest level of special events (an average of 8 events per week in the Event House).

Conclusion

The attached preliminary projections indicate that the project, as proposed, can be operated consistent with the economic assumptions of the Council-approved Re-Use Plan and the proposed Schematic Design, while providing adequate flexibility for refinements as the detailed operating plan for the site is developed.

Prepared by: Barbara Stinchfield, Director

Department of Community and Cultural Services

Attachment: Preliminary Projections – 415 PCH Operations Financial Summary, 1/10/06

Preliminary Projections – 415 PCH Operations

Financial Summary (1/10/06)

Net Operating Revenue	Year 1 - Low	Year 1 - High	Year 2 - Low	Year 2 - High
Option 1: Event House- 50/50 reduced/standard meetings/North House -50/50 reduced/standard mtgs./Pool -Closed winter
Parking	$ 255,114.00	$ 255,114.00	$ 255,114.00	$ 255,114.00
North House	$ (42,775.00)	$ (42,775.00)	$ (42,775.00)	$ 42,775.00)
Event House	$ (244,190.00)	$ (83,085.00)	$ 263,290.00	$ 422,755.00
Pool, Recreation & Site Management	$ (590,778.00)	$ (590,778.00)	$ (590,778.00)	$ (590,778.00)
Concession Stands	$ 68,500.00	$ 68,500.00	$ 68,500.00	$ 68,500.00
Total	$ (554,129.00)	$ (393,024.00)	$ (46,649.00)	$ 112,816.00
Option 2:Event House- 25/75 reduced/standard meeting/North House -40/60 reduced/standard split /Pool -Extended fall/spring weekends
Parking	$ 255,114.00	$ 255,114.00	$ 255,114.00	$ 255,114.00
North House	$ (31,645.00)	$ 31,645.00)	$ (31,645.00)	$ (31,645.00)
Event House	$ (244,190.00)	$ (83,085.00)	$ 263,290.00	$ 422,755.00
Pool, Recreation & Site Management	$ (635,243.00)	$ (635,243.00)	$ (635,243.00)	$ (635,243.00)
Concession Stands	$ 68,500.00	$ 68,500.00	$ 68,500.00	$ 68,500.00
Total	$ (587,464.00)	$ (426,359.00)	$ (79,984.00)	$ 79,481.00
Option 3 Event House- 50/50 reduced/standard meeting/ North House -25/75 reduced/standard split/Pool -Year round weekends
Parking	$ 255,114.00	$ 255,114.00	$ 255,114.00	$ 255,114.00
North House	$ (14,950.00)	$ (14,950.00)	$ (14,950.00)	$ (14,950.00)
Event House	$ (244,190.00)	$ (83,085.00)	$ 263,290.00	$ 422,755.00
Pool, Recreation & Site Management	$ (701,674.00)	$ (701,674.00)	$ (701,674.00)	$ (701,674.00)
Concession Stands	$ 68,500.00	$ 68,500.00	$ 68,500.00	$ 68,500.00
Total	$ (637,200.00)	$ (476,095.00)	$ (129,720.00)	$ 29,745.00
Option 4: Event House-25/75 reduced/standard meeting/ North House -20/80 reduced/standard split/Pool -Year round weekends with daily lap swim
Parking	$ 255,114.00	$ 255,114.00	$ 255,114.00	$ 255,114.00
North House	$ (9,385.00)	$ (9,385.00)	$ (9,385.00)	$ (9,385.00)
Event House	$ (244,190.00)	$ (83,085.00)	$ 263,290.00	$ 422,755.00
Pool, Recreation & Site Management	$ (737,918.00)	$ (737,918.00)	$ (737,918.00)	$ (737,918.00)
Concession Stands	$ 68,500.00	$ 68,500.00	$ 68,500.00	$ 68,500.00
Total	$ (667,879.00)	$ (506,774.00)	$ (160,399.00)	$ (934.00)