By Marc L. Verville, Former Audit Subcommittee Chair, Sunset Park, Santa Monica
This note is to strongly urge you to select Staff Option #1, Approve a six-month extension (two consecutive 90-day periods). As staff notes, this option would continue negotiations with RPG, while preserving the City’s ability to terminate if no viable plan emerges as prudent. This aligns with RPG’s sole request at this time, which is a 180-day extension of the Exclusive Negotiation Agreement (ENA) in order to study and quantify the financial and other impacts before any deal is finalized.
There are several major economic positives in the RPG proposal that cannot be duplicated by any alternative use of the site.
1. First, in their presentation “The Santa Monica Civic Reimagined”, RPG repeatedly states that their proposal will require NO City money or bonds to realize this project. The RPG presentation is titled “The Santa Monica Civic Reimagined” and can be found at:
2. Second, they are including a new park on the site of the existing parking lot, adding green open space to the sector of the City which has the highest rate of densification.
3. Third, the elimination of parking will increase the capacity utilization of the City’s existing downtown parking facilities by venue visitors. These facilities generate General Fund revenues, which the Council has declared to be of the highest priority for the City, both in this Fiscal Emergency and for its long-term financial stability.
4. Fourth, the influx of visitors will form the nexus of economic revitalization and growth of all of Santa Monica’s unique revenue-generating destination assets that include the Pier, the Promenade, Santa Monica Place, and the city’s large hotel footprint. Increasing hotel occupancy rates will, through the Transient Occupancy Tax (TOT), generate one of the highest immediate positive revenue impacts to the General Fund, as it is one of the Fund’s highest revenue streams.
5. Fifth, and critically, RPG estimates that visitors to this venue will spend an average of $300 per day, excluding ticket prices. This represents an almost tenfold (10x) spend compared to the $33.47 total estimated 2024 daily spend for Daytrip Visitors that was noted in the HR&A analysis of the LA28 Olympic Volleyball proposal (see SMCC 2024-10-08 Item 7.A. – HR&A Advisors Full Report – Attach 17146)
The criticality to the City’s finances of the last two points cannot be overstated!
The cratering of the City’s commercial economy, and therefore the City’s finances, is directly related to the precipitous declines in both visitors and their spending, as the following charts developed the Economic Impact Reports for the period 2017 to 2023, prepared by SM Travel & Tourism (SMTT):
There is NO OTHER OPTION for the site that can deliver the scale of benefits to the City that the RPG proposal provides. In addition to the direct economic multiplier that the RPG proposal provides, the City can increase the economic benefits even more by using the revitalized Civic as the catalyst to change its entire approach to managing its destination assets. Specifically, the City can abandon its legacy siloed asset management policies and adopt a comprehensive and integrated destination asset portfolio asset management process. In this, the City can amplify economic benefits by coordinating the programming across all public destination assets and partnering with owners of the private assets to extend programming and synergistic activities. That asset portfolio includes:
- Year-round Mediterranean weather
- A live entertainment venue at the Civic Center
- SM Place shopping
- Promenade dining and entertainment
- 245 acres of world-class beach
- A globally branded and historic pleasure pier
- Comprehensive hotel options
The city’s unique destination asset portfolio cannot be duplicated by Westfield, Caruso, or any other single-venue destination.
If RPG is not granted a 180-day extension of the ENA in order to study and quantify the financial and other impacts before any deal is finalized, then it will be clear that the City has no interest in economic revitalization within an environment of no other comparable revenue-generating options and growth opportunities of this magnitude. Since housing is a net driver of increased General Fund costs, any option that includes that use will be economically counter-productive. And, the opportunity that the Civic represents will be lost forever.
It should also be noted that:
1. The staff report’s assertion that the City has not received any financial documentation or pro forma demonstrating the project’s financial feasibility appears to be a bit disingenuous since such data will be a deliverable of the conclusion of the requested ENA extension and
2. Staff’s attempt to independently develop a financial model by definition has significant economic omissions that only RPG can provide, given its hands-on experience in this field. As such, the City’s analysis by non-subject matter experts (SME) is heavily biased in the downside.
3. In addition, the Staff’s independently developed financial model omits hotel TOT uplift, sales tax uplifts, or Pier revenue uplifts noted, just to state a few omissions on the economic impact to the City. Such an analysis, executed without input from RPG (the SME here), should neither be attempted nor any such analysis output be used as the basis for any decision whatsoever.
I do not think it is hyperbole to state that denial of a 6-month ENA extension will represent active support of permanent city economic decline.
