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AUG 1 1 1987
CjEO:EDD:PC:JPM:pw
council Meeting: August 11, 1987
Santa Monioa, California
TO: The Mayor and City Council
FROM: city Staff
SUBJECT: Adoption of a Resolution by the City council Amending
the Fee Levied for the Operation, Maintenance and Repair
of Public Improvements in the Third street Mall and
Downtown Assessment District
INTRODUCTION
This staff report recommends that the City council adopt the
attached resolution amending the fee levied for operation,
maintenance and repair of public parking structures and conunon
areas in the Third Street Mall and Downtown Assessment District.
The proposed amendment to the fee levied for operation,
maintenance and repair is intended as a concomitant action to be
effective upon installation of parking meters in the downtown
parking structures.
BACKGROUND
At its June 23, 1987 meeting, the City Council approved in
concept a plan to install parking meters in the downtown parking
structures and reduce the annual Mall Maintenance Fee which is
levied against all holders of business licenses in the third
street Mall and Downtown Assessment District. Furthermore, the
council directed staff to prepare and submit the necessary
documents to create a new parking meter zone in the Downtown area
and amend the existing Maintenance Fee.
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subsequently, Council
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AUG 1 1 1987
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has conducted two public hearings for the introduction of an
amendment to the Municipal Code relating to the creation of a new
parking meter zone for the affected six parking structures within
the Downtown Assessment District. Staff has commenced
acquisition of the previously authorized 1,434 parking meters and
scheduled installation for October I, 1987.
The concomitant proposed fee reduction is a result of an earlier
council request that staff evaluate the equity of the formula for
determining the Maintenance Fee. To pursue this evaluation,
staff worked with the various constituent groups in the District
including property owners, merchants, professional office
tenants, Chamber of Commerce representatives and the Third Street
Development Corporation. The evaluation consisted of a
comprehensive analysis of all revenues and expenses generated in
the District to determine a fair and equi table level for the
Maintenance Fee. Most importantly, consideration was given to
adjusting the Maintenance Fee so that the emerging barrier to the
economic health of businesses in the District could be mitigated
without enlarging the General Fund or citywide contribution. It
was generally understood that the loss of funds resulting from
any adjustment in the Maintenance Fee formula would have to be
offset by a new source of revenue.
DISCUSSION
Given the projected annual parking meter revenue derived from
1,434 meters being installed by October 1, 1987 and an additional
300 meters being installed by January I, 1988, the new source of
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annualized revenue should be approximately $693,600. Considering
minimum administrative and operating expenses in managing the
parking meter operation, this new revenue source would generally
allow the Maintenance Fee to be lowered as follows:
EXISTING FEE
(1986-87)
PROPOSED FEE
(1987-88)
PROPOSED FEE
(1988-89)
o Maximum 5x Business
License Tax to ex-
ceed $15,000 (or the
adjusted amount in-
creased by the CPI) .
o Maximum 3.5x Bus-
iness License Tax
or $15,000 or
$0.10/sq. ft./mo.,
adjusted annually
by the CPI, which-
ever is less,
o On-site parking
credit.
o Maximum 3x Busi-
ness License Tax
or $15,000 or
$O.lO/sq. ft./mo.,
adjusted annually
by the CPI, which-
ever is less,
o On-site parking
credit.
The gradual reduction of the primary Business License Tax formula
is intended to relieve the financial burden being experienced by
Mall merchants, restaurant operators and service businesses
tenants. Staff believes the prevailing Maintenance Fee formula
of five times Business License Tax will discourage new or
expanding businesses from locating in the Mall district. The
eventual reduction of the formula to three times business license
tax will effectively make the combined lease rates and Mall
Maintenance Fee competitive with commercial/retail rental rates
in other parts of the market area. As a result, the vital ground
floor tenant spaces fronting on the common areas of the Mall will
be better able to attract a broad spectrum of retailers and
service businesses that serve the community.
The purpose of the square foot limitation is to resolve a
significant problem occurring with office leasing. Some office
tenants must pay significant fees due to the City I s business
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license tax rate for professionals, but often occupy very small
square footage areas. Thus the $0.10 per square foot per month
cap would provide assurance to potential tenants that their
effective rent for office space would not exceed this amount.
The square foot cap would be effective on a request basis only,
with applicants having the burden to demonstrate to the City that
they qualify for a fee reduction. This is because the City does
not keep records on lease spaces with buildings (and they change
frequently as well). Applicants requesting a reduction will be
required to submit a copy of their lease and other documentation
as to the amount of gross square footage they are leasing. The
Department of Community and Economic Development, in conjunction
with the Finance Department, will work with tenants and building
owners on an individual basis to determine eligibility and
appropriate reductions in Fees. It is anticipated that
approximately 30 requests for reduction will be submitted for the
city's consideration.
The revised Maintenance Fee also provides a credit for businesses
when the following conditions are met: parking is within a 300
foot radius; parking is provided free to the public; and, the
fee-payer seeking the credit owns, controls and is the sole user
of the parking facility. If all of these conditions exist, the
business will be eligible for a percentage credit determined by
dividing the amount of parking provided by the amount required by
the zoning code. Finally, the parking credit would be available
on a request basis only, with applicants having the burden to
demonstrate to the city that they qualify per the aforementioned
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conditions. It is anticipated that fewer than five requests will
be made.
TIMING OF METERS AND FEE REDUCTION
The Maintenance Fee for each fiscal year is normally collected
through quarterly installments. It is recommended that the
payment be lowered from the 5x rate to the 3.5x rate commencing
the second quarter of FY 1987-88, which should coincide with the
installation of the meters. For ease of transition, during FY
1987-1988, the adjusted Fee shall be collected in three equal
installments, on October 1, 1987, February 1, 1988, and June 1,
1988. Thereafter, the adjusted Fee shall be collected each
fiscal year, in four equal quarterly installments at a rate of 3
times business license tax. Starting in FY 1988-89 the first
installment would become due July 1st of each fiscal year, and
would become delinquent on August 31st ~ the second installment
would become due on October 1st of each fiscal year, and would
become delinquent on November 30th, the third installment would
become due on January 1st of each fiscal year, and would become
delinquent on February 28th~ and the fourth installment would
become due on April 1st of each fiscal year, and would become
delinquent on May 31st.
BUDGET/FISCAL IMPACT
The proposed reduction in the fee and provision of credits will
result in a loss of approximately $336,465 from this revenue
source in FY 1987-88 compared with the estimated revenue that
would have been generated in FY 1987-88 using the current fee
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multiplier of 5 times the business license tax. This loss in
revenue is less than the projected new revenue which will be
generated from the meters. The meters are projected to generate
about $490,200 in FY 1987-88 and $693,600 in FY 1988-89 (the
first stabilized year for meter revenue) and annually thereafter.
Thus the gap of District revenues versus costs is made smaller.
And because net revenues to the ci ty are increased, the ci ty
subsidy is reduced and the District moves closer to
self-sufficiency in operations.
The budgeted capital cost of the purchase and installation of all
the necessary parking meters is $736,950. Projected parking
meter revenue to the City in FY 1987-88 will be $490,200 and
$693,600 in FY 1988-89 assuming that 1,434 meters are installed
by October 1, 1987 and an additional 300 meters are installed by
January I, 1988. Projected Maintenance Fee revenue will be
$387,600 in FY 1987-88 and $344,200 in FY 1988-89 assuming the
Maintenance Fee is reduced as outlined in this report. Thus, the
net benefit to the City as a result of these actions, assuming a
straight five-year amortization of the $736,950 capital costs for
meter purchase and installation, will be $22,550 in FY 1987-88
and $157,000 in FY 1988-89 when annualized meter revenue is fully
realized.
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RECOMMENDATION
It is respectfully recommended that the City Council:
1) Adopt the attached resolution amending the fee levied
for the operation, Maintenance and Repair of Public
Improvements in the Third street Mall and Downtown
Assessment District.
Prepared by:
Peggy Curran, Director
Community and Economic Development Department
Jeffrey P. Mathieu, Manager
Economic Development Division
Attachment:
A Resolution of the city Council of the City
of Santa Monica Amending the Fee Levied for
the Operation, Maintenance and Repair of
Public Improvements in the Third street Mall
and Downtown Assessment District
(feeamen2)
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