SR-410-001
RMD:EDD:MR:DM:F:RESOURCE/STAFFREPORTS\Restaurant-Retail.doc
Date: September 11, 2001 Santa Monica, California
To: Mayor and City Council
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
Introduction
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.
Background
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
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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.
Discussion
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.
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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.
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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
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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:
Delete food service from Promenade Services cart license, and enter
1.
license agreements with individual food vending cart operators
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.
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Dedicate rental space in kiosks to leases for food and beverage service
2.
with outdoor dining.
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.
Designate public right-of-way noncontiguous to restaurants for expanded
3.
outdoor dining area.
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.
Expand outdoor dining to include adjacent retail frontage with retailer
4.
and/or property owner concurrence.
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.
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Encourage retailers with incidental food and beverage service but currently
5.
without outdoor dining to include outdoor dining service.
As above, implementation will require appropriate City reviews and outdoor
dining license approval.
Encourage design of restaurants on the Third Street Promenade and the
6.
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.
Promote retention of outdoor dining through price-supported rental for any
7.
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
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or expanded outdoor dining licenses to at least recover part of the City’s cost of
issuing and administering the licenses.
Determine the feasibility of permitting installation of weather protection
8.
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
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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.
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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
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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.
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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 to determine if the 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 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
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