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SR-03-12-2013-3Dlame City af i Council Report Santa Monica City Council Meeting: March 12, 2012 Agenda Item: 3-D To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Movie Theater Consulting Services Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a sixth modification to Professional Services Agreement No. 8943 in the amount of $60,000 with IJM Enterprises, a California -based company, to provide consulting services related to development of a cinema project in the Downtown. This will result in an amended agreement with a new total amount not to exceed $180,000, with future year funding contingent on Council budget approval. The term of the agreement shall continue as month -to- month. Executive Summary The City hired IJM Enterprises in 2004 to provide consulting services related to cinema planning and development in the Downtown area. These consulting services have included assisting the City with evaluating theater operators and negotiating complex deal terms for possible cinema development. Staff is seeking an amendment to IJM's contract in the amount of $60,000 to support continued assistance with discussions and negotiations with prospective theater operators /developers for the Downtown area. Background The Promenade Uses Task Force was established by the City Council in 2001 to understand how best to enhance the vitality and maintain the proper balance of uses on the Third Street Promenade and in the Bayside District. The Task Force studied the mix of retail, restaurant, and entertainment uses at that time, and concluded that the existing cinemas in the District were outdated and likely would become less competitive in the near future unless they could provide appropriate amenities such as stadium seating and state -of- the -art technology. In its review of the Task Force recommendations, the City Council identified cinema redevelopment as a top priority for the Downtown area. 1 Following Council review, the City hired IJM Enterprises in 2004 to provide expert advice regarding cinema planning and development. With the assistance of IJM Enterprises, the City issued an RFP in January 2008 soliciting proposals for the possible development of a mixed -use cinema project at 1320 4th Street. This RFP process led to the selection of Metropolitan Pacific Capital Inc. in partnership with AMC Entertainment Inc. (AMC Development Team). On September 8, 2009, Council authorized exclusive negotiations with the AMC Development Team. During the exclusive negotiating period, IJM Enterprises assisted the City with negotiating the deal terms. The exclusive negotiating agreement with the AMC Development Team expired on November 26, 2012 and AMC informed staff that the development team would not seek an extension of exclusive negotiations. Discussion On December 11, 2012, Council authorized staff to negotiate with other cinema providers to develop a cinema project in the Downtown area. IJM Enterprises had played a lead role in reaching out to cinema operators who are actively expanding and building new theaters; however, the contract funding for IJM Enterprises has been expended. Currently, there is strong interest in the project from developers and cinema operators, and staff is expecting to receive several development proposals to evaluate this spring. If a viable cinema development proposal is selected, staff will seek Council authorization to enter into exclusive negotiations. IJM's experience and expertise will be essential for the negotiations. Contractor /Consultant Selection Given the specialized nature of the theater industry, IJM Enterprises was selected in 2004 based upon their qualifications and specialized cinema experience. The principal of IJM Enterprises, Ira Mitchell, has over 30 years of experience in cinema development. The specialized expertise of IJM Enterprises is needed to help facilitate evaluating the next phase of development negotiations for a cinema project in the Downtown area. The original contract in 2004 was executed as a sole source and each 2 subsequent modification has been executed in a similar manner. In the first modification, the term was modified to be month -to -month based on project needs. The term of the agreement shall continue as month -to- month. At the time the original contract was executed, IJM Enterprises was the only known movie theater strategy consultant in the region. The original contract was approved by the City Manager because the amount was less than $70,000. The contract was subsequently amended pursuant to Council authorization. Staff has reevaluated the professional services needed and the availability of cinema theater consultants who can perform this work and has determined that IJM Enterprises remains uniquely qualified and experienced to warrant the sole source extension. Financial Impacts & Budget Actions The contract modification to be awarded to IJM Enterprises is $60,000, for an amended contract total not to exceed $180,000. Funds in the amount of $30,000 are available in the FY 2012 -13 budget in division 012681; the contract will be charged to account 012681.555060. The remaining $30,000 will be requested as part of the FY 2013 -15 Proposed Biennial Budget and is contingent on Council budget approval. Prepared by: Erika Cavicante, Senior Development Analyst Approved: Andy Agle, Directo`r'"-- Housing and Economic Development Forwarded to Council: 3 Rod Gould City Manager Reference Amended Contract No. 8943 (CCS)