SR 06-13-2017 3H
Ci ty Council
Report
City Council Meeting : June 13, 2017
Agenda Item: 3.H
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To: Mayor and City Council
From: Andy Agle, Director , Housing and Economic Development, Economic
Development Division
Subject: Updates to the Santa Monica Pier Leasing Guidelines
Recommended Action
Staff recommends that the City Council amend the Santa Monica Pier Leasing
Guidelines to delegate tenant selection and approval of general lease terms to the
Santa Monica Pier Corporation and to delete reference to the City’s former policy on
business with Arizona -based firms.
Executive Summary
The Pier Leasi ng Guidelines (Guidelines) provide a framework for fair and consistent
leasing and licensing of City ‐owned property on the Santa Monica Pier. Periodically,
the Guidelines are updated to reflect new standards and policies. In an effort to improve
the effic iency of Pier leasing and replicate the process for City leas ing in Santa Monica’s
Downtown , staff recommends modifying the Pier Leasing Guidelines to designate the
Santa Monica Pier Corporation (SMPC) Board as the public body responsible for
approving ten ant selection and general terms for leases and licenses on the Pier.
Leases with proposed terms of over 25 years would continue to require Council
approval. Staff also recommends deletion of the City’s former policy on business with
Arizona -based firms to reflect the City’s current policy.
Background
Following a series of Council meetings held in 2011 and 2012 (Attachment s A , B , C ) to
evaluate the governance and management of the Santa Monica Pier, the City Council
approved the reorganization and reconst itution of the Pier Restoration Corporation
(PRC) as the Santa Monica Pier Corporation (SMPC). As part of th e reorganization,
tenant selection and lease approval were removed from the SMPC’s purview in an effort
to streamline leasing on the Pier. Currentl y, the City Manager cannot negotiate and
execute a lease or license agreement of more than 36 months with a prospective tenant
without approval of the City Council. The SMPC has no formal role in the leasing
process.
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At its meeting on August 23, 2016, Co uncil directed staff to update the City’s Leasing
Guidelines for City -owned property inc luding the Pier with a revised l abor -p eace
provision. Council also directed staff to evaluate the potential impacts of the proposed
policy on small businesses. Staff pl ans to prepare information to inform a City Council
s tudy s ession in the near future to consider possible modifications to the existing labor -
peace provision in the Guidelines , as well as for other City -owned properties .
Staff recommends that the City p roceed with addressing leasing authority in advance of
and separate from the larger discussion concerning modifications to the l abor -p eace
provisions.
Discussion
The Pier Leasing Guidelines were last updated on April 8, 2014. Prior to the changes ,
the Pi er Restoration Corporation Board was responsible for approving prospective
tenants and associated leases .
During the current review of the Guidelines and in discussion with the Pier Corporation
Board, staff noted that the delegation of authority differs between the Pier and the
Downtown Guidelines. The current Council -approved Downtown Guidelines delegate
authority to negotiate leases and licenses to the City Manager, pursuant to a favorable
recommendation regarding tenant selection and general business t erms by the
D owntown S anta M onica, Inc. (DTSM) Board of Directors. Recommendation by the
DTSM Board is intended to ensure that there is public participation and transparency in
the selection of tenants, while relieving tenants of the more cumbersome proce ss of
going through a public hearing before the City Council.
To improve efficiency and to ensure consistency among bodies , as well as to recognize
the qualifications and commitment to the Pier of the Pier Corporation Board of Directors,
staff seeks Counc il authorization to amend Section 13 of the Pier Guidelines to delegate
authority to the City Manager to negotiate and execute lease s or license with terms over
36 months and up to 25 years with a favorable recommendation of the Pier Corporation
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Board. Th e City Manager would continue to retain authority to execute leases and
licenses with terms of 36 months or less. Council authorization would be required for
any proposed lease terms greater than 25 years. The proposed language is consistent
with the Dow ntown Guidelines with two exceptions. First, the Downtown Guidelines do
not address lease terms of greater than 25 years because leases with such terms would
not be expected within the City -owned spaces Downtown. (Longer -term leases are
typically associa ted with significant capital improvements, which has occurred with free -
standing restaurant spaces on the Pier where the spaces have been completely rebuilt.
Spaces in the Downtown typically require less significant tenant improvements as they
are contain ed with larger buildings such as parking structures or pavilions). Second, the
City Manager’s authority to negotiate leases and licenses of less than 36 months relates
to the vending carts on the Pier. Given the short terms of the cart licenses and micro -
entrepreneurial nature of the cart business, requiring the extended public review
process associated with longer -term leases would be expected to reduce the breadth
and scope of micro -businesses that would pursue such opportunities. There are no City
lea ses of less than 36 months Downtown, as the vending carts are operated pursuant to
a longer -term master lease.
Under the proposed changes, t he City would continue to administer tenant recruitment
of available opportunities through an open and public pro cess as set forth in the
Guidelines, and continue to be responsible for lease negotiation and contract
administration. All leases and licenses would be prepared and approved as to form by
the City Attorney.
The proposed modifications to the Pier Leasing Guidelines are shown in the attached
redline version (Attachment D) and clean -copy version (Attachment E).
City Policy on Business with Arizona Firms
Section 8.4 of the Pier Guidelines references the City’s former policy regarding business
with Arizona -b ased firms. Staff recommend s deletion of the section to reflect the City’s
current policy , adopted by Council on June 28, 2016 (Attachment F ).
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Commission Action
On February 22, 2017 , and May 15, 2017, the SMPC Board of Directors recommended
that Council a pprove the proposed changes to the Pier Leasing Guidelines.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of
amending the Guidelines.
Prepared By: Elana Buegoff, Senior Development A nalyst
Approved
Forwarded to Council
Attachments:
A. November 22, 2011 staff report
B. December 6, 2011 staff report
C. February 28, 2012 staff report
D. Pier Leasing Guidelines red line 6 13 17
E. Pier Leasing Guidelines c lean copy 6 13 17
F. June 28, 2016 Staff Report
Approved by the SMPC: 2/5/20 14
Approved by City Council: 4/8/2014
Draft: 6/13/2017
SANTA MONICA PIER LEASING GUIDELINES
These Santa Monica Pier Leasing Guidelines (“Guidelines”) provide the framework for
fair and consistent leasing and licensing of City -owned property on the Santa Monica
Pier. The Guidelines provide parameters and general policy on mix of uses, standards
and terms, and tenant recruitment and selection. They reflect the general intent and
goals of the City of Santa Monica (“City”) at the time they were approved and do not
convey any right upon anyone, or impose any obligation on the City. The City may from
time -to -time change these Guidelines or depart from these Guidelines without liability to
anyone.
1. INTRODUCTION
1.1. Background
The Santa Monica Pier began in 1909 with the construction of the Municipal Pier – the
straight portion that begins at the base of the bridge from Ocean Avenue and continues
for more than 1,500 feet over the beach and Santa Monica Bay. Santa Monica Pier’s
ability to attract large crowds impressed Charles Looff, an amusement park pioneer who
had built Coney Island’s first carousel in New York. In 1916, after negotiations with the
City of Santa Monica, Looff constructed his “Pleasure Pier” alongside the Municipal Pier
(now known as the Newcomb Pier). The Pleasure Pier featured the landmark Looff
Hippodrome building, which now is listed on the National Register of Historic Places
and houses an operating vintage wooden merry‐go‐round.
Today, the Santa Monica Pier (“Pier”) is known as one of the region’s premier
recreational and entertainment destinations, attracting over six million visitors annually.
The Pier offers spectacular ocean vistas, year round events and attractions, and is home
to a changing collection of restaurants, shops, activities and experiences.
1.2. Unique Character of Pier and Pier Environment
The Santa Monica Pier has been an icon for both the local community and Southern
California for over a century. Over this time it has provided a broad variety of
entertainment and experiences that directly relate to its beach and ocean setting. These
activities and services are predominately specific to the Pier’s on‐going “microculture”,
history and surrounding community rather than a replication of things at other piers and
places. The maintenance of the Pier’s own “personality” is a core value of the Santa
Monica community and central to the recruitment and selection of tenants and licensees.
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2. LEASING GOALS AND OBJECTIVES
The Pier is a valuable historic resource of the City to be developed, used and preserved
as a public resource for the enjoyment by the general public. The commercial leasing
and licensing program on the Pier is to be managed for the benefit of the general public
and in a manner consistent with the following goals and objectives:
I. Promote and maintain the compatible uses of City‐owned property available for
lease and license located on the Pier in a manner supporting an attractive, safe and
accessible environment for visitors and the residential community;
II. Provide for a diversity of business, entertainment, event, educational, and cultural
activities as well as active and passive recreational opportunities on the Pier;
III. Promote quality and value of goods, food and services provided by the commercial
operators on the Pier;
IV. Establish pricing of leasehold and license occupancies that reflects fair market value
to help support the fiscal self‐sufficiency of the Pier;
V. Assure access to and use of City‐owned properties by the general public through a
leasing and licensing program that promotes the orderly and equitable management
of tenancies and licenses;
VI. Preserve and promote the unique, eclectic and community recreational character
of the Pier;
VII. Preserve and build on the historic elements and character of the Pier while
ensuring its relevance and vitality to current and future generations;
VIII. Achieve fiscal, social and environmental sustainability;
IX. Enhance access and encourage both local and distant visitors to visit and enjoy the
Pier;
X. Harmonize with the surrounding beach and downtown community;
XI. Take an incremental but continuous approach to change to advance
commercial, cultural and civic opportunities on the pier ; and
XII. Seek a mix of uses and tenants that will contribute to the animation of the Pier.
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3. MANAGEMENT STRUCTURE
Leasing and licensing on the Pier is the responsibility of the City of Santa Monica through
its Office of Pier ManagementA(“OPM”) in coordination with the City’s Economic
Development Division. OPM also oversees Pier maintenance and operations. Pier
events, filming and marketing are managed by the Non‐Profit Santa Monica Pier
Corporation (“SMPC”) in accordance with Event and Marketing Guidelines developed by
the SMPC and subject to Council approval.
4. VISION FOR THE PIER AND GUIDING PRINCIPLE S
4.1. Vision Statement
A Santa Monica Pier that provides an historic platform and a legacy of colorful visitor
experience s to showcase contemporary events; a community asset that attracts,
welcomes and entertains local, regional, national and international visitors of all
incomes, abilities and interests; a landmark that offers an enticing and changing array of
site‐appropriate active and passive experiences and attractions.
4.2. Pier Guiding Principles
I. The Pier will be a signature attraction of the City of Santa Monica, known and
recognizedAworld‐wide and enjoying a broad base of local community support.
II. The Pier will be an easily accessible and visually prominent destination within the
City.
III. The Pier will provide enticing year‐round experiences and attractions for visitors.
IV. The Pier will attract and engage visitors of all ages and incomes.
V. The historic fabric and character, as well as the environmental sustainability and
structural integrity of the Pier will be documented, celebrated, maintained and
improved.
VI. Pier programming will include both traditional and cutting edge entertainment,
cultural, athletic and educational experiences.
VII. Promotions, sponsorships and private and public revenue‐producing events, will
largely off‐set the cost of popular and free public programming.
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5. SUB AREAS AND USES
5.1. Areas
The Pier is approximately 9 acres in size and consists of two adjoining piers:
I. Municipal Pier . The Municipal Pier is the primary walkway of the Pier. It is
approximately 2.5 acres in size and 1,500 feet in length. This public strolling corridor
provides the main access to restaurants, shops, amusement (e.g. carousel, Pacific Park) and
recreation (fishing, walking, viewing) areas, vending carts and performers.
II. Newcomb Pier . Located south of and adjacent to the Municipal Pier, the Newcomb Pier
(also known as the Pleasure Pier) is approximately 6.6 acres, of which 2.2 acres is currently
used for public parking and special event space.
Most merchants, facilities, and events are on the Newcomb Pier while vending carts,
kiosks and fishing activities are primarily on the Municipal Pier.
5.2. Commercial and Public Areas
The Pier presently has approximately 130,000 square feet of leasable commercial space
comprised of buildings, kiosks, carts and deck area. The current Pier tenant mix is
approximately 70 percent amusement, 25 percent dining, four percent educational and one
percent retail.
Public facilities and service areas on the Pier include the Carousel building which houses City
and SMPC offices ; a Harbor Guards station ; a Police Sub‐Station ; a Pier Maintenance
workshop ; and a second floor public observation deck. In addition there are central and
west end public restroom facilities, a central trash & recycling shed, and a 270 space public
parking lot.
The “Santa Monica Pier Development Program” approved by Council on February 9,
1988, supported a development program that consisted of approximately 150,000 square
feet of commercial area. A new planning effort under development by the City with the
assistance of the SMPC, will explore access enhancements, potential expansion of existing
activities, and new commercial and civic opportunities. This enhancement effort, and
future efforts, may alter the overall mix of activities and uses on the Pier over time to
reflect the needs of the Pier and public and changing market conditions.
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6. GENERAL LEASING STANDARDS
Leases and licenses shall be consistent with the Pier Leasing Goals and Objectives.
I. The Santa Monica Pier is public property; therefore all leases and licenses will be
subject to an open and competitive public process.
II. Lease renewals will not be automatically offered to tenants. As vacancies arise either
by lease expiration or earlier termination, recruitment for occupancy will be conducted
in accordance with the Leasing Guidelines.
III. Preferred Uses include, but are not limited to, a range of entertainment and
commercial products and services that will appeal to and serve both the residential
community and area visitors. The City may change uses as leases expire in order to
attract a tenant mix consistent withAtheAGuideline’s goals and objectives.
IV. In order to promote merchant diversity on the Pier the award of multiple
leaseholds and/or licenses to an individual tenant, licensee or operator is
discouraged but may be allowed subject to conditions provided under Section
7.5 .
V. All prospective tenants must provide evidence of economic viability and
appropriateness to the Pier of their proposed uses and business plan, as well as their
capacity and ability to develop and maintain their operation.
VI. Tenants and licensees will be expected to provide quality, visitor‐ supporting services
or activities throughout the term of their lease or license, including sustained high
levels of maintenance and cleanliness. Leases and Licenses will contain performance
standards to ensure on‐going quality and service. Failure to maintain performance
standards will be considered a material breech and subject the lease or license to
termination.
VII. Tenants and licensees are expected to be active members of the Pier community,
participating in its operational life and working together with the City and other
tenants to enhance the Pier visitor experience.
VIII. Assignment or subletting of leases is prohibited without the written consent of the
Landlord. Landlord’s consent will be subject to express standards and conditions set
forth in the lease. Assignment or subletting of licenses is prohibited without
exception.
IX. Operation and improvements to lease and license areas are subject to the City’s
standard regulatory review and approval process.
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7. MINIMUM/BASIC LEASE TERMS AND CONDITIONS
7.1. Diversity & Permitted Uses
The City will seek operators who offer creative, imaginative and unique merchandise, food
options and activities that are thematically compatible with the Pier yet not overly
duplicative of the products and services already offered on the Pier.
In order to maintain an appropriate tenant mix consisting of distinct and diverse
merchandise, food and services the City will endeavor to limit the number of merchants who
carry the same or similar types of offerings. A ‘Permitted Use’ clause shall be included in
every lease and license to describe the type of business that will be operated within the
leased premises or license area. The Permitted Use description should clearly describe the
type of business the tenant or licensee intends to operate and the merchandise, food or
service the tenant intends to offer for sale.
The purpose of the Permitted Use clause is to regulate the duplication of merchandise or
services; however, it does not grant any tenant or licensee an exclusive right to sell any
item or service. Exclusivity rights shall not be granted to any merchant on the Pier.
7.2. Term
Rental lease terms for commercial space on the Pier shall be negotiated based on the level
of capital investment, use, size of the space (leases for larger footprints are normally for
longer terms) and complementary character of the operation with the Pier Leasing Goals
and Objectives. These factors also will be balanced against the City’s policy of ensuring
that public sites periodically do become available for a public competitive process.
To maintain the vitality of the Pier the City needs to insure its ability to address the mix of
uses and activities on the Pier over time. Therefore, it needs to have a variety of lease and
license timeframes and not have the majority of licenses or leases with very long terms
or the majority of leases ending simultaneously‐‐ thus limiting the City’s ability to deal with
evolutionary changes in Pier visitor needs.
7.2.1. Recommended Terms for Leases and Licenses
I. Portable Vending Carts
The recommended term for vending cart licenses is from 6 months to 1 year.
These licenses should be subject regularly to a public process to accommodate uses that
meet contemporary Pier needs and to allow frequent opportunities for businesses interested
in operating on the Pier .
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II. Fixed Location Kiosks
The recommended term for fixed location kiosk licenses and concessions is
from 3 years to 5 years.
III. Deck Space Rental
The recommended term for the commercial license of deck space is from 1 day
to 2 years, depending upon use and circumstances.
IV. Viewers and Transmitters
The recommended term for license and concession of cameras, antennas, and
coin‐operated telescopes and binoculars range is from 1 to 5 years depending on use
and circumstances.
V. Retail Shops, Restaurants, Amusements and Aquarium
The recommended term s of leases for retail shops, restaurant, attractions an d
the aquarium range from 5 years to 25 years ‐‐AinclusiveAof any option periods.
Generally, terms of five years will be granted if there is no substantial new
capital investment in structures, structural improvements or equipment. If a tenant is
required to make substantial new capital investment in structures, structural
improvements or equipment then terms of ten years to twenty‐five years may be
considered. Additional options to extend the term provided under Section 7.5, may be
offered contingent upon the amortization and financial requirements of new investment
and findings of benefit to the City.
VI. Leaseholds Subject to Development Agreements
Term s of leaseholds that are subject to a Development Agreement will be
negotiated with the City of Santa Monica. A Development Agreement is a negotiated
contract with the City that includes a developer’s contribution of significant community
benefits and requires review by the Planning Commission and the Landmarks
Commission, and final approval by the City Council.
7.3. Rates
Rents, fees and charges on the Pier are expected to reflect fair market value.
Adjustments can be made to provide for diverse uses consistent with the Pier Leasing
Goals and Objectives or significant offsetting capital investment that provides the Pier
permanent benefits also consistent with the Goals and Objectives.
In addition to a base rent, the City may elect to require that a lease include a percentage
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rent provision, which can be differentiated by categories of sales. The City, as Landlord,
shall have the right to audit tenant's financial records to ascertain that the gross sales
figure s reported by the tenant are accurate.
Leaseholds with preferred uses for research and public educational purposes (e.g. Santa
Monica Pier Aquarium) may be maintained at other than fair market rental rates. The
City will seek to reasonably minimize its costs associated with these activities by
participating in ancillary gross receipts from commercial activities at educational
facilities.
7.4. Hours of Operation
The Santa Monica Pier is a public venue open 365 days per year 24 hours per day. Pier
merchants will be encouraged to remain open for business with adjustments related to
the time of year and type of business. Minimum business hours when all businesses are
expected to be in operation, unless otherwise specified, shall be daily between the
hours of 11 am and 9 pm. Tenants will not be required to operate on Christmas Day and
Thanksgiving.
7.5. Modifications Based on Findings of Exceptional Community Benefit
Diversity of ownership in Section 6 . IV and t he length of term in Subsection 7.2.1. V may
be modified if all four of the following findings can be made and documented:
I. The proposed project will provide an exceptional opportunity to fulfill a goal or
objective of the Pier Guiding Principles and will enhance the unique character
and the viability of the Pier.
II. The proposed project will require substantial capital investment and provide an
exceptional return opportunity to the City.
III. The proposed project will enhance the mix of uses on the Pier while still being
consistent with the Pier’s unique character.
IV. The proposed project will provide a significant enhancement to the visitor
experience at the Pier.
7.6. Triple Net Lease
Unless otherwise specified, Tenant shall pay all property taxes and assessments
(including Possessory Interest Tax), insurance, utilities and Common Area Maintenance
Fees‐‐as defined below‐‐as well as any duly‐enacted future assessment or fee that the
City may elect to institute.
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7.7. Common Area Maintenance Fees
As a condition of occupancy of a Pier building, Leasehold tenants shall pay a
proportionate share of the City’s Common Area Maintenance (“C M”) cost to manage,
maintain and provide security to Santa Monica Pier. On January 1, 2000, the applied
Common Area Maintenance cost was modified to provide for a fixed CAM payment with
biennial increases of not less than three percent (3%) and no greater than six percent
(6%) per annum. Currently the CAM fee is $7.65 per square foot per year.
7.8. General Operational and Performance Standards
Tenants must maintain high quality and uniform standards of operation and service to
sustain and increase demand for their business, maintain positive customer experience,
and enhance the overall reputation of the Santa Monica Pier. In order to achieve the
highest standards of operations the following standards may be incorporated into each
lease and license:
I. Tenants are expected to staff and operate their businesses in a first‐class and
reputable manner, commensurate with transacting a high volume of business on the
Pier.
II. Periodically, Landlord or Tenant may engage a third party “mystery shopper” to
visit and evaluate Pier businesses. Tenant will provide an action plan for improvement if
so requested by the Landlord.
III. Tenant s shall respond to Landlord’s written inquiries regarding any complaints
or issues, including postings on social media sites related to Tenant’s operations. Tenant
will provide an action plan for improvement if so requested by the Landlord.
IV. Food operations that receive a designation from the Los Angeles County
Department of Health of less than anA“ ”AmoreAthanAthreeAtimesAduringAtheAtermAofAtheA
leaseAorAlicense,AexceptAtoAtheAextentAthatAanyAsuchAratingAisArestoredAtoAanA“ ”AwithinA30A
days of receiving the lower grade, will be in default and breach of the lease/license.
Landlord recognizes that thirdApartyAactionAmayArequireAadditionalAtimeAtoAreinstateA“ ”A
rating and may request tenant to provide an action plan for improvement.
V. Any Lease extension option will be conditioned upon Tenant’s economic
performance. For example, Tenants with a percent age rent clause should have reached
rent levels requiring percentage rent payments to City for at least two of the four rental
years immediately prior to the expiration of the lease.
VI. Landlord may establish an annual review process to be performed by Office of
Pier Management Staff to evaluate key criteria utilizing a standard ized rating scale .
VII. Each Lease or License may have additional operational and performance
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standards applicable to the particular Tenant’s operation.
7.9. Maintenance and Environmental Responsibilities
Lessees and Licensees shall be responsible for maintaining their facilities in
attractive and safe condition, in compliance with applicable building codes and all
applicable environmental laws, ordinances, regulations and standards. This
includes all areas under their lease, the facades and exterior presentations , and
appurtenance’s of their facility or operation.
8. CITY POLICY PROVISIONS
8.1. Labor Peace
The City owns the Pier and has a financial or proprietary interest in Pier businesses
engaged in visitor‐serving commercial activities. Some of these businesses are in
industries that have a history of labor/management conflict. Risk of interruption
of rental revenue and common area maintenance fees received by the City from
Pier businesses would be minimized if such businesses were assured of labor
peace. An appropriate labor peace provision would minimize the City’s exposure to
revenue interruption and disruption of public recreational enjoyment of the Pier.
Therefore, new or substantially amended agreements for leasehold operation shall
provide that the tenant will not engage in practices that impede employees’ ability
to organize and contract with a labor organization for the purpose of collective
bargaining. Such prohibited practices include harassment, intimidation, “captive
audience” anti‐ union meetings or illegal terminations of workers in retaliation for
organizing. A substantial amendment is defined as a change of use of the property,
an increase in seating or square footage of more than 25%, or an extension of lease
duration. Tenant engagement in prohibited practices shall constitute an event of
default under the terms of lease. Affected leases would be those businesses having
five or more full or part‐time employees that engage in restaurant or visitor‐serving
entertainment activities such as arcades, amusement parks and nightclubs.
8.2. Sustainability
The City of Santa Monica is committed to meeting its existing needs without
compromising the ability of future generations to meet their own needs. Therefore
in order to conserve and enhance local resources, safeguard human health and the
environment, maintain a healthy and diverse economy, and improve the livability
and quality of life for all community members in Santa Monica, each new or
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substantially amended agreement for leasehold operation shall include provisions
that require sustainable practices including:
A. Carbon Foot Print Reduction. Tenant shall use best efforts to help meet City‐wide
carbon footprint reduction goals by minimizing unnecessary use of electricity and water,
minimizing or eliminating use of hazardous or toxic materials, and minimizing single‐
occupancy vehicle trips by facilitating employee use of alternative transportation modes
such as carpools, buses, vanpools, and bicycles. A list of green business best practices is
available at: www.sustainableworks.org
B. Healthy Food/Sustainable Food Provision. Tenant shall exercise best efforts to
procure and promote healthy and sustainable food practices on the Premises.
Approaches include utilizing locally and sustainably grown, organic foods from California;
offering meatless menu options and food that has been minimally processed; and
reducing food packaging waste. Tenant is expected to participate in recycling and
composting programs offered by the City. Information on the City’s Sustainable Food
Commitment is available at: www.sustainablesm.org/food.
C. Non‐Recyclable Food Service Container Ban. Tenant shall comply with the City of
Santa Monica Ordinance (S.M.C.C. 5.44) banning non‐recyclable plastic disposable food
service containers. Information on the Non‐Recyclable Food Service Container Ban is
available at : www.sustainablesm.org/container .
D. Single Use Carryout Bag Ban. Tenant shall comply with the City of Santa Monica
Ordinance (S.M.C.C. 5.45) banning the use of single‐use plastic carry‐out bags.
Information on the Single‐Use Carryout Bag Ban is available
at: www.sustainablesm.org/bag .
A. Forest Stewardship Council Approved Products. Tenant is expected to follow the
recommendations of the Forest Stewardship Council recommended products list in
procurement of supplies.
8.3. Landlord’s Licensing Program
The Landlord and The Santa Monica Pier Corporation may engage in sponsorship
programs applicable to all tenants on the Santa Monica Pier. Tenant shall agree to
participate in and be subject to such sponsorship program(s) so long as the terms of
sponsor products, goods and/or services are at least as favorable to Tenant as the terms
of agreements applicable to the same products, goods and/or services supplied to Tenant
for use on the Premises at the time of Landlord’s or Pier Corporation’s request for
Tenant participation‐‐provided that such sponsorship program does not violate any
contractual agreements entered into by Tenant.
8.4. City Policy on Doing Business with Arizona Firms
The Santa Monica City Council adopted Resolution No. 10479 (CCS) on May 25, 2010,
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which requires a review of all current and likely future agreements and contracts with
rizona‐based businesses to examine the feasibility of acquiring such products and
services elsewhere. Tenants and vendors who do not have headquarters in the State of
Arizona and those who will not be working with rizona‐headquartered subcontractors
to provide goods and/or services will take priority when considering available Pier leases
and licenses.
9. DESIGN GUIDELINES
The Santa Monica Pier 1987 Design Guidelines remain the primary reference
regarding structures on the Pier, encouraging a balanced respect for the historic
architectural elements and unique character of Pier with the intent to advance the
range of activities and services to enhance the visitor experience and success of Pier
operations and businesses. All public and private structural modifications and other
improvements proposed on the Pier will be subject to review for consistency with
the Design Guidelines, without exception.
The City’s Economic Development Division in its proprietary capacity as Landlord
must review and approve in writing all proposed modifications before any regulatory
action, including submission of applications to Planning or Building and Safety. The
regulatory permit and entitlement process involves the City as regulator, not as
Landlord. These are entirely separate roles and approval of one does not mean
approval by the other.
10. TENANCY RELATIONSHIPS
All City‐owned buildings and deck areas on Santa Monica Pier appropriate and
suitable for leasing or licensing by the City to individual tenancies or licensees will
be in accordance with agreements prepared by the City. Each tenant or licensee
will be responsible for interior maintenance and repair and utility consumption at its
sole expense, and the City generally will retain responsibility for maintenance and
repair of roofs and exterior of City buildings, and of the Pier deck and substructure
unless otherwise specified in the lease or license. Structures constructed by tenants
are subject to interior and exterior maintenance and repair by the tenant at its sole
expense. The City shall have a right to inspect all tenant improvements, including
fixed assets that will revert to the City at the end of the lease term, for the purpose
of determining maintenance and repair needs. If necessary, Tenant is responsible for
making repairs to, or replacing, such fixed assets at its sole expense.
11. TENANT RECRUITMENT
All City‐owned buildings and deck areas on Santa Monica Pier appropriate and
suitable for leasing or licensing will be subject to a public procurement and
solicitation process to identify prospective tenants and licensees whose financial and
professional experience, and products and/or services are consistent with the
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Leasing Goals and Objectives set forth herein.
Prospective tenants will be sought by publicly noticing the availability of a leasing
opportunity on the City’s web site and through other appropriate forms of
communication designed to reach the intended audience. This may include printed
and electronic advertisements in appropriate trade journals or newspapers; display
banners on the property; and other forms of outreach to potential operators. In
addition, the City may retain a qualified commercial real estate brokerage firm or
listing agent to market the leasing opportunity, identify prospective tenants, and
cooperate with other realtors.
All prospective tenants must submit a Lease or License Application to the City.
Information contained in the Lease or License Application shall describe the
proposed use for the available space; provide information about the respondents’
experience; provide references; describe in detail the financial capability of the
respondent to perform; and set forth preliminary terms and conditions.
12. EVALUATIVE CRITERIA AND SELECTION
Leasing opportunities at the Pier are very limited. Therefore, each lease is vital in
order to maintain a vibrant mix of uses and sustainable Pier business environment.
This requires an extensive outreach effort and a thorough review and selection
process.
The Pier Manager will appoint an evaluation panel to review all applications
submitted to the City. The panel will include representatives from the Office of Pier
Management; the Economic Development Division; the Pier Corporation; and other
City staff and other organizations and consultants as appropriate.
The panel will review and evaluate applications based on uniform criteria that may
include but are not limited to the following: (i) character, reputation, training, and
experience of the prospective tenant or licensee; (ii) ability, capacity, and skill of the
prospective tenant or licensee to perform; (iii) quality and price of the services or
goods to be provided; (iv) uniqueness and compatibility of proposed product or
service with the Santa Monica Pier, (v) financial capability; and (vi) length of tenure
in an Exemplary Manner (see below) on the Pier.
The selection process will include additional bonus points for existing Pier tenants
and licensees who are deemed to have operated in an Exemplary Manner. The term
“Exemplary Manner” will mean and refer to those Pier tenant or licensees who meet
all of the following criteria: Merchants that throughout the term of their lease or
license have:
(i) provided consumers with relevant and quality merchandise, food and
activities,
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(ii) demonstrated a track record of good customer service,
(iii) regularly updated and invested in their operation and premises;
(iv) demonstrated increasing sales volume over time;
(v) have been productive and active members of the Pier Community; and
(vi) complied with all lease or license provisions, as well as all applicable local,
state and federal laws and regulations.
Proposers may be asked by the panel to participate in an oral interview in order to
clarify or elaborate on their proposal and to demonstrate samples of products or
services. The panel also may request verification of credit history and may contact
references.
The evaluation panel will provide to the Pier Manager its analysis and
recommendation of a preferred respondent or respondents, inclusive of
appropriate bonus points. The panel’s recommendation also may be to reject all
responses, solicit additional information from one or more respondents, or to enter
into exclusive lease or license negotiations with a preferred respondent.
13. LEASE APPROVALS & DELEGATION OF AUTHORITY
The City Manager has the authority to negotiate and execute leases and licenses
with terms of three years or less for uses in accordance with this Leasing Guideline,
and on the basis of written agreements prepared and approved as to form by the
City Attorney. Leases and licenses for terms of occupancy greater than three years
will be negotiated by the City Manager and approved by the City Council.
For Leases and licenses with terms of occupancy greater than three years and less
than twenty -five years, shall require a recommendation of the Pier Corporation Board
to the City Manager the Council may authorize staff to enter into a lease or license
with the preferred respondent subject to specific terms and conditions ;, authorize
enter ing into exclusive negotiations with a preferred respondent ;, reject the
recommendation ,; or direct that additional information be solicited prior to making
a determination. In negotiating leases, staff will refer to any suggestions or
recommendations of the board.
Negotiation of l eases and licenses with terms of occupancy greater than twenty -
five years shall require authorization by Council following a recomme ndation from
the Pier Corporation Board.
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The City Attorney will prepare and approve as to form all lease and license
agreements for review and execution by the prospective tenant or licensee. The
executed lease or license agreement will be submitted to the City Manager for
review in terms of consistency with the Leasing Guidelines and Council
authorization. If determined to be in accordance with the Leasing Guidelines , Pier
Corporation Board recommendation, and Council authorization if required, the City
Manager will execute the agreement.
14. PROTEST/APPEAL PROCESS
Applicants not selected as the preferred respondent by the evaluation panel will be
informed by letter or email. Protestant may file a written protest with the City’s
Economic Development Manager no more than seven (7) calendar days following
the notification. The written protest must set forth, in detail, all grounds for the
protest, including without limitation all facts, supporting documentation, legal
authorities and arguments in support of the grounds for the protest. All factual
contentions must be supported by competent, admissible and credible evidence.
Any matters not set forth in the written protest shall be deemed waived. Any
protest not conforming to this procedure shall be rejected as invalid. The protest
must include the name, address, and telephone number of the person representing
the protesting party.
The Economic Development Manager shall review the merits and timeliness of the
protest and issue a written decision to the Protestant within ten (10) calendar days of
receipt of the protest.
The decision of the Economic Development Manager may be appealed to the City’s
Housing and Economic Development Director by filing a letter appeal within ten (10)
calendar days of the date of the Economic Development Manager’s decision. The letter
of appeal shall set forth, in detail, all grounds for the appeal, including without limitation
all facts, supporting documentation, legal authorities and arguments in support of the
grounds for the appeal. All factual contentions must be supported by competent,
admissible and credible evidence. Any matters not set forth in the letter of appeal shall
be deemed waived. Any letter of appeal not conforming to this procedure shall be
rejected as i nvalid.
The City’s Housing and Economic Development Director shall review the merits and
timeliness of the letter of appeal and issue a written decision to the Protestant within
seven (7) calendar days of receipt of the letter of appeal. The decision of the Director is
final.
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Attachment A. Santa Monica Pier Lease and License Inventory
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ATTACHMENT A.
SANTA MONICA PIER LEASE AND LICENSE INVENTORY (Updated Dec. 2013)
As of the date of adoption of these Guidelines, the buildings and areas on the Santa Monica Pier available
for lease or license consists of (but are not be limited to) the following:
Address Current User/Use Square
Footage
Current Term
Expiration
1600 Oceanfront Walk Santa Monica Pier Aquarium/Marine research
and educational facility.
4,533 sf. June 2018
200 -A Santa Monica Pier Pier Shop/Retail shop offering souvenir items
and books featuring local history and themes.
260 sf. April 2014
200 -B Santa Monica Pier Soda Jerks/‘Old Fashion’ Soda Fountain. 400 sf. July 2025
250 Santa Monica Pier Ristorante Al Mare/Full Service Restaurant with
alcohol and ancillary entertainment.
6,069 sf. +1,033
patios
December 2038
256 Santa Monica Pier Rusty’s Surf Ranch/Full service restaurant with
alcohol service, and with evening music and
entertainment.
3,035 sf. +
1,073 sf. patios
September 2029
258 Santa Monica Pier The Albright (SM Pier Seafood)/Full service
restaurant with alcohol service.
2,557 sf. +
1,392 sf. patio
June 2020
301 Santa Monica Pier Bubba Gump Shrimp Co./Full service restaurant
with alcohol service.
8,955 sf. May 2027
310 Santa Monica Pier Blazing Saddles/Bicycle rentals, with ancillary
sales of bicycle‐related merchandise.
1,292 sf. Oct 2003
month -to -month
321 Santa Monica Pier Oatman Rock Shop/Retail shop offering
souvenir items and gifts.
135 sf. April 2013
month -to -month
322 Santa Monica Pier Starline Tours/Tour sales, visitor info services. 250 sf. April 2016
330 Santa Monica Pier Pier Burger/Limited service convenience
restaurant without alcohol service.
1,525 sf. +
584 sf. patio
Sept 2023
350 Santa Monica Pier Playland Arcade/Arcade with ancillary retail
sales.
8,603 sf. +
641 sf. patios
June 2031
350 -B Santa Monica Pier Marlene’s Beachcomber/Retail sales of beach
related items.
375 sf July 2009
month -to -month
370 Santa Monica Pier Trapeze School NY/ Trapeze school. 10,985 sf. gross
deck area
April 2015
380 Santa Monica Pier Pacific Park/Amusement park with rides, games
and ancillary retail and food service.
70,000 sf. gross
deck area
May 2046
401 Santa Monica Pier Mariasol Cucina/Full service restaurant with
alcohol service.
6,204 sf. + 2,217
sf. patios
March 2028
404 Santa Monica Pier SM Bait and Tackle/Fishing bait and tackle with
ancillary retail and food sales.
292 sf. June 2004
month -to -month
Trolley Kiosk 66 to Cali/Pier related souvenir and sundries. 85 sf June 2016
Mobile Vending Carts Pier and/or beach‐oriented retail and food that
is not otherwise available on the Pier.
Aprox 25 sf. each varies
Approved by the SMPC: 2/5/20 14
Approved by City Council: 4/8/2014
Draft: 6/13/2017
SANTA MONICA PIER LEASING GUIDELINES
These Santa Monica Pier Leasing Guidelines (“Guidelines”) provide the framework for
fair and consistent leasing and licensing of City -owned property on the Santa Monica
Pier. The Guidelines provide parameters and general policy on mix of uses, standards
and terms, and tenant recruitment and selection. They reflect the general intent and
goals of the City of Santa Monica (“City”) at the time they were approved and do not
convey any right upon anyone, or impose any obligation on the City. The City may from
time -to -time change these Guidelines or depart from these Guidelines without liability to
anyone.
1. INTRODUCTION
1.1. Background
The Santa Monica Pier began in 1909 with the construction of the Municipal Pier – the
straight portion that begins at the base of the bridge from Ocean Avenue and continues
for more than 1,500 feet over the beach and Santa Monica Bay. Santa Monica Pier’s
ability to attract large crowds impressed Charles Looff, an amusement park pioneer who
had built Coney Island’s first carousel in New York. In 1916, after negotiations with the
City of Santa Monica, Looff constructed his “Pleasure Pier” alongside the Municipal Pier
(now known as the Newcomb Pier). The Pleasure Pier featured the landmark Looff
Hippodrome building, which now is listed on the National Register of Historic Places
and houses an operating vintage wooden merry‐go‐round.
Today, the Santa Monica Pier (“Pier”) is known as one of the region’s premier
recreational and entertainment destinations, attracting over six million visitors annually.
The Pier offers spectacular ocean vistas, year round events and attractions, and is home
to a changing collection of restaurants, shops, activities and experiences.
1.2. Unique Character of Pier and Pier Environment
The Santa Monica Pier has been an icon for both the local community and Southern
California for over a century. Over this time it has provided a broad variety of
entertainment and experiences that directly relate to its beach and ocean setting. These
activities and services are predominately specific to the Pier’s on‐going “microculture”,
history and surrounding community rather than a replication of things at other piers and
places. The maintenance of the Pier’s own “personality” is a core value of the Santa
Monica community and central to the recruitment and selection of tenants and licensees.
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2. LEASING GOALS AND OBJECTIVES
The Pier is a valuable historic resource of the City to be developed, used and preserved
as a public resource for the enjoyment by the general public. The commercial leasing
and licensing program on the Pier is to be managed for the benefit of the general public
and in a manner consistent with the following goals and objectives:
I. Promote and maintain the compatible uses of City‐owned property available for
lease and license located on the Pier in a manner supporting an attractive, safe and
accessible environment for visitors and the residential community;
II. Provide for a diversity of business, entertainment, event, educational, and cultural
activities as well as active and passive recreational opportunities on the Pier;
III. Promote quality and value of goods, food and services provided by the commercial
operators on the Pier;
IV. Establish pricing of leasehold and license occupancies that reflects fair market value
to help support the fiscal self‐sufficiency of the Pier;
V. Assure access to and use of City‐owned properties by the general public through a
leasing and licensing program that promotes the orderly and equitable management
of tenancies and licenses;
VI. Preserve and promote the unique, eclectic and community recreational character
of the Pier;
VII. Preserve and build on the historic elements and character of the Pier while
ensuring its relevance and vitality to current and future generations;
VIII. Achieve fiscal, social and environmental sustainability;
IX. Enhance access and encourage both local and distant visitors to visit and enjoy the
Pier;
X. Harmonize with the surrounding beach and downtown community;
XI. Take an incremental but continuous approach to change to advance
commercial, cultural and civic opportunities on the pier ; and
XII. Seek a mix of uses and tenants that will contribute to the animation of the Pier.
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3. MANAGEMENT STRUCTURE
Leasing and licensing on the Pier is the responsibility of the City of Santa Monica through
its Office of Pier ManagementA(“OPM”) in coordination with the City’s Economic
Development Division. OPM also oversees Pier maintenance and operations. Pier
events, filming and marketing are managed by the Non‐Profit Santa Monica Pier
Corporation (“SMPC”) in accordance with Event and Marketing Guidelines developed by
the SMPC and subject to Council approval.
4. VISION FOR THE PIER AND GUIDING PRINCIPLE S
4.1. Vision Statement
A Santa Monica Pier that provides an historic platform and a legacy of colorful visitor
experience s to showcase contemporary events; a community asset that attracts,
welcomes and entertains local, regional, national and international visitors of all
incomes, abilities and interests; a landmark that offers an enticing and changing array of
site‐appropriate active and passive experiences and attractions.
4.2. Pier Guiding Principles
I. The Pier will be a signature attraction of the City of Santa Monica, known and
recognizedAworld‐wide and enjoying a broad base of local community support.
II. The Pier will be an easily accessible and visually prominent destination within the
City.
III. The Pier will provide enticing year‐round experiences and attractions for visitors.
IV. The Pier will attract and engage visitors of all ages and incomes.
V. The historic fabric and character, as well as the environmental sustainability and
structural integrity of the Pier will be documented, celebrated, maintained and
improved.
VI. Pier programming will include both traditional and cutting edge entertainment,
cultural, athletic and educational experiences.
VII. Promotions, sponsorships and private and public revenue‐producing events, will
largely off‐set the cost of popular and free public programming.
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5. SUB AREAS AND USES
5.1. Areas
The Pier is approximately 9 acres in size and consists of two adjoining piers:
I. Municipal Pier . The Municipal Pier is the primary walkway of the Pier. It is
approximately 2.5 acres in size and 1,500 feet in length. This public strolling corridor
provides the main access to restaurants, shops, amusement (e.g. carousel, Pacific Park) and
recreation (fishing, walking, viewing) areas, vending carts and performers.
II. Newcomb Pier . Located south of and adjacent to the Municipal Pier, the Newcomb Pier
(also known as the Pleasure Pier) is approximately 6.6 acres, of which 2.2 acres is currently
used for public parking and special event space.
Most merchants, facilities, and events are on the Newcomb Pier while vending carts,
kiosks and fishing activities are primarily on the Municipal Pier.
5.2. Commercial and Public Areas
The Pier presently has approximately 130,000 square feet of leasable commercial space
comprised of buildings, kiosks, carts and deck area. The current Pier tenant mix is
approximately 70 percent amusement, 25 percent dining, four percent educational and one
percent retail.
Public facilities and service areas on the Pier include the Carousel building which houses City
and SMPC offices ; a Harbor Guards station ; a Police Sub‐Station ; a Pier Maintenance
workshop ; and a second floor public observation deck. In addition there are central and
west end public restroom facilities, a central trash & recycling shed, and a 270 space public
parking lot.
The “Santa Monica Pier Development Program” approved by Council on February 9,
1988, supported a development program that consisted of approximately 150,000 square
feet of commercial area. A new planning effort under development by the City with the
assistance of the SMPC, will explore access enhancements, potential expansion of existing
activities, and new commercial and civic opportunities. This enhancement effort, and
future efforts, may alter the overall mix of activities and uses on the Pier over time to
reflect the needs of the Pier and public and changing market conditions.
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6. GENERAL LEASING STANDARDS
Leases and licenses shall be consistent with the Pier Leasing Goals and Objectives.
I. The Santa Monica Pier is public property; therefore all leases and licenses will be
subject to an open and competitive public process.
II. Lease renewals will not be automatically offered to tenants. As vacancies arise either
by lease expiration or earlier termination, recruitment for occupancy will be conducted
in accordance with the Leasing Guidelines.
III. Preferred Uses include, but are not limited to, a range of entertainment and
commercial products and services that will appeal to and serve both the residential
community and area visitors. The City may change uses as leases expire in order to
attract a tenant mix consistent withAtheAGuideline’s goals and objectives.
IV. In order to promote merchant diversity on the Pier the award of multiple
leaseholds and/or licenses to an individual tenant, licensee or operator is
discouraged but may be allowed subject to conditions provided under Section
7.5 .
V. All prospective tenants must provide evidence of economic viability and
appropriateness to the Pier of their proposed uses and business plan, as well as their
capacity and ability to develop and maintain their operation.
VI. Tenants and licensees will be expected to provide quality, visitor‐ supporting services
or activities throughout the term of their lease or license, including sustained high
levels of maintenance and cleanliness. Leases and Licenses will contain performance
standards to ensure on‐going quality and service. Failure to maintain performance
standards will be considered a material breech and subject the lease or license to
termination.
VII. Tenants and licensees are expected to be active members of the Pier community,
participating in its operational life and working together with the City and other
tenants to enhance the Pier visitor experience.
VIII. Assignment or subletting of leases is prohibited without the written consent of the
Landlord. Landlord’s consent will be subject to express standards and conditions set
forth in the lease. Assignment or subletting of licenses is prohibited without
exception.
IX. Operation and improvements to lease and license areas are subject to the City’s
standard regulatory review and approval process.
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7. MINIMUM/BASIC LEASE TERMS AND CONDITIONS
7.1. Diversity & Permitted Uses
The City will seek operators who offer creative, imaginative and unique merchandise, food
options and activities that are thematically compatible with the Pier yet not overly
duplicative of the products and services already offered on the Pier.
In order to maintain an appropriate tenant mix consisting of distinct and diverse
merchandise, food and services the City will endeavor to limit the number of merchants who
carry the same or similar types of offerings. A ‘Permitted Use’ clause shall be included in
every lease and license to describe the type of business that will be operated within the
leased premises or license area. The Permitted Use description should clearly describe the
type of business the tenant or licensee intends to operate and the merchandise, food or
service the tenant intends to offer for sale.
The purpose of the Permitted Use clause is to regulate the duplication of merchandise or
services; however, it does not grant any tenant or licensee an exclusive right to sell any
item or service. Exclusivity rights shall not be granted to any merchant on the Pier.
7.2. Term
Rental lease terms for commercial space on the Pier shall be negotiated based on the level
of capital investment, use, size of the space (leases for larger footprints are normally for
longer terms) and complementary character of the operation with the Pier Leasing Goals
and Objectives. These factors also will be balanced against the City’s policy of ensuring
that public sites periodically do become available for a public competitive process.
To maintain the vitality of the Pier the City needs to insure its ability to address the mix of
uses and activities on the Pier over time. Therefore, it needs to have a variety of lease and
license timeframes and not have the majority of licenses or leases with very long terms
or the majority of leases ending simultaneously‐‐ thus limiting the City’s ability to deal with
evolutionary changes in Pier visitor needs.
7.2.1. Recommended Terms for Leases and Licenses
I. Portable Vending Carts
The recommended term for vending cart licenses is from 6 months to 1 year.
These licenses should be subject regularly to a public process to accommodate uses that
meet contemporary Pier needs and to allow frequent opportunities for businesses interested
in operating on the Pier .
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II. Fixed Location Kiosks
The recommended term for fixed location kiosk licenses and concessions is
from 3 years to 5 years.
III. Deck Space Rental
The recommended term for the commercial license of deck space is from 1 day
to 2 years, depending upon use and circumstances.
IV. Viewers and Transmitters
The recommended term for license and concession of cameras, antennas, and
coin‐operated telescopes and binoculars range is from 1 to 5 years depending on use
and circumstances.
V. Retail Shops, Restaurants, Amusements and Aquarium
The recommended term s of leases for retail shops, restaurant, attractions an d
the aquarium range from 5 years to 25 years ‐‐AinclusiveAof any option periods.
Generally, terms of five years will be granted if there is no substantial new
capital investment in structures, structural improvements or equipment. If a tenant is
required to make substantial new capital investment in structures, structural
improvements or equipment then terms of ten years to twenty‐five years may be
considered. Additional options to extend the term provided under Section 7.5, may be
offered contingent upon the amortization and financial requirements of new investment
and findings of benefit to the City.
VI. Leaseholds Subject to Development Agreements
Term s of leaseholds that are subject to a Development Agreement will be
negotiated with the City of Santa Monica. A Development Agreement is a negotiated
contract with the City that includes a developer’s contribution of significant community
benefits and requires review by the Planning Commission and the Landmarks
Commission, and final approval by the City Council.
7.3. Rates
Rents, fees and charges on the Pier are expected to reflect fair market value.
Adjustments can be made to provide for diverse uses consistent with the Pier Leasing
Goals and Objectives or significant offsetting capital investment that provides the Pier
permanent benefits also consistent with the Goals and Objectives.
In addition to a base rent, the City may elect to require that a lease include a percentage
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rent provision, which can be differentiated by categories of sales. The City, as Landlord,
shall have the right to audit tenant's financial records to ascertain that the gross sales
figure s reported by the tenant are accurate.
Leaseholds with preferred uses for research and public educational purposes (e.g. Santa
Monica Pier Aquarium) may be maintained at other than fair market rental rates. The
City will seek to reasonably minimize its costs associated with these activities by
participating in ancillary gross receipts from commercial activities at educational
facilities.
7.4. Hours of Operation
The Santa Monica Pier is a public venue open 365 days per year 24 hours per day. Pier
merchants will be encouraged to remain open for business with adjustments related to
the time of year and type of business. Minimum business hours when all businesses are
expected to be in operation, unless otherwise specified, shall be daily between the
hours of 11 am and 9 pm. Tenants will not be required to operate on Christmas Day and
Thanksgiving.
7.5. Modifications Based on Findings of Exceptional Community Benefit
Diversity of ownership in Section 6 . IV and t he length of term in Subsection 7.2.1. V may
be modified if all four of the following findings can be made and documented:
I. The proposed project will provide an exceptional opportunity to fulfill a goal or
objective of the Pier Guiding Principles and will enhance the unique character
and the viability of the Pier.
II. The proposed project will require substantial capital investment and provide an
exceptional return opportunity to the City.
III. The proposed project will enhance the mix of uses on the Pier while still being
consistent with the Pier’s unique character.
IV. The proposed project will provide a significant enhancement to the visitor
experience at the Pier.
7.6. Triple Net Lease
Unless otherwise specified, Tenant shall pay all property taxes and assessments
(including Possessory Interest Tax), insurance, utilities and Common Area Maintenance
Fees‐‐as defined below‐‐as well as any duly‐enacted future assessment or fee that the
City may elect to institute.
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7.7. Common Area Maintenance Fees
As a condition of occupancy of a Pier building, Leasehold tenants shall pay a
proportionate share of the City’s Common Area Maintenance (“C M”) cost to manage,
maintain and provide security to Santa Monica Pier. On January 1, 2000, the applied
Common Area Maintenance cost was modified to provide for a fixed CAM payment with
biennial increases of not less than three percent (3%) and no greater than six percent
(6%) per annum. Currently the CAM fee is $7.65 per square foot per year.
7.8. General Operational and Performance Standards
Tenants must maintain high quality and uniform standards of operation and service to
sustain and increase demand for their business, maintain positive customer experience,
and enhance the overall reputation of the Santa Monica Pier. In order to achieve the
highest standards of operations the following standards may be incorporated into each
lease and license:
I. Tenants are expected to staff and operate their businesses in a first‐class and
reputable manner, commensurate with transacting a high volume of business on the
Pier.
II. Periodically, Landlord or Tenant may engage a third party “mystery shopper” to
visit and evaluate Pier businesses. Tenant will provide an action plan for improvement if
so requested by the Landlord.
III. Tenant s shall respond to Landlord’s written inquiries regarding any complaints
or issues, including postings on social media sites related to Tenant’s operations. Tenant
will provide an action plan for improvement if so requested by the Landlord.
IV. Food operations that receive a designation from the Los Angeles County
Department of Health of less than anA“ ”AmoreAthanAthreeAtimesAduringAtheAtermAofAtheA
leaseAorAlicense,AexceptAtoAtheAextentAthatAanyAsuchAratingAisArestoredAtoAanA“ ”AwithinA30A
days of receiving the lower grade, will be in default and breach of the lease/license.
Landlord recognizes that thirdApartyAactionAmayArequireAadditionalAtimeAtoAreinstateA“ ”A
rating and may request tenant to provide an action plan for improvement.
V. Any Lease extension option will be conditioned upon Tenant’s economic
performance. For example, Tenants with a percent age rent clause should have reached
rent levels requiring percentage rent payments to City for at least two of the four rental
years immediately prior to the expiration of the lease.
VI. Landlord may establish an annual review process to be performed by Office of
Pier Management Staff to evaluate key criteria utilizing a standard ized rating scale .
VII. Each Lease or License may have additional operational and performance
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standards applicable to the particular Tenant’s operation.
7.9. Maintenance and Environmental Responsibilities
Lessees and Licensees shall be responsible for maintaining their facilities in
attractive and safe condition, in compliance with applicable building codes and all
applicable environmental laws, ordinances, regulations and standards. This
includes all areas under their lease, the facades and exterior presentations , and
appurtenance’s of their facility or operation.
8. CITY POLICY PROVISIONS
8.1. Labor Peace
The City owns the Pier and has a financial or proprietary interest in Pier businesses
engaged in visitor‐serving commercial activities. Some of these businesses are in
industries that have a history of labor/management conflict. Risk of interruption
of rental revenue and common area maintenance fees received by the City from
Pier businesses would be minimized if such businesses were assured of labor
peace. An appropriate labor peace provision would minimize the City’s exposure to
revenue interruption and disruption of public recreational enjoyment of the Pier.
Therefore, new or substantially amended agreements for leasehold operation shall
provide that the tenant will not engage in practices that impede employees’ ability
to organize and contract with a labor organization for the purpose of collective
bargaining. Such prohibited practices include harassment, intimidation, “captive
audience” anti‐ union meetings or illegal terminations of workers in retaliation for
organizing. A substantial amendment is defined as a change of use of the property,
an increase in seating or square footage of more than 25%, or an extension of lease
duration. Tenant engagement in prohibited practices shall constitute an event of
default under the terms of lease. Affected leases would be those businesses having
five or more full or part‐time employees that engage in restaurant or visitor‐serving
entertainment activities such as arcades, amusement parks and nightclubs.
8.2. Sustainability
The City of Santa Monica is committed to meeting its existing needs without
compromising the ability of future generations to meet their own needs. Therefore
in order to conserve and enhance local resources, safeguard human health and the
environment, maintain a healthy and diverse economy, and improve the livability
and quality of life for all community members in Santa Monica, each new or
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substantially amended agreement for leasehold operation shall include provisions
that require sustainable practices including:
A. Carbon Foot Print Reduction. Tenant shall use best efforts to help meet City‐wide
carbon footprint reduction goals by minimizing unnecessary use of electricity and water,
minimizing or eliminating use of hazardous or toxic materials, and minimizing single‐
occupancy vehicle trips by facilitating employee use of alternative transportation modes
such as carpools, buses, vanpools, and bicycles. A list of green business best practices is
available at: www.sustainableworks.org
B. Healthy Food/Sustainable Food Provision. Tenant shall exercise best efforts to
procure and promote healthy and sustainable food practices on the Premises.
Approaches include utilizing locally and sustainably grown, organic foods from California;
offering meatless menu options and food that has been minimally processed; and
reducing food packaging waste. Tenant is expected to participate in recycling and
composting programs offered by the City. Information on the City’s Sustainable Food
Commitment is available at: www.sustainablesm.org/food.
C. Non‐Recyclable Food Service Container Ban. Tenant shall comply with the City of
Santa Monica Ordinance (S.M.C.C. 5.44) banning non‐recyclable plastic disposable food
service containers. Information on the Non‐Recyclable Food Service Container Ban is
available at : www.sustainablesm.org/container .
D. Single Use Carryout Bag Ban. Tenant shall comply with the City of Santa Monica
Ordinance (S.M.C.C. 5.45) banning the use of single‐use plastic carry‐out bags.
Information on the Single‐Use Carryout Bag Ban is available
at: www.sustainablesm.org/bag .
A. Forest Stewardship Council Approved Products. Tenant is expected to follow the
recommendations of the Forest Stewardship Council recommended products list in
procurement of supplies.
8.3. Landlord’s Licensing Program
The Landlord and The Santa Monica Pier Corporation may engage in sponsorship
programs applicable to all tenants on the Santa Monica Pier. Tenant shall agree to
participate in and be subject to such sponsorship program(s) so long as the terms of
sponsor products, goods and/or services are at least as favorable to Tenant as the terms
of agreements applicable to the same products, goods and/or services supplied to Tenant
for use on the Premises at the time of Landlord’s or Pier Corporation’s request for
Tenant participation‐‐provided that such sponsorship program does not violate any
contractual agreements entered into by Tenant.
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9. DESIGN GUIDELINES
The Santa Monica Pier 1987 Design Guidelines remain the primary reference
regarding structures on the Pier, encouraging a balanced respect for the historic
architectural elements and unique character of Pier with the intent to advance the
range of activities and services to enhance the visitor experience and success of Pier
operations and businesses. All public and private structural modifications and other
improvements proposed on the Pier will be subject to review for consistency with
the Design Guidelines, without exception.
The City’s Economic Development Division in its proprietary capacity as Landlord
must review and approve in writing all proposed modifications before any regulatory
action, including submission of applications to Planning or Building and Safety. The
regulatory permit and entitlement process involves the City as regulator, not as
Landlord. These are entirely separate roles and approval of one does not mean
approval by the other.
10. TENANCY RELATIONSHIPS
All City‐owned buildings and deck areas on Santa Monica Pier appropriate and
suitable for leasing or licensing by the City to individual tenancies or licensees will
be in accordance with agreements prepared by the City. Each tenant or licensee
will be responsible for interior maintenance and repair and utility consumption at its
sole expense, and the City generally will retain responsibility for maintenance and
repair of roofs and exterior of City buildings, and of the Pier deck and substructure
unless otherwise specified in the lease or license. Structures constructed by tenants
are subject to interior and exterior maintenance and repair by the tenant at its sole
expense. The City shall have a right to inspect all tenant improvements, including
fixed assets that will revert to the City at the end of the lease term, for the purpose
of determining maintenance and repair needs. If necessary, Tenant is responsible for
making repairs to, or replacing, such fixed assets at its sole expense.
11. TENANT RECRUITMENT
All City‐owned buildings and deck areas on Santa Monica Pier appropriate and
suitable for leasing or licensing will be subject to a public procurement and
solicitation process to identify prospective tenants and licensees whose financial and
professional experience, and products and/or services are consistent with the
Leasing Goals and Objectives set forth herein.
Prospective tenants will be sought by publicly noticing the availability of a leasing
opportunity on the City’s web site and through other appropriate forms of
communication designed to reach the intended audience. This may include printed
and electronic advertisements in appropriate trade journals or newspapers; display
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banners on the property; and other forms of outreach to potential operators. In
addition, the City may retain a qualified commercial real estate brokerage firm or
listing agent to market the leasing opportunity, identify prospective tenants, and
cooperate with other realtors.
All prospective tenants must submit a Lease or License Application to the City.
Information contained in the Lease or License Application shall describe the
proposed use for the available space; provide information about the respondents’
experience; provide references; describe in detail the financial capability of the
respondent to perform; and set forth preliminary terms and conditions.
12. EVALUATIVE CRITERIA AND SELECTION
Leasing opportunities at the Pier are very limited. Therefore, each lease is vital in
order to maintain a vibrant mix of uses and sustainable Pier business environment.
This requires an extensive outreach effort and a thorough review and selection
process.
The Pier Manager will appoint an evaluation panel to review all applications
submitted to the City. The panel will include representatives from the Office of Pier
Management; the Economic Development Division; the Pier Corporation; and other
City staff and other organizations a nd consultants as appropriate.
The panel will review and evaluate applications based on uniform criteria that may
include but are not limited to the following: (i) character, reputation, training, and
experience of the prospective tenant or licensee; (ii) ability, capacity, and skill of the
prospective tenant or licensee to perform; (iii) quality and price of the services or
goods to be provided; (iv) uniqueness and compatibility of proposed product or
service with the Santa Monica Pier, (v) financial capability; and (vi) length of tenure
in an Exemplary Manner (see below) on the Pier.
The selection process will include additional bonus points for existing Pier tenants
and licensees who are deemed to have operated in an Exemplary Manner. The term
“Exemplary Manner” will mean and refer to those Pier tenant or licensees who meet
all of the following criteria: Merchants that throughout the term of their lease or
license have:
(i) provided consumers with relevant and quality merchandise, food and
activities,
(ii) demonstrated a track record of good customer service,
(iii) regularly updated and invested in their operation and premises;
(iv) demonstrated increasing sales volume over time;
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(v) have been productive and active members of the Pier Community; and
(vi) complied with all lease or license provisions, as well as all applicable local,
state and federal laws and regulations.
Proposers may be asked by the panel to participate in an oral interview in order to
clarify or elaborate on their proposal and to demonstrate samples of products or
services. The panel also may request verification of credit history and may contact
references.
The evaluation panel will provide to the Pier Manager its analysis and
recommendation of a preferred respondent or respondents, inclusive of
appropriate bonus points. The panel’s recommendation also may be to reject all
responses, solicit additional information from one or more respondents, or to enter
into exclusive lease or license negotiations with a preferred respondent.
13. LEASE APPROVALS & DELEGATION OF AUTHORITY
The City Manager has the authority to negotiate and execute leases and licenses
with terms of three years or less for uses in accordance with this Leasing Guideline,
and on the basis of written agreements prepared and approved as to form by the
City Attorney.
Leases and licenses with terms of occupancy greater than three years and less than
twenty -five years, shall require a recommendation of the Pier Corporation Board to the
City Manager to enter into a lease or license with the preferred respondent subject
to specific terms and conditions ; enter into exclusive negotiations with a preferred
respondent ; reject the recommendation ; or direct that additional information be
solicited prior to making a determination. In negotiating leases, staff will refer to any
suggestions or recommendations of the board.
Negotiation of l eases and licenses with terms of occupancy greater than twenty -
five years shall require authorization by Council following a recommendation from
the Pier Corporation Board.
The City Attorney will prepare and approve as to form all lease and license
agreements for review and execution by the prospective tenant or licensee. The
executed lease or license agreement will be submitted to the City Manager If
determined to be in accordance with the Leasing Guidelines , Pier Corporation
Board recommendation, and Council authorization if required, the City Manager
will execute the agreement.
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14. PROTEST/APPEAL PROCESS
Applicants not selected as the preferred respondent by the evaluation panel will be
informed by letter or email. Protestant may file a written protest with the City’s
Economic Development Manager no more than seven (7) calendar days following
the notification. The written protest must set forth, in detail, all grounds for the
protest, including without limitation all facts, supporting documentation, legal
authorities and arguments in support of the grounds for the protest. All factual
contentions must be supported by competent, admissible and credible evidence.
Any matters not set forth in the written protest shall be deemed waived. Any
protest not conforming to this procedure shall be rejected as invalid. The protest
must include the name, address, and telephone number of the person representing
the protesting party.
The Economic Development Manager shall review the merits and timeliness of the
protest and issue a written decision to the Protestant within ten (10) calendar days of
receipt of the protest.
The decision of the Economic Development Manager may be appealed to the City’s
Housing and Economic Development Director by filing a letter appeal within ten (10)
calendar days of the date of the Economic Development Manager’s decision. The letter
of appeal shall set forth, in detail, all grounds for the appeal, including without limitation
all facts, supporting documentation, legal authorities and arguments in support of the
grounds for the appeal. All factual contentions must be supported by competent,
admissible and credible evidence. Any matters not set forth in the letter of appeal shall
be deemed waived. Any letter of appeal not conforming to this procedure shall be
rejected as invalid.
The City’s Housing and Economic Development Director shall review the merits and
timeliness of the letter of appeal and issue a written decision to the Protestant within
seven (7) calendar days of receipt of the letter of appeal. The decision of the Director is
final.
Attachment A. Santa Monica Pier Lease and License Inventory
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ATTACHMENT A.
SANTA MONICA PIER LEASE AND LICENSE INVENTORY (Updated Dec. 2013)
As of the date of adoption of these Guidelines, the buildings and areas on the Santa Monica Pier available
for lease or license consists of (but are not be limited to) the following:
Address Current User/Use Square
Footage
Current Term
Expiration
1600 Oceanfront Walk Santa Monica Pier Aquarium/Marine research
and educational facility.
4,533 sf. June 2018
200 -A Santa Monica Pier Pier Shop/Retail shop offering souvenir items
and books featuring local history and themes.
260 sf. April 2014
200 -B Santa Monica Pier Soda Jerks/‘Old Fashion’ Soda Fountain. 400 sf. July 2025
250 Santa Monica Pier Ristorante Al Mare/Full Service Restaurant with
alcohol and ancillary entertainment.
6,069 sf. +1,033
patios
December 2038
256 Santa Monica Pier Rusty’s Surf Ranch/Full service restaurant with
alcohol service, and with evening music and
entertainment.
3,035 sf. +
1,073 sf. patios
September 2029
258 Santa Monica Pier The Albright (SM Pier Seafood)/Full service
restaurant with alcohol service.
2,557 sf. +
1,392 sf. patio
June 2020
301 Santa Monica Pier Bubba Gump Shrimp Co./Full service restaurant
with alcohol service.
8,955 sf. May 2027
310 Santa Monica Pier Blazing Saddles/Bicycle rentals, with ancillary
sales of bicycle‐related merchandise.
1,292 sf. Oct 2003
month -to -month
321 Santa Monica Pier Oatman Rock Shop/Retail shop offering
souvenir items and gifts.
135 sf. April 2013
month -to -month
322 Santa Monica Pier Starline Tours/Tour sales, visitor info services. 250 sf. April 2016
330 Santa Monica Pier Pier Burger/Limited service convenience
restaurant without alcohol service.
1,525 sf. +
584 sf. patio
Sept 2023
350 Santa Monica Pier Playland Arcade/Arcade with ancillary retail
sales.
8,603 sf. +
641 sf. patios
June 2031
350 -B Santa Monica Pier Marlene’s Beachcomber/Retail sales of beach
related items.
375 sf July 2009
month -to -month
370 Santa Monica Pier Trapeze School NY/ Trapeze school. 10,985 sf. gross
deck area
April 2015
380 Santa Monica Pier Pacific Park/Amusement park with rides, games
and ancillary retail and food service.
70,000 sf. gross
deck area
May 2046
401 Santa Monica Pier Mariasol Cucina/Full service restaurant with
alcohol service.
6,204 sf. + 2,217
sf. patios
March 2028
404 Santa Monica Pier SM Bait and Tackle/Fishing bait and tackle with
ancillary retail and food sales.
292 sf. June 2004
month -to -month
Trolley Kiosk 66 to Cali/Pier related souvenir and sundries. 85 sf June 2016
Mobile Vending Carts Pier and/or beach‐oriented retail and food that
is not otherwise available on the Pier.
Aprox 25 sf. each varies
Ci ty Council
Report
City Council Meeting : June 28, 2016
Agenda Item: 7.B
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To: Mayor and City Council
From: Gigi Decavalles -Hughes, Director , Finance Department, Procurement
Subject: Review and give direction on procurement methods; Repeal Resolution
suspending travel to Arizona; and, Introduce for first reading an ordinance
am ending Municipal Code Chapter 2.24 to reflect current purchasing
practices.
Recommended Action
Staff recommends that the City Council:
1) Receive the attached report on Santa Monica procurement; and
2) Repeal Resolution No. 10479 (CCS), suspending official trav el to the State of
Arizona and developing additional financial sanctions while the Arizona law
SB1070 remains in effect; and
3) Introduce for first reading an ordinance amending Santa Monica Municipal Code
Chapter 2.24 to reflect proposed changes to current p urchasing practices ; and
4) Give staff direction to pilot or implement new methods of procurement, including
reverse auctions, broad problem statements and partnerships , and an
eM arketplace site , to increase purchasing power , vendor participation and
innovati on .
Executive Summary
In recent years, improving market conditions and the City’s commitment to innovative
and sustainable practices have resulted in a growing number of one - and two -bid
procurements that threaten to weaken the City’s ability to achieve v alue and inclusivity
in its purchasing. The policies and procedures guiding the procurement process,
including the development of scopes or specifications, the outreach process, proposal
evaluation and contract award, have been established to maximize com petition, quality,
fairness and transparency. It is, however, important to review these processes from
time to time to identify opportunities for improvements.
In t his report, staff identifies challenges to an effective procurement process. For each
ch allenge, staff presents a response that includes new ideas, best practices currently
being implemented, and recommended changes to the City’s law, policies, and
procedures, some of which require Council action, as summarized here:
Technological limitation s : Staff recommends process changes to transition from
hard copy to electronic bid submission. This addresses a timing constraint that
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vendors identified as a barrier to submitting bids. This recommendation takes
advantage of the City’s online bidding s ystem’s existing features.
Disclosure and documentation requirements : Staff recommends the Council
repeal the resolution limiting official travel to Arizona and requiring additional
scrutiny for purchasing from Arizona companies. This will ease the burd en on all
vendors, and broaden the potential vendor field.
Santa Monica’s needs are ahead of the market : The convergence of innovative
practices and traditional proc urement processes often results in low response to
bids. Staff recommends increasing th e use of more flexible, broader procurement
solicitations, such as requests for qualifications, and incorporating broad problem
statements and partnerships to increase potential responses and solutions that
support Santa Monica’s innovative practices.
Le ngthy, complicated process : Staff recommends the Council adopt changes to
the Municipal Code shortening the City’s protest procedure. This will provide for
faster resolution to protest disputes and a faster overall process.
Decentralized purchasing can be inefficient : Staff monitors individual department
purchases to make sure that any standard purchases are combined into citywide
contracts that take advantage of the best possible pricing. This process will be
simpler with the additional technical capa city of the City’s new enterprise
resource program (ERP) system. Standardized contract management, training,
and contract reporting assist in identifying any areas of inefficiency or where
contracts could be combined.
Limited participation and low purc hasing power : Staff will continue proactive
outreach to vendors through its online vendor portal and through local
organizations. Procurement staff will train key staff throughout the City to use its
online market research subscription for better informa tion about scope of work
development and pricing standards for specific commodities and services, and
will be more proactive in pursuing piggybacking and cooperative purchasing
practices. Staff will also identify areas where reverse auctions could lead to
better pricing.
Background
In the past two years, 27% of City procurements received one or two bids, suggesting a
weakening in the City’s position to achieve the best value. Council has expressed
concerns about this trend, and asked staff to provide a report on the City’s current
procurement practices as well as efforts to encourage minority, women, veteran, or
disabled -owned businesses’ participation in City procurement. To provide context for
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the discussion, the following is a summary of the City’s c urrent procurement policies
and practices.
Purchasing Authority and Competitive Bidding
The City Charter (Sections 608, 1507, and 1508) and the Municipal Code (Chapter
2.24) define Santa Monica’s procurement authority and practices. The Charter
establis hes a centralized purchasing system in the Finance Department and requires
that, before making any purchase of, or contract for, materials or services, the City must
provide ample opportunity for competitive bidding within parameters established by
ordinan ce and through administrative policies and procedures.
The Municipal Code establishes exceptions to the competitive bid procedure in limited
cases. These include where the amount of the purchase is small; competition does not
exist (such as with a propr ietary software); competitive bid procedures have already
been formulated by other government agencies (piggybacking or cooperative
purchasing); and in emergency situations.
Cumulative totals apply when a particular vendor, consultant or contractor is us ed by
the same or several departments for like goods and/or services and without a
competitive process. If a vendor is selected through the competitive process, the
cumulative policy does not apply regardless of how many departments are using the
same ven dor. The type of competitive process to be used in a procurement is based on
the type of item being purchased and the dollar amou nt of the purchase, as follows:
Type of Purchase
Type of Competitive
Process
Exempt Informal Formal
Goods and Contractual Services
$0 - $10,000 X
$10,001 - $175,000 X
$175,001 and up X
Professional Services
$0 - $10,000 X
$10,001 - $80,000 X
$80,001 and up X
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An exempt process does not require multiple price quotes.
An informal process requires that staff solicit at least three quotes from competing
vendors.
A formal process requires that staff advertise the proposal, follow strict rules in
opening bids, and request Council authorization to enter into the contract.
In FY 2014 -15, the City conducted more than 470 competitive processes for goods,
contractual services, construction and professional services, totaling over $50,000,000.
Sustainable Purchasing
The Sus tainable City Plan (Attachment A ) guides City purchasing within the Charter
and Municipal Code guidelines. This plan establishes requirements fo r categories of
products and services based on their environmental impact and the City’s goals.
Purchasing Process
City policies and procedures guide the development of scopes or bid specifications, the
outreach process, and proposal evaluation and cont ract award to ensure competition,
quality, fairness and transparency in City procurement.
Specification/Scope Development
The department purchasing a good or service begins the process by preparing
specifications or a scope of work: a written descripti on of the requirement for materials
and/or services. Procurement staff reviews the description and may require additional
justification if a specific requirement appears to be unreasonably restrictive or
Type of Agreement Number
Informal Quotes 242
Formal Bids 124
Request for Proposals (RFP) 92
Request for Qualifications (RFQ) 11
Request for Information (RFI) 8
TOTAL 477
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inappropriate. This oversight is meant to allow for the broadest range of competition
possible given the City’s needs.
Outreach
Outreach processes are aimed at reaching the largest possible p ool of potential
vendors. The C ity notifies its vendors electronically, through its online vendor portal and
bidd ing system (PlanetBids), and through newspaper advertising, as the Municipal
C ode requires. In addition to those vendors registered on Planet Bids, Procurement
works with staff to identify a list of vendors who provide services like those being
requested and reach out to invite them to join the online bidding system.
Evaluation and Award
Evaluation teams rate bids or proposals based on the quality of the material or service,
qualifications, project plans, financial stability, experience, references, and price. The
City’s evaluation process is based on a best responsible bidder model, in which several
criteria play a role in vendor selection, rather than a lowest responsible bidder model
where cost is the primary selection factor. This is to ensure that the City receives the
best possible service and thus most effective use of resources, which is not always
indicated by the lowest cost option.
Staff created this process to maximize the City’s purchasing power; provide for
competition for all segments of the supplier community; protect against corruption,
waste, fraud and abuse; and ensure appropriate public access to contracting
information . This process should provide the answer to a central question for every
procurement: how can the community be sure that the recommendation represents the
best value?
Discussion
Out of 120 formal bids since 2015, 88 bids received over three responses, while 17
offerings received one bid and 15 received two bids. The one -bid procurements were
for specialized vehicles (25%), specialized goods or services (17%), and services
requiring a particular vendor certification (47%). CNG and electric powered vehicles,
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membrane replacement for the water treatment plant and bus surveillance equipment
maintenance are examples of on e - and two -bid awards.
Through discussion with vendors who downloaded bids but chose not to submit
proposals, staff identified 1) technological limitations; 2) disclosures and documentation
requirements; and 3) the City’s innovative needs being ahead of t he market, as
challenges to attracting more bid offerings.
Also putting the City at a disadvantage are improving market conditions, where vendors
are benefiting from greater demand for their products and therefore do not have the
capacity or interest in participating in a large number of solicitations. In this economic
climate, an efficient, understandable and flexible process has a greater ability to retain
or draw new vendors.
For each challenge, staff presents a response that includes new ideas, b est practices
currently being implemented, and recommended changes to the City’s law, policies, and
procedures, some of which require Council action. In addition to recommendations tied
directly to these specific challenges, staff identifies innovative pr actices and process
improvements to further streamline purchasing and to reach a larger range of potential
service providers.
Key Factor No. 1: Technological Limitations
Issue overview : Vendors indicated that the requirement to submit hard copy bids
pre vented them from submitting proposals when they otherwise would have done so.
The City currently requires wet signatures on all documents. This practice has the
negative effect of discouraging vendors from submitting bids because they must build in
extra time to allow for mailing or delivery.
Response : The City’s online vendor portal and bidding system has the ability to accept
bids electronically. Staff will revise bidding procedures to allow electronic submission
for initial bids, but will continue to require the selected bidder to submit a hard copy of
the signed bid after it is awarded. This transition to a real -time electronic platform
during the selection process will improve customer service and potentially increase the
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number of vendor respons es. Electronic submittals would also facilitate data collection
used for reporting and reduce time -consuming and error -prone manual processes.
Key Factor No. 2: Disclosure and Documentation Requirements
Issue O verview : Vendors who have chosen not to submit a proposal frequently noted
the large number of disclosures as an impediment. With limited exceptions, regulations
require vendors to comply with a number of requirements to do business with the City.
Compared to neighboring cities (see Attach ment B ), Santa Monica has more
requirements in its bidding process. A number of these requirements are mandated
within the City’s Charter or the Municipal Code and facilitate transparency (the Oaks
Initiative Charter Provision), fair wages (the Living Wage Or dinance), and accountability
(the Business License Ordinance), while others protect both the City and vendors (Non -
Discrimination Policy and Insurance documentation). Vendors must also comply with
the City’s Arizona disclosure requirement, related to Sant a Monica’s policy stance
against Arizona's anti -immigration law, Senate Bill 1070 (SB 1070).
Council adopted Resolution 10479 (CCS) in 2010, denouncing Arizona's anti -
immigration law. The resolution suspends official travel to the State of Arizona and
d evelops additional financial sanctions until such time as the new law was revoked.
The law remains partially in place. Senate Bill 1070 was immediately challenged after
its implementation, and, after the City’s guidelines had been issued, the U.S. Suprem e
Court struck down much of the law. The Supreme Court’s decision reduced SB 1070’s
potential to do harm, and subsequent challenges further weakened the law, alt hough
one key negative element – related to whether peace officers may check for immigration
s tatus based on “reasonable suspicion” that a pers on is in the country illegally –
remains. The Arizona disclosure requirement negatively impacts the competitive
process in that any vendor located in Arizona is discouraged from bidding, and may not
be selec ted unless considered a sole source purchase and approved by the City
Manager and/or City Council, depending on the amount of the purchase. E ven vendors
not based in Arizona have taken exception to the sanctions, and have refused to sign
the disclosure st ating that they are not an Arizona firm, thereby eliminating themselves
from the bidding process . Finally, the City is legally precluded from imposing the
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Arizona sanctions when using Federal funds. This complicates the process even further
since not all purchases are subject to the Arizona sanctions.
Response : Staff recommends the City Council repeal Resolution 10479 related to
Arizona sanctions. Other required documents provide necessary transparency and
provide other protections for the City and ve ndors. To mitigate the difficulty with
required forms, staff has developed instructions, examples, and detailed descriptions to
assist vendors in understanding and completing these documents.
Key Factor No. 3: Santa Monica’s Needs are A head of the M arke t
Issue Overview : The City values innovative services and products that are not
currently mass -produced. This can result in low -response bids and less competitive
prices. When Procurement contacted vendors that did not bid in response to one -bid
procure ments in the past fiscal year, the vast majority stated the product or service was
too specialized for them. In the past year, these have included CNG and electric
vehicles, LNG tank refurbishments, single jet water meters, and electrical services on
motor s for the Water and Wastewater treatment plants.
While the City’s value for new and innovative products impacts many procurements, it is
most frequently tied to the City’s environmental standards. The market for sustainable
products has expanded over tim e, but at times only a limited number of vendors will be
able to meet the City’s specifications for environmentally preferable products or
services. Procurement of the following items generally include very limited
specifications:
Vehicle purchases : The City’s goal is to have 80% of its fleet vehicles using
alternative fuels by 2020 as part of its effort to drive down greenhouse gas
emissions and achieve goals set out in the 15 x 15 Climate Action Plan and the
Sustainable City Plan. Alternative fuel veh icles operate on fuels other than
gasoline or diesel to reduce greenhouse gas emissions and pollution. These
vehicles exceed the basic standards all new vehicles must meet to be sold in
California. As a result, the majority of the trucks the City purchase s cannot be
simply purchased off the lot or from a regular dealer. Instead, an unleaded fueled
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vehicle on the lot must have its engine and fuel components removed and
replaced with a CNG system. In some cases, a vehicle may be prebuilt as a
CNG vehicle; h owever, only one brand may offer this option, and then the vehicle
must also be California Air Resources Board (CARB) certified for the specific
model year. Vehicle purchases, which form a significant part of City purchasing
and which can seem simple on t he surface, are limited in the context of
sustainability requirements.
Equipment size requirements can also restrict specifications when purchasing a
vehicle that will be used in tight spaces, alleys and buildings that were built to
older code standards r egarding height of openings.
The total cost of ownership for vehicles also plays a role in the development of
specifications. Factors such as standardization and worker safety can have a
significant impact on fixed and variable costs over time, as follow s:
o Standardization: T he adoption of a single product or group of products to
be used by a department or the City as a whole streamlines the training of
mechanics, tools used, and parts , and the inventory for the product.
o Worker Safety: F or those employees who continuously use a vehicle, and
repeatedly enter and exit the vehicle, attention to ergonomic and safety
details on the front end reduces injury to workers and prevents workers’
compensation claims.
Other examples of purchases subject to restrictive specifications are those
controlled by the following sustainability -focused policies:
o Toxic Use Reduction Pol icy for City Chemical Purchases
Janitorial Products Purchasing Criteria
Integrated Pest Management Program
o Regulation of Ozone -Depleting Compounds (Section 5.28 of the Municipal
Code ): R egulates the purchase and recycling of coolants in mobile
refrigerant/air conditioning systems and release of halon from fire
extinguishers
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o Fleet Maintenance Policy: G uides the purchase of re -refined oil, retread
tir es, and water -based parts cleaners
Response : The City is committed to its sustainability principles, and to pursuing
innovative products. However, staff has identified several areas where expanding
existing practices could address this limitation, and w here new procurement practices
could open up new solutions.
Specification R eview . As part of the City’s regular purchasing process,
procurement staff reviews the specifications or scope of work, and requires
additional justification if a specific requi rement appears to be unreasonably
restrictive or inappropriate for the specified product. Staff will cont inue
encourage purchasers in departments to broaden their scope.
Subscription Market Research Service. The City seeks out reliable external
informat ion to inform all aspects of its procurement process. In July 2015, the
City subscribed to International Business Information Services (IBISWORLD), an
online membership that provides market research, market prices and forecasts
for all commodities and ser vices. IBISWORLD gives the City an advantage
during the solicitation, award, and renewal process. During the solicitation
process, the City has access to sample scopes of work for various purchases,
based on market research. During the evaluation and aw ard phase, the City may
access information about supplier performance and price comparisons, in
addition to sample contract terms that might be specific to a particular industry.
Finally, during the renewal phase, the City benefits from market research to
understand whether price escalations are warranted.
Request for Q ualification. The City has effectively used requests for qualifications
(RFQs) to establish a short list of vendors for broadly -defined services. The City
solicits vendors to provide their qualifications, often relating to a broad array of
specialized services such as hazardous materials cleanup services or
organizational training, developing short lists that can be referred to as the need
arises and increasing the efficiency of the bidding process. In the future, staff
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anticipates using the RFQ process to solicit qualifications from experts who will
assist us in developing solutions. One such instance could be the
implementation of a performan ce -based framework for the City – a project tha t is
defined broadly but that will benefit from a more open -ended procurement
process. An RFQ process would provide the City with a range of options and
ideas based on what experts have completed in other areas, and would give the
City the info rmation need ed to develop a Request for P roposals for the final
vendor selection.
Staff has also used RFQs to take advantage of time -sensitive electricity rates in
its direct access purchasing of power. Staff established a pre -qualified list of
green power vendors f rom which pricing can be solicited on an annual basis.
The direct access program enables the City to purchase green power directly
from smaller vendors rather than through conventional electricity providers such
as SCE, enabling the City to buy at less ex pensive rates. This process could
provide a further opportunity, which the Office of Sustainability is researching, to
combine electricity purchases with other agencies, creating a consortium that
would combine needs and bid for the larger quantity.
St aff will train department purchasers on the benefits of this type of procurement,
and assist them in using this process where appropriate.
Broad Problem Statements and Partnerships. A broad problem statement is an
alternative to highly prescribed requi rements that can tend to favor existing
approaches and established vendors. A problem statement informs potential
vendors of the City’s end goal, and invites them to submit solutions. This shift
opens the door for small businesses and entrepreneurs with new ideas,
potentially leading to low -cost, innovative solutions that could improve the way
the public sector has traditionally bought goods and services. Procurement staff
will work with departments to identify procurements where broad problem
statements could be appropriate, like the recent partnership with local business
groups and businesses for the Hack the Beach Challenge (hackthebeach.com),
which challenged firms to provide innovative solutions to any one of the City’s
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five strategic goals. Staff w ill also consider opportunities to allow unsolicited
proposals from the private sector, as long as other competitors are able to bid on
the same project. Staff will support such practices with a simple and clear guide
to City procurement, to ensure that en trepreneurs get the same information as
established vendors.
Key Factor No. 4: Lengthy, Complicated Process
Issue Overview : Policies that promote fairness, transparency and accessibility in
procurement can also result in a long and complicated process. On average, a fo rmal
procurement can take from three to six months, depending on the complexity of the
product or service. Research, analysis, and communication needed in various parts of
the process add time. In a typical process, specification develop ment can take one
mo nth, formal processes require ten days to advertise at least twice, vendor proposal
development takes three to four weeks, and evaluation and reference checks may take
two to three weeks. Another factor that adds time to the process is the protest period,
which occurs after the initial contractor selection is made and therefore negatively
impacts customer service as the vendor is now poised to begin work but must wait.
Section 2.24.105 of the Municipal Code sets forth the City’s protest procedures for all
competitively bid contracts, with the exception of Public Works contracts , where the
protest procedure is included in bid documents but is not yet codified . The protest
procedure provides an opportunity for vendors who feel their propos als were not
evaluated according to the rules of the City to protest the City’s recommended award
before the City enters into a contract. The current process takes up to 34 days: seven
days to submit a protest to the Purchasing Services Manager after the City announces a
recommended selection on the City’s online vendor portal, ten days for the City to
respond, followed by another seven days for the vendor to appeal the City’s decision to
the Fina nce Director, who has another ten days to respond. The leng thy process
delays project implementation and resolution of the concern for the vendor.
Response : Procurement staff will continue its practice of engaging departments in
planning for future purchases, and recommends a change to the Municipal Code to
st reamline the protest procedure.
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Protest Procedure . Staff recommends a change in the Municipal Code that will
add a protest procedure to Public Works contracts and will allow vendors to
address protests directly to the Finance Director for non -Public Work s contracts,
and the Public Works Director for Public Works contracts. This change will
shorten the protest process and provide faster resolution. The protester would
then have the opportunity to appeal to the City Council, which is the same
ultimate ste p as in the current process.
Create Efficiencies. Staff has begun meeting with departments in the beginning
of the fiscal year to strategically lay out a purchasing plan of the department’s
needs. Procurement will continue to collaborate with department s by assisting in
the development of the bid or proposal. In addition to speeding up the process,
this continued facilitation has the ability to increase savings, quality and value
while lowering risk and cost. Additional efforts to speed up the process include
development of bid and proposal templates and a process for departments to
obtain their own quotes for smaller one -time p urchases. This process meets the
Charter requirement for a centralized system of supervised purchasing.
Together, t hese solut ions will improve the administration of the current process
and allow the Procurement team to focus on strategic planning and
improvements.
Key Factor No. 5: Managing Decentralized P urchasing
Issue Overview : While P rocurement staff reviews and sets stan dards for City
purchasing, each City Department initiates and manages its own purchases. This can
lead to inefficiencies if multiple departments purchase similar products at a smaller
volume, as larger value and longer -term contracts generally provide cos t savings and
price protections, and lessen the workload from repetitive purchases.
Response : Procurement staff will continue with current practices that address the
potential for inefficient purchasing, and will research an online purchasing tool that could
provide a new way to manage internal purchases.
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Citywide Contracts. Staff regularly reviews all informal quotes and formal bids to
identify repetitive purchases conducted across multiple departments. Staff then
combines like goods and services in to citywide bids. Over the past year, the City
has converted 150 individual bids into 17 citywide bids and saved over $200,000
per year .
Contract Management. Contract management helps ensure effective
management and use of resources. The City conduct s quarterly contract
management training sessions and has created standardized contract
documents easily available to all City staff. Over 75 employees have participated
in the training, with another 30 signe d up for the fall. A dedicated C ontract
C oordin ator position ensures frequent monitoring and compliance testing to
support the City’s partially decentralized system. Finally, the procurement team
will present a contract closeout report to Council along with the Year -End Budget
report in the fall that will include for each closed contract the initial funding
budgeted, the actual funds spent over the term of the contract, and the work
completed.
eProcurement / eMarketplace Site . The City has begun researching an
eMarketplace site: a customized “Amazon ” site selling goods and services for
which the City has bid. If the City implemented such a site, all department staff
could access the webpage and order the supplies directly from the supplier,
charge the appropriate account and send data to Procurement . This tool would
create an automatic approval workflow, improve compliance by using a standard
set of catalogs and pricing, and increase transparency as spending data and
analytic information could easily be converted to management reports. This
method c ould also tie most purchases to the City’s purchasing card, reducing
cost and time for check printing, improving cash management, increasing the
amount of the rebates earned on purchasing card transactions. Staff will present
the results of research into this option in the next fiscal year.
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Key Factor No. 6: Limited Participation and/or Low Purchasing P ower
Issue Overview : Santa Monica can receive a low number of bids because vendors are
not aware of opportunities or are intimidated by the procurement p rocess. And, Santa
Monica as a smaller city may receive higher prices than would be available for larger
entities with larger volume needs.
Response : Staff will continue with best practices for proactive vendor outreach to
break down barriers to the b idding process, and will increase use of piggybacking and
cooperative purchasing options to effectively augment the City’s purchasing power and
take advantage of lower prices.
Vendor Outreach.
PlanetBids. While many agencies throughout the country are still contemplating
converting to an electronic bidding system, the City has been using PlanetBids,
its online vendor portal, for nine years. PlanetBids reaches a large number of
participants and has the capability to support innovative procurement practi ces.
Through PlanetBids, the City advertises its formal and informal opportunities,
notifies vendors of any upcoming solicitations, and notifies proposers of proposal
selection. Vendors registered with the system receive automatic email
notifications whe n opportunities in their selected commodities and services are
available. In this way, the City is able to reach a large number of vendors
quickly, and track the number of vendors viewing and downloading bids. Santa
Monica currently reaches 15,393 vendor s, 794 of which are local. The City also
has the ability to send bid notifications to an additional 250 vendors registered
with neighboring cities that also use PlanetBids.
Local Vendor Outreach . The City holds annual outreach events for Santa
Monica v endors, with the Chamber of Commerce’s support. At these events,
staff explains the City purchasing process and the Sustainable Purchasing and
Buy Local resources, and also helps vendors register on PlanetBids o r sign up as
a Buy Local vendor and have the ir business featured on the City’s website. Over
50 people attended the most recent event o n October 21, 2015. Staff is working
on additional opportunities to reach the business community in partnership with
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the County, the various Chapters of the Chambe r of Commerce and the City’s
Business Improvement Districts.
Piggybacking and Cooperative Bidding . Municipal Code Section 2.24.080(b)
establishes exceptions to the competitive bid procedure in limited cases,
including when competitive bid procedures have already been formulated by
other government agencies. Piggybacking is a form of intergovernmental
purchasing in which an agency extends the pricing and terms of its contract to
another agency. Generally, a larger agency will extend its pricing to smaller
agencies, which would otherwise be unable to achieve the economies of scale
achieved by the larger agency with its larger purchase. Using this method, the
City recently purchased 22 Police Interceptor patrol vehicles using the State bid,
resulting in fl eet pricing and payment discount, an estimated $11,000 or 1.5%
cost savings. Staff will look to expand use of this method, especially through
other progressive cities or government agencies with similar sustainability goals.
Cooperative bidding , the other exception to competitive bidding, occurs when two
or more agencies combine their requirements to obtain advantages of volume
purchases that usually result in lower pricing . The City can arrange the process
so that various public agencies purchase from th e same supplier using a single
bid. The City currently participates in a cooperative office supplies contract with
Staples, which provides discounts for any agency that buys from this government
contract. The City will emphasize not only using these alter native processes, but
also initiating the contracts that facilitate collaborative purchasing, where capacity
exists, thereby helping to expand the market for innovative, sustainable goods
and services.
Subscription Market Research Service. Staff now has access to IBISWORLD , an
online membership that provides market research, market prices and forecasts
for all commodities and services. During the solicitation process, the City has
access to sample scopes of work for various purchases, based on market
res earch. During the evaluation and award phase, the City may access
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information about supplier performance and price comparisons, in addition to
sample contract terms that might be specific to a particular industry.
Reverse Auction. Reverse auctions are a process whereby cities determine a
base price for a commodity and ask vendors to bid against each other, on an
electronic bidding system, allowing the city to purchase the commodity at the
lowest price. Since these procurements are based solely on price , however, they
could affect the quality of the product being bid on and received. The initial step
of prequalifying the vendors and having the terms and specifications clearly
defined therefore becomes very important, as to leave no room for ambiguity.
Re verse auctions are most effective when used to purchase large amounts of
basic commodities, such as fuel, water treatment chemicals, supplies such as
safety gloves, office paper, traffic signal LEDs, and engineered parts and
equipment that many distributor s or suppliers can provide. Goods and services
that can be provided by only a few sellers cannot be acquired by reverse auction.
The City’s current online vendor portal, PlanetBids, has the capability for an
electronic bidding system and has the ability to accommodate reverse auctions.
Procurement staff will work with departments to identify procurements where a
reverse auction process could yield savings.
Inclusiveness / Preference
At its Jul y 14, 2015 meeting (Attachment C ), Council expressed an int erest in various
preferences that might broaden and encourage vendor participation. California law and
current experience with preferences in procurements involving federal funds indicate
that additional preference practices could involve significant trad eoffs.
Per SMMC Chapter 2.24, City businesses receive a one and one half percent (1.5%)
price preference (equal to the portion of the sales and use tax rate that returns to the
City) when determining the rank order of the bids in the selection process. If after the
1.5% preference is applied, a City business has submitted a bid that is equal to or is
lower than all other bids, the Purchasing Agent shall award the contract to the City
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business so long as it is otherwise the best bidder. During the past four years, only one
of the bids eligible for local preference consideration has been selected.
The City Charter (Article IV, section 608), states that, “to the extent permitted by law,
the City Council shall adopt procedures that encourage the award of City contracts to
disadvantaged or minority persons”. Thus, the City has an existing framework to
support additional preference policies. However, State law limits the City’s options. In
1996, Proposition 209 amended the California Constitution to prohi bit public institutions
from discriminating on the basis of race, sex or ethnicity, including in the area of public
contracting. This prohibition includes policies intended to assist minority or women -
owned businesses by providing advantageous bidding con ditions, except where such a
prohibition would make an agency ineligible for a federal program or funding. What
State law still allows, and what is required for some Federally -funded programs, is the
Disadvantaged Business Enterprise (DBE) program. To qua lify as a DBE, the business
must be owned and controlled by one or more socially and economically disadvantaged
persons. Generally the certification process is done at a local or regional level; Metro
and Cal -Trans, the closest certifying agency is in down town Los Angeles. The City
currently takes part in the DBE program for transit and construction projects. Federal
law mandates a number of stringent requirements with respect to DBEs. These
requirements include setting DBE use goals; design and implemen tation of a DBE
program; and outreach, monitoring and reporting. The department receiving the funds
must abide by these requirements, which are under the jurisdiction of the US Federal
program issuing the funds.
To implement a DBE preference for all its competitive processes, the City would need to
meet the requirements listed above and create a program to monitor and report on the
process. Adopting such a program for all City procurements would be prohibitive in
terms of additional staff needs and other resources, and would further limit participation
in City bids or lengthen the amount of time necessary to bid on and complete projects,
or both. At the same time, a large number of vendors on PlanetBids with access to City
solicitations have DBE status (Attachment D). Given the tradeoffs involved, that the
City participates in preference programs through $10 to $20 million annually in federally
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funded programs, and that our vendor portal shows that the City is already reaching a
large number of disadvant aged businesses, staff recommends no changes at this time.
Alternatives
Council could choose to maintain the Arizona exclusion policy and protest procedure as
is, and could direct staff away from pursuing any of the proposed innovative practices in
the report: broad problem stat ements, reverse auctions, and eP rocurement. Finally,
Council could direct staff to implement a DBE preference program in Santa Monica.
Should Council choose any of these options, staff would work within these parameters
and with existing methods to address the problem of limited participation in City bids.
Summary of Recommended Changes
Staff is recommending that the Council consider the following:
Repeal Resolution 10479 restricting business with Arizona -based vendors;
Chan ge Section 2.24.105 of the SMMC to streamline the protest process;
Give staff direction to pilot or implement new methods of procurement
Financial Impacts and Budget Actions
There is no immediate financial impact associated with the staff recommendation.
Prepared By: Araceli Esparza, Purchasing Services Manager
Approved
Forwarded to Council
Attachments:
A. Sustainable City Plan (we b link)
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B. Comparison Cities Contracting Information
C. July 14, 2015 Council Agenda (web link)
D. PlanetBids Preference Table
E. Resolution
F. Ordinance
G. powerpoint