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SR 09-26-2017 3B City Council Report City Council Meeting: September 26, 2017 Agenda Item: 4.B 1 of 7 To: Mayor and City Council From: Andy Agle, Director, Housing and Economic Development Subject: Strategy for Long-Term Economic Sustainability Recommended Action Staff recommends that Council review and provide direction regarding the scope of a strategy to address Santa Monica’s long-term economic sustainability. Executive Summary Santa Monica has enjoyed sustained economic prosperity over the past three decades, resulting in both a strong fiscal balance sheet for City government and strong ongoing revenue to support City services for residents. Local strategies put into place decades ago have fueled high levels of retail sales, visitor spending, and tax revenue from commercial businesses. As a result, Santa Monica has consistently outpaced Los Angeles County as a whole across a wide range of economic indicators. None of this should be taken for granted, however. Some futurists have predicted that humanity will undergo more changes in the next 20 years than it has in the last 100 years. As the scope and scale of technological change and economic disruption increases exponentially in the coming years, no sector of the economy will be left unchanged, including local government. From internet retailing to autonomous vehicles and from the sharing economy to automation of jobs, there is enormous potential to transform how cities in general, and Santa Monica in particular, provide services and pay for them. Santa Monica’s success today derives from strategies developed by civic leadership in decades past. It is prudent to be equally far-sighted in anticipating the future direction of the international, national, and regional economies to assess the place of Santa Monica and to take a pro-active role in safeguarding our community’s long- 2 of 7 term prosperity. A healthy economy not only pays the bills for City services, it undergirds the fabric of resident employment, the demand for city services, the sources of support for civic and cultural institutions, and the upkeep of public and private infrastructure that supports our standard of living and quality of life. Tonight’s study session is intended to initiate a dialogue regarding how we strategize and plan for the upcoming changes and disruptions to ensure that Santa Monica continues to benefit from a strong and diverse economy that supports it as an outstanding place to live, work, and visit. Background Santa Monica has long been engaged in planning for its future, from the elements of the General Plan, such as the Land Use and Circulation Element, to specific plans, such as the Downtown Community Plan. The City has also developed strategies and plans to address key elements of Santa Monica’s local, sustainable, and creative future, such as the Creative Capital cultural plan, the Sustainable City Plan, and the Strategy for a Sustainable Economy. However, additional strategic planning to evaluate the opportunities and threats is necessary given the level of economic disruption that is expected to occur in the coming years. Many observers have noted that the pace of technological change is increasing exponentially. Technologies and ways of doing business are rapidly changing and are expected to have significant impacts on how the City provides services and how it pays for those services. Experts have started to identify how local governments may be impacted by changes in the economy and have urged local governments to begin planning for how to address the impacts and changes. The changes not only pose threats to our traditional sources of prosperity and the local revenues that support city services. They also present opportunities to enhance our community standard of living, wellbeing, and quality of life. Proactive strategic planning and implementation has the potential to enhance environmental sustainability and 3 of 7 resilience in the face of acute and chronic stressors, from earthquakes to climate change. Some of the changes that are currently underway or expected to arrive in the near future and that have the potential to significantly impact the City include:  Growing globalization and exploding digital communication that allows people to work, live, shop, and visit anywhere, unrestrained by geographic advantages and disadvantages, which has the potential to undermine key sectors of Santa Monica economy, potentially leave high levels of business vacancy, and depress City revenues associated with a strong business sector.  A growing share of retail sales over the internet, which has the potential to transform our downtown and commercial corridors, as well as depress sales taxes, the City’s largest revenue source, and business license taxes, while leaving potentially high levels of business vacancies.  The implementation of autonomous, shared vehicles, which has the potential to transform our streets, our parking facilities, and our public transit systems, as well as depress revenues from parking fees, parking fines, traffic citations, and sales taxes on automobiles and fuel.  The continued automation of jobs, which has the potential to transform how services are provided to the community and who provides them. Above are four key examples of changes associated with the changing global economy that could impact City services and revenues. Given the pace of technological advancement and economic disruption, it is likely that there are many other changes that have yet to be developed or embraced on a broad scale, that nonetheless could have significant impacts on Santa Monica. 4 of 7 Previous generations of Santa Monica leaders had the foresight to take strategic steps to ensure the strength of the local economy, from planning for the conversion of obsolete industrial areas to contemporary employment centers, to investing in the Third Street Promenade as an urban entertainment district that sparked the revival of Santa Monica’s historic downtown, to selectively promoting travel and tourism that generates revenue to support the local economy and underwrites the vibrancy of cultural, civic, and experiential amenities. Previous generations did not have a crystal ball, though they did have the wisdom and determination to anticipate economic changes and proactively adjust to the changes in ways that have been generally beneficial for the local economy and for the City’s ability to provide services and support a high quality of life in Santa Monica. Given the continued global economic disruption before us, can Santa Monica retail a competitive edge for commerce that is congruent with our values, natural environment, and quality of life? Are there ways that we can reduce pollution, minimize consumption of natural resources, preserve our heritage, promote equity and diversity, strengthen our unique sense of place, and better serve our community by an intentional strategy to be masters of our economic destiny? There is significant danger in failing to plan for change. Not only does Santa Monica risk erosion of its economic resilience as powerful market forces could overwhelm the city in ways that could significantly undermine our quality of life. It has been observed that “nature abhors a vacuum.” In the absence of well-thought-out plans and consistently executed implementation and adjustments, global forces and faceless corporate entities could determine the shape of our business sector in ways that eviscerate our commitment to local businesses, environmental sustainability, and respect for resident quality of life. Discussion Staff seeks Council direction on several foundational questions related to pursuing the development of an economic sustainability strategy, as discussed below. 1. Should we devote time and resources to developing an economic sustainability strategy? 5 of 7 Developing an economic sustainability strategy is expected to involve an investment of Council, community, and staff time and resources, as well as resources for expert support and assistance in developing a strategy. While the commitment of time and resources could be substantial, staff believes that the costs of failing to plan for the future greatly outweigh the costs associated with the planning effort. 2. If Council is supportive of moving forward, what should the scope of the effort entail? There are a variety of means for developing a strategy of this nature. One approach is to start at the broadest level by considering Santa Monica’s competitive economic advantages and disadvantages, including our role in the regional economy. Such evaluation could then support consideration of the nature and focus of Santa Monica’s future economy. The consideration could be supported by: (a) evaluations of opportunities to best support Santa Monica’s local needs in the future, (b) analysis of the fiscal and economic impacts of the community’s future evolution, and (c) needed changes in the City’s processes, policies, regulations, and infrastructure to support desirable future advances in technology and the way we live. 3. How does the Council wish to participate? Development of a strategy could be a largely staff-driven exercise where staff and consultants prepare reports, refine options, and return to Council for approval at key stages. Alternatively, Council could be integrally involved in the development of the strategy, including establishing subcommittees to consider different elements of the strategy, which could then report back to the full Council with findings and recommendations. Given the importance of the effort to the City’s long-term sustainability, staff recommends strong Council involvement in the development of the strategy. 4. How should the Santa Monica community participate in development of the strategy? 6 of 7 While Council would have ultimate responsibility for defining a strategy, staff believes that the strategy would be enhanced by broad community engagement among residents, businesses, and local stakeholders, with a variety of ways to participate in the development of the strategy. 5. How can we best engage local institutions and partners? The impacts of future changes will not solely affect the City. The school district, college district, local organizations, non-profits, business organizations, and business districts will also be affected. Allowing our partner institutions to participate in development of the strategy presents an opportunity to achieve optimal outcomes that benefit multiple participants. 6. How should we allocate resources for development of the strategy? Preparing special studies and engaging community members will require staff and financial resources. Given the City’s budget constraints and an already overflowing staff workload, trade-offs will be necessary to support development of the strategy. 7. Where should we start? What is the first step? Preparing a strategy to help ensure Santa Monica’s long-term economic sustainability is expected to involve many components and take place over the course of several years. However, it is critical to identify where to begin. One option is to engage a team of experts to begin the process of evaluating Santa Monica’s competitive economic advantages and disadvantages relative to the future economy, while at the same time initiating dialogue with partner institutions, neighborhood groups, local non-profits, and business groups regarding the effort and how they wish to participate. We may also want to invite convenings and consultations with both influential and provocative thinkers who are actively exploring the direction of global economic, technological, and social changes, particularly as they may influence Southern California and Santa Monica. 7 of 7 Next Steps Based on Council direction, staff would begin to identify experts and partners who can support the initiation of the effort. Staff would return to Council before beginning any formal studies or processes. Financial Impacts and Budget Actions Council’s initial discussion has no budgetary or financial impacts. Depending on if and how Council wishes to pursue development of the strategy, staff and budgetary resources would need to be allocated in the future to support the effort. Prepared By: Andy Agle, Director Approved Forwarded to Council Attachments: A. Written Comments B. Powerpoint Presentation 1 Vernice Hankins From:Jerry Rubin <jerrypeaceactivistrubin@earthlink.net> Sent:Tuesday, September 26, 2017 11:12 AM To:Jerry Rubin Subject:Suggestion for addressing Santa Monica's longterm economic stability..... Dear City Council, City Staff & Fellow Santa Monica Friends, How about this unique suggestion for ensuring Santa Monica’s longterm economic stability? Plant a few Money Trees! Thank you, Jerry Rubin P.S. Hey, I thought it would be a TREE-MENDOUS idea! P.P.S. I think I might mention it at the City Council meeting when the topic comes up on the agenda tonight. Item 4-B 9/26/17 1 of 5 1 Vernice Hankins From:Elizabeth Van Denburgh <emvandenburgh@gmail.com> Sent:Tuesday, September 26, 2017 2:43 PM To:councilmtgitems; Ted Winterer; Councilmember Kevin McKeown; Tony Vazquez; Sue Himmelrich; Pam OConnor; Gleam Davis; Terry O’Day Cc:David Martin; Rick Cole; Laurence Eubank; Stacy Dalgleish; Andrew Gledhill; Tricia Crane; Zina Josephs; cristopher Subject:City Council Agenda - Study Session 4B. - Strategy for Long-Term Economic Sustainability Mayor Winterer and City Council Member, While I applaud the long-term view and the 4B Study Session on how to fund the City I believe we should focus our time and effort on the work that has already been accomplished. We have done significant planning and have outlined a multitude of goals and objectives with specific time frames including our 2020 Water Independence Commitment to addressing the ongoing homeless issue to moving the Airport to Park to no new PM trips to ensuring all the buildings that have been assessed to be earthquake issues are reviewed and retrofitted if necessary. It would seem prudent to pull all this planning and designing work into a time-based strategic roadmap that summarizes and synthesizes all the work the City has done to date. This type of approach will lay out the timing and key milestones/activities to achieve our goals and objectives and will provide the framework for what future revenue is needed (along with an evolution of declining revenue) to support the capital and operational costs around projects and ongoing operations. While we have defined where we are and where we want to go we do not yet have a picture of how to get there. I would suggest that the discussion of disruption by technology is putting the cart before the horse in terms of near-term priorities for the City and its residents. What have been planned and designed to achieve and then address the revenue to achieve it as well as the analytics to ensure we are on target. Thank-you for the work on behalf of the residents of Santa Monica. Regards, Elizabeth Van Denburgh Resident and Wilmont Board Member Item 4-B 9/26/17 2 of 5 Chair West Hooker-Poletti Locanda del Lago Past Chair Yesenia Monsour Kaiser Permanente Chief Financial Officer Dave Nelson Tegner-Miller Insurance Brokers Vice Chairman Richard Chacker Perry’s at the Beach Vice Chairman Michael Gruning Pence Hawthorn Vice Chairman Ellis O’Connor MSD Hospitality Fairmont Miramar Hotel & Bunga-lows Vice Chairman Peter Trinh Avery/The Craftsman Bar and Kitchen Board Members Daniel Abramson RAND Corporation Matthew Allnatt Jonathan Club Alisha Auringer LAcarGuy Judy Barker Barker Hanger Barbara Bishop BBPR, Inc. Gauri Brienda-Ramnath A Day in LA Tours Julia Cooksey Frontier Communications Kiersten Elliott Santa Monica College Colby Goff Rustic Canyon Family Jeff Klocke Pacific Park on the Santa Monica Pier Mitchell Kraus Capital Intelligence Asso-ciates Board Members, Cont. Bob Kull The Lobster Restaurant Tim Kusserow Carlthorp School Leonard “Len” Lanzi Los Angeles Venture Association Richard Lawrence National Bank of California Paul Leclerc Le Meridien Delfina Gary Loeb Chezgal Merchandising Creations John Loyacono Bank of America Sara Mailloux Hulu Brian Mac Mahon Expert Dojo Jennifer McElyea Watt Investment Partners Pat McRoskey The Water Garden Greg Morena The Albright Restaurant Evan Pozarny Muselli Commercial Realtors Susan Gabriel Potter Bob Gabriel Insurance Dave Rand Armbruster Goldsmith & Delvac Scott Schonfeld Linwood Ventures Camille Strickland Orthopaedic Institute for Children Nat Trives Coalition for Engaged Educations Juan Viramontes Georgian Hotel John Warfel Metropolitan Pacific Real Estate David Woodbury Arthur Murray Dance Studio. September 25, 2017 Santa Monica City Council 1685 Main Street, Room 209 Santa Monica, CA 90401 Re: Item 4-B Economic Sustainability Strategy Dear City Council Members, The Chamber is thrilled that the city is taking the long-view of our community’s economic future. We en- courage you to develop the proposed long-term economic sustainability strategy, and hope you will take the following points into consideration when determining the scope of the plan: While some aspects of our future economy may be difficult to predict, others like the “needed changes in the City’s processes, policies, regulations, and infrastructure”, referenced in part 2(c) of the Discussion section of the staff report, may be easier to identify now. Organizations like the Chamber, the BIDs, and Santa Monica Travel & Tourism, would be important partners in this conversation. Santa Monica’s growing technology sector “Silicon Beach” employs over 25,000 people (28% of the city’s total employment). We encourage you to engage technology rep- resentatives in the development of the strategy. In particu- lar, how can we should encourage startups that begin in San- ta Monica, to stay here as they grow? The impact of our regional housing shortage crisis is making it increasingly difficult for our local workforce to live in, or near, Santa Monica. We believe this is one of the most critical challenges that should be addressed in the eco- nomic sustainability strategy. We look forward to being part of this important strategic planning effort, and we thank you for your consid- eration of our suggestions. Sincerely, Laurel Rosen President / CEO Santa Monica Chamber Item 4-B 9/26/17 3 of 5 1 Vernice Hankins From:Mary Marlow <mmarlow7@icloud.com> Sent:Tuesday, September 26, 2017 4:22 PM To:councilmtgitems; Terry O’Day; Pam OConnor; Gleam Davis; Kevin McKeown Fwd; Ted Winterer; Tony Vazquez; Sue Himmelrich Cc:mmarlow7@icloud.com; Rick Cole; David Martin; Andy Agle Subject:Agenda Item 4B Mayor Winterer and City Council Members, Experience tells us that economic and technology forces that were not anticipated, nor planned for, have more to do with the fortunes of cities across the country than thoughtful planning. According to the latest city budget, about 24% of city revenues come from “services”, yet the staff seems to focus on an anticipated decline in “sales tax”, which is about 19% of the city’s revenue. I would like to see how the current plans for example, Sustainability, Development, Creative Capital, and Capital Expenses would affect our economic future by creating an implementation plan with estimated financial outcomes for all the plans approved. I think a careful ongoing examination of the impacts of our priorities as codified in current plans will provide a better future roadmap than guessing what disruptions may come. As disruptions and priorities change, the financial impacts of adjusting current plans could be anticipated and estimated, allowing the city to move nimbly through constant change. Please consider the Bergamot Area Plan approved in 2013 as an example. The housing crunch in all of California may require an adjustment to the 60% commercial/40% housing split that seemed workable in 2013. How would additional housing in the Bergamot Area impact services revenue? Property taxes? Sales taxes? Utility taxes? Plans made during the 6 years of the Downtown Community Plan process have already been adjusted for new known technologies and changes to communications and transportation that will continue to require adjustment as we move into an unknown future together. The City has wisely anticipated adjustments in the LUCE, Downtown Plan, Bergamot Plan, Bike Plan, Pedestrian Plan, Safe Routes to Schools, etc. in recognition of the ongoing pace of change. In fact, change is built into all our current plans, but financial projections are not. Please consider ongoing financial projection yearly reports, based on actual plans, as a necessary addition to the city’s economic outlook instead of guessing what comes next with or without “expert” input. Thank you for considering my thoughts on this important issue. Mary Marlow Ocean Park Resident Item 4-B 9/26/17 4 of 5 2 Item 4-B 9/26/17 5 of 5 Strategy for Long-Term Economic Sustainability Santa Monica City Council September 26, 2017 “It’s tough to make predictions, especially about the future.” -Yogi Berra Sales Per Capita $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 LA County So Cal State Santa Monica Picto of data and trends 1. Go forward? 2. Scope? 3. Council involvement? 4. Community participation? 5. Institutions and partners? 6. Resources? 7. How to begin? 1.Go forward? 2.Scope? 3.Council involvement? 4.Community participation? 5.Institutions and partners? 6.Resources? 7.How to begin?