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SR 02-13-2018 3J City Council Report City Council Meeting: February 13, 2018 Agenda Item: 3.J 1 of 6 To: Mayor and City Council From: David Martin, Director, Administration Subject: Proposed Use of 10 Parking Spaces in Parking Structure 7 by Electric Automotive Dealer Tesla Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a modification to the Agreement for Lease, Operation, and Maintenance of Parking Facilities executed July 28, 2010 with Macerich SMP LP to designate 10 parking spaces within Parking Structure 7 for use by Tesla, a proposed electric automotive tenant of Santa Monica Place/Macerich, Inc. Executive Summary Macerich currently leases Parking Structures 7 and 8 from the City. As part of this lease, Macerich is responsible for all maintenance and repairs, and has a revenue sharing arrangement with the City. The lease requires Macerich to provide 1,852 parking spaces on a non-exclusive basis for members of the general public. It is also entitled to purchase a certain number of parking key cards for general and valet parking use. Macerich is seeking a modification to the Lease Agreement that would allow Macerich to sublease 10 of the public parking spaces in Parking Structure 7 to Tesla, a proposed tenant of Santa Monica Place, to park vehicles to be used for test driving. If Tesla does not move forward with the sublease, the modification to the Lease Agreement would not be implemented. The modification of the Lease Agreement would allow Macerich to sublease 10 parking spaces only during the term of Tesla’s sublease. Discussion Macerich currently has an Agreement for Lease, Operation, and Maintenance of Parking Facilities (Lease Agreement) and other license agreements with the City that generally provide for the following: 2 of 6  Parking revenue from Structures 7 and 8 are split equally between Macerich and the City after parking facilities taxes and certain expenses (e.g. Parking Operator) are deducted as agreed to in the lease agreement.  Macerich is responsible for all maintenance and upkeep costs and utilities for the structures, including cleaning, painting, and repairs.  Macerich contributes to the cost of the Parking Access and Revenue Control Equipment.  Macerich has the right to purchase 278 keycards for general parking on the 5th and 6th levels in Structures 7 and 8. However, please note, the requirement that individuals who purchase one of these key cards park on the 5th and 6th levels of the parking structure is not actively enforced by City staff due to limits on staff’s ability to track where these individuals park. Without additional technology or manual tracking which is resource intensive, it is cost prohibitive and not practical for staff to ensure compliance with this provision.  Forty-three (43) of the 278 key cards are licensed to be used for valet in designated spaces on the ground floor of Parking Structure 8 (see Attachment A).  Macerich has the right to install and operate an interior parking guidance system.  Macerich is required to provide 1,852 public parking spaces Contract Modifications Staff recommends a modification of the Lease Agreement and to allow Macerich to sublease 10 of the public parking spaces in Parking Structure 7 to Tesla in connection with Tesla subleasing space situated on the first and second levels of the Santa Monica Place shopping center, at the entrance to the shopping center at the intersection of Broadway and 3rd Street Promenade. This location serves as the entrance to Santa Monica Place from the 3rd Street Promenade. Tesla will be engaged in sales of electric vehicles similar to how it operates in other shopping malls, using the 10 parking spaces for parking and charging of the tenant’s test drive vehicles and for parking by its customers. Tesla currently has a number of 3 of 6 California sales locations in malls, such as The Village at Corte Madera, Americana at Brand in Glendale, Westfield Century City, Fashion Island in Newport Beach, Fashion Valley in San Diego, and The Grove in Los Angeles. Following are two examples of Tesla locations with vehicles available for test driving, although these are not reflective of what would be within Structure 7, particularly since the parking spaces would not be allowed to be roped off as they are in these locations. A more accurate reflection is provided later in this report. Brea Mall located in Orange County Westfield Century City in Los Angeles The spaces will be located on the 3rd level of Parking Structure 7 immediately adjacent to the 2nd level of the tenant’s space (see attachment B). The tenant space has an exit door for easy access to the vehicles, however, this door will not be permitted as a customer entrance to the tenant space and no showroom furniture would be allowed in the parking area. Additionally, no employee parking will be allowed in the spaces. Under this modification, Macerich would also purchase an additional 10 parking key cards for use by Tesla for the daily maximum rate established by Council for the Parking Structure. Replacement fees for key cards will also apply. The maximum daily amount is currently $17.50. This would be an annual revenue of $6,387.50 for each space for a total annual revenue of $63,875 for all 10 parking spaces; revenues that would otherwise not be collected based on current occupancies. These revenues will be included in gross revenues and subject to the revenue sharing provisions of the Lease Agreement, less applicable Parking Facilities Tax, consistent with all other parking 4 of 6 revenues generated in Parking Structure 7. The agreement includes a fixed parking rate that is based on the current daily maximum daily rate established by Council, which changes from time to time, therefore the revenue could increase or decrease if Council adopts a different daily maximum rate in the future. Average peak parking occupancy recorded in Parking Structure 7 for the last fiscal year was 68% on the weekdays and 82% on the weekends. The highest peak occupancy recorded in Parking Structure 7 last fiscal years was 97% for limited periods of time on certain days in July and August of 2016, and the next highest was during the LA Marathon in March 2017 when occupancy reached 91% at times. During periods of peak occupancy, more than 250 parking spaces are open at all times on weekdays and 150 spaces on the weekends in the structure, and staff does not anticipate any disruption to parking availability for the general public or loss of revenue. Macerich and Tesla will be responsible for the cost of all improvements necessary. Proposed improvements would include:  The Tesla name on the west wall above three of the spaces  Painting of the door area from the tenant space to the parking facility and other minor aesthetic enhancements  Lighting  Installation of 10 Electric Vehicle (EV) Chargers Although the following picture is of a Tesla charging station, it is a representative example of what Tesla has proposed for the west wall. 5 of 6 Domain Northside Mall Tesla Charging Station – Austin, Texas If Telsa does not move forward with the lease, this modification would not be implemented. The term of the modification would be set to the same term as the lease agreement between Tesla and Macerich, and would terminate if Tesla vacates the space. Providing this option would assist with securing a tenant for a space that has been empty since December 2015 after Kitson vacated the space, with a couple of pop-up stores having occupied the space short term. Providing the spaces would not disrupt parking availability. CEQA The proposed parking management public valet program is exempt from the provision of CEQA pursuant to CEQA Guidelines Section 15061(b)(3) in that it can be seen with certainty that the proposal will not result in significant adverse environmental impacts since the modification only represents an operational change to the use of the existing parking spaces and will not result in the creation of any new parking demand. Financial Impacts and Budget Actions There is no immediate financial impact or budget action necessary as a result of the 6 of 6 recommended action. Staff will return to Council if specific budget actions are required in the future. Approval of the modification of the agreement will generate gross annual revenues in the amount of $63,875. These revenues will be subject to the revenue sharing provisions of the Lease Agreement, less applicable Parking Facilities Tax, consistent with all other parking revenues generated in Parking Structure 7. The agreement includes a fixed parking rate that is based on the current daily maximum daily rate established by Council, which changes from time to time, therefore the revenue could increase or decrease if Council adopts a different daily maximum rate in the future. Prepared By: Salvador Valles, Assistant Director of PCD Approved Forwarded to Council Attachments: A. Marcerich - PS8 Valet Spaces B. SMP GARAGE 7 Levels 3 - VER4 A t t a c h m e n t A A t t a c h m e n t B REFERENCE: Agreement No. 10623 (CCS)