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)