SR 09-14-2021 8A
City Council Report
City Council Meeting: September 14, 2021
Agenda Item: 8.A
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Approval of Proposed Amendments to City’s Rent Abatement Program for
City Tenants.
Recommended Action
Staff recommends that the City Council authorize the City Manager or designated staff
to take the following actions regarding the adopted COVID-19 Rent Abatement Program
for commercial tenants in City-owned properties:
1. Approve proposed amendments to the City’s Rent Abatement Program criteria
associated with actual demonstrated economic hardship.
2. Clarify tenancy requirements associated with the Rent Abatement Program to
ensure the funding directly supports tenants who continue to lease or license
City-owned property.
Summary
As part of our efforts to support an equitable and inclusive economic recovery, the City allocated
$2.068 million received from the American Rescue Plan to support the Rent Abatement
Program for tenants of City-owned properties. The deadline for City tenants to apply for the
COVID-19 Rent Abatement Program was July 30, 2021. As a result of reviewing these
applications, staff are recommending a few modifications to the program criteria to provide
greater clarity while supporting the greatest number of program applicants who have suffered
significant economic hardship. This report seeks Council authorization to amend the City’s
COVID-19 Rent Abatement Program to address the eligibility requirements and help clarify
program administration.
Discussion
At its meeting on June 22, 2021, in conjunction with the adoption of the City’s FY 2021-23
Biennial budget, Council adopted the eligibility criteria and allocated $2,068,260 million in
American Rescue Plan Act (ARPA) funds for the Rent Abatement Program.
This funding will support up to:
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• nine-month rent abatement for nonprofit city tenants,
• six-month abatement for small business tenants on the Pier and cultural arts tenants
at Bergamot Station and Santa Monica Airport,
• three-month abatement for other small business enrolled in the City’s Rent
Deferment Program, and
• two-month abatement for Pier or Beach tenants who were not enrolled in the City’s
Rent Deferment Program but experienced a 25% decline in revenues.
To date, the City has received 60 applications for rent abatement. Tenants have
expressed appreciation of Council and staff efforts to help support an equitable and
inclusive economic recovery.
Under the current adopted Council program, eligibility is based on the applicant’s demonstrated
inability to pay lease or license fees, or any portion thereof, with a requirement to provide proof
of economic hardship demonstrating a minimum 25% revenue decline of gross sales when
comparing calendar years 2019 and 2020. The documentation requirements include submission
of copies of 2019 and 2020 IRS tax schedules to demonstrate this minimum 25% drop in gross
sales as reported on Line 1.c. on the 1120 (corporate return) or 1120S (S-Corp return). Line 3
on IRS Schedule C (single member LLCs and sole proprietorships), Line 1.c on Form 1065
(partnerships), and Line 12 on Form 990 (non-profits) are also accepted forms of proof.
Schedule E is not eligible. This practice is consistent with Federal and State COVID-19 recovery
grant and loan eligibility requirements. Staff also accepted and compared annual Profit and
Loss Statements from 2019 and 2020 for tenants who have not yet completed their 2020 taxes.
In the process of reviewing the rent abatement program applications, staff have witnessed that
some of the Bergamot Station cultural arts tenants are having challenges in meeting the
Program’s economic hardship criteria based on the year-over-year documentation requirements
listed above. To help as many cultural arts tenants as possible, staff seeks authorization to
amend the eligibility criteria associated with the abatement program to include the ability to
compare Second and Third Quarter profit and loss statements from 2019 and 2020, alternatively
if this approach does meet the 25% threshold, staff requests the ability to prorate the abatement
amount. The pro-rated abatement rates would be calculated based on the percentage of the
year-over-year (YOY) decline in relation to the 25% requirement if the financial decline does not
meet the 25% threshold. For example, if a tenant demonstrates a 16% decline rather than a
25% decline, the value of the abatement would be prorated at 64% of the 6-month abatement
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since 16% of 25% is 64%. This would result in a tenant receiving a 4-month abatement instead
of 6-months. In several cases, this methodology would help tenants qualify for abatement
assistance where they are currently ineligible. Lastly, to help ensure greater equity of funding
support, staff also recommends that all Bergamot Arts Center tenants participating in the Rent
Deferment Program (Commercial Tenant 1) be eligible for the 6-months abatement if they can
meet the economic hardship criteria.
All existing requirements associated with the City’s Rent Deferment and Rent Abatement
Programs will remain as-is including the requirement that tenants benefitting from the
Programs’ interest free rent deferments, 12-month rent freeze, and rent abatement must
agree to maintain their lease or license tenancy during the duration of the repayment
period. To help provide greater clarity to the tenancy requirement, staff recommends
Council add to the Program requirements that tenants receiving rent abatement funding support
must commit to maintaining tenancy at City-owned properties for a minimum of 12-months
following receipt of approved abatement, or, if tenants’ leases are based on a calendar year,
tenancy shall be agreed and extended through the full calendar year (January through
December). If a tenant, including tenants who are month-to-month, terminates tenancy
prior to the establishment of the rent abatement program or does not maintain tenancy a
minimum of 12-months following receipt of abatement, the abatement amount will be
nullified and all outstanding deferred rent will be due in full. This provision recognizes the
partnership and commitment of both parties to retain and support on-going business
operations in the City of Santa Monica.
Staff will submit a final Information Item update to report the results of this program.
Past Council Actions
Meeting Date Description
3/23/2021 Approval of COVID-19 Rent Relief for City Tenants
4/13/2021 American Rescue Plan Allocation Recommendations, Rent Relief
Programs, and Proposed Community Funding Project
Submissions
6/22/2021 Financial Status Update, FY 2021-23 Proposed Budget, and
FY2021-22 Exception-Based CIP Budget
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended actions.
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Prepared By: Nia Tang, Senior Development Analyst
Approved
Forwarded to Council
Attachments:
A. PowerPoint Presentation
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Santa Monica Rent Abatement Program for City Tenants
June 22, 2021 -Council adopted the eligibility criteria and allocated $2.068 million in American Rescue Plan Act (ARPA) funds for the Rent Abatement Program for City Tenants as a critical component of the City's equitable and inclusive economic recovery efforts.
•Rent abatement Program for City Tenants:
•9-months non-profit tenants on City-owned properties
•6-months Pier/Beach tenants
•6-months Bergamot galleries and Airport artists
•3-months For-Profit tenants in other City-owned properties
•2-months Pier/Beach tenants not enrolled in rent deferment due to beach closure
•Program Criteria:
•Mirrors the City of SM's Rent Deferment Program requirements established under the City's Emergency Orders
•Tenants must be enrolled in the Rent Deferment program and provide evidence of financial hardship:
Ø Tenants must demonstrate a minimum of 25%revenue decline of gross sales (2019 and 2020 IRS Tax Schedules)
Ø Application Deadline -July 30, 2021 (60 Tenants have applied)1
8.A.a
Packet Pg. 219 Attachment: PowerPoint Presentation (4739 : Proposed Amendments to City’s Rent Abatement Program
Rent Abatement + Economic Recovery (cont’d)
Proposed Amendments to Rent Abatement Criteria:
1.Approve proposed amendments to the City’s Rent Abatement Program criteria associated with actual demonstrated economic hardship.
•Financial hardship documentation to include Quarter 2 +3 Profit and Loss Statements (2020 vs. 2019) to demonstrate the minimum 25% revenue decline of gross sales
•Authorize staff to pro-rate rent abatement if cultural arts tenants are not able to demonstrate 25% revenue decline
•Extend 6-month abatement to all Bergamot Arts Center tenants participating in the Rent Deferment Program (Category 1) if they can meet the economic hardship criteria
2.Clarify tenancy requirements associated with the Rent Abatement Program to ensure the funding directly supports tenants who continue to lease or license City-owned property.
•12-month tenancy requirement for all recipients receiving abatement 2
8.A.a
Packet Pg. 220 Attachment: PowerPoint Presentation (4739 : Proposed Amendments to City’s Rent Abatement Program