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SR 06-13-2023 5H City Council Report City Council Meeting: June 13, 2023 Agenda Item: 5.H 1 of 4 To: Mayor and City Council From: David Martin, Director, Administration Subject: Approval of the Pier Corp FY 2023-24 Budget and Work Plan Recommended Action Staff recommends that the City Council: 1. Adopt a finding of no possibility of significant effe ct pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines; 2. Approve the Santa Monica Pier Corporation Fiscal Year 2023-24 Budget and Work Plan; 3. Authorize the City Manager to execute a fourth modification to agreement #10101 with the Santa Monica Pier Corporation to extend the term through June 30, 2024. Summary The Santa Monica Pier is an iconic landmark drawing millions of visitors each year to enjoy one-of-a-kind experiences while strolling above the ocean waves. The City contracts with the Santa Monica Pier Corporation (SMPC) through a Services Agreement to manage certain programs and services at the Pier including marketing, production of community programming such as the highly popular Locals’ Night series, as well as coordination of filming and private event rentals and proctoring the daily street performer lotteries. The Council-appointed SMPC board is also charged with the development of policy guidelines pertaining to sponsorship, marketing, events and leasing, subject to Council approval. The SMPC is required to prepare an annual budget and business work plan to set forth its goals and objectives for the ensuing fiscal year. In accordance with the Services Agreement, the SMPC is submitting its FY 2023-24 work plan and budget to Council for its 5.H Packet Pg. 285 2 of 4 review and approval. If approved, the SMPC’s Services Agreement is to be extended to June 30, 2024. Discussion The SMPC FY 2023-24 Budget (Attachment A) and Work Plan (Attachment B) describe in detail the activities and programs SMPC will undertake in the upcoming fiscal year. SMPC Budget The SMPC’s main sources of income are event rentals, filming, corporate promotions and partnerships, followed by the City’s annual grant. SMPC’s FY 2023-24 Budget projects total revenues in the amount of $1,912,000 and estimated total expenditures in the amount of $1,945,000. This will result in a projected shortfall of $33,000 which will be covered by SMPC reserve funds. The SMPC’s budget comparison from the previous year indicates that FY 2022-23 year-end budget was projected to close with an $15,000 deficit but due to a faster than anticipated recovery of revenues, SMPC year-end actuals for FY 2022-23 are projected to end with a surplus of $52,000. An explanatory memo highlighting certain budgetary changes and expectations is detailed in Attachment C. Revenues Projected revenues include: City grant funding of $150,000; revenues of $1,415,000 from deck and carousel rentals, corporate promotions and partnerships; $200,000 from filming; $60,000 from other grants and donations; and $87,000 from licensing, guided tours, registration fees and food/beverage and merchandise sales. Expenditures Projected expenses include: $980,000 for personnel expenses comprised of salaries, benefits and related services; $430,000 for expenses related to facility charges (e.g. Pier Deck and Carousel rentals) including payments to the City; $430,000 for SMPC-produced Pier programming such as Pier 360, Locals' Night series, Wellness & Waves, Dia de Los Muertos, Save the Pier play, Samo PRIDE and seasonal holidays; $35,000 for marketing; $20,000 for merchandise; and $50,000 for contingencies. 5.H Packet Pg. 286 3 of 4 SMPC Work Plan The attached FY 2023-24 Work Plan describes the activities SMPC plans to perform during the fiscal year. Efforts will focus on continuing and growing its popular free public programming and community engagement including a new, in-person historical walking tour of the Pier. In addition, given the financial stress placed upon the organization following the impacts of COVID pandemic, the SMPC seeks to also explore other models and methods of fiscal sustainability for its organizational future. SMPC intends to embark on a 3-5 year strategic plan with a 10 year “north star” vision. Extension of Service Agreement The Service Agreement between the City and SMPC (Contract No. 10101 CCS) will expire on June 30, 2023. Staff seeks authorization to extend the Service Agreement term through June 30, 2024, to coincide with the 2023-24 Fiscal Year. Commission Action The SMPC Board of Directors approved the FY 2023-24 budget and Work Plan on April 17, 2023. Environmental Review The approval of the SMPC FY 2023-24 budget and work plan is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) (Common Sense Exemption) of the CEQA Guidelines, which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in qu estion may have a significant effect on the environment”. The work plan provides activities and programs that would not result in a significant adverse physical impact on the environment , and therefore, is exempt from CEQA. Past Council Actions Meeting Date Description 6/14/2022 Approval of FY 2022-23 Budget and Work Plan and extension of Services Agreement through 6/30/2023 6/22/2021 Approval of FY 2021-22 Budget and Work Plan and extension of Services Agreement through 6/30/2022 5.H Packet Pg. 287 4 of 4 7/14/2020 Approval of FY 2020-21 Budget and Work Plan and extension of Services Agreement through 6/30/2021 7/14/2015 Council Authorization of five-year Services Agreement with SMPC. Contract No. 10101 (CCS) Financial Impacts and Budget Actions Funds of $150,000 for the Services Agreement with the SMPC are included in the FY 2023-25 Proposed Biennial Budget in the Community Development Department. No additional financial impact or budget action is necessary. Annual Services Agreement Extension Agreement FY 2023-24 Amount Account Number Annual Agreement Amount 10101 150,000 53700002.540150 $150,000 Prepared By: Elana Buegoff, Pier Administrator Approved Forwarded to Council Attachments: A. SMPC 2023-24 Budget B. SMPC FY2023-2024 Work Plan C. SMPC Budget Memo 5.H Packet Pg. 288 Proposed Projected Actuals Proposed 2022/2023 2022/2023 2023/2024 Income City Funding $150,000 $150,000 $150,000 Facilities - Event Deck Rental $600,000 $780,000 $675,000 Facilities - Film Permits $275,000 $130,000 $200,000 Facilities - Merry Go-Round Rental $100,000 $100,000 $130,000 Facilities - Corporate Promotions $200,000 $250,000 $250,000 Partnerships $200,000 $150,000 $360,000 Food and Beverage Sales $25,000 $25,000 $30,000 Licensing and New Revenue (Tours)$15,000 $15,000 $25,000 Registration Fees $15,000 $15,000 $17,000 Merchandise Sales $15,000 Donations and Grants $30,000 $40,000 $60,000 TOTAL INCOME $1,610,000 $1,655,000 $1,912,000 Expenses Facilities - City Refund - Merry Go-Round $55,000 $48,000 $60,000 Facilities - City Refund - Pier Deck $300,000 $300,000 $325,000 Facilities - Event Staffing, Security & Supplies (Tours)$20,000 $40,000 $45,000 People - Wages & Salaries $650,000 $600,000 $685,000 People - Benefits (Health Ins, Payroll Tax, Wrkrs Comp, 403b)$150,000 $170,000 $190,000 People: Meetings, Office Supplies, Retreat $35,000 $40,000 $40,000 People - Services, Audit, Insurance, (Consultant)$35,000 $45,000 $65,000 Marketing Creative $10,000 $10,000 $12,000 Marketing Promotions, Travel $20,000 $20,000 $23,000 Pier Produced Programming (Pier 360, Locals' Night, Wellness & Waves, Dia de los Muertos, Holidays, "STP" Play, PRIDE)$300,000 $300,000 $430,000 Merchandise $20,000 Planning Contingency (<3%)$50,000 $30,000 $50,000 TOTAL EXPENSE $1,625,000 $1,603,000 $1,945,000 NET INCOME ($15,000)$52,000 ($33,000) NOTE: The deficits in budget will be covered by Pier Reserves. Santa Monica Pier Corporation Budget 2023/2024 5.H.a Packet Pg. 289 Attachment: SMPC 2023-24 Budget (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) Item 5-b FY2023-2024 Work Plan This document lays out the strategic work plan of the Santa Monica Pier Corporation for Fiscal Year 2023-2024, a year of exploration, learning and planning for the future, while simultaneously building upon the great traditions and experiences that have made the Santa Monica Pier one of the most iconic destinations in the world. The Pier is approximately the size of a 3-block city street, upon which are an amusement park, an aquarium, a trapeze school, 8 restaurants, 13 licensed vendor carts, 4 retail shops and a 100-year-old antique carousel that is housed within an official Nationally landmarked building. Fishing and street performance add to the daily scope of activities on the Pier, as well as frequent brand activations, art installations and free-and-open-to-the- public programming. A spacious, pinpointable, outdoor venue, the Pier has emerged from two years of a pandemic-rattled and weary world to once again welcome approximately 10-12 million visitors throughout the past year. The Santa Monica Pier experience has long been defined by activity, and the past year has seen an incredible blossom of activity. Whether by attending events, dining at favorite restaurants, enjoying the thrills of the amusement park, or even simply watching the sunset, visitors came to enjoy their preferred activity in droves. For the Pier Corporation, this translated to a very good year, but with the dramatic effects of lengthy closure and caution still fresh in mind. For the new fiscal year, the Pier Corporation will enter a new phase of reimagination, planning for its own organizational future while simultaneously building upon what the organization does best with its treasured free public events and continually seeking new ways to provide a better and even more memorable experience to those millions of visitors. 5.H.b Packet Pg. 290 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) Map of Santa Monica Pier 2023 5.H.b Packet Pg. 291 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) Santa Monica Pier Corporation Board of Directors Board Chair Vice-Chair Secretary/Treasurer Nicholas Rolston Randi Parent Jeffrey Jarow Christopher Foster Daniel Hall Misti Kerns Carter Rubin Santa Monica Pier Corporation Staff Members Executive Director: Jim Harris Operations Director: Aurora Piña Activations Manager: Anne Railsback Brand Manager: Julieta Giner Facilities & Weekend Specialist: Corey Hart Events & Office Specialist: Leo Erickson 5.H.b Packet Pg. 292 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) Accomplishments Of Fiscal Year 2022-2023 Fiscal Year 2022-2023 will be well-remembered as being the long-awaited re-emergence toward normality for the Pier Corporation as well as for the Pier in general. After over two years comprised of temporary closure, an abundance of caution and looming uncertainty due to the COVID-19 pandemic, the first full year of social gatherings, events, and business operations fully (and finally) resumed at the Pier with visitor numbers often resembling the levels prior to March 2020. While some areas of business continued to be tentative, the eagerness of people to visit and enjoy the Pier proves its vitality and meaning to a wide range of visitors that includes tourists as well as the regional and local communities. The final weekend of the previous fiscal year (FY2021-2022) saw the return of the Pier Corporation’s marquee event, Pier 360. This annual beach culture and athletics festival has long been billed as the Pier’s “official kickoff to summer”, and its return after a two-year hiatus served as a grand declaration that the Pier – and Summer – were back and open for enjoyment. The following weeks (the first weeks of Fiscal Year 2022-2023) re-emphasized that statement as they ushered in a new era of outside-produced public and private events, highlighted by the Major League Baseball All-Star Oceanfront Experience in mid-July, and paved the way for the most successful year of event offerings in the Pier’s history. That same fervor extended into most other revenue streams for the Pier Corporation, with activations/corporate promotions and Merry Go-Round party & event rentals seeing a return to pre-pandemic levels. Curiously, filming on the Pier (and in the overall Los Angeles area) endured an inexplicable drought during the normally busy fall and winter seasons, providing a reminder of how tenuous and unpredictable the Pier Corporation’s income sources can be. The success of event and activation bookings enabled the Pier Corporation to expand its own free public programming offerings, which included the extraordinarily beautiful Dia de los Muertos celebration and the increasingly popular monthly Locals’ Nights, both of which incorporate and utilize the entire Pier. Building upon the results of the constructive and informative sessions of the previous year’s study groups, the Pier Corporation continued with a reconfigured lineup of new study groups for Fiscal Year 2022-2023, with the year’s three new groups focused upon community engagement, policy & planning, and large projects. Each study group was composed of representatives of the Pier Corporation board and staff, Pier businesses, City Staff, and members of the local community. A brief definition and highlighted accomplishments follows: • Community Engagement Study Group continued the brainstorming work of the previous year’s study group, with a mission to engage with Santa Monicans in ways that heighten appreciation of the Pier’s role in the life of the community in general and the personal emotional connections it evokes, ensuring the long-term sustainability of the Pier as a relevant and cherished community asset. The group 5.H.b Packet Pg. 293 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) invited representatives of local service organizations and local non-profits to help explore ideas and provide advice regarding outreach and encouragement for such organizations to hold their meetings at the Pier as well as to participate in monthly Locals’ Nights. • Policies and Procedures Study Group was formed with a mission to review and recommend policies and long-term strategic plans that provide sustainable and inclusive economic benefit and a welcoming, positive experience for stakeholders to the Pier Corporation Board of Directors. From this group came the recommendation to the Board to approve a newly proposed Extended Events Policy for the Pier, which was then submitted to the City for adoption. • Large Projects Study Group was assigned to determine, discuss, and advise the Pier Corporation Board of Directors about upcoming projects that will likely have significant impacts on the Pier. Such projects include the Pier Bridge Replacement Project, Santa Monica Bay Foundation’s prospective restoration of the Pier’s breakwater, future alternative use ideas for the Pier Parking Deck, the prospect of moving the Heal the Bay Aquarium up onto the Pier deck, and the City’s current proposed bicycle ramp from beach to Pier deck. The recent fiscal year also included the establishment of new relationships with two of the Santa Monica Pier’s most similar worldwide counterparts: the Brighton Palace Pier of the United Kingdom and the Navy Pier of Chicago. o Brighton Palace Pier - In July 2022 representatives from the Pier Corporation joined Santa Monica Travel & Tourism, Santa Monica Sister Cities, and Santa Monica’s Mayor Pro Tem for the official signing of a “Friendship Cities” agreement between Santa Monica and Brighton & Hove. Much of the delegation’s visit was spent at the Brighton Palace Pier, where staff from both iconic piers exchanged experiences with operations, events, marketing and management. The two venues have since enjoyed a mutually valued relationship. o Navy Pier – In late-winter 2023 representatives from Navy Pier visited with Santa Monica Pier staff, followed by Santa Monica Pier’s staff reciprocating with a visit to Chicago’s Navy Pier. As with the Brighton visit, the staff from each venue exchanged information and ideas, highlighted by the prospective marketing opportunities of each of these iconic American piers being at the opposite ends of another icon – Route 66. 5.H.b Packet Pg. 294 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) Fiscal Year 2023-2024 The new fiscal year shows great promise, as well as considerable challenges, with the Pier Corporation building upon the successes and lessons learned from FY2022-2023 and turning an eye toward the future of the organization. In FY2023-2024 the Pier Corporation will focus and build upon the comprehensive Pier visitor experience. Included in this will be exploration into improvements to wayfinding, information-sharing, and in-person interaction. The organization will also continue to build upon what it is best known for: providing unforgettable free public events including the summer kickoff Pier 360 beach festival, monthly Locals’ Nights, and the enchanting Dia de los Muertos celebration as well as interactive campaigns such as “Dear Pier”. In recognition of the prospective impacts of several upcoming large-scale projects such as the replacement of the Pier Bridge and major events that include the 2026 World Cup and 2028 Summer Olympics, the Pier Corporation will embark upon determining the possible impacts of each, as well as how to best prepare for them. Recalling lessons learned from the pandemic and its impact upon the Pier Corporation’s revenue model, coupled with the prospective impacts of some of the aforementioned upcoming projects and events, the Pier Corporation will focus on researching and exploring better models and methods of fiscal sustainability as well as embark upon a 3-to-5-year strategic plan with a 10-year NorthStar vision for its own future. PIER VISITOR EXPERIENCE The Pier is a large public venue upon which are many privately-owned businesses, yet from the perspective of the average visitor, it is all one comprehensive destination. As such, there is a general expectation of congruity which, unfortunately, does not really exist. The Pier Corporation is eager to focus on filling that void in a number of ways including the use of 21st century technology alongside traditional information sharing methods such as signage and good old-fashioned-person interaction. Included in the improved experience will be the launch of new, in-person historical walking tours of the Pier, while the organization continues to develop new ways of keeping the century-plus of the Pier’s story alive and relevant to its visitors. FREE PUBLIC PROGRAMMING Complimentary to the comprehensive Pier Visitor Experience is the Pier Corporation’s programming slate its traditional free annual events and campaigns including: Pier 360 Beach Festival – The Pier’s official summer kickoff event featuring paddleboard races, swim races, beach volleyball, skateboarding, and lifeguard 5.H.b Packet Pg. 295 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) competitions, all complimented by live music, deck activities and a popup “Museum of Beach Culture” which celebrates Santa Monica’s historic role in these highly popular activities. Locals’ Night – Introduced in Spring 2022, this event has already become established as a Pier tradition. Operating under the theme of “By Santa Monicans, for Santa Monicans”, it is a monthly showcase of everything that is special about this city. “Save the Pier!” Play – The annual retelling of the true story of how the Pier was saved from its slated demolition by a community grass-roots movement, staging a battle between City Hall and a dedicated collection of fishermen & fisherwomen, bumper car operators, surfers, restaurant cooks and wait staff and people who simply loved the Pier. Wellness & Waves – A six-week Saturday morning yoga series produced once, sometimes twice annually at the peaceful west end of the Pier. Dia de los Muertos – Honoring our ancestors and respecting cultural tradition, this is arguably the most beautiful experience on the Pier, with extraordinary altars inside the historic Merry Go-Round Building, a Chumash blessing, a parade featuring Aztec dancers, ballet folklorico, and mariachis, this relatively new annual event is a true inspiration. SAMO Pride - The Pier Corporation partners with Downtown Santa Monica, Santa Monica Place and the City of Santa Monica to celebrate June as “Pride Month” in very unique Santa Monica fashion. Seasonal Campaigns – Winter holidays, Valentine’s Day (month), Black History Month and other seasonal campaigns round out the calendar of Pier Corporation offerings and recognition, primarily through social media. While this is a full slate of free public programs and campaigns, the Pier Corporation will continue to explore opportunities for more, with a specific focus toward a Lunar New Year campaign in Winter 2024 and possible arts festival in Fall 2024. PREPARATIONS FOR UPCOMING MAJOR CITY PROJECTS & EVENTS Several large-scale projects and are foremost on the minds of the Pier Corporation including the 2026 FIFA World Cup, Pier Bridge Replacement Project (2025-2028) and the 2028 Summer Olympics. While each of these projects presents potentially good things for the Pier and surrounding area, they are equally concerning in that they will also have dramatic impacts on accessibility and traffic (both pedestrian and vehicular). 5.H.b Packet Pg. 296 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) The Pier Corporation will work with City Staff, Pier businesses and the neighboring community to study and plan for the impacts that each of these projects and events may present, likely in ad hoc committees assembled with the same makeup of the organization’s study groups which have proven so successful in recent years. PIER CORPORATION FISCAL SUSTAINABILITY REVIEW While FY2022-2023 proved to be a better-than-expected year for revenue from rentals and activations on the Pier deck and in the Merry Go-Round, revenue for film permits suffered drastically and unexpectedly. Corporate partnerships too, have proven more elusive than in the past. The organization is currently exploring emphasis on seeking grants and donations, capitalizing on its status as a non-profit organization, and is also turning focus on developing new and unique merchandise to sell both to local retail outlets and directly through its website. Coupled with the significant reduction of the annual grant from the City of Santa Monica for the fiscal year, and with the devastating impact the pandemic placed upon the organization in very recent memory, the need for the Pier Corporation to review and reimagine its funding model is ever-present in the minds of the Pier Corporation’s Board of Directors. The possible impacts of upcoming large projects and events add to the impetus of the need to work with City of Santa Monica Staff to investigate alternative models of partnership. 3-5 YEAR STRATEGIC PLAN WITH 10 YEAR NORTHSTAR VISION With the devastating impact of the pandemic mostly behind us, the Pier Corporation will turn its focus toward its future, both immediate and long-term. The organization will develop an overall strategic plan to proceed through the expected and unexpected events and prospective complications of the next several years with an ultimate vision toward 10 years in the future, likely with the guidance of a professional consultant. 5.H.b Packet Pg. 297 Attachment: SMPC FY2023-2024 Work Plan (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) Date: April 14, 2023 To: Members of the Santa Monica Pier Corporation Board of Directors From: Jim Harris, Executive Director Re: Summary of Proposed Budget for FY2023-2024 Attached is the proposed budget for the Santa Monica Pier Corporation for Fiscal Year 2023-2024, which includes comparison Fiscal Year 2022-2023’s proposed budget and the actuals that are projected for the fiscal year’s conclusion. The following are note on some specific line items: INCOME: • Facilities – Event Deck Rental: The FY2022-2023 projected actuals will be significantly higher due to the Major League Baseball All-Star Oceanfront event which, at the time that the budget was presented, was not yet a certainty and ultimately provided an unexpected significant boost in income. The proposed FY2023-2024 budget number is aligned with a return to more normal expectations. • Facilities – Film Permits: FY2022-2023 included an unexpected drought of film bookings on the Pier during the late fall and winter months, which are usually very active. Since the reasons for that drop in business are still unclear, the expectation for FY2023-2024 have been lowered to a more modest level. • Facilities – Merry Go-Round: Rental rates for FY2023-2024 event and party rentals in the facility will be increased by 20%, maintaining competitive pricing as interest in indoor events has recently been rejuvenated. 5.H.c Packet Pg. 298 Attachment: SMPC Budget Memo (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan) • Partnerships: The new Locals’ Night event series and summer kickoff Pier 360 Beach Festival have drawn significant interest from prospective sponsors for the upcoming fiscal year. • Merchandise Sales (New Line Item): The organization expects significant sales of merchandise that will include new specialty items as well as the release of the new 2nd edition of the Pier history book. • Donations and Grants: The organization will employ increased focus in this area, better utilizing its non-profit status. EXPENSES: • Facilities – Event Staffing, Security & Supplies: FY2022-2023 included unexpected levels in repairs to the small electric “peewee” event support truck and a surge in amusement park tickets purchased for resale. Neither of these expense items are expected to be as significant for FY2023-2024, but materials for the new year’s historical walking tour plus upgrades to existing event furniture and supplies will add to this line item. • People – Wages & Salaries: The organization intends to increase staff by one full time assistant-level position plus one part-time weekend position. • People – Services, Audit, Insurance, Consultant: During FY2021-2022 the Pier Corporation was named in two separate law suits, neither of which directly involved the organization (one on a beach walking path, the other underneath the pier deck, and neither associated with a Pier Corporation event). Nevertheless, the organization’s insurance company at the time chose to settle both suits, then subsequently drop service to the Pier Corporation, leaving the organization to source a new insurance company while having two negative marks on its record within the previous year and, as a result, a $10,000 increase over the expected insurance rate. This cancellation and sourcing occurred after the FY2022-2023 budget was approved by the Board and submitted to the City. An addition to this line item for FY2023-2024 will be a prospective consultant to assist with the organization’s 3-5 year strategic plan indicated in its work plan. • Pier Produced Programming: The burgeoning popularity of the new Locals’ Night and Dia de los Muertos events indicates need for growth. Likewise, the Pier 360 Beach Festival is expected to expand its offerings as it continues to grow as the area’s marquee summertime beach kickoff event. 5.H.c Packet Pg. 299 Attachment: SMPC Budget Memo (5765 : Approval of the Pier Corp FY 2023-24 Budget and Work Plan)