City of Santa Monica
California

Staff Report
3184

Parking Structure 2 License Agreement with Downtown Santa Monica, Inc. (DTSM)

Information

Department:Economic Development Division, Housing and Economic DevelopmentSponsors:
Category:03. Consent Calendar

Recommended Action

Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and execute a license agreement with Downtown Santa Monica, Inc. (DTSM), a California-based not-for-profit corporation, for the use of the rooftop deck of City-owned Parking Structure 2, located at 1235 2nd Street, as an outdoor cinema. The proposed license agreement would have a five-year term with one, five-year renewal option

Staff Report Body

Executive Summary

Since the rebirth of Santa Monica’s Downtown (Downtown) in the late 1980s, entertainment has played a key role in its vitality, along with shopping, dining, community services, and vibrant sidewalks.  However, Downtown has experienced a decline in movie attendance due to cinema industry changes as well as reduced in-store shopping due to the growth of on-line shopping over the last decade.  As a result, the City has worked with Downtown Santa Monica, Inc. (DTSM) to add to the diversity of activities that draw the community to, and support the vitality of, Downtown. Outdoor cinemas have grown in popularity as a compelling, cultural, evening activity that can enhance economic vitality and activate underutilized spaces. To solicit interest from outdoor cinema operators, DTSM is requesting a license agreement to use the rooftop deck of Parking Structure 2 (PS 2) for the installation and operation of a rooftop cinema that would expand entertainment and activity opportunities Downtown. The term of the proposed license agreement would be for five years, with one, five-year renewal option, for a total license term of up to ten years, with fifty-percent revenue sharing between the City and DTSM.

 

Discussion

In the late 1980’s, the City recognized that a key element to revitalizing the Third Street Promenade (Promenade) and Downtown was entertainment activities to serve as an attraction for community members, while also supporting local restaurants and shops. The Zoning Ordinance was amended to encourage cinemas, a key entertainment activity, to locate in the Downtown area by restricting new cinema development outside Downtown. The strategy was successful in attracting new cinemas, and the cinemas played a key role in Downtown’s revitalization and evolution as a retail, dining, and entertainment destination.

 

Locating an outdoor cinema on the roof of PS 2 provides an opportunity to take full advantage of Santa Monica’s exceptional weather and beautiful views while stimulating activity towards the struggling north end of the Promenade. An outdoor cinema also supports the goals of the Downtown Community Plan, which encourages multiple types of cinema uses with a broad range of appeal and provides policies to support economic success by diversifying entertainment and cultural attractions.

DTSM, a 501(c) (3) non-profit organization, is seeking a license agreement from the City so that they can issue a Request for Proposals (RFP) to solicit interest from qualified and experienced vendors to operate an outdoor cinema on the rooftop deck of PS 2 (See Exhibit A). The management of the rooftop cinema is consistent with DTSM’s roles and responsibilities to support economic stability, growth, and community life in Downtown. DTSM has several similar license agreements with the City, including operating a popular seasonal ice rink, displaying public art, activating public rights-of-way with outdoor dining facilities, and providing pedestrian-oriented services and amenities along the Promenade.

Staff recommends that fifty percent of any base rent and participation payments from the cinema operator to DTSM be shared with the City.  The equal sharing of income is intended to recognize that DTSM would take responsibility for soliciting proposals, negotiating and managing a lease agreement, and supporting the operator, while the City would make a parking structure rooftop available for the activity.  While a rent forecast is extremely speculative at this early stage, similar venues are able to pay rents of $100,000 per year or more. 

Based on an analysis of parking occupancies in PS 2 and adjacent City-owned parking facilities, staff does not anticipate a disruption to Downtown core parking availability or a net revenue loss to City parking revenues. The monthly peak occupancy in PS 2 in FY 2017-18 ranged from 65 percent to 85 percent. The 85 percent peak occupancy occurred for a limited period during the annual Genesis Open Golf Tournament in February 2018. Based on occupancy data, staff anticipates that a reduction from 645 to 566 total available spaces would result in the following:

·         projected monthly peak occupancies ranging from 69 percent to 90 percent in FY 2019-20, and

·         while occupancies could increase during peak hours of the operational months (April to October) due to the popularity of the proposed attraction, it would not result in a reduction in City parking revenues.

In an effort to ensure sufficient parking availability at no more than 85 percent occupied at all times, staff would leverage data analytics and make necessary operational adjustments to redirect parkers, if necessary, to other Downtown City-owned parking facilities based on real-time parking availability.

General License Agreement Terms

The outdoor cinema on the rooftop deck of PS 2 (as conceptually rendered in Exhibit B) could accommodate two screens on each side of the ramped deck to create a stadium seating condition that could have up to 225 seats per screen for nightly screenings, Tuesday through Saturday, plus occasional special events. The cinema would be open from approximately April through October and would provide individual wireless headphones for movie audio, and lounge chairs and blankets to make the experience comfortable. All costs to implement the outdoor cinema operation including permits, studies, utilities, fire-life safety and other required infrastructure improvements would be paid by DTSM through the sublicensee. The City would not bear any costs or responsibilities for the entitlement, permitting, installation, or operation of the outdoor cinema operation. Requirements associated with the outdoor cinema entail creating and marketing the screening schedule, producing a food and beverage program, and developing a community engagement program that would involve the arts, special events, and promotions. A joint panel of DTSM and City staff would be responsible for evaluating the cinema proposals before the cinema operator could be selected. City staff would have approval rights of the sublicensee and the sublicense agreement, including administrative discretion to modify the license agreement to respond to the specific requirements associated with the unique use and the selected operator. 

 

 

 

The proposed terms of the license agreement are as follows:

·         The license area would utilize the rooftop of PS 2 (approximately 30,000 square feet and 79 parking spaces).

·         A five-year term with one, five-year renewal option for a total license term of up to 10 years, with a profit-sharing license fee formula.

·         The City would receive fifty percent of any revenue DTSM receives.

·         DTSM would provide annual revenue and expense reports to the City. 

·         Tentative hours for the license area would be daily from approximately 6 PM to midnight, with an ability to adjust the hours based on seasonality and program activity.

·         Rules and regulations may be developed, posted, and enforced by the City, DTSM, or the cinema operator.

·         Access to the license area would be ticketed. DTSM and the cinema operator would be responsible for ensuring adequate staffing to monitor the license area.

·         DTSM and any sub-licensee or subcontracted vendors would be required to agree to defense and indemnity provisions; maintain and provide adequate insurance coverage; and comply with all rules, regulations, and laws.

·         All improvements or installations within the license area would be coordinated in advance with Public Works, Planning, Fire, and Building and Safety to ensure adherence to administrative policies and municipal code requirements.

·         At the termination of the license agreement, DTSM would be responsible for the removal of any improvements installed and any repairs required to the license area and PS 2 as a result of the installation of the improvements.

·         Commencement of the services is estimated to occur in spring 2020, following execution of the license agreement and approval of any necessary entitlements and permits.  

·         The City would continue to provide the same level of routine maintenance services and repairs for the licensed area.

 

 

 

Financial Impacts and Budget Actions

The proposed license agreement with DTSM for use of the roof-deck of the City-owned PS 2 located at 1235 2nd Street would generate annual revenues to the City based on the lease terms associated with the selected outdoor cinema operator. Revenue budget would be included with the FY 2019-21 Biennial Budget.

Meeting History

Aug 28, 2018 5:30 PM  City Council Regular Meeting
draft Draft