DOWNTOWN — How much would you be willing to pay for a stretch of sidewalk along picturesque Ocean Avenue or the popular Third Street Promenade? How does $5.67 a square foot sound?
That’s the question Santa Monica city officials are asking restaurant owners after members of the City Council in July questioned whether or not rents should be increased for those who offer outdoor dining on public property — especially those whose dining areas are almost fully enclosed.
In a meeting Tuesday with members of the Bayside District Corp. board, City Hall’s economic development manager, Miriam Mack, introduced possible increases for outdoor dining license fees, increases that some believe are too steep to stomach given the current state of the economy.
One proposed increase has restaurant owners along the promenade paying as much as $6.25 a square foot per month for fully enclosed patios, $5.67 for partially enclosed per month and $3.71 per month for outdoor dining areas with no barriers or railings separating diners from the public.
The idea is that locations with more pedestrian traffic are more valuable and restaurants should be charged more for using the public right of way for outdoor dining. Restaurants should also pay higher rents the more they enclose outdoor dining, as the enclosures essentially turn a public space — the sidewalk — into a private one, Mack said.
The current fee formula charges a flat rate per square foot depending on a restaurant’s location. The type of outdoor dining — fully enclosed verses no barriers — is not considered. The highest price is $1.90 per square foot, with the lowest being 79 cents.
A consultant conducted a survey of surrounding rents for restaurants and developed the preliminary pricing formula, one which was met with plenty of opposition from members of Bayside, a public-private management company that is in charge of managing and promoting Downtown for City Hall.
“[T]o raise it like this with a recession out there, people will go out of business,” said Bayside board member Barbara Bryan, who owns the Interactive Cafe on Broadway across from Santa Monica Place. “This just seems unfair.”
Bryan said many restaurants and bars are offering extended happy hours in a desperate attempt to draw in customers.
“They don’t put out happy hours because they are happy, they do it because they’re miserable,” she said.
Bayside board member Barbara Tenzer, a commercial property manager who works closely with restaurateurs in Downtown, said restaurant space typically is leased for around $6 to $7 a square foot on the promenade, and that comes with a kitchen, vents, electrical outlets and other amenities, whereas a sidewalk space is just concrete, and therefore shouldn’t be nearly as expensive as indoor space. She also pointed out that restaurants cannot use their outdoor dining space every day of the year because of rain, wind or other issues.
“It’s sad that [City Hall] is thinking about this when businesses are choking,” Tenzer said. “Landlords are dealing with rent decreases, not rent increases.”
The council has tried for decades to strike a proper balance between retail, restaurants and street performers, all of which officials say contribute equally to the unique spirit of the promenade.
This desire led to the formation of the Promenade Use Task Force in 2002, which was comprised of current and former councilmembers, business leaders and city staff. The task force recommended changes to current zoning to allow for outdoor dining at the pavilions, the center courts between the promenade’s dinosaur fountains, and extending dining to the edge of the sidewalk in front of a given restaurant.
Some city officials believe too many restaurants have been pushed off the promenade because of high rents, forcing them to move where rents are lower.
Rob York, a real estate development consultant who works closely with Bayside, said the City Council has enacted regulations requiring landlords to rent only to restaurants and not retail, which commands higher rents. Charging higher rents for outdoor dining would be counterintuitive to the council’s mission of preserving restaurants on the promenade and surrounding areas.
York said the pricing scheme needs to be simplified and rents lowered.
“If you want to encourage something you don’t price it … above market,” he said.
Patricia Hoffman, co-chair of Santa Monica’s leading political party — Santa Monicans for Renters’ Rights — who sits on the Bayside board as a representative of the community, spoke in favor of increasing the rents, particularly for those restaurants that use full enclosures, creating a barrier that does little to enliven a sidewalk. She thought the preliminary pricing increase for fully enclosed patios was too low.
“I think the city should get as much for that space as private landlords do,” she said. “A full barrier does nothing for the community.”
However, Hoffman agreed the time is not right to introduce the new rents given the struggling economy.
Members of the board questioned the preliminary pricing scheme developed by City Hall’s consultant and may consider conducting an independent analysis. They also advised Mack to put the matter on hold until the economy improves.
Mack said she plans to meet with business owners in the city’s major shopping districts to get their feedback before moving forward.