Parking Structure 3

A new movie theater could still open in Downtown Santa Monica but the project will have to provide significantly more details in order to guarantee approval.

City Council voted 4-2 at their Jan. 26 meeting to direct staff to begin negotiations with the developer over the project. However, several councilmembers said their final approval of the project would be contingent on a more robust economic analysis, better information about parking and potentially, a revised design.

The proposed project requires demolition of parking structure No. 3 and construction of an approximately 100,000 square foot building, which includes 90,000 square feet of theater floor area with up to 16 auditoriums/screens; approximately 2,700 theater seats; interior restaurant/lounge space available to theater patrons, as well as to the public; and approximately 10,000 square feet of ground floor retail/restaurant tenant space leased separately from the theater use. Macerich has applied as the developer with the theater to be operated by Arclight.

The discussion was part of a “float up” process that allows potential developers to receive feedback from regulators before a project reaches its final stages. The intent is to guide a project toward the community’s standard and provide applicants time to adapt to input from the council.

Council’s discussion quickly focused on the economic viability of the project with particular focus on the terms of the agreement that would allow private use of public land and the long-term health of the movie industry.

Councilman Kevin McKeown said he could support the project if guarantees were made that negated some of the perceived risk to the city, particularly a requirement to share revenue from the leased retail component and an agreement the movie theater would operate for 20 years. Those guarantees were not made and he voted against the proposal.

“Money, per se, was not the issue, equitable risk is the issue; and I didn’t have the information tonight to roll the community’s dice,” he said.

Councilwoman Sue Himmelrich also opposed the project. She questioned the financial stability of the project and said the current application wasn’t a true public/private partnership because the applicant was unwilling to compromise on important city issues such as sharing revenue from retail uses.

“When I look at the numbers I’m not so sure this is going to be an economic plus for us. I’m not sure it’s going to be an economic plus for the people on that street,” she said. “I personally am not willing to bet on this creating our Downtown.”

Staff said Parking Structure 3 generates about $1 million in revenue per year for the city and the proposal would require $100,000 per year in rent from the movie theater. Himmelrich said the disparity between the current revenue, potential value of the land and the proposed rent all contributed to her opposition to the project.

Councilwoman Gleam Davis said the economics weren’t as cut and dry as some have suggested. She said if the building remained a parking structure, the city would have to invest $3 million in seismic upgrades and any financial analysis should include the cost of that work. Davis said downtown parking lots are not at capacity and that any revenue lost from the removal of Structure 3 would likely be recouped through higher occupancy at any of the other facilities.

“It’s not as if that million in revenue is going to go away,” she said. “People won’t stop driving because Structure 3 isn’t there. What they’re going to do is find parking in our other structures which have exactly the same price point.”

Mayor Pro Tempore Ted Winterer described his support as “lukewarm” and said while he isn’t a fan of the proposed design, he wanted to see a more detailed parking analysis related to the project.

“I will support the motion, not with great enthusiasm, but I think it’s an idea worth exploring,” he said.

Winterer said he was less concerned with the economics of the project because if successful, the project will contribute to arts within the city while potentially keeping local moviegoers in town rather than driving to nearby large-screen theaters.

“I think we have to acknowledge this is a cultural venue and cultural venues often don’t make money for the residents of the city or city coffers but they provide something we all want, movies are one of the two true American art forms, along with jazz,” he said.

Councilmembers seemed to agree that the initial economic outlook for the project isn’t strong and that its design has problems, but their disagreement stemmed from the appropriate reaction to the so-called “float-up” process.

The four councilmembers voting to advance the project did so with varying levels of reservation but all said the next step would provide more details, including a financial analysis, from which better decisions could be made.

The two opposing councilmembers said no time should be wasted on the project if the applicant is unwilling to meet some basic terms.

Mayor Tony Vazquez was absent.

Council’s direction to staff authorized a negotiation of a development agreement with direction that the city gain a percentage of the retail revenues, secure at least a 15 year term for the movie operator and explore the presence of a cut through connecting 4th Street to the ally.

Once negotiations are complete, the development agreement will return to council for final approval with additional research into the project’s finances and parking impacts.