Stay at home through August. Those were the chilling words delivered this week by Barbara Ferrer, LA County’s Public Health Director and our version of Anthony Fauci.
We don’t know the final extent of a summer closure because the County continues to walk-back the initial statement and equivocate, but it’s not hard to figure out what they want: allow businesses to open but discourage anyone from actually going out.
This paradox will be truly devastating for Santa Monica’s $2.0 billion tourism industry should we lose the entire summer. Tourists provide one-third of the revenue for our general fund budget. Optimists might say that forced staycations by Santa Monicans will ease the burden, however if every man, woman and child — all 93,000 of us — were to spend lavishly, say $1,000 each above and beyond our normal, our tourism revenue would still be down over 90%. It is that bad.
We also need to subtract the additional lost revenue from members of our daytime workforce that has been laid off, furloughed or, if lucky, still employed but Zooming from home.
All those lunches not eaten in our restaurants, all those trips to the Apple store now done online … you get the point. More financial pain.
While county officials have said they plan to move forward with opening more businesses, an open business can only sell to customers who come out to purchase and by telling people to stay home, we can all but guarantee many retail businesses won’t have the foot traffic to survive long term. And that means tax revenue will be anemic.
The municipal corollary will be reduced services, empty storefronts and higher borrowing costs. We are in the early stages of the roller coaster dropping and we have no idea how steep it is and when we will start to level off.
Business closures will be a particularly insidious repercussion of the COVID crisis because we won’t see the closures all at once and not right away. Due to the rent relief laws in place, many businesses that know they are on life support will stop paying rent immediately but they will take the full 12-month allowance in the law before they close up.
A study by the U.S. Chamber of Commerce found that 53 percent of small businesses were under a temporary closure. One in ten said they could only last a month before closing for good and about 40 percent said they had a six month window before they would be gone permanently.
The city can only do so much to fight these huge tidal forces but there are life-rafts worth launching.
As residents, we can reiterate our support for local businesses. The easiest way to do so is to abandon the third party delivery services. Grubhub, DoorDash, Uber Eats, etc. etc. take huge percentages from local restaurants, so much so that a restaurant might be lucky to cover costs on some orders. Order directly from the restaurant and pick it up yourself.
On the same topic, the City’s minimum wage ordinance should be revised to account for the vastly different rules imposed on the restaurant and the company that picks up from the restaurant.
Preventing blight will be hugely important as we look to come out of this slump. Boarded up storefronts surrounded by homelessness will only exacerbate the problem. Local officials need to step up efforts to fight homelessness, encourage landlords to take reasonable rents to fill vacant storefronts and pursue criminal activity that deters the limited number of visitors we will receive.
City Hall should also look at a future where retail just isn’t as important to the city and we should diversify the revenue base by leaning into our reputation as an incubator of new ideas and new companies. Santa Monica has historically been home to businesses in their infancy and our city loses out on the maturing companies to places like Playa Vista. We’ve reversed that trend a little recently and the city should do more to solidify Santa Monica as the heart of Silicon Beach. Tech, media and other early-stage companies create good jobs and attract support services like dedicated law firms or finance. They are also collaborative and benefit from co-location, even with the rising tide of telework, finding places for these businesses to function in our city will be a long-term boon.
We’ve got a cold winter coming made that much harder without the economic warmth of a bustling summer, but we need to sow seeds of recovery now to set up our future bounty.
SMDP Editorial Board