Santa Monica Civic Auditorium Renovation

History

The Santa Monica Civic Auditorium, designed by renowned Los Angeles architect Welton Becket, opened in 1959. The facility was designated a City Landmark on November 12, 2001. That decision was upheld by the City Council at its April 9, 2002 meeting. Over the course of its history the Civic has been the subject of a number of studies as the City grappled with its future such as the June 2004 Urban Land Institute report.

Community Vision

The Santa Monica Civic Auditorium has also been an important component of a number of recent community planning initiatives. Each of these processes confirmed the community’s desire to see the venue brought to life as a focal point for large musical and cultural performances. They include:

· Civic Center Specific Plan (CCSP), June 2005, defines the “Civic Auditorium District” with the Civic Auditorium as its cornerstone, to be bordered by open space as well as an early childhood education center and additional cultural facilities. The CCSP identifies the need to make improvements to the Civic Auditorium as a venue for large musical and cultural performances as well as exhibitions and community gatherings.

· Creative Capital, approved by City Council on February, 27, 2007 committed the City to a cultural use of the Civic Auditorium in line with the community’s vision for the facility. That vision includes the need for significant upgrades to the building and its technical equipment in order to support its repurposing from primarily an exhibition hall to primarily a cultural venue or performing arts center, highlighting concerts, theatrical shows and other special events.

· The Santa Monica Redevelopment Agency’s five year implementation plan, adopted November 17, 2009, includes an allocation for Civic Auditorium. During the extensive community process that the City undertook to develop that plan, investing in the renovation of the Civic Auditorium emerged as the key cultural priority.

Renovation

Once renovated, the Civic Auditorium would become a state of the art facility while retaining notable characteristics such as the façade and the hydraulic floor. Anticipated improvements include a flexible seating system, enhanced technical capacity (sound, lighting, projection, etc.) and improved public spaces such as the lobby and concession areas. The renovated facility would be able to host a full range of events from concerts to award shows, including corporate events and consumer shows.

Timing

The confluence of the economic downturn’s impact on construction costs and the option of RDA funding create a unique opportunity for the renovation of Civic Auditorium. The City recently issued an RFB for a design-build team for the renovation and close to two hundred interested parties attended the recent job walk. Interest in the project is extremely high and will undoubtedly ensure a highly competitive and responsive process. If the City were to undertake the renovation in the future it would likely come at a much higher cost, with fewer responses from highly qualified teams.

Return on Investment

· City-wide Economic Impact: The City can anticipate a substantial increase in economic activity, primarily in the hospitality sector, as a result of repurposing the Civic Auditorium due to spending by an increased number of attendees at an expanded range of Civic Auditorium events. Strategic Advisory Group, the City’s consultants for this project, did an analysis of the projected economic impact of a repurposed Civic Auditorium which shows an anticipated increase of approximately 95,000 attendees in year seven of this proposed agreement over 2010, with an estimated increase of almost $18M in combined direct spending and indirect spending. A renovated Civic would also support the planned development in the area by providing confidence in its long-term vitality and sustainability and by attracting tens of thousands of visitors, many of whom will stay overnight.

· Enhanced Asset: Renovation of the Civic Auditorium would result in the enhancement of a significant asset for the City and the creation of an outstanding facility for the community. If there were a dramatic change in the concert and performing art industries, such that the proposed business model failed, the City would still own a first rate facility that could serve other community needs, such as supporting the visitor industry through expanded convention and consumer shows. Were the City to choose to return to programming the facility at that point, with a mix of events and consumer shows, it is likely that the upgraded facility would be more competitive and attract events with larger audiences and a higher return.

Partnership Option

The proposed Exclusive Presenter/Joint Venture model invests Nederlander, a top industry promoter, in the success of the venue and ensures that the City shares in that success. Nederlander, established almost 100 years ago, is one of America’s premier entertainment companies with the ability to secure top headline entertainment based on long-term industry relationships. Nederlander is one of the primary theatrical producers and theater operators on Broadway, whose production list includes shows such as Lion King, Wicked, Rent, Avenue Q, Stomp, Riverdance, Evita and Chicago, among many others. Nederlander also has a major concert programming division that works with a broad array of talent across all musical genres, including such superstars as Sting, Bruce Springsteen, and Bob Dylan, as well as Erykah Badhu and Kristin Chenoweth. Further they have extensive experience working with municipalities and other government entities as well as with landmark facilities. In California, they have agreements to operate or program the Greek Theater in Los Angeles, the Santa Barbara Bowl, the Grove in Anaheim, the San Diego Civic Theater, and the Civic Auditorium and Center for the Performing Arts in San Jose. Nederlander’s standing in the industry and status as an international promoter are critical to repositioning the Santa Monica Civic Auditorium as a destination venue for music and theatrical productions; it is not likely the City can achieve this on its own.

Proposed Business Model

· Event Mix: Under the proposed model, once renovated, the Civic Auditorium would host a mix of concerts, theatrical performances, film screenings, Broadway shows and special events, which would include a broad range of activities from award shows and movie premieres, to select corporate events. It would also continue to host Stairway and the Santa Monica Symphony, along with a limited number of other popular Santa Monica charitable and community events.

· Conservative Baseline Scenario: The various financial scenarios developed to analyze the proposed business model included both pessimistic and optimistic options, along with the baseline. Given the volatile nature of the entertainment business, in developing the number of events a renovated Civic Auditorium might host under a baseline scenario, all parties agreed to take a conservative approach. This was confirmed by a range of consultants that reviewed the baseline.

· City Subsidy Comparison: Although in all scenarios modeled the venue would still require an annual subsidy ranging from $0.6M to $1.7M, the projected cumulative subsidy over the same time frame under a “status quo” scenario, where the Civic Auditorium would continue to operate as it currently does, is over $32.9M. Repurposing the Civic under the proposed business model is projected to result in a significant subsidy reduction of $18M to $24M over the ten year term. (Additional information on the business models and scenarios is available in the March 8, 2011 staff report on the proposed agreement with the Nederlander Organization.)

Alternatives

· Status Quo: The City Council could choose to continue to operate the Civic Auditorium as is, presenting primarily consumer shows. However the projected deficit would continue to mount, reaching $32.9M over the next ten years. The facility would also still require major infrastructure improvements to address ADA accessibility and retrofits for earthquake safety at an estimated cost of $15M to $20M.

· Mothballing the Facility: The City Council could choose to simply close the Civic Auditorium until such time as an alternative funding source for the necessary improvements is identified. Annual costs associated with shuttering the facility are estimated at $1.7M if the core staff identified in the proposed business model were retained and assigned other responsibilities. Or $0.25M for such items as insurance, security, and utilities, if the City were to lay-off all Civic Auditorium staff and close the building.

· Development of Adjacent City Land: Another possible measure to fund the renovation of the Civic is for the City Council to capitalize the development value of the Civic parking lot. Currently, the Civic Center Specific Plan designates the Civic parking lot for a new park, cultural uses and the Civic Center Early Childhood Education Center. Rather than using the property for park and cultural uses, the City could make the parking lot available for development in order to help fund the renovation of the Civic. If the City kept a portion of the lot for the Early Childhood Education Center, up to five additional acres could be made available for development. Depending on how much of the lot was made available, the timing with respect to market conditions, and the requirements imposed on the development, the City could generate significant income to support the Civic renovations. For example, if only one acre of the lot was made available for development, market timing was poor and many requirements were placed on the development, the City might generate as little as $6M. If the full five acres were made available, the real estate market had regained its full strength, and requirements placed on the development were modest, the land could generate as much as $80M.