City Council Meeting: October 23, 2012

Agenda Item: 4-A 

To:                   Mayor and City Council 

From:              Karen Ginsberg, Director of Community and Cultural Services

Subject:          Options for the future of the Santa Monica Civic Auditorium

 

 

Recommended Action

Staff recommends that the City Council review and provide direction on which options for the future of the Santa Monica Civic Auditorium Council wishes staff to further analyze for future decision-making. 

 

Executive Summary

The $51.9 million renovation of the landmark Santa Monica Civic Auditorium (Civic) is suspended due to recent legislative actions related to the dissolution of redevelopment and the uncertainty of funds designated for this project.  The facility is still scheduled to close on June 30, 2013. Since the August 14, 2012 meeting at which City Council authorized the suspension, staff has identified options for the facility and potential funding sources.  These options fall under four broad categories: 1) partial renovation; 2) full renovation; 3) adaptive re-use; and 4) demolition.  This study session is intended to inform Council of the various options and seek direction to prioritize further research and planning efforts for the future of the Civic. 

 

Background

The Civic cannot continue to operate “as is” for the following reasons:

Moreover, the venue can better meet community needs and market demand. Both the Civic Center Specific Plan (CCSP) and the City’s cultural plan, Creative Capital, place a high priority on renovation and upgrades to the landmark Civic to allow for a desired future program of high quality, community-responsive cultural events. 

 

The Current Model

The Civic functions as a 3,000 seat, full-service rental facility hosting  a range of events from consumer shows, concerts and community events, to filming and award shows, with the majority of the use coming from consumer shows.  In FY 2011-12, the Civic hosted 101 events for a total of 210 use days including days required for set-up and tear down.  Of the total, 54 were contracted events and 47 were City events, which took place primarily in the East Wing.  The Civic is staffed with 20 permanent management and event employees and six as-needed employees who staff specific events.  This  level of staffing is needed due to the predominance of consumer and trade shows that require a great deal of staff time for set up and tear down by staff with both general and specialized trade skills to achieve the high level of customer service for which the Civic is known.  The Civic budget was established as a City enterprise fund, but beginning in FY 2006-07 has required a General Fund subsidy

 

Community Context

The Civic, designed by Welton Becket and completed in 1958, was designated a City Landmark by the Landmarks Commission on November 12, 2001.  That decision was upheld by the City Council at its April 9, 2002 meeting.  In June 2005, the City adopted an update to the 1993 Civic Center Specific Plan (CCSP) setting forth planning policies and land use and development regulations for the 67-acre area bounded by Pico Boulevard on the south, Fourth Street on the east, Ocean Avenue on the west and Colorado Avenue on the north.  The southwestern corner of the Civic Center is defined as the “Civic Auditorium District” with the Civic 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 as a venue for large musical and cultural performances as well as exhibitions and community gatherings.  Further, it calls for the surface parking to be consolidated into above and below ground parking thus freeing up the land for park purposes.

 

Creative Capital, the City’s Cultural Plan, approved by Council on February, 27, 2007 committed the City to a cultural use of the Civic in line with the community’s vision for the facility.  Creative Capital suggests that the recommendations regarding the Civic in the CCSP be refined to reflect specific cultural uses envisioned by the community including a performing arts venue, museum or cultural center.  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.

 

During the summer of 2008, capitalizing on the potential inherent in concurrent development at Santa Monica High School (Samohi) and the Civic, staff from the City, the Santa Monica-Malibu Unified School District (SMMUSD) and Santa Monica College (SMC) worked collaboratively with consultants (Koning Eizenberg Architecture and R.L. Binder, FAIA Architecture and Planning) to explore possible shared use opportunities between the Civic Auditorium and Samohi campuses and focused on possible shared use in the areas of cultural linkages (Civic Auditorium, Samohi’s Barnum Hall & Greek Theatre), open space & recreation (fields, gymnasiums, courts), education (childcare, cultural classes), mobility & access (for vehicles, buses, pedestrians & bicycles) and the character of the surrounding streets. The findings were presented to Council on July 23, 2008. 

 

Partnership Opportunities -- Selection of the Nederlander Organization

In exploring ways to reposition the Civic as a vital cultural hub within the Civic Center area, on March 24, 2009, City Council authorized release of a Request for Qualifications (RFQ) from non-profit and/or for-profit entities interested in participating in a public/private partnership for the cultural use and programming of the Civic.  On September 22, 2009, Council authorized the City Manager to negotiate an agreement with the Nederlander Organization (Nederlander) to program the Civic Auditorium, and on March 8, 2011 Council approved business terms for an agreement between the City and Nederlander.  Nederlander was selected as the City’s partner to operate the Civic’s programs based on its years of experience, financial capacity, expertise in working with historic facilities and the public sector and its national reputation for the quality and breadth of its entertainment products. 

 

Key provisions of AB 1484, as well as the Department of Finance’s (DOF) aggressive implementation, create significant uncertainty with respect to Santa Monica’s long-planned priority projects.  Provisions that would allow the DOF to raid the City’s General Fund create even greater risks.  In order to mitigate risks to the City, while attempting to ensure that certain priority projects that are underway are completed according to community expectations, on August 14, 2012 Council approved a contingency plan comprised of adjustments to certain priority projects.  If successful legal challenges, DOF actions, or legislation reduces the risks associated with these projects, the contingency plan can be further adjusted.  At that meeting Council authorized the suspension of the Civic renovation project as part of the contingency plan and directed staff to develop alternatives for the rehabilitation of the Civic for a Council study session to be scheduled this fall.

 

Discussion

Since the August 14th meeting, an interdepartmental committee comprised of staff from Community and Cultural Services, Finance, Housing and Economic Development, Planning and Community Development and Public Works explored options for the future of the Civic.  Without the financial resources originally designated for the renovation, staff has re-visited all possible options, drawing on the information developed during the multi-year community planning process outlined above.  Staff identified three key questions to frame the discussion of the future of the Civic:

Preservation of the building and long-term cultural use:

The future of the Civic is an important component of a number of recent community planning initiatives, including the Civic Center Specific Plan (2005), the City’s adopted cultural plan, Creative Capital (2007), and the former Santa Monica Redevelopment Agency’s Five-Year Implementation Plan FY 2009-10 to FY 2013-14.  Each of these planning initiatives confirmed the community’s desire to see the landmark building preserved, the venue refurbished and brought to life as the cultural heart of the Civic Center area.  Key considerations include:

 

Community benefits, financial risks and other key considerations:

Staff has identified four broad concepts for the future of the Civic:

  1. Partially renovate the Civic Auditorium
  2. Fully renovate the Civic Auditorium as a multi-purpose performing arts venue
  3. Adaptive re-use of the Civic Auditorium
  4. Demolition of the Civic Auditorium

For each of these concepts staff explored several options, and evaluated the community benefits, financial risks and other considerations (see Attachment A).  Potential benefits include whether an option creates positive economic benefits, creates positive cultural impact, enhances the Civic as a City asset and enacts the Civic Center Specific Plan (CCSP).  Potential financial risks include whether or not the option requires an operating subsidy, impacts long-term parking and/or parking revenue, leverages outside funding sources, and offers viable partnership prospects.  Other key considerations include the estimated timeline, the preservation of the Civic’s landmark status and the community planning process for any options that are not clearly defined in the CCSP. 

Possible options for the future of the Civic are as follows:

  1. Partially renovate the Civic Auditorium

1a.       Retrofit facility and re-open – This option would entail undertaking limited construction to address the basic needs of this aging facility.  Once completed, the facility would offer its current programming which consists of consumer shows, community events along with some award shows and concerts.  This option would replicate the current operations and likely the current deficit. 

 

1b.       Retrofit facility and lease – Similar to 1a, this option entails undertaking basic necessary renovations.  In this option, the City would lease the facility to another entity and would not be responsible for its operations.  Several entertainment and retail entities have expressed interest in leasing the facility.  It is possible that a lease arrangement could include a tenant improvement requirement.

 

Public Works staff estimates limited construction to address basic seismic needs and related ADA requirements, roof replacement and hazardous material abatement at approximately $8 to $10 million.  It is not at all clear where this funding would come from at this time.  In both of the ‘partially-renovate’ options, the full scope of Civic renovations is not addressed and the broad arts programming envisioned by the City and community is not realized.  Prior to the loss of redevelopment funds dedicated to the Civic, the full renovation plan was to develop a state-of-the art performance and special events venue including extensive acoustical, theatrical, mechanical and other customer oriented improvements. 

 

  1. Fully renovate the Civic Auditorium as a Multi-Purpose Performing Arts Venue

2a.       Renovate facility for City-managed facility with an exclusive presenter – As noted above, in 2011 Council approved terms of an agreement with Nederlander to move forward with this model.  Leading up to this agreement, it was determined that the model of a City-managed facility with an exclusive presenter worked best for the City since this model would provide greater control over the mix of entertainment offered and would ensure a wide range of community programming at the facility in addition to commercial entertainment productions.  This model included retaining 11 City staff to collaboratively operate the facility.

 

2b.       Renovate facility for long-term lease presenter – In this option, the Civic would be fully renovated and leased to a performing arts presenter.  This option differs from the City-managed presenter in that City staffing is not anticipated and  programming may differ from the Nederlander arrangement given the lack of City participation and oversight.

 

2c.       Issue RFP to renovate facility and develop adjacent site – This option is essentially a financing option, a way to leverage the City’s land asset to secure the funding necessary to move forward with the renovation and development of the cultural facility the community envisions.  The City would offer a developer the opportunity to develop the adjacent site and the associated long-term lease fees would generate funds to renovate the Civic.  Another approach would be to require the renovation and operation of the facility as a requirement of any development of the balance of the site.  In each case a developer may be able to leverage additional financial sources, such as historic tax credits, unavailable to the City.

 

Option 2c, along with the next group of options regarding re-use, would require further research, discussion and community input.  Planning considerations would need to include the mix of uses; architectural design; streetscape design; the nature and quality of open space; pedestrian, bicycle and vehicle circulation; parking; connectivity to surrounding areas including the downtown and to light rail, implications for the CCSP and compliance with the requirements of the California Environmental Quality Act (CEQA).

 

In all of the ‘fully-renovate’ options, the Civic construction budget is currently estimated at approximately $52 million, a figure that will likely increase by the time construction would begin.  The availability of capital financing depends on the partnership structure that would be in place at the time the Civic is renovated as well as the combination of financing sources and the terms of each source.  Financing sources are discussed below.

 

  1. Adaptive re-use of the Civic Auditorium

3a.       Art center and museum – There has been a longstanding discussion of an art center or museum in this location.  The Civic Center Specific Plan calls for the expansion of the Civic Auditorium with the addition of up to a 20,000 square foot cultural venue.  The Creative Capital planning process identified the establishment of a cultural center or museum as an option for the Civic Auditorium.  Subsequent to discussions with Eli Broad regarding a potential museum in 2009, the City issued a notice of opportunity for the establishment of a museum adjacent to the Civic Auditorium in late 2010; however no responses were received.  Without the right partner organization, along with a major funder, this option poses significant challenges. In addition, the operations model, the re-design and potential impacts on the Landmark status, and the overall financial viability all require further research.

 

3b.       Meeting and events center – Adapting the Civic as a meeting and convention space could attract more visitors to the City, increasing hotel occupancy and other local sales.  The demand for this kind of space, the operations model, the re-design and its impacts on Landmark status, and overall financial viability require further research. 

 

3c.       Recreational sports facility – Adapting the Civic as a multi-purpose gym with basketball courts, exercise studios, showers and lockers would require significant infrastructure improvements and radical interior changes.  The demand for this kind of space, the operations model, the re-design and its impacts on the Landmark status, and financial viability require further research.

 

3d.       Offices and meeting space for the City – In this option the City would adapt the Civic to move staff offices that are currently leased in and around downtown Santa Monica.  The majority of these leases end between 2017 and 2021. Public Works staff has determined that it would be expensive and inefficient to retrofit the facility, which was not originally designed as offices. 

 

In these ‘adaptive re-use’ options, the Civic construction plan would entail adapting the facility for uses that it was not originally designed for, which presents potentially expensive design challenges and triggers new building code requirements.  Public Works preliminarily estimates that the various ‘adaptive-re-use’ construction budgets could be as much $80 million depending on the ultimate use and design.

 

  1. Demolish the Civic Auditorium

4a.       Issue RFP for entire site development – If the Civic were demolished and the entire site made available for development, a new, state of the art, multi-purpose performing arts facility could be built by the City or private developers at a lesser cost given the higher costs associated with historic renovation. Deal terms associated with the development of the site could provide the method for financing a new facility; however a valued community landmark would be lost.  Public Works estimates the demolition budget at approximately $1.25 million.  Entitlements to demolish the Civic would require compliance with the procedures outlined in the City’s Landmarks Ordinance including requirements pursuant to the California Environmental Quality Act (CEQA).

 

Timeline

The timeline for the renovation of the Civic depends on the selected option. Options 1a and 1b are of shortest duration, 18 months, and would entail limiting construction to roof replacement, seismic retrofit with associated ADA and hazardous materials abatement required during the construction.  For options 2a, 2b and 2c, it is anticipated that modernizing the Civic for future use as a multi-purpose performing arts center, would require a timeline of least five years due to financing, community outreach, partnerships, planning and construction.  The timeline for adaptive re-use options 3a, 3b, 3c and 3d is estimated at three to five years, depending on the nature of the project and the financing. 

 

Financial Sources

To raise $8 million to $52 million for the renovation of the Civic, the City has two primary options that may be used alone or in combination, seek voter-approved funding and leverage private resources. 

Assessments, taxes and bonds are the three most common forms of voter-approved funding if an alternative revenue stream cannot be identified to finance a capital project.  The most likely option being explored by staff for the Civic Auditorium is a general obligation bond.  Preliminarily, for the issuance of a 30-year, $50 million general obligation bond at today’s rates, it is estimated that the annual debt service cost would be approximately $3.5 million, which translates to an increase of over $100 to the property tax bill of the owner of a property valued at $820,000, the median home price in Santa Monica.  This is a large financing, and one that would compete in priority with the potential financing of Fire Station 1, as well as with any bonds or parcel taxes proposed by the Santa Monica-Malibu Unified School District or Santa Monica College during the next 18 months.  Other financing methods not requiring voter approval, such as a lease-revenue bond, may be considered if a revenue stream is identified among the options. 

The City can opt to leverage private resources for the renovation of the Civic, in combination with voter-approved funding or without it.  It is likely that several sources of private funding would need to be combined to make the project viable.  Many sources of financing can be layered together.  In fact, some financial products are only available if they are combined with private investment.  When these sources are combined, or leveraged, it mitigates risk for each financial source.

 

Preliminarily, staff has identified that private financing could include private investment, foreign investment, historic tax credits, a lease-back option, a long-term lease and a fundraising capital campaign, including providing naming rights.  The exact financing, or combination of financing, would depend on the development option and deal structure ultimately selected by Council and, in particular, if the adjacent site is leveraged for a cash payment dedicated to the Civic renovation in the form of a ground lease or similar agreement. 

 

Interim Use and/or Mothballing

Starting on July 1, 2013, it is estimated that the Civic may be closed or operating with an interim use or periodic use, such as filming, for 18 months to five years or more.  During this time, the building and its systems will require ongoing maintenance, and the facility will need to be secured and monitored regularly.  Public Works staff estimates that the costs of maintaining a closed Civic would be approximately $185,000 annually.  This amount includes staff time and funds for contract services to maintain the facility, provide minimal custodial services, install and monitor an external security system, and pay utility costs for a closed facility.  Additional costs associated with interim use and/or mothballing require further research. 

 

In any scenario, it is anticipated that the East Wing may be needed for City meetings and trainings, personnel exams and interviews, and community workshops (in FY 11/12, these types of events utilized the East Wing 43 times).  In addition it is anticipated that the City could continue to rent the parking lot for certain special events such as the recent Ford Fusion Launch and for film company base camps.  The mothballing estimate does not provide for additional staffing needed for interim uses such as filming or events.  Additional research needs to be done to see if the management of this rental activity can be incorporated into existing staff responsibilities or offset by rental income.

 

Next Steps

There has been strong community and Council support for the renovation of the Civic and enriched cultural programming at the landmark facility.  Concurrently, a lack of capital improvement funds is stalling any progress toward the Civic renovation.  If the Civic is to have a future as a community cultural resource, funds must be either committed by the voters or leveraged with existing City assets to attain private financial support.  For these reasons, staff seeks direction from Council to pursue additional exploration and analysis of options, especially 2a, 2b and 2c that suggest retaining the Santa Monica Civic Auditorium and renovating it for a cultural use. 

 

Financial Impacts & Budget Actions

There is no immediate financial impact associated with the recommendation presented in this report.  However, as part of the next phase of analysis there may be a need for some targeted outside expertise in evaluating aspects of specific options.  Staff would return to Council to seek authorization to contract for specific professional services as needed.

 

Prepared by: Jessica Cusick, Manager, Cultural Affairs

 

Approved:

 

Forwarded to Council:

 

 

 

 

 

 

Karen Ginsberg, Director

Community and Cultural Services

 

Rod Gould

City Manager

Attachments:

A – Civic Options Descriptions