Santa Monica economy continues to grow steadily
CITY HALL — Downtown Santa Monica remains the lifeblood of the local economy, representing the largest growth in sales last year.
The Bayside District, which incorporates all of downtown, grew 22 percent from 2002 to 2003. And the shopping district is up nearly 23 percent for the first quarter of 2004, according to City Hall sales tax figures.
The Third Street Promenade also has seen remarkable growth — up nearly 24 percent this past quarter and 14 percent from 2002 to 2003. The Promenade brought in $2.3 million in sales tax revenue for City Hall last year, and $584,651 for the first quarter of 2004. Santa Monica shoppers are taxed 8.25 percent on purchases, and City Hall gets 1 percent of the cut.
“Bayside is really coming into its own,” said Gwen Pentecost, City Hall’s economic analyst.
The Promenade is nearly 100 percent full and its secondary streets are beginning to fill up with retailers and restaurants.
“Sales are phenomenal in the district,” said Kathleen Rawson, executive director of the Bayside District Corp., which manages downtown with City Hall. “We are obviously pleased and we make sure quality tenants know about the area and move into the area.”
Economic analysts attribute the growth to new businesses moving downtown — an area that has seen a transformation in the past several years. Whether it’s viewed as good or bad, that transformation has meant a proliferation of chain stores and as a result, more shoppers. On weekends, particularly during the summer and holiday seasons, it’s difficult to walk along the three-block-long mall because there are so many people.
“The momentum is clearly there... There aren’t many places that show those kind of numbers,” said Rob York, a consultant who works with Bayside. “People respond to a good experience and a good selection of restaurants and retail.
“The stores are providing what people want,” he added.
And even with its problems — panhandlers, smelly alleyways and a lack of parking, to name a few — the Promenade and Bayside still remain significant sales tax generators for the city. The area even increased — although slightly — from 2001 to 2002, after the Sept. 11 terrorist attacks and the recession.
“Third Street has been extremely resilient even through tough times,” York said, adding high profile retail stores continue to be drawn to the area. Retail space on the Promenade costs between $7 and $10 a square foot.
York expects the outer areas of the Promenade to experience “really impressive” sales tax gains in the next two years. A lot of office space along Second and Fourth streets is planned to be converted into retail and restaurants, he said. And more high profile retailers like Circuit City, which recently opened on Fourth Street and Arizona Avenue, contribute a large amount of sales tax revenue.
“Statistically, it’s been emptier on Second and Fourth streets,” York said. “But because of the strength of the Promenade, people have invested and spilled onto the secondary streets.”
The key to the district’s continued success is meeting its challenges, keeping up with competition and planning for the future. That means building new movie theaters, providing more parking and cleaning up the alleys.
“If we sat back, saying everything is hunky dory, in a few years we’d be accused of sleeping at the wheel,” Rawson said. “We have to invest back into the district so we can enjoy increased sales tax for years to come.”
The pier, hotels and Ocean Avenue is another business district that has seen significant growth — up 17 percent from 2002 to 2003, and 11 percent in the first quarter of this year.
The Santa Monica economy overall has fared well, despite a decline in tourism, the recession and the crash of the technology industry, which combined took about 5,000 jobs out of Santa Monica, Pentecost said. In 2001, overall sales tax figures declined 3.2 percent and in 2002, that figure was 1.9 percent.
The Santa Monica economy had a 7.8 percent increase in sales tax revenue from 1999 to 2003. “It’s an interesting four-year period because there’s a tremendous change with the tech crash,” Pentecost said, adding there are fewer people employed in Santa Monica. Those people would have normally supported the local economy by shopping and eating here, she said.
The city is still recovering from the loss of jobs. At the end of 2003, there were 72,740 jobs in Santa Monica, compared to 75,000 at the end of 2002. Still, Santa Monica businesses spent $4.1 billion in payroll last year, Pentecost said.
Santa Monica Boulevard saw sales tax gains of nearly 14 percent from 2002 to 2003, directly relating to “no interest” financing and other incentives used by the industry to keep consumers buying. Their $1.4 million increase is responsible for almost 50 percent of the $2.9 million increase in sales tax revenue between 1999 and 2003, Pentecost said. The decline in sales tax revenue on Broadway from 2002 to 2003 can be attributed in general to retail changes at locations such as Fred Segal, and offset shifts in business services, which tend to reflect changes in the office clientele along the business district. If a single advertising firm or other high-dollar business moves and is replaced by a service business which does not generate sales tax, the impact on the sales tax totals can be fairly significant, Pentecost said.
Jack Kyser, chief economist for the Los Angeles Economic Development Corporation, said the past few years fared well for many in Los Angeles because consumers benefited from income tax cuts, refinancing of their homes and the return of the international tourist.
But he cautions people that consumers will continue to budget themselves as a result of increasing gas prices and no tax cuts this year. He predicts that people will be more subdued in their spending this upcoming holiday season.
“It’s going to be an interesting second part of the year,” he said. “(Christmas) is always a nail biter.”
Originally published in the Santa Monica Daily Press print edition on August 31, 2004. Read the original PDF.