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Santa Monica's 2020 Economic Summit - State of the City
February 13, 2020
by Mayor Kevin McKeown
This is the most full this hall has been for a State of the City. In part, that’s because this year your City Council decided to make the event free for all Santa Monica residents. Welcome. We’re glad you’re here.
Last time I came to you as your Mayor with the State of our City was five years ago, and you may remember I suggested a number of game-changers that were about to affect life here in Santa Monica. So how did I do on those predictions?
Well, yes, I missed that one. But so did we all. That just indicates that the hardest thing to expect is the unexpected.
We’ve seen big changes, obviously, as scooters and electric bikes, available for rental via smartphone, created a new category of “micromobility.” More on that, and our other transportation efforts, later.
Let’s go back to the game-changers from five years ago. Probably the most relevant to today’s theme of social impacts and working together is the rise of millennials. We’ll get a new local demographic snapshot with this year’s national census – please stop by the Complete Count 2020 Census booth in the lobby. Meanwhile, as expected, it is now the millennials joining GenXers in management and setting the standards, not us boomers.
That means the connection between business and social impact is more important than ever. Whether as workers or as customers, millennials are more demanding about the values of companies they support. If companies don’t embed social impact into their operations, they risk losing crucial engagement from a generation that cares ever more deeply about climate change, diversity, social issues, and equity in economic opportunities.
Five years ago, we were all astonished at the local explosion in tech jobs, as we became Silicon Beach. In 2015, our best guess was 22,000 tech jobs in Santa Monica. Now, in 2020, it’s over 31,000 jobs, at over 3,000 businesses. We are grateful for this growth, as other traditional City revenues like hotel taxes have flattened this past year.
Half of our tourism market is generated by international travelers. That means instability around the globe — and in Washington — impacts Santa Monica. Our hotel tax dollars and other tourism activity are affected by issues like Brexit… foreign trade wars… tougher visa policies… and straight out of today’s news, health concerns coming from China. To better weather these ups and downs, we need to nurture a diverse local economy, one that encourages a variety of sectors to co-exist and thrive.
So it is fortunate that we have become home to a major tech and creative cluster, including information, entertainment, motion picture, and video production, post-production and distribution, and all the professional and technical services that go along with that: advertising, graphic design, website creation, computer programming, and so on. Marquee names include Activision, Cornerstone, Hulu, Lionsgate, Oracle, Snap, and Universal. Those are the biggest players, but Santa Monica has become even more pre-eminent for start-ups, innovators, and entrepreneurs. We have 28 co-working spaces like Cross Campus, Expert DOJO, and WeWork. Those “office and opportunity” businesses each host dozens of new, exciting tech companies.
The total tech payroll in Santa Monica is over $5 billion, now well over half of the total annual payroll in the entire city. So yes, the influx of the tech industry has truly been a game-changer.
Of course, there can be a problem with changing games. New winners can, without meaning to, make life harder for others.
Poverty and homelessness still exist side by side with economic success. What can we do to create an economy that works for everybody? Does one segment’s growth have to mean another’s disappointment? Does neighborhood gentrification have to mean displacement? Or can we make sure all boats rise together, without washing some of us away?
Equity in economic opportunities has come up locally in our recent efforts to reach consensus about a meaningful wellbeing plan for the Pico neighborhood. City surveys have shown that residents of our 90404 zip code have the greatest concerns about household economics, including rent, food, and basic necessities.
Santa Monica is looking at community planning on a neighborhood level, addressing local needs and building on local resources. How can we foster a stable, affordable environment where residents enjoy not only fair pay, but the opportunity to become businesspeople themselves, using skills they already have? For the larger Santa Monica business community, looking for meaningful ways to have social impact, could local community capital investment be satisfying and transformative? Could owners and employees find the social value in their own expertise and experience, by mentoring those whose aspirations are still unfulfilled?
Just as the original Silicon Valley has changed San Francisco, the success of Silicon Beach is changing Santa Monica. Tech jobs pay well, and we’re grateful for that. But all that new money is in competition for our limited housing. The online real estate database Zillow recently reported that the median home in Santa Monica now exceeds $1.5 million. Apartments have soared, too. The median rent for new tenancies in a one-bedroom Santa Monica apartment last year was $2,450, and that includes older buildings. An apartment in a new building can easily top twice that.
Meanwhile, almost a quarter of renter households in Santa Monica pay over half of their income for rent. And those are the lower-income households, so it doesn’t leave much for food, other expenses, or raising a family.
Santa Monica has long been a leader in the successful production of affordable housing, but housing demand continues to outstrip supply. Since the last time I came to you, we’ve begun direct interventions to save long-time renters who are seniors on fixed-incomes. Results were so promising, we recently expanded that program, called Preserve Our Diversity. New regional housing allocations expected to be finalized this year may ask Santa Monica to accommodate over 9,000 new housing units, of which over half are supposed to be affordable.
There’s the problem. Left to itself, the real estate market won’t produce that many affordable apartments, because the money is clearly in luxury housing. Our inclusionary zoning laws will force some affordability, and Community Corporation of Santa Monica continues to build and operate deed-restricted affordable apartments with the limited money we can make available to them.
By the way, if you haven’t heard already, two weeks ago Community Corporation of Santa Monica, with a $15 million investment from the City of Santa Monica, bought an existing, occupied apartment building in the Pico neighborhood. That preserves 40 units of affordable housing in our city. Thirty-seven families who live there now, mostly low-income, will remain our neighbors for years to come.
When our City adopted a new zoning code five years ago, we created opportunities for new housing in downtown, along transit boulevards, and in formerly industrial areas. We can produce plenty of housing in places that won’t disrupt existing, occupied neighborhoods – but it will take subsidies to make that housing affordable.
Let me pull you back to the importance of business values, and the strong commitment of millennials to patronize, and work for, businesses that have clear plans for social impact. Housing is a crisis. Housing is necessary for our workforce. And our workers, and both resident and regional customers, want their money and their efforts to make positive change — not continue economic competition forcing seniors and low-income households out of our city. What can our companies commit to doing about housing? What can the business community as a whole do about housing?
The residents of our city, who were another of my game-changers five years ago, are increasingly fearful that the price of economic success will be the loss of their existing housing. New workers streaming to our regional job center and wanting, quite understandably, to live near work, increase market rent levels and the temptation for property owners to replace existing renters paying less. The City of Santa Monica has expanded tenant harassment protection with stronger ordinances and focused enforcement. We put in place Ellis Act eviction delays for teachers, one of our essential middle-class working categories feeling particular pressure. We’re exploring ways to provide free legal assistance to residents facing displacement.
Santa Monica’s legal team is led by our City Attorney Lane Dilg, who is here tonight. Lane, give everyone a wave.
Lane and the rest of Santa Monica’s legal department continue to work on stronger tenant protection ordinances. Lane also led the charge as Santa Monica went head-to-head in court with home-sharing giant Airbnb — and Lane, and Santa Monica, won. Airbnb challenged our local home-sharing ordinance, but the Courts upheld our policy to protect our residential units from conversion into vacation rentals or defacto hotel rooms. In the past five years, our local home-sharing law has resulted in the return of an average of 100 units per year to the permanent residential market.
I think we can all understand why no one wants to be forced out of Santa Monica. Working together, we have created a truly wonderful place to live and work. We will continue to be – and we want to be – a promising place for investment, entrepreneurship, and innovation. Santa Monica is a good place to do business, and you all know the importance of a business being in the right place:
So let’s take a pause from the challenges and take a look at some more of the good news. Santa Monica remains a place more and more people want to enjoy. Even with recent concerns, our tourism industry contributes almost $60 million a year in hotel taxes alone, money that provides essential funding for schools, police, fire, parks, and libraries. Visitors to Santa Monica dine out in our restaurants and shop in our stores, providing a steady flow of new customers for our small businesses.
Santa Monica will continue to be a great place to live, work, and do business because we are actively planning for a better future. After two years of studying global trends, we’ve now entered into the local phase of a process called Santa Monica 2050. By the end of this year, we’ll have developed a long-term economic sustainability strategy for Santa Monica.
We can survive disruption, which creates new business as old models become outmoded. We can capitalize on data-driven decision making. New mobility options can reduce the challenges of commutes and gridlock. Connected technology will shift how businesses interact with their customers and each other.
Understanding the global trends, we can identify our particular local strengths and make the most of them. The Santa Monica 2050 process will, this year, outline actions and targets so we can all prepare not only to weather economic trends but to benefit from them.
But I’m just a Mayor. YOU are the ones who best understand the challenges of your business, your neighborhood, or your neighborhood business. Please stop by the Santa Monica 2050 booth in the lobby, if you haven’t already. Take our Santa Monica 2050 survey on paper, or online.
We can probably best visualize the process of reinventing our local business assumptions by considering the Promenade. Santa Monica’s Third Street Promenade has been the envy of other communities for three decades now: an economic engine that also provides entertainment and a public gathering place. Now, the City Council, Downtown Santa Monica, and the community are envisioning a reimagined Promenade 3.0. We all know that brick-and-mortar retail has hit hard times. In the past 20 years, movie attendance nationwide has dropped almost 30%. For the Promenade to continue as the centerpiece of Santa Monica, we must diversify from consumption to engagement. We need to rethink how to use existing spaces to encourage new arts and performance options that will bring people downtown for something they can’t buy online or stream on Netflix. And that work, including a physical reconfiguration of the public space on Third Street, is all underway. Santa Monica is committed to riding waves of innovation, not succumbing to the undertow.
Santa Monica 2050 looks mostly to the future of local business, but another overarching initiative – our Wellbeing Project – is transforming how our City can best serve its residents and the people who make our businesses thrive. The Wellbeing Project has given us data-driven insights on what the needs of our Santa Monica people really are, and where resources are most effective. It has led to a new performance-based City budget, where dollars spent are measured against a framework of desired outcomes.
Last time I stood before you as Mayor, we were just beginning something called the Wellbeing Project, creating a snapshot in time with generous funding from Bloomberg Philanthropies. In 2019, while Gleam Davis was Mayor, we hosted our first Wellbeing Summit, a free interactive event at Santa Monica College. Over 900 people heard from experts, shared in hands-on activities, and enjoyed performance art, going home with a better idea of how we all can participate in making Santa Monica a sustainable city of wellbeing.
That reflects a long local interest in sustainability. Last year we celebrated the 25th anniversary of Santa Monica’s original Sustainable City Plan, which set measurable goals for how we as a community act as stewards of our natural environment. In the decade just ended, we added to our urban forest over 3100 net new trees. Our Farmers’ Markets now generate over $18 million in sales each year, infusing our homes and restaurants with healthful, local, sustainable food. While climate change worldwide has become a worldwide climate crisis, we have continued to make great progress here, where we live and work. Yes, the business community is “all in,” and we appreciate that. Don’t forget the 26th annual Sustainable Quality Awards, coming up in April.
Just last year, in one fell swoop, we reduced Santa Monica’s greenhouse gas footprint overnight by 17%, as we switched from electricity created using fossil fuels to 100% renewably sourced electricity from the new regional Clean Power Alliance, which Santa Monica helped create. I’m proud to report that 92% of Santa Monica business and residential customers committed to the Clean Power Alliance all-renewable service with completely clean solar, wind, and other green power.
If you’re one of the only 8% who chose to stay with dirty fossil fuel electricity, Greta Thunberg would like to have a word with you.
We’ve done well on water, too, with Santa Monica reducing overall consumption by 20% since the most recent drought. That still leaves us at risk from future droughts, or from being cut off from Metropolitan Water District water by breaks in quake-vulnerable aqueducts, or from rising costs of pumping that distant water to Southern California over mountain ranges. With a new rate program recently adopted by the City Council, we will become water self-sufficient by 2023, while also investing in local infrastructure so we don’t suffer leaks and sinkholes like we’ve seen in Ocean Park or along Ocean Avenue. Our own local water will be cheaper in the long run, and guarantees resiliency and stability whether you’re planning a business or planning a family.
Being prepared for environmental change is the focus of our 20-year Climate Action and Adaptation Plan, which sets the goal of achieving an 80% reduction in carbon emissions for Santa Monica, compared to 1990, in the next decade, by 2030. Besides clean energy and local water, the Plan includes coastal flooding preparedness and a transition to lower-carbon food-supply chains.
A great example of what is possible for a cleaner, greener future in our town is rising right now behind City Hall. Our new Community Services Building, City Hall East, will open to the public on Earth Day, April 22nd, which is the 50th anniversary of the original Earth Day. Santa Monica already has over 150 buildings that are “LEED certified,” but this will be the first municipal building in the world to meet the “Living Building Challenge” -- net zero energy, net zero water, and net zero waste. Besides that, it will save our City two and a half million dollars just in the first year, by bringing resident-serving functions together, out of offices we now lease throughout the city, also freeing up scarce office space for local business.
Nearby in Santa Monica’s Civic Center this year, we’ll be opening the long-awaited Civic Center multi-purpose sports field, while work continues nearby on the Sustainable Water Infrastructure Project, which is a key part of our water self-sufficiency plan.
And there’ll be still more ribbon-cutting during 2020 in the Civic Center, with the new Santa Monica Early Childhood Lab School, which was part of the original Civic Center Master Plan back in 1993. The Lab School is an innovative partnership between the City and SMC, providing quality early care and learning experiences for young children, along with the training and preparation of early childhood teachers and providers.
The Lab School will serve up to 110 infants, toddlers, and pre-schoolers, increasing the availability of much-needed full-time child care for working families in Santa Monica. We know what this can mean for the healthy development and wellbeing of our children. The City and the School District, working with Connections for Children, have documented that our existing child care network means Santa Monica kids enter kindergarten ready to learn at higher rates than the rest of the country. The number of kids who are developmentally vulnerable is decreasing year after year, and across every neighborhood in Santa Monica, there are large gains in the percentage of kids who are on track or better. That, folks, is our future. If local companies or employees are looking for social impact through community engagement, early education for kids under five can always use your support.
When I was under five, after a fire in my apartment house, I dreamed of growing up to be a firefighter. Santa Monica’s Fire Department is probably better off without me. Our Fire Department has maintained their Class 1 rating, the highest rating given to any fire department nationwide by the Insurance Services Office. They earned this rating by confining 84% of all structure fires to the areas where they started, helping to save $42 million in property. California was hit hard this year by wildfires, and our Santa Monica firefighters joined statewide agencies in responding to the Getty, Tick, and Kincade fires. Down at the beach, our pilot fire department substation 7 has reduced beach emergency response times there by 50 to 60%. I am proud to announce that the construction of our much-needed and long-awaited new downtown fire station is on schedule and under budget. I hope you will join us at the Grand Opening when we cut the ribbon for Fire Station 1 this May.
Our other public safety service in Santa Monica is our police department, and I know crime has been a major concern for many people these last few years. Under Chief Cynthia Renaud, we have now added twenty new officers on Santa Monica streets, and I have good news on the results. After three years of significant increases in what are called Part One crimes, last year we saw a 16% drop. That made last year the lowest in five years for rape, burglary, both residential and commercial, and bike theft. Also, aggregated assaults, which had increased over the prior two years, were down 18% last year. We still have work to do: grand theft auto is still rising, by 5%, and shoplifting was the highest in five years. Overall, though, the downward trend in crime seems well established and is continuing with the tentative figures we’ve seen so far this year. If we can lower local crime an additional 7.5% percent below last year, we’ll have returned Santa Monica to the lowest crime rate in thirty years! Thank you, Chief! Santa Monica Police Chief Cynthia Renaud, whose hard work against crime we so much appreciate, will this autumn be sworn in as the President of the International Association of Chiefs of Police. Yes, I said International.
Another reason to be grateful: Chief Renaud, our Fire Chief Bill Walker, and many Santa Monica police officers and firefighters were part of our annual homelessness count three weeks ago. We don’t have those latest numbers back yet, but we do know that new strategies these past several years have been working locally, while the County-wide homelessness tragedy just gets worse. L.A. County has a shortage of over half a million affordable housing units for low-income renters. If sometimes it seems as soon as we house one homeless person, another is on the street, the numbers bear that out. Every day in L.A. County, our efforts to end homelessness house an average of 130 people. Every day in L.A. County, 150 new people fall into homelessness, because the root causes of homelessness in our County are getting worse.
Nonetheless, here in Santa Monica, we achieved a 16% reduction in homelessness downtown last year, with just a very small increase in people on the streets citywide. We are “respectful but relentless” in contacting homeless individuals and offering real help. Our C3 team, the HLP team, Downtown Ambassadors, and service providers like West Coast Care, are all making a difference. We expanded the Downtown Ambassadors to Reed Park last year, helping to create a welcoming public space for everyone to enjoy. We’ve now put social workers in our Public Libraries to ensure that people can be connected to the services they need. Last year, the City Council committed the site of a seismically unstable, outmoded parking garage on Fourth Street to 150 units of supportive affordable housing to get homeless individuals and families off the streets and into the services they need to avoid homelessness in the future.
Residents and businesses looking for social impact, for a way to have their families and their employees make a difference, may need to look no further than the sidewalk outside. And don’t trip over a scooter. Scooters and other micromobility options are only one of the transportation choices new since five years ago. We now have the first all-electric Big Blue Bus in operation on our streets. Big Blue Bus ridership is UP by 5%, and new bus lanes on Lincoln Boulevard have improved transit travel time there by 25%.
We’ve made a commitment to a thousand electric vehicle chargers in our city. Since five years ago, we’ve installed 19 miles of highly visible green bike lanes throughout the city, and begun pilot testing of separated bike lanes on selected streets. The biggest change since 2015 is Expo light rail, which carries 53,000 riders a week and had over four million boardings last year alone.
At the same time, Uber and Lyft flooded our streets, and that means we’ve gone from four local taxicab companies to only one. Is anyone here from Taxi, Taxi? Good. We really need you in our city. We really need all of us in our City. We really need YOU.
Tonight’s theme is social impact. Social impact takes action, so in 2020 I challenge all of us to take action and make an impact. There are so many ways to make a difference!
- Join the Homeless Action Network – they are making a thousand hygiene kits and need your help!
- Or attend a Universal Human Rights Initiative community dialogue on homelessness at Calvary Baptist Church.
- You can apply to be on a board or commission, please! Our City is always looking for people who care, and want to contribute.
- If time is scarce but there’s money in your pocket, donate to a charity that will make social impact.
- Or just, in general, give a damn. Advocate for meaningful change that will help make our community a better place.
This evening I’ve been able to touch on only the highlights of what’s going on in Santa Monica. The real “State of the City” is a much longer story. It’s a story you and I are writing… every day… together.