Economic Analysis of the Riles Community of Downtown Hermosa Beach


Customers stroll along a crowded Pier Plaza. A new report attempts to determine whether businesses in the region cost more in municipal services than they bring in revenue.

A draft of a report commissioned by Hermosa Beach on the financial impact of the city’s downtown core has the makings of a classic compromise: it has left almost everyone unhappy.

Citizens gathered in the city council chamber Thursday evening for a presentation on the costs of providing municipal services in the region and the revenues they generate. While downtown business owners pointed out flaws in the report’s methodology, activists for Hermosa argued the report ignored the additional costs.

The report and accompanying comments come as Hermosa updates its overall plan, which will guide the city’s development policy for years to come. A follow-up community meeting is scheduled for Thursday evening and the response will be provided to City Council at a study session on February 23.

Based on fiscal year 2014-2015 information, the interim report found that downtown businesses generated approximately $ 6.8 million in revenue and were responsible for $ 6.5 million in municipal spending. . Of these, “night establishments”, defined as those open after 11 p.m. and serving alcohol, generated about $ 1.3 million in municipal revenue and cost the city about $ 1.6 million. .

But officials at Kosmont Companies, the consulting firm that prepared the report, warned that data limitations meant these numbers were only estimates and should not be treated as final projections of net income.

“It’s a very difficult analysis from that point of view,” said Wil Soholt, senior vice president at Kosmont. “We talk to the services, take the information we have and try to give the reader as much information as possible. “

The draft report presented general conclusions: downtown businesses likely contributed as much or more to city coffers than they consumed in services; and nightclubs “probably generate direct municipal revenues generally in line with their associated expenses”.

Stacey Armato, a candidate for city council in the upcoming special election on March 1, said the report would be more useful if it provided comparable cost-income analyzes for similar towns in Southern California.

“It would be nice to know, what are the costs in Newport Beach, Huntington Beach, Solana Beach, other communities with nearby residents in a busy downtown?” said Armato.

Presenting the $ 300,000 shortfall as “generally in line” with the costs of nightlife establishments angered some residents, who pointed out that the downtown area as a whole was characterized as neutral to positive, even though revenues exceeded. costs the same amount.

“Couldn’t we turn it over and say that the end of the night generates as much or less [than it costs]? ”said resident Sheryl Main, who has spoken about the concentration of alcohol establishments at previous town meetings.“ Sounds like we’re playing with words.

Hermosa had previously contracted with Kosmont for a cost-benefit analysis of last year’s oil drilling measure, which participants at Thursday’s meeting said produced more specific conclusions. As it became clear, however, some analysis input data was not sufficiently reliable to provide greater certainty.

The analysis used a wide range of city data, including sales tax receipts, meter readings, and police department call logs, as well as qualitative evidence such as interviews with residents. While some figures, such as property taxes, were considered to have “good” levels of reliability, others, such as utility user taxes, had “low” levels of reliability. Such discrepancies became more prominent when attempting to draw conclusions about the subset of overnight establishments.

“For moderate to low reliability categories: We used anecdotal evidence, but we’re not sure why the numbers are as they are,” Soholt said.

Dave Lowe, owner of the former establishment on Hermosa Avenue, produced a response to the draft report for the Hermosa Beach Hospitality Association. Lowe questioned how the draft report chose to geographically define “downtown”.

The report uses an area bounded by the Strand, Monterey Boulevard, 8th Street, and 16th Street. Previous city documents have focused on the area, such as the 2014 Downtown Revitalization Strategy, only extended to 15th Street in the north and Manhattan Avenue in the east. The blocks added in Kosmont’s report were almost entirely residential – 96 percent, according to the hotel association’s report – skewing the numbers for calculations on downtown businesses.

Additionally, Lowe and other business owners were in disbelief at the level of parking revenue attributed to nighttime uses. According to the draft report, 10 percent of the city’s total revenue from the two lots and multi-level structure surrounding Pier Plaza, and five percent of the area’s meters, came from motorists frequenting nightlife establishments.

“It seems way too low,” said Ron Newman, owner of Baja Sharkeez. “These lots are always packed, and what else are people doing at these times?” “

But some countered that the draft report underestimated parking costs. Jim Lissner, who previously backed a 2013 initiative to cap the opening hours of local bars, argued that parking costs should include depreciation of the downtown structure.

Another ambiguity arose from a third finding of the draft report: that the city center has a “synergistic mix” of land uses that collectively stimulates economic activity and creates jobs. This too was based in part on interviews with clients.

“The different companies are helping each other out there,” Soholt said. “You wouldn’t get the same result if you removed some of them. “

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