Council Explores Curbing Chains Downtown

By Olin Ericksen
Staff Writer

April 29 -- Worried that the market forces fueling a Downtown business boom may be threatening the area’s local flavor, the City Council Tuesday night voted 4 to 3 to explore ways to curb retail chains and encourage independent stores.

To try and balance the retail mix, the council asked staff to further study the effects that chain stores, also called “formula retailers,” have on the character of Santa Monica’s Downtown and what the City can do to keep them in check.

“We need to secure a healthy economic balance in order to ensure the Promenade still works,” said Council member Michael Feinstein, who sponsored the item. “The Third Street Promenade has only gone in one direction, from small unique, locally owned retailers to large national formula retail.

“What’s going to happen if twenty owners each pursues his own economic interest?” Feinstein said.

Dissenting council members argued that the City shouldn’t meddle with market forces and create more red tape.

"That's what we need in this town is more and longer bureaucracy,” said Council member Hebr Katz. “I don't see the problem. What I'm really hearing is commercial rent control. I'm sorry. This is free enterprise."

Bayside District officials -- who recently voted to oppose the action -- argued that formula stores fit in fine Downtown.

“This is more of a philosophical question,” said John Warfel, who chairs the Bayside District board. “The majority of the board does not support the notion that corporate ownership of retail outlets is, or should be, a primary concern.”

The Promenade has revitalized Downtown, making it a success story, Warfel said. Indeed, City coffers are brimming with sales tax revenues to prove it.

The Promenade chipped in nearly $3.1 million toward the record setting $24 million dollars in sales tax revenue the City reaped in 2003, bringing total revenues up by nearly $2 million from 2002, according to a recent City treasurer’s report.

Various surveys show that Santa Monicans visit the Promenade on a “regular basis” and that it is the center of city commerce, Warfel said.

The Bayside District and the City have been studying the issue of “formula” stores in the Downtown since 1997, Warfel said, adding that insufficient funding and misdirected studies have not resulted in a comprehensive view. Further studies, he argued, should be refocused on the financial impacts.

Independent stores have a hard time paying the Promenade’s rents because the spaces are large, Warfel said.

Council member Pam O’Connor compared dedicated formula retail areas in San Francisco, such as Union Square and Fisherman’s Warf, to the Promenade.

Other areas of Santa Monica, O’Connor argued, could be suited to smaller, local and independent stores. She also pointed out that it is difficult, if not impossible, to exactly define a formula store.

Some questioned whether it would be defined by who owns the business or how many outlets there were. And what would happen, some asked, if a store that started in Santa Monica became a chain?

Bayside Board member Rob Rader said the impacts of the two kinds of businesses were clearly different.

“The local stores tend to keep their profits in the community,” Rader said. “The chain stores tend to siphon off profits to the headquarters of the large corporate company.

“Therefore when you promote independent retailers, they keep the money local and they have a huger impact on our local economy,” Rader said.

Council members suggested some ways to address the issue. Mayor Pro-tem Kevin McKeown, for example, suggested that the City consider a new permit system, which brought a sharp rebuke from Council Member Katz, who argued that such a proposal would add another layer to an already dense bureaucracy.

Mayor Richard Bloom asked about incentives for smaller independents businesses and said he would support a more moderate set of regulations.

Proponents of curbing formula retail lamented the loss of the International Food Court. Indeed, McKeown said it was at that moment he realized there was a problem.

But Councilman Bob Holbrook, said he “didn’t really much care for it.” While he misses stores like Woolworth’s, Holbrook said, he understands this is a free market.

After fending off a procedural motion to table the item, Bloom, Feinstein, McKeown and Council member Ken Genser voted to direct staff to study the issue.