By Jorge Casuso

October 2, 2025 -- A proposed ordinance that would pave the way for unionizing businesses on City-owned properties could force them to shut down or leave Santa Monica, according to a report released Wednesday.

The mandated Labor Peace Agreement (LPA) -- which the Council is scheduled to take up on October 14 -- would increase business costs, "leading to more closures, longer vacancies, and reduced city revenues," according to the report.

Commissioned by a coalition of local business and the California Restaurant Association, the report "reviewed a decade of financial data and confidential profit-and-loss statements from a cross-section of affected businesses."

The economic analysis conducted by the Hatamiya Group, a business consulting firm, found that local businesses with City leases are still in the red after seeing profits plummet during the coronavirus emergency.

These businesses are already operating "on razor-thin or negative" margins, according to the report, which found that:

X Profit margins collapsed during the pandemic, from +7 to +16 percent between 2016 and 2019 to as low as –109 percent in 2020.

X Margins currently remain deeply negative, between –16 percent and –50 percent in 2024, with further declines in 2025.

X Rising labor, food, lease, legal and supply costs are already squeezing businesses, "leaving little to no room to absorb additional costs."

A mandated LPA would “further reduce profit margins, thereby jeopardizing their ability to stay in business,” the report warns.

“For the most part, locally owned businesses across the City have not rebounded from the downturn caused initially by the COVID-19 pandemic and further exacerbated by a slowly recovering economy, stagnant or declining tourism, natural disasters (e.g. Palisades fire), and increasing labor and supply costs," the report found.

"Moreover, proposing Labor Peace Agreement mandates upon businesses operating on City-owned properties could further exacerbate declining profit margins and higher costs facing local business owners."

After a "short-lived recovery," restaurant sales are slipping again this year, reducing revenues to the City's cash-strapped general fund, the report said.

"As many city leases are tied to sales, declining business revenue directly affects what the City collects," the report noted.

"Imposing new mandates could lead businesses to leave or avoid Santa Monica entirely, resulting in longer vacancies and lower lease income for the City."

Mayor Lana Negrete, who cast the lone dissenting vote on July 8 to draft the ordinance, called the proposed measure a "political attack" by the hotel workers union, UNITE HERE Local 11.

"We should be fostering collaboration between the City and all businesses, not forcing politics into the back door of businesses at our own peril," said Negrete, who is a small business owner.

"Santa Monica doesn't need more division. We need collaboration," the mayor said. "That means bringing workers and businesses together, not using City Hall to tilt the playing field in favor of one side.

"Supporting businesses isn't anti-worker, it's pro community," Negrete said.