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Santa Monica City Officials Brace for a Future of Hi-Tech Change
By Niki Cervantes
September 28, 2017 -- Blessed by three decades of prosperity, the Santa Monica City Council on Tuesday asked for an assessment on surviving a hi-tech future likely to upend the popular beach city's economic success stories.
Successful venues that face new challenges are the Third Street Promenade, thriving office parks and even the city’s biggest attraction, the Pacific Ocean.
A fast-evolving world of new technology “has the potential to undermine past strategies” for a thriving economy, said Andy Agle, the City’s director of housing and economic development.
The council asked for a broad look at future trends, including autonomous cars, internet shopping and employees who work from home using smartphones and tablets, not behind a desk in an office complex.
“The die is cast for the next, five, ten, 15 years," said Council Member Gleam Davis. "What we need to look at is the long term,” .
Santa Monica’s economy has remained healthy compared to other parts of metro Los Angeles, and the city rode out the Great Recession with fewer ill effects than neighboring communities. It is home to a thriving tourism industry, Silicon Beach and other hubs of commerce.
But the City of Santa Monica is forecasting the first significant economic slowdown in years and has been preparing, like the rest of California, for a possible recession ("Forecast Predicts Slowing in Santa Monica Economy," January 26, 017).
In a report delivered to the Council Tuesday on the long-term economic forecast for Santa Monica and the region, Agle noted that “no sector of the economy will be left unchanged” by the hi-tech revolution predicted over the next few decades.
Climate change also poses future threats to the Pacific Ocean, a key to the City’s popularity from its earliest days, City Council Member Kevin McKeown said.
Santa Monica’s biggest single economic driver is the “Creative Industries and Technology Sector,” or Silicon Beach, City officials said.
It employs 24,797 people, or 28 percent of the city’s total employment, with a total annual payroll of $2.9 billion (or 41 percent of the city’s total annual payroll).
Tourism employs 14,729 people, or 17 percent of the city’s total employment, with a total annual payroll of $374 million. The Health Care Sector includes 2,557 businesses, employing 9,525 people, or 11 percent of the city’s total employment.
Retail accounts for 10 percent of all employees in Santa Monica, with a total payroll of $445 million.
“From internet retailing to autonomous vehicles and from the sharing economy to automation of jobs, there is enormous potential to transform how cities in general, and Santa Monica in particular, provide services and pay for them,” Agle's report said.
Many observers, he said, note that the “pace of technological change is increasing exponentially. Technologies and ways of doing business are rapidly changing and are expected to have significant impacts on how the City provides services and how it pays for those services.
"Experts have started to identify how local governments may be impacted by changes in the economy and have urged local governments to begin planning for how to address the impacts and changes,” Agle said.
A major change underway is globalization and “exploding digital communication” that allows people to work, live, shop, and visit anywhere, which "has the potential to undermine key sectors of Santa Monica economy,” he said.
It could create high levels of business vacancy, and depress City revenues, Agle warned.
Internet shopping will threaten brick-and-mortar retail more than ever. Evidence of the trend can be seen at the Third Street Promenade, which is undergoing “unprecedented” problems as a result, he said ("Retail Vacancies on Santa Monica's Promenade Offer Opportunities, Downtown Officials Say," July 26, 2017).
The trend “has the potential to transform our downtown and commercial corridors, as well as depress sales taxes, the City’s largest revenue source, and business license taxes, while leaving potentially high levels of business vacancies,” Agle wrote.
Rising popularity of autonomous and shared vehicles also could “transform our streets, our parking facilities, and our public transit systems, as well as depress revenues from parking fees, parking fines, traffic citations, and sales taxes on automobiles and fuel," he wrote.
Another issue, Agle said, is the continued automation of jobs.
There is significant danger in failing to plan for change,” he said. “Not only does Santa Monica risk erosion of its economic resilience as powerful market forces could overwhelm the city in ways that could significantly undermine our quality of life.
“It has been observed that ‘nature abhors a vacuum,’” Agle wrote. “In the absence of well-thought-out plans and consistently executed implementation and adjustments, global forces and faceless corporate entities could determine the shape of our business sector in ways that eviscerate our commitment to local businesses, environmental sustainability, and respect for resident quality of life.”
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