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|One-Year Downtown Assessment Relief|
By Gene Williams
August 23, 2011 – Downtown real estate and business owners are in for a pleasant surprise this fall.
Downtown Santa Monica, Inc. (DTSM) has decided to send a one-time rebate for assessment fees collected throughout the district. The rebate is being issued on accrued operating funds from the Property Based Assessment District's (PBAD) inception in 2008.
The new district is divided into three zones, each of which pays assessment fees according to the amount of Downtown services and programs it receives. In areas outside the Promenade, the rates are also determined by how a property is used.
The Promenade receives the most services and pays the highest fees at about 77 cents per square foot per year. Nonprofits east of Fourth Street, which require fewer services, pay the lowest fees at only 7 cents per square foot.
The levies support the district’s annual $3.4 million operating budget, of which roughly one-third goes to maintenance, another one-third to the Ambassador program, and the remaining one-third to marketing, homeless outreach, special projects and administration.
The assessments first appeared on tax bills in October 2008 and the money had to wind its way through a series of government agencies, including the county tax assessor and the City of Santa Monica, before reaching Downtown coffers.
Approximately $2 million in assessments were collected before a services agreement with the City was finalized and a new 13-member board that sets policy for the expanded district was seated.
And, DTSM needed to have the monies in place before any vendors could be chosen and before any contracts could be signed for the 2009/2010 fiscal year.
By applying the money that built up during that period to upcoming expenses, in the coming fiscal year DTSM will only need about $1.4 million more in revenue to meet its $3.4 million annual assessment budget.
This marks a decision rarely made by any board and sets a precedent for
fiscal responsibility in the business improvement district industry.
While the rebate should make property owners happy, it will also benefit tenants, many of whom are required to pay property taxes and insurance as part of their leases.
Though the details of how the rebate will be administered and how much each rebate will be are still being worked out, City and Downtown officials say they expect Downtown taxpayers will get their rebate sometime before the 2012 billing cycle.
“We think property owners will receive rebates that are at least 50 percent, probably more,” said Elana Buegoff, a senior economic analyst for the City, adding that the current plan is to come up with a percentage that will be applied evenly across Downtown.
For example, assuming at least a 50 percent rebate, a business with 5,000 square feet of retail space on the Third Street Promenade — where the property-based assessments are highest at around 77 cents per square foot per year — can expect a rebate of $1,925 or more.
The rebate for a larger, multi-story office building with 60,000 square feet near the Promenade — where annual commercial assessments are around 38 cents per square foot — will probably be at least $11,400.
And the same sized office building east of Fourth Street — where commercial assessments are lowest in the district at around 19 cents — will get a rebate of $5,700 or more.
Downtown officials acknowledge that the rebates come at a time when a number of district projects are in need of funding — including improvements to street lighting and alleys. But these kinds of capital expenditures are typically paid for by other revenue sources, whereas assessment fees are primarily intended to meet Downtown’s operating expenses.
“It’s been very challenging times for the property owners and tenants, so the board voted to rebate the money, in lieu of using to meet other district needs,” said Kathleen Rawson, CEO of DTSM. “It’s a good decision to give that money back this one time and a very prudent and fiscally responsible action for our board to take.”
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