I suspect that many you reading this joined the 5,000 demonstrators who jammed Palisades Park on Saturday for the “No Kings” rally. Leaving aside the bigger issues like whether a nation conceived in liberty and dedicated to the proposition that all men are created equal can long endure, the rally sure showed the importance of parks and other public spaces.
As I wrote last week, the de-privatization of Santa Monica Airport into that paradigm of a public space, a great park, will depend on three factors: land, money, and time. I wrote about land in my last post. Now, money.
First, context. Courtesy of a parks bond 99 years ago, Santa Monica owns the land at the airport. In any developed urban environment, land is the most expensive element of a park. Done.
The City also owns the buildings on the airport, from which it has, since regaining control of the buildings in 2015, earned tens of millions of dollars from leases to non-aviation businesses. This income will continue once the airport closes.
Widening the context, this is a wealthy subregion of southern California. The Westside of L.A., including Santa Monica, is the second largest jobs center in the region. Property values, both commercial and residential, are among the highest in the state. The rate of millionaires per square mile is high.
Widening the context further, parks are good economic investments. Many studies show how parks increase property values and attract investments, and thus increase tax revenues. They improve public health, lessening healthcare costs, They provide services, such as for recreation and environmental mitigation, that have economic values. For tourism centers like Santa Monica, they attract visitors.
I bring up these contexts, local and general, to say that if you are worried about whether there will be enough money to build a park on land we already own in one of the richest areas on the planet, take a deep breath. The idea that there will not be enough money to build a park at the airport is simply fear talking. Have we lost the ability to have a positive vision for the future?
The positive context doesn’t mean, however, that money doesn’t need to be found. It is additional good news, though, that we have more than three years before the airport closes. Time to work on financing. Time, however, also adds uncertainty. The further we look into the future, the more speculative the financing picture becomes.
It is important to focus on realistic sources of funding in the relatively short-term, five to ten years after the airport closes on Jan. 1, 2029. What shouldn’t happen is that anxiety about money causes the City to make decisions (or deals) that compromise the vision of a great park. A vision that may be realized over decades.
I will try here to be as realistic as possible, but with one caveat: the City’s park planners have not yet released an economic analysis that is part of the planning program, or figures about the cost of building specific park features. The City has engaged HR&A Advisors, the City’s go-to firm for financial analysis, to prepare a study. Once the study is released, I may want to update what I am writing now with more detail.
Let’s start with what we know: the revenues that the City earns from leasing buildings to non-aviation businesses. At present, these gross revenues are about $15 million, of which about half goes to operating expenses, leaving about $7 million of surplus. These revenues only become available to the City if the airport closes; otherwise, under FAA rules, the money can only be spent at the airport.
These lease revenues will be available to maintain and operate the park, but the City can also issue bonds against them to pay capital costs. For instance, $80 million borrowed at 4 percent for 30 years would be amortized at about $5 million per year. (Caveat: we don’t know what interest rates will be four years from now.)
There are also means to generate operating funds for the park that are consistent with park purposes. These include user fees for facilities, such as sports fields and other recreational facilities, and income from concessions, such as cafés, that City Council can permit under Measure LC with a zoning overlay for the park. These revenue sources can be predicted and planned for now; staff to its credit has solicited “letters of interest” from organizations that can use the park. (And right now: please, let’s reopen a restaurant where Typhoon was!)
There are other governmental sources that can be considered at this early stage, depending on planned uses. For instance, water features have always scored high on public surveys about what to include in the park: there could be water bond or other infrastructure money available depending on whether water features at the park can serve water conservation purposes.
Philanthropy has traditionally played a major role in the funding of parks, and there are many wealthy people who live in Santa Monica and nearby. Philanthropy enabled Santa Monica to build the Annenberg Beach House, and philanthropy endowed the Broad Stage. In the long run I suspect philanthropy will pay for significant features at the park, but unless a major benefactor comes forward now (such as what happened with Banning Ranch in Orange County), we won’t be able to predict what philanthropy might pay for until we have specific projects to be funded.
Another source to be considered, but it’s too early for any action, would be a parks bond. Santa Monica voters have been generous with bond funding for infrastructure, and funding specific projects could be quite popular, but as long as municipal infrastructure bonds need a 2/3 vote to pass, bond funding is problematic.
Finances since Covid have been tight for Santa Monica. We don’t know if the important international tourism sector of our economy will rebound soon. High interest rates are stifling development. Santa Monica has been described as “broke,” and the budget makers are looking for savings everywhere.
However, we should remember that before the pandemic, Santa Monica had one of the strongest economies in the country, with high per capita tax revenues and a triple-A bond rating. The City may be running a deficit, but the City has paid out hundreds of millions of dollars to settle Eric Uller abuse cases. If Uller had been stopped decades ago, that money by itself could pay for a big park.
My next post will look at the third factor in building the park, time.
Thanks for reading.
