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Manhattan Beach to Charge Restaurants For Outdoor Dining Spaces

Sep 23, 2021 08:59AM ● By Jeanne Fratello
The Manhattan Beach City Council has agreed to charge restaurants $1 per square foot for temporary outdoor dining spaces that are in the public right-of-way.

On Tuesday night, council members agreed, on a vote of 5-0, that it was time to ask restaurants to reimburse the city for some portion of the cost of the spaces they are now using,

Currently, the city has issued encroachment permits and signed agreements for 27 businesses to operate street dining. Those businesses are using 71 parking spaces and about 2,755 square feet of public right-of-way areas, and the city is not charging fees for those spaces.

Under the new agreement, at $1 per square foot, the restaurants would be charged between $176 and $1,132 per month, depending on the amount of space they are using.

The city has agreed to extend use of the temporary outdoor dining decks through January 3, 2022.

The $1-Per-Square-Foot Calculation

Currently, the city is waiving fees for restaurants that are using spaces in the public right-of-way for street dining. The city waived a total of $886,618 in potential revenue between June 2020 and August 2021. 

Over the summer, the City Council extended this waiver of use fees until at least September 7. The council also discussed the possibility of introducing a fee, and had directed staff to return with a formula for a “nominal but reasonable fee.”

According to the subsequent report from the city, Manhattan Beach is currently foregoing $56,161 in parking meter revenue monthly ($673,932 annually) for the use of 71 parking spaces.

(Note that the city raised parking meter rates in September 2020 to $2.00 per hour for on-street meters and city-owned parking lots to help offset losses associated with the use of metered parking spaces for street dining. At that time, the increase in parking meter rates was estimated to generate an additional $750,000 per year. However, parking meter revenues to date have fallen far short of the original estimate. The revised estimate will be approximately $550,000 per year. While this revised amount approximately compensates for lost parking meter revenue caused by street dining, it will not compensate for the loss of revenue from use fees for of non-parking public right-of-way areas, parking citation revenue, or staff time and resources. According to the city, its costs to support the program include, but are not limited to, extra public services for trash and maintenance, modifications of streets to accommodate additional dining areas, code enforcement, traffic control, law enforcement presence, sign installation, creation of custom signs, and staff resources diverted from other work initiatives.)

To calculate the market value of providing outdoor space for businesses, city staff cited the common industry standard of charging 50% of the indoor lease rate for outdoor use (due to the less certain terms and usability of outdoor right-of-way space). With the average rate of approximately $8 per square foot for indoor commercial space in premier downtown locations, staff assessed the approximate market rate of temporary public right-of-way use to be $4 per square foot. The city’s current rate is $3 per square foot.

The city concluded that since the market rate is $4 per square foot, and its current rate is $3 per square foot, a $1 per square foot rate would represent a "nominal fee" to allow a business the flexibility to operate in outdoor spaces during the COVID-19 emergency.

Voluntarily Scaling Back?

Meanwhile, the Manhattan Beach Downtown Business and Professionals Association has stepped forward to recommend that its restaurants prepare to downsize their outdoor dining spaces so that they only take up space in front of their own businesses.

Currently, many restaurants have dining decks that extend in front of other retail storefronts.

In a letter to the City Council, restaurateur and DBPA President Mike Simms and Jill Lamkin, the executive director of the DBPA wrote:

"To minimize the parking constraints created by outdoor dining, our DBPA Board of Directors recommends if no indoor dining restrictions or distancing guidelines are in place as of November 1, 2021, all restaurants reduce their outdoor dining decks to a footprint no larger than the front of their own businesses. There will likely be practical considerations causing some decks to not be located directly in front of their business, such as handicapped ramps, but as much as possible, we encourage city staff to begin the logistical exercise of reducing the overall size and impact of the dining decks. In addition, we ask that any dining decks not in use by September 1, 2021, be removed to open all available parking.

"This is an important step forward to acknowledge and amend the sacrifices our retailers and service businesses have made over the last 18 months. Decreasing deck sizes will begin addressing our organization’s concerns about blocking the visual sight line to a business from the street or sidewalk, and also provide some of the much needed parking to return in time for our busy holiday season."

The issue of downsizing existing decks is expected to come before the City Council at its next meeting on October 5.

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