An independent analysis of the management of the Sunset Strip Business Improvement District shows major budget discrepancies, failure by Executive Director Todd Steadman to follow required financial procedures, significant unbudgeted expenditures and execution of contracts involving city property without the city’s knowledge or the approval of the district’s full advisory board. That, and the fact that the Sunset Strip Music Festival has incurred nearly $2 million in losses in the past three years, has led the City of West Hollywood’s Arts and Economic Development division to recommend the Sunset Strip Business Association and Steadman be removed as managers of the business improvement district.
In a report that the City Council will consider at its Monday meeting, Economic Development staffers recommend that the city itself take over management of the business improvement district and that a new advisory board be appointed. Those recommended for that board include Lin Schatz of the Andaz hotel, John Terzian of Bootsy Bellows, Lee Maen of Innovative Dining Group, Norbert Relecker of the Mondrian hotel, Amanda Browning of Nicole Miller, Stacey Bowers of SoHo House and Brett Latteri of the Den on Sunset. Many of those proposed members were signers of a letter to the Council in May that expressed concern with the management of the business improvement district and suggested the Council consider suspending it. Issues with SSBA’s management of the district have led to significant turnover on the current board, with more than half of its 15 members resigning in the past 18 months. Currently there are six open seats.
The report also recommends a new assessment structure for businesses within the district. Those businesses are assessed a fee collected by the city, with the money used to provide public safety safety and cleaning services and marketing services for the area. The SSBA board voted earlier this month to reduce the current assessment levels by 65 percent for large nightclubs and bars and restaurants Smaller bars, hotels and small restaurants and liquor and convenience stores would see their assessment reduced by 60 percent. Retailers would see their assessment decline by 20 percent. But the city staff report suggests reductions by range of assessment, with 50 percent for those ranging from $4,000 to $35,000, 33 percent for assessments of $3,000 a year and 20 percent for assessments of $250 to $2,500 a year. That would represent an 80 percent reduction in assessment revenue to $274,000.
The City Council authorized the formation of the Sunset Strip Business Improvement District in 2004. For the last several years the SSBA has served as its advisory board and Todd Steadman as its executive director. Perhaps the organization’s most famous annual event is the Sunset Strip Music Festival, intended to call out the Strip’s history as the birthplace of rock and roll. The first music festival was held in 2008 within six venues along the Strip. It grew to become a one-day event with stages along Sunset Boulevard. The event lost money in 2012 and 2013. In 2014, the SSBA contracted with the Nederlander Organization, an event management company, to manage the event and expanded it to two days. Losses grew from $577,000 in 2012 and $389,000 in 2013 to more than $1 million last year.
Earlier this month the SSBA board approved a settlement that calls for it to repay an advance loan of $150,000 from Nederlander in increments of $10,000 a month, with the revenue coming from advertising on banners on city-owned poles on Sunset Boulevard. Under the agreement it will make payments of 30 cents on the dollar on another $622,000 that it owes Nederlander associated with the festival’s losses. The SSBA contracted with Brown-Forman Corp., manufacturer of Jack Daniels, to advertise that alcoholic beverage on the banners and has agreed to divert up to 25 percent of its $408,000 a year in ad revenue to pay its bills to Nederlander.
Other SSBA events also haven’t fared well. The Sunset Strip Market, an event on Thursday evenings during the summer, began in 2012 with a focus on local produce. It morphed several times in an apparent event to attract an audience, eventually with a focus on fast dining and alcoholic beverages. The SSBA decided not to stage the market this summer after sustaining losses each year. The SSBA’s annual Guitar Town, a public art exhibit with guitar sculptures displayed along Sunset Boulevard, ends with an auction that raised $147,000 for various non-profit groups in the 2014-2015 fiscal year. But the SSBA never budgeted the $25,000 in expenses associated with the event.
An analysis of the SSBA conducted by White Nelson Diehl Evans LLP (WNDE) under contract with the city found instances where 14 checks for more than $10,000, which require two signatures, only had one signature. Those checks totaled $405,000. In a number of other instances, money from the SSMF account was used to pay SSBA bills and vice versa. The WNDE analysis also found that expenditures exceeded amounts budgeted for services such as advertising and promotions, security and maintenance and office expenses.
The City Council will consider the staff recommendation during a public hearing on extending the Sunset Strip Business Improvement District at its meeting at 6:30 p.m. Monday at the City Council Chambers, 625 N. San Vincente Blvd., south of Santa Monica.