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2005

Council Debates Fate of Little Guy

By Ryan Hyatt, Santa Monica Daily Press
September 29th, 2005

The uncertain fate of Perry’s Beach Cafe this week spurned a larger debate among elected leaders on how they should treat small businesses.

Recent controversy over a city initiated bid to solicit vendors that could replace Perry’s Beach Café and Rentals, a long-time food and retail concession along the boardwalk, prompted City Councilman Herb Katz on Tuesday to open the debate regarding City Hall’s policy toward small businesses that operate on public property.

Santa Monica has a policy to promote small businesses, according to elected leaders. However, Perry’s owner, Richard Chacker, said City Hall’s request for bidders is an invitation for large food-service corporations, such as McDonalds, to take over the sites he’s been leasing from Santa Monica for 25 years. Meanwhile, City Hall says it’s following basic legal procedure and that the request is as broad as possible in order to allow City Hall to choose the best vendor.

Chacker insists the “devil is in the details” in regards to the 75-page request for proposal. He cites that not only is City Hall opening up his business to competition, but encouraging candidates who can provide concession service at the civic auditorium and the beach cafe at 1100 Pacific Coast Highway.

Based on City Hall’s new requirements under the request for proposal, Chacker said the minimal capital investment would be $783,000 for the four concession stands, a contract guaranteed for five years. He argues that it would be difficult to recoup his investment with only a guarantee he would be operational for five years. In response, Katz questioned whether Santa Monica was heading in the right direction with its request.

“ Maybe we’re not looking out for small businesses,” Katz told the City Council. Katz’s concerns were shared by fellow Councilmen Ken Genser and Kevin McKeown, and members of the public who spoke on the issue.

“ The capital required negates the possibilities of small businesses participating in the bid,” said former mayor and councilman Mike Feinstein. “This request shouldn’t have been made without the council debating it publicly.”

Elaine Polachek, open space manager for City Hall, said the bidding process is often stressful for business owners, who have a lot riding on their success.

However, the requests are meant to abide by legal standards.

Polachek said the last time City Hall went out to bid for the beach cafes in the late 1990s, Chacker submitted the only proposal and was awarded the agreement.

This time around, City Hall hired a food services consultant to assist in the preparation of the proposal to help expand the process.

But it’s not meant to exclude the incumbent, either, she said.City Manager Susan McCarthy spoke on staff’s behalf and indicated the request had been misportrayed publicly. “It’s entirely inappropriate for the operator to advise us on what should be included in the (request),” McCarthy said. “It’s competition — good for the city and existing operators.”

McCarthy indicated the request was designed in such a way that a small business operator who failed to win the bid could likely attribute it to a poor business plan. She said the seemingly high start-up fees would be used, in part, to make structural improvements needed at some of the facilities.

Genser wasn’t entirely satisfied with McCarthy’s explanation of the request for proposal. He wanted to know if small businesses would be looked unfavorably in the bidding process if they couldn’t provide all the services City Hall asked for.

According to McCarthy, some of the services requested had gone under-utilized for several years, and if City Hall chose an operator that couldn’t provide those services, it meant they’d likely be under-utilized for several more years.

Genser asked if vendors who provided the city a good service in the past received “bonus points” in the bidding process.
City Attorney Marsha Moutrie said that line of questioning discredited City Hall. Since the bids were due on Wednesday, discussing the process the night before didn’t appear objective.

Moutrie suggested the City Council look to a future date to re-address its policy toward small businesses and how that’s played out in its contracts.

She also suggested City Hall may need to better address a broader, legal and philosophical question about the private use of city-owned space. “Can a person continue to use public property simply because they’ve had it?” Moutrie said. “It’s an issue that needs to be discussed.”

The City Council asked staff to arrange a time to debate policies toward small businesses operating on Santa Monica property.