BH Small Business Task Force: Not Asking the Obvious Questions

Tree base on South Beverly Drive
North Beverly has fancy tree grates. South Beverly? Not so much. Task Force: start here!

It’s one of the regular Beverly Hills approaches to a problem: appoint a ‘task force’ that meets behind closed doors with notice not required and scant public participation beyond the handpicked appointees. That’s how City Council approaches issues like sustainability and revitalization, and it’s been most recently applied to small business viability and associated challenges of recruitment and retention. The Small Business Task Force delivered recommendations this week which included parking measures, streetscape improvements, and ‘shop local’ marketing, but it overlooked one potential bottom-line booster: attracting more cyclists to boost foot traffic to retailers.

Let’s Start With Governance

Let’s take a look at the Task Force. A task force is an ad-hoc body created by the City Council to identify problems, find facts, and penultimately identify policy options from which policymakers can choose. Task forces generally report findings in study session (held the afternoon prior to a formal council meeting where much problem-solving actually happens); subsequently, direction may be given to city departments. If action is to be taken, action items will appear on the Council’s formal agenda.

Traditionally, the task force is Council-appointed with seats apportioned to each Council member. For the interested stakeholder, it is important to pay attention to those appointments, and to the guiding question(s) that define the scope for the task force. Gadflies would also do well to monitor study session agendas closely to see if a task force is making recommendations. That’s the time to speak up, before the City Council subsequently considers formal action in an evening session.

Now, the task force is but one kind of body created to problem-solve city problems. And the task force is not even mentioned in the city’s City Council Policy and Operations Manual (essential reading). City commissions (defined in the municipal code) create ad-hoc committees to do fact-finding and recommend action. Like the task force, and ad-hoc committee need not meet publicly, nor post notice of meetings, or even produce findings for public review. In practice, findings are transmitted via staff report to the commissions under which committee members serve (and all products are accessible via public records request). Our city’s Bike Plan Update Committee is one such ad-hoc body.

Small Business Task Force Background

Let’s consider the Small Business Task Force roster. Appointments were weighted somewhat toward corporate entities (law firms, finance, and realtors) with disproportionately smaller representation among concerns that we might conventionally call ‘small business,’ like small shop proprietors. (See p. 2 of the findings report for a rostser.) No surprise here: it’s in keeping with the City Council Policy and Operations Manual‘s direction to conduct business outreach “at the corporate level.”

But the Task Force’s definition of ‘small business’ was established as: “independently owned and operated, is organized for a profit, and is not dominant in its field.” That leaves much flexibility for making appointments as Beverly Hills businesses are typically not dominant and relatively few businesses here are franchised.

A true small-business task force, by contrast, might have drawn exclusively from independent proprietors like the small retailers who labor in the shadow of larger firms, and perhaps those in our neglected commercial areas outside of the Triangle who suffer disproportionately in an economic crisis. It might weight findings to reflect districts where the vacancy rate is much higher – perhaps double – that of the Triangle. That might surface a greater variety of perspectives on the ‘barriers’ to small-business viability that identified in this report.

Turning to scope, the Task force, which first met in September of 2011, was charged (in brief) to:

  • Review vacancy rates in “key commercial areas”;
  • Identify barriers to retention and new small business recruitment;
  • Review “best practices” of programs in other cities;
  • Develop feasible solutions to overcome identified barriers; and
  • Provide recommendations to Council “to retain and attract small business in [sic] Beverly Hills.”

While the findings presented to Council don’t include an analysis of vacancy rates per se, a follow-up call to the city’s economic development office produced data that puts the citywide vacancy rate into a Westside context (though too coarse to assess vacancy rates across our outlying retail districts).

Vacancy rates chart for the Westside 2009-2011
Vacancy rates for the greater Westside (2009-2011) via Costar report.

That limited data suggest that Beverly Hills is not as competitive as we would like. For the current quarter, the citywide retail vacancy rate is about 13.3% – a level sustained for the past 8 quarters. The average of all other Westside cities during that span was 4.6%. (Charts by Better Bike.)

Asking lease rates chart for the Greater Westside 2009-2011
Asking lease rates for the Greater Westside (2009-2011) via Costar.

Likewise, our lease ask rate (per square foot) was on the decline over that period. That’s not surprising since the vacancy rate was relatively high. But it is a drop of 17% from late 2009 nonetheless – the largest percentage drop among cities studied. That it remains relatively high is due to our city’s unique advantages – brand, cachet, and centrality. But most important, we will have to await more fine-grained data to understand the variance across BH districts as our outlying commercial districts are grouped with Triangle retailers in this dataset.

Foot Traffic is Key

From our anecdotal understanding of vacancy rates across the city, vacancies are relatively fewer in the Triangle and higher in outlying retail districts. Certainly the ask price also shows a peak in the triangle. In the Triangle, retailers pay high freight for high foot traffic and maximal visibility. So when we look at shops north of Wilshire we can see that revenues are high; even in tough times these shops tend to persevere (with some exceptions) because they are better capitalized to start and have the foot traffic (and tourist visitors) to cushion against a recession.

In outlying districts like Robertson south of Wilshire, for example, or the western gateway between Moreno and Wilshire, and even to an extent South Beverly, retailers tap relatively less foot traffic. They pay less for space, of course, but here absolute undercapitalization (i.e., not simply relative to costs)  is a problem. These concerns are less financially robust and may succumb in a downturn.

What is the single best means to reduce this variance? Increase the foot traffic in outlying districts. Indeed our outlying commercial districts are the key to improving the small business picture overall because there’s so much more upside there (relative to investment) when compared to the prospects for small businesses in the Triangle. In other words, much can be done in the outlying areas and it can be done tomorrow.

How important is foot traffic? Compare the 200 and 300 blocks of South Beverly. The 200 block is vital and vibrant and draws from the surrounding neighborhood. Noontime visitors come from local offices off Wilshire, and even walk south from the North Beverly corridor. (Tourists even make the trek as the Beverly Wilshire is just two blocks away.)

On the 300 block it’s much different. Some make it as far south as the Post Office, then they turn around – leaving the businesses south of the P.O. with hardly a fighting chance. It’s proven difficult to sustain even a casual dining restaurant much less a high-dollar boutique there, and vacancies tend to linger longer. Because there just isn’t the foot traffic!

The problem is one of planning: there is no critical mass of retailers to draw shoppers south of Gregory. The west side is almost exclusively small offices plus a supermarket; on the east side, retail contiguity is interrupted by the post office and a parking lot. This kind of micro-district needs a wholly different, perhaps unconventional approach (or mix of businesses) to attract traffic. The mid-block crossing suggested by the Task Force won’t cut it.

While it’s pretty clear that small businesses need foot traffic in order to improve their bottom line, one Task Force answer to undercapitalized small businesses is to subsidize them. Indeed the Task Force identified “financial incentives” such as grants, loans, and tax deferrals, for example. But consider the shops on the eastern side of the Triangle on Crescent Drive as a cautionary tale. The shops there cater to residents but they’re just not drawing additional foot traffic because they’re off the beaten path, retail-wise.

In response, the city lowered rents in city-owned properties to as little as 5% of the average citywide lease rate (“below market,” the city dryly notes). But tossing them a lifeline won’t right a sinking ship; they simply have to generate more revenue. And that means more foot traffic.