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SANTA MONICA, CALIFORNIA.
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Examines the major economic policies of the city.... More...
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Paper Abstract:
Examines the major economic policies of the city. Effects on the local economy. Overview of Santa Monica. Concerns in the city regarding too much development and growth. Rent control issue and goals of affordable housing and demographic diversity. Minimum wage and economic impact. ATM fees & city's ban on surcharges.
Paper Introduction:
Introduction
Local governments have the delicate task of balancing growth against quality of life, and of maintaining a sound economic base which can support the infrastructure (schools, public services) necessary for day-to-day activities. Some cities actively court new business and pass regulations which favor commerce. Property tax incentives for new businesses, enterprise zones and low cost fee structures can all be ways in which communities seek to attract commerce which will contribute to economic growth. Some communities, however, seek to minimize growth. These communities may favor remaining largely residential and seek to attract the smallest amount of commerce necessary to support the residential "flavor" of the area. High-technology companies, which offer high paying jobs and little pollution, can be particularly attractive to these communi
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This strong economic performance has led some in the city to beconcerned about too much development and too much growth, much as those atthe federal level are concerned about a booming economy leading toinflation. High-technology companies, which offer high-paying jobs andlittle pollution, can be particularly attractive to these communities.Santa Monica, located in Southern California, has taken a particularly hardline against uncontrolled growth. Certainly a ban on ATMsurcharges would bring other customers into Santa Monica in order to usethe ATM machines, but companies such as Bank of America and Wells Fargohave indicated that they would remove ATMs, or limit them to bank-customeruse only, rather than operate the machines at a loss (Stock, 2 , p. Rents have continued to increase (new development is notaffected by rent control in the same way as existing development), and theproblems of development (congestion, noise) have caused concern amongcommunity residents. 1). Opponents of minimum wages argue thatthe market is a better mechanism for setting wages than the government, andthat minimum wages artificially inflate wages without requiring additionalskills (or other factors) which would typically account for wage increases. New constructionwas exempt from rent control, and a provision for annual adjustments wasincluded (such adjustments were subject to the approval of an elected rentcontrol board). 3 . Unlike many SouthernCalifornia cities, residents (including renters) have been successful inorganizing and voicing their concerns in ways which cause local politiciansto change the regulations within the city. This became the new maximumallowable rent and had to be registered with the rent control board. 26). Internet address: http://pen.ci.santa-monica.ca.us/rentcontrol/what1999.htm. 18. Some communities, however, seek to minimize growth. Such an increase was viewed asprohibitive by a number of small businesses which argued against theminimum wage at public hearings. It can be difficult for visitors to Santa Monica to find aparking place even in the municipal lots, and the success of the ThirdStreet Promenade (a popular shopping and restaurant location) has led toparking on neighboring streets and congestion in the surroundingneighborhoods. Minimum Wage The United States maintains a minimum wage for most occupations; allemployers are required to pay this minimum wage ($5.15 per hour as of 1997)unless a higher rate prevails in individual states. 18). In addition, the city also spends a considerable amount ofcivic resources fighting court battles which arise from this legislation,taking resources away from other projects which might benefit residents.In all, the city's position, while motivated by the best of intentions,proves costly for all involved. New York: W. Keeping rents at a level which provides a fair returnto landlords but which prevents gouging enables lower income members of thecommunity to remain in their homes without spending a larger proportion oftheir incomes on housing than wealthier community members (Atlas & Dreier,1989, p. 14 ). E., & Heskin, A. A Primer for Economic PolicyAnalysis. 1). Landlords were guaranteed a "fair rate ofreturn," and hardship increases were possible if the landlords could provetheir necessity. percent inJuly 1999, one of the lowest rates anywhere in Los Angeles County. Conclusion The issue of fees at ATMs demonstrates again the city's desire to havea large role in the way that business is conducted within city limits.Such involvement can mean that companies either make less money byoperating in Santa Monica as opposed to other cities (rent control and ATMfees), or that they have higher operating costs as a result (minimum wage). (2 ). Fine, H., & Hayes, E. Santa Monica has a high demand for both residential and businessrentals: its vacancy rates were among the lowest in Los Angeles County in1999. 26-31. Itsphysical location has made it a prime target for real estate developers andthe upwardly mobile, and the community's older residents have, over theyears, voiced concern that they would be forced out by new development.The city has a population which is politically active, and concerned aboutthe quality of life that it has come to enjoy. Proponents of rent control suggestthat "decent affordable housing is a basic right," exempt from traditionalprivate property and free market policy when that policy threatensaffordable housing. Three recent areas oflegislation, rent control, minimum wage and ATM fees, provide examples ofthe ways in which Santa Monica has sought to limit rather than promoteeconomic growth within its borders. The city council did not enact the minimum wage at that time, butinstead opted to study the matter further. Beginning in January 1999, owners and newtenants could agree on a rental amount based on market rates (fair for theapartment and the available amenities). Other economic statistics also indicate that the city is enjoying aperiod of strong economic performance: retail sales in the city increased7.8 percent in 1998 over 1997, and hotels in Santa Monica have the highestoccupancy rates of any in the county (including those located close to theairport). Nine states (including California)filed a legal brief in early 2 disputing the judge's view (Stock, 2 ,p. Some cities actively court new business and pass regulationswhich favor commerce. American Planning Association Journal, pp. Thesecommunities may favor remaining largely residential and seek to attract thesmallest amount of commerce necessary to support the residential "flavor"of the area. What happened on January 1, 1999? (2 ). In the fall of 1999, Santa Monica's city council considered raisingthe minimum wage in the city to $1 .69 per hour, well above both thefederal and state minimums. The Santa Monica ordinancerolled rents back to their April 1978 level and covered all existingbuildings with four or more units; buildings of three and fewer units werecovered when the landlord did not live in the building. Atlas, J., & Dreier, P. 1) which employers have complainedincreases the cost of doing business in California. 18).From a growth and development standpoint, Santa Monica's ordinance mightwell backfire if these banks adopt this role since the level of servicewould decline with fewer ATMs available to Santa Monica residents. 4A-5A. The community has long maintained an identity separatefrom its more famous neighbor, and is recognized for its mild weather,accessible beaches, and large variety of restaurants and shops. Santa Monica is back in the new housingbusiness. Those which could not relocate easily (such asrestaurants) would simply close, and employees would be thrown out of workcompletely ("$1 .69 an hour," 1999, p. Rent Control Rent control is an attempt to use economics to achieve the goals ofaffordable housing and, in the case of Santa Monica, demographic diversity. The Progressive, pp. Who benefitsfrom rent control? Washington, DC: Department of Labor.Internet address: http://www.dol.gov/dol/esa/public/minwage/america.htm. Some capital improvements could be passed on to renters ona 15-year program, and unit registration fees (required) could also bepassed along to tenants. Stokey, E., & Zeckhauser, R. Santa Monica's legislative environmentprovides examples of how government regulations can be used to shape theeconomic growth which does, or does not take place in a particularcommunity. American Banker, p. "Vacancy control" was also included, which meant thatrents remained controlled even when tenants moved. Insteadof having access to ATMs which might charge non-bank customers a fee,residents and others could be forced to drive to other cities in order toaccess ATMs. Background Santa Monica is located next to Los Angeles alongside the bay whichbears its name. 296). References $1 .69 an hour? A federal district court judgeissued a preliminary injunction barring the cities from enforcing theordinances until the case is resolved, and noted that the ordinances were"probably" pre-empted by federal law. cities' ban onsurcharges. Levin, N., Grigsby, J. This research examines the major economic policies in placewithin Santa Monica and their effects on the local economy. Rents are no longer controlledfor those who moved in after that date. In a market without rent control, landlords are able to charge whateverrents they want. 3 ). (1999, August 23). In an ideal market, the price for housing will seek thelevel at which there is an equilibrium between the number of unitsavailable and the number of people who want those units. (1989, April). Here, the council is trying to maintain both a goodstandard of living for the residents of Santa Monica (or those who workthere) while also maintaining a good relationship with the businessesnecessary for the city's success. The study is not expected to becompleted until late spring or early summer 2 , and no action will betaken until the council has the time to consider what type of action (ifany) is appropriate. According to these businessprofessionals, such an increase would result in layoffs and companieshaving to relocate. 9 states back Calif. (2 , February 4). ATM Fees In late 1999, Santa Monica and San Francisco passed ordinances whichprohibited banks from charging consumers fees for using automated tellermachines (ATMs) within city limits. W. The restaurants and shops on the city'sThird Street Promenade are particularly key to the city's economic well-being, and an onerous minimum wage could result in some of these businessesclosing or relocating if they have no other recourse. Los Angeles Business Journal, pp. Other Measures In addition to rent control, minimum wage and ATM fees, Santa Monicahas considered other measures in recent years which have given the city areputation as being unfriendly to business. Eviction protections remained inplace even after January 1, 1999 ("What Happened," 2 , p. Rent controlimposes a ceiling on the price that is designed to keep the price ofhousing artificially low (assuming a high level of demand for this housingto begin with). Companies which already do business in Santa Monica, and those which areconsidering doing business there, must consider whether the various costsassociated with this highly regulated city justify the company'sinvestment. If the banks do not prevail against Santa Monica and SanFrancisco, it is likely that service to customers in those cities willdecline, possibly leading to additional litigation but certainly resultingin a decrease in overall service to Santa Monica residents as they mustfind other ways to use services formerly provided at ATMs. (199 , Spring). In areas where jobs are scarce, opponents say, minimum wages are notsufficient to fill positions; in areas where jobs are plenty, minimum wagesartificially increase the cost of doing business. (1991, July 22). Santa Monica, CA: City ofSanta Monica. In addition, unemployment in Santa Monica fell to 4. Minimum wages. Mullen, L. 23. In 199 ,voters also passed Proposition R, which required that 3 percent of unitsin any new development be "affordable" housing; this proposition wasimmediately challenged in court (Mullen, 1991, p. The ban on surcharges demonstrates that Santa Monica is dedicated topreserving a certain relationship between business and consumers which doesnot weigh heavily on the side of business. Norton and Company, Inc. Santa Monica's left turn.Los Angeles Business Journal, pp. Introduction Local governments have the delicate task of balancing growth againstquality of life, and of maintaining a sound economic base which can supportthe infrastructure (schools, public services) necessary for day-to-dayactivities. Property tax incentives for new businesses,enterprise zones and low-cost fee structures can all be ways in whichcommunities seek to attract commerce which will contribute to economicgrowth. (1997, March 1 ).Nation's Restaurant News, p. 23). 1, 7-8. Jack in the Box sues city over restricted hours. Proponents of minimumwage legislation hold that such legislation is necessary to prevent workerexploitation. 14 -149. California has longmaintained a minimum wage rate higher than the federal standard ($5.75 in1999) ("Minimum Wage," 2 , p. (1978). The phony case against rentcontrol. These measures include makingit difficult for 24-hour drive-through operators to continue (noisepollution and traffic congestion now force companies to obtain specialpermits for these operations) ("Jack in the Box," 1997, p. Opponents of rent control use this argument to suggestthat rent control promotes homelessness since the artificially low price isbeneath the equilibrium price for housing, which leads to a shortage(Stokey & Zerkhauser, 1978, p. (1999, October 1). Stock, H. Restaurant Business, p. The ordinances were designed to beuser-friendly, but companies such as Bank of America and Wells Fargo (whichoperate the largest ATM networks in California) immediately sued SanFrancisco and Santa Monica claiming that the ordinances infringed on thecompanies' ability to conduct business. State law eventually overtook some of the strident rent controlprovisions in Santa Monica. 4A). Thestate law did not remove rent control for apartment dwellers regardless ofwhen they moved into their units, and renters of condominiums and singlefamily homes continued to have rent control in place providing they movedinto their units prior to January 1, 1996. If the minimum wage were not in place, proponents maintain,employers would pay wages which would preclude employees from having accessto even the most basic necessities. (Fine &Hayes, 1999, p. The increase would be applied to thosebusiness with more than 5 employees. This provision made itdifficult for landlords to convert their buildings to condominiums ordemolish them to convert them to other uses (Levin, Grigsby & Heskin, 199 ,p. Rent control in Santa Monica was first enacted in 1979, and wasdesigned to "protect the poor, minorities, students, young families andsenior citizens" from rapidly rising rents.
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