The board of directors and some members of the financially troubled Sunset Strip Business Association (SSBA) struggled yesterday with whether to put the association and its music festival into bankruptcy or continue to explore options for resuscitating it.
The organization is burdened with $1.7 million in debt, which includes a loan of $250,000 made by its chairman, Mikeal Maglieri, and $150,000 from the Nederlander Group, an event promotion firm that managed last year’s Sunset Strip Music Festival. The Nederlander loan payment is due next Tuesday, however, the SSMF at the end of May had only $375 in its bank account. Maglieri is owner of Whisky A Go Go, the famous rock club, and the Rainbow Bar & Grill. In addition to that debt, the SSBA and the Sunset Strip Music Festival LLC (SSMF), a separation organization that it owns, jointly owe Nederlander another $619,000 to cover its share of the loss in last year’s annual music festival.
Data supplied by Nederlander to the SSBA shows the festival generated $490,000, mostly from ticket sales, and had expenses of $1.1 million. Under its contract with Nederlander, the SSBA has to pay for the losses by allocating at least 25 percent of the revenue it gets from sources other than assessments on businesses, which are required under law to pay those assessments because the SSBA is a city-sanctioned business improvement district. But currently the only significant source of such revenue is the $408,000 that Jack Daniels pays to advertise on banners on city-owned street light poles on Sunset Boulevard. Under questioning, Todd Steadman, the SSBA’s executive director, disclosed yesterday that $15,000 of that revenue goes to him as a commission for making the sale.
The board and various SSBA members discussed the situation at a meeting yesterday, with some suggesting the SSBA shut down and others pressing for time to consider more options. The SSBA has tried unsuccessfully to sell the music festival and is exploring ideas for generating revenue such as selling Sunset Strip-branded merchandise and advertising on its website.
Lee Maen of Innovation Dining Group, owner of restaurants such as Katana and BOA Steakhouse on Sunset Boulevard, said the SSBA should close. “Instead of making the Sunset Strip better we’re spending a lot of time cleaning up this mess,” he said. Maen was the author of a letter to West Hollywood City Manager Paul Arevalo in May asking that the City Council not authorize the continuance of the SSBA until major changes were made. His letter was signed by the owners or managers of other prominent Sunset Strip businesses including the Andaz, Grafton, Mondrian and Sunset Marquis hotels; bars and nightclubs such as Bootsy Bellows, the Den, the Pearl, Rock and Reilly’s and the Viper Room, and restaurants such as Pink Taco and Rivabella. In a sign of the members’ discontent, four have resigned from the SSBA board of directors.
Norbert Relecker, general manager of the Mondrian, expressed concern yesterday about the SSBA’s ability to promote local businesses, noting the SSMF and the summer Farmer’s Market have both been unsuccessful. “You don’t have any buyers, any takers,” said Lin Schatz general manager of the Andaz, referring to efforts to sell the festival. “I think we just have to say we’re done.”
Maen and other frustrated SSBA members also have pressed the organization to reduce the assessments levied on its members. Several proposals offered by Todd Steadman would reduce the assessments for its members. For example, under one proposal nightclubs and bars with an occupancy of 500 or more would have their annual assessment reduced from $35,000 to $8,750. Hotels with up to 119 rooms would see their assessment reduced from $2,500 a year to $1,000.
Maglieri said he found himself going back and forth on whether the SSBA should continue. While he would lose his $250,000 loan if it closed, he said he also wouldn’t have to pay a $35,000 annual assessment. Maglieri said his business doesn’t need the marketing services of the SSBA
“We’re in a state of limbo between disgruntled City Council mebers, part of our members that are disgruntled, and rightfully so, and members who got threatening letters from the city,” he said, citing letters sent to SSBA members who haven’t paid their asssessments.
If the SSBA were to close, Maglieri said, “it would take years to start a new BID (business improvement district) over again… It’s not going to happen.”
Steadman has presented various options for moving ahead, all of which focus the SSBA on spending to provide security on the Strip, albeit less than it currently provides. For example, the SSBA would not pay for security patrols on Mondays and Tuesdays and would reduce the number of security officers on Sundays from four to three.
Because the subject wasn’t on its official agenda, the board was unable to vote yesterday on whether to close the SSBA or put the SSMF into bankruptcy. It has scheduled a special meeting in two weeks to consider those issues.