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California City Solutions: Laguna Beach Continues to Cultivate Arts Through Business Improvement District

November 7, 2014
This story is part of an ongoing series featuring Helen Putnam Award entries.
The 2014 entries are available on the League’s website as a resource for cities in a searchable database called California City Solutions. Laguna Beach’s Business Improvement District for the Arts was submitted in 2014 for the Economic Development through the Arts award category.
Laguna Beach is well known for its 8 miles of beautiful beaches and is home to a unique coastal community and artist’s colony. A deep rooted interest in cultural arts has grown into a dynamic arts industry becoming one of the city’s greatest assets. In 2001, the Laguna Beach City Council, Laguna Beach Arts Commission, and the Laguna Beach Visitors Bureau partnered with the city’s hotels to form the Laguna Beach Business Improvement District (LBBID) to create ongoing funding to strengthen the arts industry. One decade later, this industry now generates more economic activity and contributes to the city’s annual revenue stream.

A study conducted by the Center for Economic Research at Chapman University in 1994 found that Laguna Beach’s total estimated economic impact for nonprofit arts was $33 million per year. Community leaders then recognized the economic importance of the local arts industry and potential for economic development.
At the beginning of 2001 the Laguna Beach arts and culture industry faced steep increases in costs of living and property values. Arts groups found it difficult to sustain their annual operations with the increasing living and rent expenses in Laguna Beach, forcing some local arts groups relocating out of the city. The community feared losing some of its long standing nonprofit cultural institutions, including the Laguna Art Museum and the Festival of Arts. The nonprofit arts and culture organizations were depending heavily on contributors and were only receiving minimal funding from the city’s Community Assistance Fund.
The Arts Commission, acting as an advisory committee to the city council on all issues related to artistic and aesthetic aspects of the city since 1978, also experienced its own financial restrictions. The Arts Commission essentially had no funding to support smaller local arts groups or create any new, year-round public cultural program initiatives. In addition, the city had many public art installations that were in need of restoration with no Arts Commission funding to accommodate the work. These financial limitations weakened the ability of aspiring local artists to remain in the city to grow their talents and caused the slow decay of Laguna Beach’s public art infrastructure.
The city worried that one of its most important assets in generating profitable economic activity would be sharply reduced within a few years because of a lack of funding and strategic direction. Community members knew the importance of retaining its existing arts culture, but also recognized the need for creating new art opportunities and programs to draw future residents and tourists to Laguna Beach.
The Laguna Beach Visitors Bureau, Council Member Paul Freeman, and Community Activist Sam Goldstein, among others, developed a solution: the Laguna Beach Business Improvement District (LBBID). Serving as a mutually beneficial partnership between local hotels and motels, and public entities, the group founded LBBID to provide funding to the operations and promotion of local large arts institutions, small arts groups, and city arts programming. It is the first business improvement district to dedicate funds towards nonprofit arts and culture programs in California.
Laguna Beach’s unique cultural arts opportunities proved a major draw for its estimated 3 million visitors, so naturally the local hotels and businesses were becoming concerned that fewer visitors would negatively affect vacancy rates. The primary objective for Laguna Beach hotels and motels is to fund year-round, palpable arts and culture in the community to increase overnight visitors in the non-summer months.
LBBID levies a 2 percent self-assessment on hotel room revenues to be collected in addition to the 10 percent transient occupancy tax. The money collected from the 2 percent assessment goes strictly toward the participants' mutual benefit of growing Laguna Beach arts environment.
LBBID strategically designates five recipients that were a best suited to nurture a thriving local arts industry. Three of the city’s major arts institutions — the Laguna Art Museum, The Laguna Playhouse, and the Laguna College of Art + Design — were selected as recipients based on their operating budgets of over $850,000, 501(c)(3) nonprofit status, professional management, and year-round operations.
The Arts Commission also receives money from LBBID to create new public arts programming for the community, support smaller budget non-professional arts groups through a grant program, and restore aging or damaged pieces of public art in the city. The Laguna Beach Visitors Bureau additionally receives a portion for marketing the community’s growing cultural arts opportunities to prospective visitors.
The city council first adopted a resolution of intention to establish the proposed business improvement district in March of 2001. The resolution received minimal objection from participants and a very high level of community support. The city council then adopted an ordinance effective July 1, 2001 officially establishing the LBBID with its set beneficiaries.
From its inception in July of 2001 through June of 2012, LBBID generated $14,652,159 in funding to support the city’s arts. This funding helped build and sustain a thriving local arts industry in the community.
Laguna Art Museum, The Laguna Playhouse, and the Laguna College of Art + Design have had 12 years of financial stability with the aid of LBBID funding. The three major institutions have successfully grown their operations to serve more patrons year-round and act as a magnet for smaller arts groups to migrate their operations to the city.
The Arts Commission has been able to supplement these arts institutions with its share of BBID funding by offering a variety of additional events and programs. Some of the programs include a music concert series, film series, banner and palette art competitions, monthly art exhibitions at City Hall, and a quarterly publication of a Cultural Arts Calendar highlighting local arts attractions year round. The commission also restored numerous public art pieces and created an artist designed bench competition program.
A flourishing arts community and industry prompted the city to establish a Cultural Arts Department with a full-time staff member, funded out of the city’s General Fund, which acts as a liaison between the city, Arts Commission, and local arts groups. The Cultural Arts Manager is responsible for administering the Arts Commission’s grant program to small upcoming arts groups, overseeing LBBID, and booking visual and performing arts events as well as other activities.
The impact from this local arts industry on Laguna Beach has been well documented by the Americans for the Arts organization. It’s most recent 2012 Arts and Economic Prosperity report shows that the local arts industry generates over $49 million in direct and indirect spending annually in Laguna Beach; $28 million spent by nonprofit arts and culture organizations and $21 million spent from their audiences. This is more than five times the amount of other studied regions with a similar population. This spending supports over 1,300 full-time jobs and generated $4.6 million in local and state government revenue. Residents of all ages are able to get involved in the arts as a community as over 2,000 volunteers and 93,000 hours are needed to operate Laguna Beach’s vibrant nonprofit arts and culture industry.
LBBID helped stabilize Laguna Beach’s economy during the Great Recession and now fosters arts tourism. The city preserves more local dollars and gains new revenue from visitors that would have otherwise gone to another destination for the art experience.

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