The Hermosa Beach City Council will decide at its meeting tonight whether to approve the revocation of the Conditional Use Permit (CUP) for Establishment, potentially forcing the restaurant’s closure or setting the stage for future litigation.
The Planning Commission voted three to two to revoke the permit at a June meeting, citing Establishment’s ongoing failure to provide audited quarterly reports demonstrating that alcohol sales constitute no more than 50 percent of its business. The business would be unable to operate if the permit is revoked.
Establishment has “repeatedly failed to comply with ongoing requests by the City to provide sufficient records of food and alcohol sales in accordance with” their permit, and that the business has not cooperated with the city-appointed auditor, according to the planning commission’s resolution revoking the permit.
Owner Dave Lowe argues that he has done all that is legally required of him.
Lowe “has gone beyond what is required of him under the [permit],” according to a letter sent to the city council Wednesday from attorney T. Peter Pierce of the Los Angeles law firm Richards, Watson and Gershon. The permit requires that Lowe submit monthly sales summaries indicating a percentage breakdown of food and alcohol sales, which Lowe did each quarter between 2012 and 2014.
When the city’s auditor Albert da Costa requested additional documents, including a breakdown of items sold, Lowe offered to make the documents available to Police Chief Sharon Papa. In the past, Lowe had been hesitant to give the information to the the auditor, arguing that da Costa is not a CPA, and that disclosure could harm his business.
Community Development Director Ken Robertson has said that Lowe’s objections in this regard are meritless.
“We were willing to keep it confidential,” Robertson said.
The revocation issue comes as the city grapples with the concentration of on-site alcohol sales on Pier Plaza and Hermosa Avenue. The Hermosa Beach Police Department issued 600 citations last year for alcohol and public nuisance violations.
At a meeting in March, the council altered the definition of “restaurant” in the city’s municipal code, jettisoning the requirement that alcohol sales constitute no more than 50 percent of business at a restaurant serving liquor. Rather than compelling all businesses to submit records demonstrating compliance, the so-called “50-50 rule” has become an enforcement tool to be used when businesses encounter other problems, such as noise complaints or violence, Robertson said.
However, four businesses in the downtown area — Establishment, the Standing Room, Waterman’s and Dia de Campo — have provisions written into their conditional use permits, requiring that they report compliance with the 50-50 rule.
Establishment has been subject to the reporting requirement since it opened. The requirement was a holdover from Blue 32, the business that Lowe previously operated at the same location.
Complying with the rule can be tough, Lowe said, noting that ordering a $100 bottle of wine with dinner can throw an individual meal well out of the ratio. It can also lead to paradoxical incentives.
“The fastest way to get to 50-50 is to have $1 drinks and a $30 meal, and I’m pretty sure that’s not what the city wants,” Lowe said.
Establishment and the Standing Room face the additional requirement that the reports be prepared by an auditor.
Lowe said that accountant fees associated with the reporting requirements add a significant financial burden to his business.
“It’s between $2,000 to $8,000 each quarter,” he said. “It adds up. And that’s on top of normal year-end accounting fees.”
The Standing Room has so far not encountered problems complying with the reporting requirements, Robertson said.
Lowe said that revocation would be unduly harsh, given the way the punishment has historically been applied.
“Normally, revocations are last ditch efforts. There was a shooting a Club 705, and a one-year drug investigation at Cafe Boogaloo,” Lowe said, referring to two previous Hermosa businesses that had their CUPs revoked. “So it does seem a bit extreme.”
Planning Commission member Kent Allen insisted that the commission approached the revocation process evenhandedly, and that Establishment was not being singled out.
“As long as places follow their CUP, they have nothing to worry about,” said Kent Allen, a member of the Planning Commission. “If any establishment, let alone The Establishment, conforms to the terms of their CUP, then there is no problem.” ER
