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HomeMy WebLinkAbout2013/08/13 Item 15_ _ ,~ ~~ ~ _ ~. --~ -• CITY COUNCIL ~- =~ ~ AGENDA STATEMENT _ _ ~, ,~ ~`~~ CITY OF CHULA VISTA Item /5 AUGUST 13, 2013 ITEi\1 TITLE: REQUEST FOR COUNCIL DIItECT10\' REGARDLNG THE FUTURE OF A TOL`RISA4 i`4ARKETLNG DISTRICT FOR THE CITY OF CHUZA VISTA HOSPITALITY INDUSTRY ' ~4ARKETII~TG AI~iD COit4i~ 'ICATIONS MA\?AGER_ /~ SUBMITTED BI ASSISTANT CITY~E REVIENED BY: CITY MANAGE ASSISTANT CITY . ~\TAGER~(j~ ~/STHS VOTE: YES ~ NO ~X SU171i 4ARY Follovting the disestablishment of the City of Chula Vista Tourism Mazketing District (TD~ID) on October 23; 2012; staff was asked to return to the City Council with information on potential next steps for a TMD. A new TMD would provide a dedicated source of fundins for "improvements and activities' that benefit the real property and/or businesses of the District with the professional guidance and support of the hotel/motel industry. The primary stated goal of the industry in the past has been to increase ovemieht and multi-night stays in the city's 24 hotels and motels. The active participation of the hospitality industry from the beginning of the process would accelerate the effectiveness of improvements and activities selected by the District to increase their collective success; and ensure a collaborative approach to mazketing the local features that compliment that success. If the Cit<~ Council is interested in pursuins a TMD. Council is asked to direct staff to meet with the hotel/motel o~~nersloperators to gauge interest in a new TMD. The group would be asked to consider how that entin~ should be formed; what level of assessment would be desirable. what are the coals; how the oversiehUmanagement should be provided; what is the duration of the TD4D; and review estimated start-up costs and a proposed budget. 15-1 August 13. 20li Item /5 Page 2 of 7 EN~TIRONA'IENTAL RENTER' The Environmental Review Coordinator has reviewed the proposed activity for compliance a~th the California Environmental Qualit}= Act (CEQA) and has determined that the activity is not a Project as defined under Section ISS78 of the CEQA Guidelines; therefore pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus no environmental review is necessary. RECOMMENDATION That the City of Chula Vista City Council discuss the desirability of and options for establishing a Tourism Mazketing District and provide direction to staff on potential discussions with hotel/motel owners/operators. DISCUSSION _ Tourism Marketins Districts provide a stable source of funding that directly benefits the businesses in the TMD. Additional benefits of TMDs include: • The marketing and promotion activities are designed and created under the oversight of those who pay the assessment • The TMD is governed by those who pay the assessment • Funds cannot be diverted for public or private programs that are not pre-approved by the TMD, under their adopted rules of governance • Funds aze raised through a small assessment paid by visitors that stay at the hotels/motels and are used to provide services desired by and directly benefitting the businesses in the district. Staff was asked to return to City Council with a report regarding the options for establishing a Tourism Marketing District (TMD) in the City of Chula Vista. Staff recommends the Council consider one of the following two options for establishing a new Tourism Marketing District. Option 1) City of Chula Vista manages the Tourism Marketing District A new Hotel/Motel Committee could be established with a majority of hotel/motel operators and other stakeholders to set priorities and oversee the improvements and activities including their direction for marketine, advertising. and promotional activities and how the funding is spent. The new TMD would beyoperated by the City of Chula Vista following a majority vote by the hotel/motel operators. The Cit}= would dedicate a staff member to serve as the liaison with the hotel/motel owners/operators and would coordinate the improvements and activities selected and funded by the industry including a comprehensive marketing and advertising. program through the City`s Office of Communications. The strategic marketing and advertising program would promote Chula Vista, its visitor amenities, its attractions, its proximity to San Diego and its attractions, all with the goal of capturing more ovemight/multi-night visitors. The City would regularly communicate and coordinate with the Hotel/Motel Committee to ensure ongoing feedback, provide budget reports, and update the committee on results of advertising and marketing efforts. City staff would provide quarterly reports to the City Council. As a City function, this program ~a=ould be managed following established financial, accounting, and audit 15-2 .Aueust 13. 2013 Item ~S Paee 3 of 7 practices conducted b}~ the City's Finance Department. The program coals; budget; and financial reporting would be presented and considered for approval b.' the City Council annually. Option 2) Ivon-Profit Entity manages the Tourism Mazketing District A new'fi\~ID is established through the City of Chula Vista and is managed by a new non-profit entity (e.g., Chula Vista Tourism Authority) follo~~dne a majority vote by the hotel/motel owners. The non-profit entity would hire staff to manage the program. The City would enter into an agreement Nith the non-profit entity to oversee a strategic mazketine and advertising program to promote Chula Vista, its visitor amenities. its attractions; its prosimih~ to San Diego and its attractions, all with the goal of capturing more ovemighUmulti-night visitors. A new HotelMotel Committee could be established with a majority of hotel/motel operators and other stakeholders to set priorities and oversee the marketing; advertising; and promotional activities and how the funding is spent. The program coals, budget, and financial reporting would be presented; reviewed and considered for approval by the City Council. City staff would provide oversight of the agreement and the non-profit entity would provide regular (quarterly) reports to the City Council. Under either scenario, the Office of Communications recommends considering a TMD governance structure with the following elements: 1) A HoteUMotel Committee should be established that includes a majority of hoteUmotel representatives. This committee would be responsible for overseeing and directing activities of the TMD program. The committee also could include a City of Chula Vista Office of Communications representative; and could include representatives from other organizations such as Chula Vista Chamber of Commerce, Third Avenue Village Association; South Couni<~ Economic Development Council other visitor industry representatives. 2) A Tourism Marketing Subcommittee that is advisory to the Hotel/Motel Committee should be established and should include hotel/motel representatives; aCity of Chula Vista Office of Communications representative; as well as invite representatives from Chula Vista Center; Otay Ranch Towm Center. Aquatica, Live Nation/Sleep Train; Living Coast Discovery Center, and Sports Commission. City of Chula Vista Recreation Dtrector; City of Chula Vista Arts/Culture representatives. other visitor industry representatives. This subcommittee would meet quarterly to keep the TI\~ID informed of upcoming activities and opportunities for cross-promotion. 3) Chula Vista City Council oversieht. The City Council would approve an annual budget and goals, and would receive quarterly reports on TMD activities as well as budget and financial updates. The program budget would be managed following established financial, accounting; and audit practices conducted by the City's Finance Department. If council directs staff to pursue establishing a Ti\~ID; staff would invite hotel/motel o~~mers and operators to discuss the potential for establishing a ne~v Tourism Mazketing District; consider how that entity should be formed. what level of assessment would be desirable, what are the 15-3 August 13. 2013 Item /5 Page 4 of 7 goals, how the oversight management should be provided, what is the duration of the TMD; and review estimated start-up costs and a proposed budget. LEGAL ANALYSIS The City Attorney has identified some potential issues which will require further analysis and research, based on the City Council's direction in this matter. The issues are discussed briefly below. Proposition 26 Proposition 26 became effective in November 2010, subsequent to establishment of the City's prior TMD. Proposition 26 expanded the definition of "tax" to include "any levy, charge or exaction, of any kind imposed by a local government," unless it falls into one of the enumerated exceptions. If no exception applies; no such "tax° could be imposed without voter approval. In the case of a potential TMD assessment; there are at least three exceptions which may apply that would eliminate the requirement for ``voter approval":~ (i) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (ii) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; and (iii) assessments and property-related fees imposed in accordance with the provisions of art. XIIID (Prop 218). In addition, an assessment would be exempt from Proposition 26, if it were determined that it was not being "imposed' by the City. With a TMD assessment, it could be argued that the City is not "imposing" the assessment, if the hotel/mote] owners voluntarily agree to assess themselves. Even if voter approval is required; an argument could be made that the appropriate group of "voters'' are the hotels themselves, not the entire City. Notwithstanding the above. the City Attorney's office will need to conduct additional research on the application of Proposition 26 to any proposed TMD assessment to make sure that it complies or is otherN~ise defensible as "exempt.'' The law continues to be unclear in this area. It is of note that the City of San Diego initiated a validation proceeding for a similar business-based assessment, in order to obtain a court determination that it is compliant with Proposition 26. We will continue to follow that proceeding and provide the City Council with updates as we learn of them. ' Cal.Const. Art. XIIIC, ~ 1, subd. (e). 15-4 Auwst 13. 2013 Item / 5 Paoe ~ of 7 O«~ners Association One option to be considered by the Cit}~ Council is that the TNID would be manased by City staff rather than by a third-parrs-; ossners association. Rltether or not this structure is allowed under current lase. is another issue that will warrant further leeal reseazch and analysis. depending on the Citv Council's direction. The City could create its ossn TMD structure as a Charter City to address this issue. The Propem and Business Improvement District Law of 1994' ("PBID Law") allows the Cin~ to initiate proceedings to establish a property or business improvement district; "upon the submission of a w7itten petition. signed by the property or business ossners in the proposed district svho will pay more than ~0 percent of the assessments proposed to be levied."' It requires that the City adopt a district plan and provides that the ~~manaeement district plan may, but is not required to, state that an ossners association will provide the improvements or activities described in the manasement district plan if the management district plan designates an osyners' association; the city shall contract with the designated nonprofit corporation to provide semices.'a This provision seems to imply that an ossners` association is discretionary, but that if one is designated, it must be anon-profit corporation, under contract to the Cih~. However, there are other provisions of the PBID Law which require certain actions be done by the osimers' association. indicatine that it may be mandatory to have such an ossners' association.' There is no case law interpreting the PBID Law. In addition. each of the cities we surveyed used athird- pam~, non-profit corporation as the ossmers association. Thus, sve have no clear authorih° or precedent for the Cih actine as the administrator or owners' association of the TD4D and it remains unclear as to whether the City could leeally do so using the existing PBID structure. In light of the above. the City may want to consider adopting its osyn ordinance to govern the establishment of business improvement districts in the City. The PBID Law cleazly contemplates this in Section 36603 which states: "\othina in this part is intended to preempt the authority of a charter city to adopt ordinances providing for a different method. of levying assessments for similaz or additional purposes from those set forth in this part." By adopting its ossv ordinance; the City may be able to clazify some of the ambiguity in the existing PBID Law. Other California Tourism Marketing Districts Ciry ofOcemaside, T~YID Established 2010 In January 2010. the City of Oceanside established a Tourism Darketing District to provide funding for a collective mazketing effort to benefit tourism. The Cih~ collects 15% of hotels (with 30 or more rooms) gross revenue and passes throueh the funds to a nonprofit croup called Visit Oceanside; Inc. This nonprofit organization seas set up to administer the TMD. The TMD is valid for five yeazs. The Cit}~ receives 510,000/year to administer the TD4D. The City paid '- Cal. Sts. 8- High. Code §56600, et seq. ' Id at 56621. "Id. at 36651. s See, Cal. Sts. R High. Code j 6650 (ostners` association shall prepare annual report). 15-5 August 13.2013 Item l5 Paee 6 of 7 $21,70 from General Fund and Redevelopment Funds to create the TMD. The TMD reimbursed those funds following formation. Visit Oceanside Inc.; a nonprofit corporation, is the Conference and Visitors Bureau (CVB) for Oceanside and was established to administer the TMD funding. Visit Oceanside has a 19- member board of directors that includes representatives of local hotels and restaurants; city commissions; city staff. police, museums, Legoland, MainStreet, Oceanside; and Camp Pendleton. The aeency employs 8 people. In addition to destination marketing, Visit Oceanside manages the California Welcome Center- Oceanside and facilitates the Oceanside Tourism Council. The Oceanside Tourism Council (OTC) was created in partnership with tourism related business in order to unite the industry in impacting issues that directly affect tourism and visitor spending in Oceanside. The OTC promotes tourism issues. related sales, public policy, education and marketing. City of Sacramento, TMD Established 2012 Sacramento lodging businesses petitioned the City of Sacramento to replace the existing Tourism Business Improvement District (included City, unincorporated County, and City of Isleton) with a new district in order to recon5gure services and benefit zones as well as to change the method of assessment and increase total revenue. The new district is named the Sacramento Tourism and Marketing District. The total STMD assessment budget in the first year of operation is estimated to be $5.2 million. City of Sacramento retains 2% of the assessment to cover costs of collection and administration. Sacramento ConVis manages the STMD. The STMD is composed of approximately 114 lodging businesses and they are assessed a rate of 1% to 3% of gross room revenue depending on their benefit zone. The percentage-based assessment provides additional funds to allow for more marketing and sales efforts as well as for increased zone specific marketing. Ciry of Santa Motaica,. Td9D established 2012 TMD includes all lodging businesses located within the boundaries of the City of Santa Monica with an average daily room rate of $100 and above (30 businesses). Assessment funds are used for marketing and sales promotions to increase tourism and to market Santa Monica lodging businesses as tourist, meeting, and event destinations. Assessment is a fixed rate per room night. TMD has a five year term beginning Jan. 1, 20li through Dec. 31, 2017. The TMD is expected to generate $3.1 million per year. The Santa Monica Convention and Visitors Bureau serves as the ov<mers association for the TMD and a hotel committee is responsible for making recommendations to the CVB Board regarding TMD funds and programs. The hotel committee may research the feasibility of expanding the TMD to include businesses other than hotels. Any such modification would require an amendment to the proposed Management Plan, as well as a new public hearing and resolution adopted by the City Council. The City retains $16,500 annually of the SMTMD assessments to cover administrative costs. Smtta Cru= County Tourism Marketing Dish•ict, established 2010 15-6 August li. 2013 Item ~,~ Paee 7 of 7 In June of 2010. Santa Cruz County joined many other tourism destinations throughout California in establishing a Tourism Mazketing District (TNID). The action taken by the Santa Cruz Count= Boazd of Supervisors finalized the District which includes the unincorporated azeas of the County as well as the cities of Scotts Valley=, Capitola, Santa Cruz and V.%atsonville. Each City Council gave their consent through a resolution to be part of the count~2de effort. Before the action was brought before the County or the Cities. the majority of the lodging industry signed an official petition supporting the initiative. The counriwide Tb~ vti~ll benefit local Santa Cruz County residents. businesses and goverrunent bv_ generating locally collected taxes related to tourism spending, supporting hundreds of local businesses and helping to keep residenu employed. The focus of the district is specifically to increase overnight visitation; particulazh= during the non-summer months. Anv lodging propem or vacation rental company representing six or more units and operating within Santa Cruz County is included in the TD4D. The Santa Cruz Count= Conference and Visitors Council has been identified as the implementing agency for the Tb~ID mazketing program. The District is funded through a lodging propem= assessment; 51.30 for properties with thirt}= or more units/rooms; 51.00 for units with fewer than thirty rooms and more than five. The Santa Cruz TMD brings in approximately 51.1 million/yeaz (FY 2012 number). DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that it is not site- specific and consequently, the 500-foot rule found in California Code of Regulations Section 18704.2(a) (1) is not applicable to this decision. Staff is not independently aware, nor has staff been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter. CL"RRENT YEAR FISCAL IMPACT Initial staff costs for communications and legal staff support will be covered under the existing FY 2013-14 general fund budget. The City may be reimbursed for costs incurred as part of the formation but would need to be reviewed to ensure compliance with Califomia State and Highways Code 36600. ONGOING FISCAL IDIPACT If a new TMD is established; ongoing costs to the Cin= associated with administering the TD4D will be considered as part of the budget developed in consultation with the Hotel/Motel Committee and presented to the City Council annualh= for approval. If formation occurs afrer FY 20li-14, the City ma}= be reimbursed for costs incurred as part of the formation but would need to be reviewed to ensure compliance with Califomia State and Highways Code 36600. The City also benefits from increased Transient Occupancy Taxes. as well as sales tax increases and local jobs creation associated with higher volume of visitor stays and purchases during those stays. In addition. an ongoing mazketing and advertising program boosts awazeness of the city; its assets; its location, and its appeal as a destination for visitors. As the City`s development plans aze implemented (e.g., Millenia; Chula Vista Ba_vfront. Otav Ranch) those new properties will expand the variety of hotels in Chula Vista and contribute funding to the advertising and marketing program administered by the TMD. 15-7 ~-ddiflbsl~ .~'n~irmQflDh ~¢--em Nv. l5 ,.ii. CItY OF CHUTA VISTA August 12, 2013 T0: The Honorable Mayor and City Council FROM: James D. Sandoval, City Manag SUBJECT: Correction to August 13, 2013 ity Council Agenda Item 15 re: Tourism Marketing District (TMD) Errata Sheet Revision to Item 15 On page 5, paragraph 2, under "Owners Association," it states "Thus we have no clear authority of precedent for the City acting as the administrator or owners' association of the TMD and it remains unclear as to whether the city could legally do so using the existing PBID structure." This statement needs further clarification. According to the report Tourism Business Improvement Districts: A Study of Tourism Business Improvement Districts in California (issued in November 2010 by Strategic Marketing Group and Civitas), of the respondents to a survey on tourism related business improvement districts, 18 percent of respondents indicated the TMD funds were administered by a City or County. The study did not indicate which California cities administered their TMD funds. If staff is directed to take additional steps regarding establishing a TMD, further research would need to be conducted on what/how local governments are administering TMDs.