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Home My WebLink About09 - CC-7 - Business Improvement Area (BIA) Reauthor - 5/18/20211 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 18, 2021 ITEM NUMBER: CC-7 SUBJECT: BUSINESS IMPROVEMENT AREA (BIA) REAUTHORIZATION, RESOLUTION OF INTENTION, AND REVIEW OF ANNUAL REPORT DATE: APRIL 26, 2021 FROM: CITY MANAGER’S OFFICE PRESENTATION BY: ALMA REYES, ASSISTANT TO THE CITY MANAGER FOR FURTHER INFORMATION CONTACT: ALMA REYES, ASSISTANT TO THE CITY MANAGER (714) 754-5090 RECOMMENDATION: Staff recommends that the City Council: 1. Approve the 2020-21 Annual Report for the Business Improvement Area (BIA) (Attachment 1); 2. Receive and file the audited financial report for Fiscal Years 2019 and 2020 (Attachment 2); and, 3. Adopt the Resolution declaring the City’s intention to levy an annual assessment for Fiscal Year 2021-22 for the Business Improvement Area covering certain Costa Mesa hotels and motels and setting the time and place for a Public Hearing on the proposal (Attachment 3). BACKGROUND: The Parking and Business Improvement Area Law of 1989 (Streets and Highways Code §§ 36500 et seq.) enables cities to impose an assessment fee on businesses within an area designated by the city. On July 5, 1995, the City Council adopted Ordinance No. 95-9 to establish a Business Improvement Area (BIA) for the purpose of assisting the hotel and motel industry in its promotion of tourism within the City. The City Council authorized the City Manager to enter into an agreement with the Costa Mesa Tourism and Promotion Council to develop and administer the BIA. In 2001, the Costa Mesa Conference & Visitor Bureau (CVB), now known as Travel Costa Mesa (TCM), became the administrator of the BIA. 2 In accordance with TCM bylaws, TCM’s Board of Directors is currently comprised of eleven (11) General Managers from the eleven (11) participating hotels and motels, one member of the City Council, and the City Manager’s designee. Since November 2010, the City levies a three percent (3%) special assessment on the eleven (11) participating hotels in the BIA based on the sale of overnight guestroom stays in the partner hotels (2,375 total available rooms). The levy is transmitted by the hotels to the City and ninety-nine percent (99%) of the assessment is remitted to TCM. The remaining one percent is retained by the City to offset administrative costs. ANALYSIS: Currently, the number of properties included in the BIA assessment levy is limited to the eleven (11) hotels and motels that have expressed an interest in participating in the program as detailed in the proposed Resolution of Intention (Attachment 3). Upon adoption of the Resolution of Intention, property owners of the participating hotels will be notified in writing within seven (7) days of the assessment renewal. Subsequently, the Resolution will be published in the Daily Pilot at least seven days prior to the public hearing scheduled for June 1, 2021 at 7 p.m. City staff will also notify all the hotels and motels in the City not currently included in the BIA to allow them the opportunity to participate in the BIA. Property owners will be provided an opportunity to speak in support of, protest the annual assessment, and/or address any concerns regarding the BIA at the public hearing. The City Council will vote to adopt or deny the resolution levying an annual assessment for the upcoming fiscal year, and makes the ultimate decision as to the size of and the properties to be included in the BIA. Upon the approval of the annual assessment, the three percent (3%) assessment is collected along with the City’s Transient Occupancy Tax (TOT). The hotels and motels included in the BIA are required to itemize the BIA levy as a separate assessment. The staff at TCM manage the day-to-day activities and provide all services to administer the BIA. Per the agreement between the City of Costa Mesa and TCM and as required by Streets and Highways Code § 36533, TCM is required to provide an annual report describing the programs and activities implemented during the previous fiscal year as well as the status of the programs and activities implemented during the current fiscal year (Attachment 1). The City Council may approve the report as filed or modify the report and approve it as modified. Once the City Council approves the report, it may adopt the resolution of intention to levy the annual assessment. Further, in accordance with the agreement between the City and TCM, the annual audit for Fiscal Years 2019 and 2020 has been completed by KMJ Corbin & Company, an independent auditor, and paid for by assessment funds. The audit is intended to ensure that the assessment revenue is expended for public purposes as specified within the resolution and that no expenditures are made in a manner contrary to the agreement. The City Council is requested to receive and file the independent audit (Attachment 2). 3 Highlights of the 2019-2020 Fiscal Year In March 2020, the COVID-19 pandemic impacted the world and presented unforeseen challenges and an economic downturn. Prior to the pandemic, Travel Costa Mesa had been gearing up for a culinary and culture media tour for thirteen (13) international visitors which was canceled due to strict travel restrictions. With increasing COVID-19 cases and Statewide Health Orders restrictions including social distancing and shelter-in-place orders, TCM pivoted to a crisis communication plan. TCM created COVID-19 information pages on their website, provided travel and community-related business updates, and actively participated in the City’s COVID-19 response initiatives such as the Costa Mesa Business Assistance Collaborative (BAC) and reStore Costa Mesa. Additionally, engaging in Statewide advocacy to bring relief to the travel and tourism industry became a priority. According to the United States Travel Association (USTA), the travel industry lost the most jobs approximating 4 million in 2020 or thirty nine percent (39%) of the total jobs lost in the country. In 2020, travel spending losses equated to more than $528 billion, which represents a forty percent (40%) decrease year-over-year. The largest losses were noted in the months of April and May. Travel-generated taxes in 2020 equated to $112 billion, down thirty-four percent (34%) from the previous year. International travel spending was severely impacted experiencing a seventy six percent (76%) decrease, domestic travel spending decreased by thirty four percent (34%), leisure travel spending declined by twenty seven percent (27%), and the business travel segment decreased by seventy percent (70%). As vaccination efforts continue and COVID-19 cases continue to decline, leisure travel is expected to rebound quicker than business travel in the months to come. However, the travel industry is not expected to recover from the losses incurred in 2020 for another 4 to 5 years from now. Given its heavy reliance on travel, tourism and conferences, California has been one of the seven hardest hit states by the pandemic. The leisure and hospitality industry was the most impacted of all industries with 518,000 of hospitality and leisure related jobs eliminated. This equates to 38 percent of all California jobs lost. Additionally, the state suffered $85.9 billion in travel-related spending losses, and $6.3 billion in State and local tax revenue declines. During the pandemic, TCM was faced with making significant budget reductions, including a forty percent (40%) cut in staff salaries, terminating their ad agency contract and suspending all funds to support community/cultural arts programs and events. TCM has implemented a two-month versus a twelve-month budget approach. ALTERNATIVES: City Council may choose to deny the resolution of intention, which will prevent the public hearing from taking place to consider levying an annual assessment for the upcoming fiscal year. 4 FISCAL REVIEW: According to the audit report, TCM’s cash equity as of June 30, 2020 totaled $2,166,138. Based on the 2020-21 annual report, TCM is forecasting a $786,382 budget for fiscal year ending June 2021, a significant decrease from prior years. As of February 2021, BIA revenues were at $639,968.58 (a 63% decrease). TCM estimates a revenue loss of 66 percent (66%) from FY 2019-20 and a 71.5 percent (71.5%) decrease from FY 2018-19. The City receives one percent (1%) of the BIA revenue/assessment as partial reimbursement for its collection and administrative costs. The one percent (1%) allocated to the City for reimbursement is estimated at $7,800 for the 2020-2021 Fiscal Year. Since 2014, TCM has also provided funding to the City to support community-wide marketing and community events that attract many visitors to Costa Mesa under a Professional Services Agreement (PSA). The 2018-19 TCM community event funding to the City totaled approximately $144,000. All expenditures incurred under the PSA are on a reimbursement basis and adhere to the City’s purchasing policy guidelines. In March 2020, the COVID-19 pandemic triggered suspension of all community events and a majority of City programs. The on-going pandemic has had a significant financial impact on TCM’s operational budget. As a result, TCM’s community events budget for the City has been suspended since May 2020. The City began budgeting the TCM Community Events Programing for a total of $164,000 within the City’s financial system. This budget typically added annually as an addendum to the existing Professional Services Agreement between the City and TCM, approved by City Council at a public hearing. In prior years, the City has utilized TCM funding for community-wide marketing and support of community events such as ARTventure, Snoopy House, Summer Concerts in the Park and more. The current year’s Fiscal Year 2020-2021 adopted budget did not include an appropriation of $164,000 for the City’s community-wide marketing and event expenses due to the significant financial impacts of COVID-19 on TCM’s operational budget. Although the TCM community event funds were not available during FY 2020-21, City staff managed to host the long-standing community holiday event known as Snoopy House, following all State and Federal COVID-19 guidelines. The expenses for this event, which historically were funded by TCM, were absorbed in the General Fund from vacancy savings. The slow economic recovery and lack of State guidance for corporate meetings, events, and conventions continues to have significant impacts on the TCM budget. At this time, TCM has not resumed the allocation of community events funds to the City until further notice. As vaccinations are distributed and the State begins to reopen, the City will also develop plans to resume community events and assess the costs during the FY 2021-22 budget development process. 5 LEGAL REVIEW: The City Attorney’s Office reviewed this report and has reviewed and approved the resolution as to form. CONCLUSION: Adoption of the resolution of intent is the initial step in the reauthorization of the BIA assessment. State law mandates the specific procedure to be followed in the establishment of such an area. Staff will make a presentation to the City Council on the implementation of the BIA assessment at the public hearing on June 1, 2021; however, the City Council must approve the annual report and the proposed resolution of intention before the hearing can be scheduled to consider the levying of an annual assessment. Therefore, staff recommends that the City Council: 1. Approve the 2020-21 Annual Report for the Business Improvement Area (BIA) (Attachment 1); 2. Receive and file audited financial report for Fiscal Years 2019 and 2020 (Attachment 2); and 3. Adopt Resolution 21-xx, declaring the City’s intention to levy an annual assessment for Fiscal Year 2021-22 for business improvement area covering certain Costa Mesa hotels and motels and setting the time and place for a public hearing on the proposal (Attachment 3). ALMA L. REYES CAROL MOLINA Assistant to the City Manager Finance Director DISTRIBUTION: Travel Costa Mesa ATTACHMENTS: 1. Fiscal Year 2020-21 Annual Report for Travel Costa Mesa 2. Completed Audit Report for Fiscal Year 2019-20 3. Proposed Resolution of Intention LORI ANN FARRELL HARRISON KIMBERLY HALL BARLOW City Manager City Attorney 2020/21 ANNUAL REPORT Attachment 1 3// TRAVEL COSTA MESA // TABLE OF CONTENTS 4 President’s Message 5 Mission of Travel Costa Mesa 6 TCM Funding 8 Hotel Partners 10 U.S. Travel Facts 12 California Travel 14 Marketing Costa Mesa 18 TravelCostaMesa.com 20 Social Media 22 Public & Community Relations 26 Media Relations 30 Group Sales 33 Travel Costa Mesa Leadership 4 // 2020-2021 ANNUAL REPORT // “TRAVEL DEFINES THE AMERICAN SPIRIT. It inspires our sense of adventure, brings forth our welcoming nature and fulfills our aspirations to connect with the world and each other.” -Roger Dow, U.S. Travel Association President and CEO at his annual state of the industry address earlier this year The annual review and changes to Travel Costa Mesa’s (TCM) emergency plan were relatively minuscule. That is, up until last year. A new tab was created that addressed pandemics. It is a section that has been added with first-hand experience and remains incomplete. Lessons continue to be learned. No one could have predicted the devastation of the pandemic, the lives lost, and the economic nightmare it has become. On March 11, 2020, TCM received notice from our State destination marketing organization, Visit California, that our culinary and culture media tour for 13 international visitors was cancelled due to travel restrictions as a result of COVID-19. We remained hopeful this event would be rescheduled to later in the year, along with other marketing PRESIDENT’S MESSAGE initiatives that TCM had planned. By the end of March, TCM had pivoted to a crisis communication plan. Creating COVID-19 information pages on the website, providing tourism and community-related business updates, actively participating on the city’s Business Assistance Collaborative, and restoring Costa Mesa programs took precedence. Advocacy for bringing relief to the travel and tourism industry also became a priority. Traveler sentiment surveys tracking consumer perceptions, attitudes, and behaviors during the COVID-19 crisis were and continue to be closely studied. Zoom meetings dominated staff calendars from organizations like U.S. Travel Association, Destination Analysts, Destination International, Cvent, and local destination marketing organizations all trying to assist us in navigating through the most difficult times we have ever experienced. As summer approached, road trip messaging began to rise. Outside activities, hotels, restaurants, and shopping destinations were highlighted in video and online formats to inform the community and visitors of cleanliness protocols in and around Costa Mesa. Shopping local, providing media with evergreen content about the destination, and virtual vacation tours kept us connected with our market. Sharing stories of inspiration, like businesses doing good in our community by helping others in need, dominated our content. TCM leveraged influencer relationships to get additional coverage for Costa Mesa with prize giveaways. Public relations stories were eagerly sought after to inspire travel intenders. 5// TRAVEL COSTA MESA // MISSION STATEMENT Travel Costa Mesa enhances and promotes the destination brand experience, further increasing visitor spending for industry and community economic viability, sustainability, and quality of life. KEY OBJECTIVE Increase brand awareness for the city of Costa Mesa as a desirable, overnight, leisure Orange County destination. SALES OBJECTIVE Increase brand awareness and new group room nights for the city of Costa Mesa – to make it the preferred Orange County destination ideal for small to mid-size business and boost the economic benefits throughout the city. VISION STATEMENT Travel Costa Mesa is the engaged destination marketing leader, supporting, and selling the city’s distinct visitor brand experiences and advocating community tourism benefits. In 1995, Travel Costa Mesa was formed as a non-profit corporation to market the city of Costa Mesa as a desirable, leisure overnight destination in Orange County. When our new fiscal year began in July, Visit California created the acronym RESPECT that encouraged responsible travel, as well as respecting the state, its culture, and residents. Roam responsibly, Educate myself, Safety first, Preserve California, Embrace community, Celebrate culture, and Teach others. The creation of a co-op summer campaign, “Create Your Escape - Close to Home,” launched with Visit California. Uncertainty remained as to when the pandemic would end as a record number of cases continued to be reported throughout the United States and around the world. October generated a glimpse of hope as we envisioned a more promising end to the year with the holidays approaching. The “Light Up Your Holiday” campaign that highlighted a South Coast Plaza gift card to those staying overnight in our partnering hotels was paused as a result of the surge in COVID-19 cases in Southern California. A redirect of efforts during the holiday included a spotlight back to supporting local businesses within the city. The rollercoaster ride the pandemic created, with more dips than peaks, has left the national travel industry unemployment rate at 51 percent as of March 2021. It is predicted that it will take five years to recover. While the state of California is finalizing its unemployment rate, initial studies reveal the travel and hospitality workforce is down by as much as 48 percent. As vaccinations continue and overall virus cases decrease, Americans are looking forward to leisure travel this spring and summer. However the lack of state guidelines for corporate meetings, events, and conventions are perpetuating the recovery for the industry. As TCM and its partners try to plan for the future regarding these segments of business, this task becomes fruitless without guidelines. Business continues to book outside our state and leaves us with a great economic disadvantage. Advocacy for the industry has never been more important. U.S. Travel and CalTravel associations are working tirelessly to work with lawmakers on protocols and safety guidelines for reopening. The road ahead of us will be challenging and competitive. TCM will continue to rebuild with a team dedicated to promoting the destination brand experience for both leisure and corporate travel which benefits our community. We will need to do more with less. Collaboration and creativity will be important as we navigate recovery. Paulette Lombardi-Fries PRESIDENT, TRAVEL COSTA MESA    6 // 2020-2021 ANNUAL REPORT // TRAVEL COSTA MESA IS ENTIRELY FUNDED through a Business Improvement Assessment (BIA). Each of the 11 Costa Mesa partner hotels listed in this annual report collects a 3 percent levy from overnight hotel guests (2,375 total available rooms). All of the Transient Occupancy Tax (TOT) that the city of Costa Mesa collects goes into its general fund. Business owners shall pay the assessment to the Costa Mesa City Finance Department on a monthly basis. A penalty and interest shall be assessed on late payments. New hotel and motel businesses that are interested in participating in the BIA should contact the city of Costa Mesa and Travel Costa Mesa. This is a voluntary program for hotel partners. Business Improvement TCM FundingTCM FUNDING 100% Swift Reaction TCM partner hotels were impacted tremendously by COVID-19 in mid-March 2020 and continue to suffer great losses. While the hotel industry is struggling, state mandates against leisure and corporate travel create ongoing challenges. In March 2020, TCM recreated its April to June 2020 budgets based on significantly reduced occupancy and average daily rates from the funding partners. The organization pivoted quickly by cutting back on expenses, including a 40 percent decrease in staff salaries for seven months, terminating our ad agency contract, and suspending hotel marketing and city funds. TCM continues to set forth budgets every two months versus a 12-month approach prior to the beginning of the new fiscal year. This has been the new norm as the pandemic continues and the uncertainty of when travel will fully resume remains high. As California’s overall COVID-19 cases decrease, as vaccinations become more available, and as the state’s tiered color system improves, the industry looks forward to welcoming back leisure and business travel. However, pre-COVID-19 revenues aren’t expected to recover quickly. It will likely take over the next four to five years to regain what the market has lost. 7 // TRAVEL COSTA MESA // FISCAL YEAR 2020-2021 TCM is forecasting a budget of $786,382.00 for the current fiscal year (July 2020-June 2021). As of February 2021, BIA funds are at $639,968.58. TCM estimates a revenue loss of 66 percent from fiscal year 2019-2020 and a 71.5 percent decrease from fiscal year 2018-2019. PRIMARY EXPENSES (FY 2020-21) BIA REVENUE 2500 2000 1500 1000 0.500 0.000 $2,323,074 FY 2019-2020 FY 2020-2021 $786,382 TOTAL MARKETING EXPENSES26% 59% 15% TOTAL EMPLOYEE EXPENSES TOTAL ADMINISTRATIVE EXPENSES 8 // 2020-2021 ANNUAL REPORT // Avenue of the Arts Costa Mesa, A Tribute Portfolio Hotel 3350 Avenue of the Arts Rosanna Inc. Rosanna Inc. Costa Mesa, CA 92626 3350 Avenue of the Arts 3350 Avenue of the Arts Costa Mesa, CA 92626 Costa Mesa, CA 92626 Ayres Hotel Costa Mesa 325 Bristol Street Newport Country Inn & Suites, Inc. Newport Country Inn & Suites, Inc. Costa Mesa, CA 92626 355 Bristol St., Ste. A 355 Bristol St., Ste. A Costa Mesa, CA 92626 Costa Mesa, CA 92626 Best Western Plus Newport Mesa Inn 2642 Newport Blvd. James Hsuen & Shang-Pu Lee James Hsuen & Shang-Pu Lee Costa Mesa, CA 92627 2642 Newport Blvd. 2642 Newport Blvd. Costa Mesa, CA 92627 Costa Mesa, CA 92627 Hilton 3050 Bristol Street Ashford TRS CM LLC Remington Lodging & Hospitality LP Costa Mesa, CA 92626 14185 Dallas Pkwy, Ste. 1100 14185 Dallas Pkwy, Ste. 1100 Dallas, TX 75254 Dallas, TX 75254 Crowne Plaza 3131 Bristol Street Brighton Management Bright Bristol Street, LLC Costa Mesa, CA 92626 1901 Main Street, Ste. 150 3131 Bristol Street Irvine, CA 92614 Costa Mesa, CA 92626 Holiday Inn Express Hotel & Suites 2070 Newport Blvd. Narendra B. Patel Narendra B. Patel Costa Mesa, CA 92627 2070 Newport Blvd. 2070 Newport Blvd. Costa Mesa, CA 92627 Costa Mesa, CA 92627 Marriott 500 Anton Blvd. Starwood Capital Group HEI Hotels & Resorts Costa Mesa, CA 92626 591 West Putnam Ave. 101 Merritt 7 Corporate Park, 1st Flr Greenwich, CT 06830 Norwalk, CT 06851 Ramada Inn & Suites 1680 Superior Ave. B.D. Inn Inc./Ramada Ltd. B.D. Inn Inc./Ramada Ltd. Costa Mesa, CA 92627 1680 Superior Ave. 1680 Superior Ave. Costa Mesa, CA 92627 Costa Mesa, CA 92627 Residence Inn by Marriott 881 Baker Street Marriott International BRE Select Hotels & Resorts Costa Mesa, CA 92626 10400 Fernwood Rd. 6201 15th Ave. Bethesda, MD 20817 Brooklyn, NY 11219 The Westin South Coast Plaza 686 Anton Blvd. Host Hotels & Resorts CJ Segerstrom & Sons Costa Mesa, CA 92626 6903 Rockledge Dr., Ste. 1500 c/o South Coast Plaza Bethesda, MD 20817 686 Anton Blvd. Costa Mesa, CA 92626 BLVD Hotel 2430 Newport Blvd. Hollywood Corner Inc. Shyamal Patel Costa Mesa, CA 92627 2430 Newport Blvd. 16609 Honeybee Dr. Costa Mesa, CA 92627 Tustin, CA 92782 HOTELPARTNERS LODGING + ADDRESS BUSINESS OWNER PROPERTY OWNER 9 // TRAVEL COSTA MESA // OCCUPANCY OF HOTEL PARTNERS (Full year 2019 & 2020; January and February 2021) AVERAGE DAILY RATE OF HOTEL PARTNERS (Full year 2019 & 2020; January and February 2021) AVG DAILY RATE 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $200.00 $160.00 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 2021 2021 2020 2020 2019 2019 10 // 2020-2021 ANNUAL REPORT // U.S. TRAVEL Impact of COVID-19 THE HOSPITALITY INDUSTRY has been devastated as a result of the pandemic. According to the United States Travel Association (USTA), the national, non-profit organization representing all components of the travel industry, this sector lost the most jobs at just under 4 million in 2020. That’s 39 percent of the total jobs lost in the country. U.S. Travel Spending In 2020 travel spending losses equated to more than $528 billion, which represents a 40 percent decrease year over year. Largest losses were noted for the months of April and May. The best month since the beginning of the pandemic was September. Travel-generated taxes in 2020 equated to $112 billion, down 34 percent from the previous year. NATIONAL JOBS LOST IN LEISURE & HOSPITALITY (% OF JOBS LOST, FEB-20 TO JAN-21, SEASONALLY ADJUSTED) 11// TRAVEL COSTA MESA // Most notably international travel spending decreased by 76 percent while domestic travel spending decreased by 34 percent. Leisure travel spending declined by 27 percent and the business segment decreased by 70 percent. Leisure travel will rebound quicker than business travel in the months to come. However the USTA expects the travel industry in general will take four to five years to recover from the 2020 losses. Markets hardest hit by the pandemic related to travel spending and year-over-year change include Hawaii, DC, New York, Massachusetts, Illinois, Washington, and California. Markets that saw a decrease year over year, but were not as drastic, include Mississippi, Idaho, Montana, South Dakota, and Alabama. NATIONAL TRAVEL SPENDING - MONTHLY ($ BILLIONS) NATIONAL TRAVEL SPENDING - BY SEGMENT (2020, YEAR-OVER-YEAR % CHANGE) NATIONAL TRAVEL SPENDING ANNUALLY BY MARKET (2020 VS. 2019, YEAR-OVER-YEAR % CHANGE) -100% -80% -60% -40% -20% 0% -100% -80% -60% -40% -20% 0% BEST 10 MARKETS WORST 10 MARKETS MS PA ID MN MT CA SD WA AL PR WY IL AR MA DE NY UT DC KS HI 12 // 2020-2021 ANNUAL REPORT // CALIFORNIA TRAVEL 518,000 Number of leisure and hospitality jobs eliminated $85.9billion Travel-related spending lost $6.3billion State and local tax revenue lost 13// TRAVEL COSTA MESA // California Airports Airport traffic for the state of California decreased 67 percent in 2020 compared to the prior year. Domestic traffic was down 65 percent and international flights decreased by almost 76 percent. Los Angeles (LAX) and San Francisco (SFO) airports had the highest number of passengers in 2020. LAX serviced 28.77 million passengers (down 64 percent to 2019) and SFO had 16.43 million (down 71 percent to 2019). John Wayne Airport, Orange County (SNA) U.S. carriers lost an estimated $35 billion in 2020 according to analyst estimates provided by FactSet. Our local airport experienced great loss as it served 5.3 million less passengers in 2020 compared to 2019. John Wayne Airport - Airport Statistics (December 2020) Some relief is expected in the second half of 2021 as COVID-19 vaccinations continue to be administered. Additionally, John Wayne Airport - Orange County added several non-stop destinations: • Allegiant Air added Boise, Idaho; Grand Junction, Colorado; Medford, Oregon; Missoula, Montana; Provo, Utah; Las Vegas and Reno, Nevada; and Spokane, Washington. • Southwest Airlines resumed flights to Cabo San Lucas and Puerto Vallarta. • United Airlines will fly directly to Honolulu, Hawaii starting in May. • Sun Country Airlines will provide service to Dallas, Texas and Minneapolis, Minnesota In spring 2021, Hoag will operate an 850-square-foot Fly Well Clinic for travelers and employees of the airport. Offerings onsite include a licensed health care provider, general health and wellness information, rapid COVID-19 testing, vaccinations including flu shots, on site office visits, blood pressure, and other vital screenings. Notes: Sourced from individual airports as of February 9, 2021; includes airports in Los Angeles, Burbank, Long Beach, Ontario, Orange County, Oakland, Sacramento, San Diego, San Jose, and San Francisco; monthly figures may not sum to YTD due to data revisions CALIFORNIA AIRPORTS - PASSENGER STATISTICS (2020 VS. 2019, % CHANGE) January February March April May June July August September October November December YTD* January February March April May June July August September October November December YTD* 14 // 2020-2021 ANNUAL REPORT // MARKETING COSTA MESA WITH LAST YEAR BEING AN incredibly difficult year for travel, Travel Costa Mesa walked a tightrope on what was appropriate to market about the destination. Since March 2020, our general strategy converted to an evergreen “info-only” program. Besides a couple of small campaigns, we did not promote travel to Costa Mesa in much of 2020. We realized our two most important goals were:1.1. 2.2. To continue to keep prospective visitors and media informed of Costa Mesa’s story until travel returns. To support the city and local businesses through the pandemic by sharing crisis communications and promotional offers. 15// TRAVEL COSTA MESA // TCM marketed only to nearby drive markets in Los Angeles, San Diego, Inland Empire, and even communities within Orange County for “staycations.” As budgets were drastically cut, much of our big ad campaigns were paused in 2020. Due to vendor cutbacks, TCM’s Social Media and Content Manager took over aspects of web development – new pages were coded in-house along with page updates and redesigns. TCM created socially-distanced itineraries for solo, couple, family, and pet-friendly travel. TCM kept website visitors informed of the latest news on the pandemic. Our COVID-19 information page, support Costa Mesa restaurants and Costa Mesa business updates pages were refreshed weekly. A New Kind of Content What we learned from the pandemic was that our communications strategy needed to evolve, and quickly. We began functioning as another communications arm for Costa Mesa to provide emergency information, updated business hours and restrictions, messages from state, county and city government, coronavirus news updates, and later, standards of health and safety provided by our hotels and businesses. We also wanted to keep some of the content light and keep our visitors thinking about travel. To that end we created our “Costa Mesa Virtual Vacation” page, which contained 360-degree videos of various attractions of the city, a virtual art walk tour, a photo gallery, social stream, and more. With 10,743 views, this was one of our most visited pages of 2020. 16 // 2020-2021 ANNUAL REPORT // MARKETING COSTA MESA Art Walk Audio Tour After months of planning, writing scripts and creating website content, TCM launched the Costa Mesa Art Walk Audio Tour in November 2020. This was an exciting venture and a long time passion project for the team, and to see it come to fruition was definitely a highlight of 2020. For 20 of Costa Mesa’s top public art pieces, visitors can simply hit “play” on their mobile device to hear highlights of each piece and the artist who created it. Eatcation® Campaign We launched Eatcation® in March 2020 to promote Costa Mesa as a foodie destination. Promotion included a video, display ads, a hotel deals page, a social program, and a planned media food tour. The campaign ran for just a few days before we had to postpone it due to the COVID-19 lockdown. We hope to re-launch this evergreen campaign in fall 2021 or spring 2022. Our Eatcation® video that we created won a Platinum MarCom Award for Excellence in October 2020, an honor for excellence in marketing and communication. Each year about 6,000 print and digital entries are submitted from dozens of countries. “Create Your Escape Close to Home” Summer Campaign Other marketing efforts included launching a “Create Your Escape Close to Home” campaign in June 2020 for Southern California locals interested in a “staycation” or a quick trip away from home quarantine. The campaign garnered 900 hotel leads and approximately 65,000 site visits. We ran ads on Uber and Lyft cars in the Los Angeles area which covered over 1,600 miles and received over 1.5M impressions. 17// TRAVEL COSTA MESA // “Make a Clean Break” Campaign “Make a Clean Break” was a smaller, social- only campaign that we started in late- summer 2020. We asked local businesses to provide videos of what their businesses were doing to keep guests safe. We featured 12 local businesses including hotels, restaurants, and retail stores. Our video has 7,500 views on Facebook. Visit California Co-Op Campaign In a unique opportunity from Visit California (VCA), partner destination marketing organizations (DMOs) in the state were invited to participate in a co-op whereby those DMOs would get a discount on advertising spend with five vendor partners. TCM joined this initiative in September and October 2020. The campaign received 411 hotel leads and 15,100 visits to our page. Due to the stoppage of international travel, VCA’s international team pivoted to work more closely with regional and state DMOs. TCM’s Vice President of Marketing partnered with VCA’s web team to implement content that could drive more traffic to travelcostamesa. com. Costa Mesa was featured in two pieces of visitcalifornia.com content, and we are continuing to see traffic increases from the site. “Light Up Your Holiday” Campaign We created a holiday campaign that included a $100 gift card to South Coast Plaza for any guests that stayed at our hotels for two or more nights. While we launched the campaign in November 2020, we paused it shortly afterwards due to increased COVID-19 shutdowns. Importance of the DMO There’s no question people continue to look to DMOs to get information about planning a trip, and even while visiting a city. While it has been a tough year, we remain optimistic about our role in returning travel and tourism to Costa Mesa. 18 // 2020-2021 ANNUAL REPORT // TRAVELCOSTAMESA.COM Website Traffic For the first two months of 2020 (January 1 - February 29), our website traffic was excellent. Website users increased by 64.52 percent (100,751 vs. 61,239) and sessions increased by 71.68 percent (118,897 vs. 69,255) year over year, and we were expecting those numbers to continue to grow. As we went into March, the pandemic crashed traffic numbers for travel and tourism sites as a whole. Not only that, because we had to curb our pay-per-click and other advertising spend driving traffic to the site, we were mostly dependent on organic traffic. We ended calendar year 2020 down in website users by 37.46 percent (300,616 vs. 480,661) and down in sessions 37.85 percent (349,539 vs. 562,448) over the previous year. Clearly the pandemic was the sole cause of our downturn in traffic. ages 25-34 2.2% increase in sessions in 2020 (24.9% to 27.1%) ages 35-44 3% increase in sessions in 2020 (18.13% to 21.13%) Male VS. Female 2.2% increase female visitors in 2020 (46.4% to 48.6%) 19// TRAVEL COSTA MESA // Videos On our Vimeo channel, our 40 various videos received 38,000 views. We saw our “Make a Clean Break” series receive 7,500 views on Facebook. We also counted on media influencers like “Mike’s Road Trip” with over 3,000,000 followers on YouTube to share our story via video. In preparation for the launch of Eatcation®, TCM produced five new videos to show the personality and diversity of Costa Mesa’s bars and restaurants. The series was set to premiere over Memorial Day weekend 2020 but has been postponed until 2021. We added to our social media videos through the Lumen5 platform. In summer 2020 we created a video showcasing Costa Mesa as the City of the Arts® with a virtual art walk. Video production was limited due to a strict 24-hour week for TCM’s Social Media and Content Manager from April to November 2020. 79.49 % MOBILE 15.88% DESKTOP 4.64% DESKTOP 39.17 % CONTENT MARKETING 19.40% DISPLAY ADS 13.28% ORGANIC SEARCH 10.56% PAID SEARCH 9.67 % SOCIAL 22.60% LOS ANGELES 6.63% SAN DIEGO 2.66% SAN FRANCISCO 2.28% ONTARIO 1.39% LONG BEACH 38.95 % CALIFORNIA 5.62 % TEXAS 5.51 % NEW YORK 4.42% FLORIDA Top 10 Webpages Visited 1. Summer Hotel Deals 2. Things to Do in OC 3. Holiday Hotel Deals 4. April 2020 Blog: Travel Costa Mesa From Home 5. Travel Costa Mesa Home Page 6. December 2019 Blog: An Active Getaway in Costa Mesa 7. March 2020 Blog: March Madness in Costa Mesa 8. March 2019 Blog: Satisfy Your Sweet Tooth with These 5 Desserts from Costa Mesa 9. Costa Mesa Virtual Vacation 10. Hotel Specials and Discounts Content Marketing In 2020 TCM continued to use Taboola for content marketing, one of our top traffic drivers. The strategy changed as Costa Mesa moved through stages of shutdown. Evergreen content, socially-distanced events, and outdoor activities were the focus for the majority of the year. We posted content marketing pieces to the TCM blog, which were syndicated through Taboola’s advertising platform. Our top blog for 2020 was the April piece, “Travel Costa Mesa from Home,” which received 23,086 sessions (the third most visited page of the year). This shows the continued hunger for travel through the pandemic and hopefully an interest in visiting Costa Mesa in the near future. WEBSITE VISITORS BY DEVICE WEBSITE TRAFFIC DRIVERS TOP WEBSITE VISITORS BY STATE TOP WEBSITE VISITORS BY CITY (OUTSIDE OF OC) 20 // 2020-2021 ANNUAL REPORT // SOCIAL MEDIA 6,242 FOLLOWERS 5,669 FOLLOWERS 12,911 FOLLOWERS DUE TO THE PANDEMIC, social media growth slowed significantly from mid-March through the end of 2020. Instagram, however, increased by 20.9 percent throughout the year and Travel Costa Mesa reached over 1.2 million people on Facebook. As with our website content, the pandemic shifted much of our focus of social media from strictly marketing and brand awareness to three main areas: • Crisis communication • Support for local restaurants and businesses • Inspiring travelers to put Costa Mesa on their post-COVID destination list 21// TRAVEL COSTA MESA // TCM followed Visit California’s lead for social media during the pandemic. We participated in campaigns related to COVID, including #MaskUpOC and #CATakeoutTuesday User-Generated Content Travel Costa Mesa continued to collect and store user-generated content (UGC) through the CrowdRiff platform. In 2020 CrowdRiff added new features such as social media scheduling. TCM expanded the use of galleries on our website, including the Costa Mesa Art Walk, murals and street art, and the open restaurants pages. UGC remains a large part of our social media strategy as research shows its effectiveness. UGC STATS (Source: “Why Marketers Should Implement User-Generated Content: 23 Stats to Know” HubSpot, June 2020) As part of brand awareness and travel inspiration, we asked followers to tag us in photos specifically with murals and began featuring them in #MuralMonday posts. Mural photos have been some of the most popular images in 2020. 60%79 % OF CONSUMERS FIND UGC THE MOST AUTHENTIC CONTENT OF INTERNET USERS SAY UGC INFLUENCES THEIR DECISIONS WHEN PURCHASING 22 // 2020-2021 ANNUAL REPORT // PUBLIC & COMMUNITY RELATIONS IN 2020, TCM REFOCUSED its attention toward the local community, supporting Costa Mesa businesses and finding inspiring stories to share. Prior to the pandemic, communication with Costa Mesa stakeholders – local businesses, elected officials, and community organizations – occurred quarterly via an electronic Partner Newsletter and during in-person community familiarization tours (FAMs). Content in the e-newsletter traditionally focused on what TCM campaigns were underway to draw tourists to the city, information about tourism industry events and programs, and the status of the industry, in general. In-person FAMs were also a successful way to engage and educate frontline hotel staff and various community partners about new and existing businesses and attractions to share with visiting guests. 23// TRAVEL COSTA MESA // Partner Newsletters Partner Newsletters have become a key conduit to staying connected with the Costa Mesa community during the pandemic and will continue to be a valuable mechanism to share information and support local business. The e-newsletter provides regular updates and information about COVID-19 and guidelines from the state, county, and city. Additionally, it features local businesses that are supporting each other and giving back to the community during this challenging time. TCM doubled the size of its e-newsletter contact list by including sales leads brought on by its new Destination Sales Executive. We also increased frequency from quarterly to monthly, providing more timely information and reaching nearly 400 partners and potential Costa Mesa meeting planners. Virtual Meetings Being unable to meet in person made it more challenging to stay connected. In addition to the more frequent newsletter communication, the TCM team conducted three partner presentations via Zoom: During National Travel & Tourism Week in May, a timely update about the state of the tourism industry Following the summer stay- at-home order, an update on traveler sentiment leading into the fall months and beyond An update just ahead of the winter stay-at-home order included special guests from John Wayne Airport and Segerstrom Center for the Arts Virtual meetings are a welcome opportunity for participants to reconnect with each other as well as the TCM team. 24 // 2020-2021 ANNUAL REPORT // Partner Bulletins Prior to the July 4 holiday in 2020, TCM implemented a weekly bulletin to distribute to partner hotels to communicate what businesses and activities were open and closed within the city for the coming weekend. This was intended to provide the most up-to-date information for any visiting guests and was easily accessible by being displayed at the hotel front desk area. What started as a static flyer transitioned into a new website landing page on travelcostamesa.com that could be accessed by a QR code. The hotels displayed the QR code, making it easy for guests to scan and access on their mobile devices. Love Costa Mesa Day As in previous years, a key metric for engaging with the local Costa Mesa community is to participate in community events, often sponsored by the city, chamber of commerce, or local non-profits. One event that continued in 2020 was “Love Costa Mesa Day,” a citywide project organized by Trellis. TCM and its partner hotels came together to supply, package, and donate more than 100 kits (toiletries, socks, and more) to Trellis, a Costa Mesa non-profit organization, who distributes thousands of kits to the homeless each week. PUBLIC & COMMUNITY RELATIONS 25// TRAVEL COSTA MESA // reStore Costa Mesa In May 2020, TCM’s president was called up to join Mayor Katrina Foley along with other community leaders in Costa Mesa to be a part of a “reStore Costa Mesa” recovery team. The team is made up of representatives from the hospitality, tourism, personal care and fitness, and community services sectors. Faith-based, education, and parks and recreation industries are also represented on the team. “We have recruited a star- studded team of professionals to guide us and allow us to move quickly once we are able to and move into a recovery period.” -Mayor Katrina Foley A subset of the Restore Costa Mesa effort was the creation of the Business Assistance Collaborative (BAC), an effort between the City of Costa Mesa, the Costa Mesa Chamber of Commerce, Travel Costa Mesa, and South Coast Metro Alliance. The TCM team supported the BAC by spreading the word about resources available to local businesses, such as small business loans and grant funding. The team sent emails and made phone calls to connect with business owners and understand how their business had been economically impacted by the pandemic. This website and the resources continue to be available at costamesabac.com. 26 // 2020-2021 ANNUAL REPORT // MEDIA RELATIONS TO REACH AND INSPIRE media in Travel Costa Mesa’s target markets (Southern California, Northern California and Arizona), the Director of Public Relations schedules regular meetings with various bloggers, journalists, and influencers in these regions to introduce them to Costa Mesa and what the city offers for visitors. CA AZ Getting Ahead of the Story In March 2020, just ahead of the announcement that COVID-19 would require a stay-at-home order in California, six meetings were scheduled in Arizona with the media. Three were completed in person with Arizona Foothills Magazine, Skewed & Reviewed, and a freelancer focused on family road trips. Along with providing tourism and business updates to partners throughout the pandemic, TCM reached out to the local media during National Travel and Tourism Week in May 2020 to shed some light on how the pandemic was also affecting tourism, an economically significant business sector. While every sector has struggled during this trying time, tourism remains an important segment for a thriving local economy. The Daily Pilot, a daily newspaper published by the Los Angeles Times, highlighted tourism’s challenges as a result of the pandemic in its May 7, 2020 article, “Record-low hotel occupancy threatens the survival of Costa Mesa’s tourism boosters.” “I don’t see travel going away. Travel, to me, is essential. It’s going to change without a doubt, but I’m cautiously optimistic we’re going to learn a lot from this — and we’ll be OK.” -Paulette Lombardi-Fries, President, Travel Costa Mesa Another opportunity to meet with media is U.S. Travel Association’s IPW travel trade show, originally scheduled for June 2020 in Las Vegas but cancelled due to the pandemic. TCM used this opportunity to schedule virtual meetings with journalists, bloggers, and influencers to tell Costa Mesa’s story. As a member of the International Food, Wine and Travel Writers Association (IFWTWA), TCM has access to hundreds of writers that are focused on food, wine and travel. Membership in this organization includes hosting a webinar for the writers with a presentation by Costa Mesa, plus an interview on Big Blend Radio, which reaches more than three million listeners. TCM’s Director of Public and Community Relations presented to 20 IFWTWA members during an hour-long webinar. 27// TRAVEL COSTA MESA // Blogger and Influencer Partnerships Relying on past media partnerships became very valuable in navigating the media landscape and determining appropriate messaging during the pandemic. With TCM marketing only to nearby drive markets in Los Angeles, San Diego, Inland Empire, and communities within Orange County, having already established relationships with influencers in these regions made it easy to create some inspirational online content that kept Costa Mesa top of mind even while people were unable to travel. In fall 2020, the Women in Travel Summit (WITS) offered TCM a seat at their virtual meetings conference. This allowed for an efficient set of 15-minute meetings to be scheduled with 12 freelancers, bloggers, and influencers, many of whom live within driving distance of Costa Mesa. As a result, many of these contacts are now on the list to make future visits to Costa Mesa when they can safely travel and experience the city. Virtual Vacation Coverage Travel media rely on the opportunity to visit destinations to create content, or at least gather information from DMOs like TCM to talk about seasonal travel and events. In the “safer-at-home” climate, many writers were seeking any type of content that could be shared, including virtual experiences from home. California Life with Heather Dawson, a syndicated lifestyle newsmagazine show, published “Costa Mesa Brings Experiences into Your Home” on its site californialifehd.com. The article provided inspiration to readers about how to experience the destination through a DIY de- stress blog, virtual vacation video, imagery of the Costa Mesa Art Walk, as well as recent podcasts and streaming entertainment from performing arts venues in the city. Blogger Jill Weinlein of dineandtravel.me included Costa Mesa Art Walk in her “8 Virtual Getaways.” In its weekly “Travel Fun Guide,” Chinese- language streaming news channel Phoenix Television highlighted Costa Mesa’s art and culinary scene and drive-thru events at the OC Fair & Event Center. Visit California featured OC Fair & Event Center’s “Pig Cam” from Centennial Farm in its web article “Awesome Webcams and Virtual Experiences.” Emily Kaufman, a worldwide traveler, started Travel Talk with The Travel Mom from her home in the Los Angeles area. TCM worked with her to schedule interviews and short “how-to” segments with a few Costa Mesa chefs. In addition, Emily hosted a Costa Mesa giveaway on Facebook. #Men Who Blog is an online broadcast created by men who travel to destinations for experiences and activities, usually involving bars and restaurants. In one episode, TCM was joined by Old Vine Kitchen & Bar’s owner Mark McDonald and their bar manager to demonstrate how to mix a few types of cocktails for Cinco de Mayo. The broadcast reached 780 viewers on menwhoblog.com and the additional post on its partner’s website PubClub.com reached a potential audience of 65K readers. Blogger Nabila of doseoftravel.co took the opportunity in “California’s City of Arts and Major Eats” to explore Orange County and stay in Costa Mesa, then followed that with a social media giveaway. @doseoftravel (10.7k followers) 28 // 2020-2021 ANNUAL REPORT // MEDIA RELATIONS Blogger Caroline Ikeji of picturesandwordsblog.com (22K monthly readers) is a San Francisco native who recently relocated to Orange County. She has been spending time exploring different cities and has taken a great liking to Costa Mesa’s art scene. @picturesandwordsblog (17.4k followers) The San Diego Food Girl blogger headed to California’s central coast in her article “The Road Trip You Need to Take Right Now” with an overnight stop in Costa Mesa. @sandiegofoodgirl (24.6K followers) Mariah of pickingdaisesblog.com (100K monthly readers) made a road trip from central California for a girl’s weekend with her mother and daughter in “Weekend in Costa Mesa,” followed by a social media giveaway. @pickingdaisiesblog (42.5k followers) Video Content Created with Media Partners Darley Vacations, created by television host Darley Newman, is a takeoff of her travel experiences on the PBS series Travels with Darley. TCM worked with Darley in 2020 to create a “Los Angeles & Beyond” episode for exploring Southern California. In 2021, she launched Darley Vacations, giving her viewers an opportunity to experience her travels, such as learning to skateboard in Costa Mesa. Darley has begun promotion of these vacation packages on her website and via Facebook livestream videos. 29// TRAVEL COSTA MESA // Accolades Costa Mesa continues to be a popular destination for foodies and its arts and culture scene. During this past year, the city has earned several accolades of recognition from the news media. Now more than ever, the road trip is a popular way for people to experience new destinations by traveling in the comfort and safety of their own vehicles. Video blogger Mike Shubic of Mike’s Road Trip demonstrated exactly what that road trip would be like in one episode of his You Tube Channel (three million viewers) highlighting Costa Mesa arts, culture, and culinary scene. Media Coverage TCM published six press releases this fiscal year. Despite a tumultuous year for so many industries, the media continued to curate travel content – from highlighting how to stay safe while traveling, how to experience a destination virtually, taking staycations, as well as creating ideas and inspiration for planning a future trip to Costa Mesa. 45 Number of articles/podcasts 275,011,570 Media impressions* *Potential audience based on reach (from March 1, 2020 – February 28, 2021) MeetingsToday.com featured Costa Mesa’s Social Kitchen & Craft Bar and Café Sevilla in “Inspiring Stories from the Meetings Industry,” highlighting their efforts to help feed out-of-work restaurant workers and donate thousands of pounds of food to local pantries (39.5K monthly readers) LGBTQ travel site PrideJourneys.com provided inspiration to its audience when planning a future trip in “Costa Mesa Should Be Your Next LGBTQ Destination” (400K monthly readers). MSN.com highlighted the Urban Legends Haunt at OC Fair & Event Center, one of 20 haunted events in the U.S., in its “Haunted Houses that are Actually Open This Year” article (69.4M monthly readers). NBCLosAngeles.com featured TCM’s street and mural webpage about artwork throughout the region in “Marvelous Murals of Southern California” (1.67M monthly readers). Women’s lifestyle magazine CHIC featured Costa Mesa’s performing arts scene in “California Dream” as part of its Spanish edition to Mexico (45K monthly readers). 30 // 2020-2021 ANNUAL REPORT // GROUP SALES THE DESTINATION SALES EXECUTIVE for Travel Costa Mesa handles all segments of group business (at least 10 or more overnight room bookings) including corporate, sports, association, and government business. In this role, Debbie Megna works daily to build a strong foundation of relationships with TCM’s 11 hotel partners and other community hospitality venues. She strives to reach annual goals through direct sales activities and networking with meeting professionals at major industry events and trade shows, direct marketing, and personal outreach. During the pandemic, Debbie reached out to her client base and attended several Zoom meetings designed to introduce her contacts to Costa Mesa. In fiscal year 2020-2021, TCM generated 40 leads representing 160,000 potential room nights. This resulted in eight bookings with over 29,000 room nights. Hotel room nights not only bring in revenue to our hotel partners but they also bring ancillary revenue to other segments including restaurants, shopping, transportation, attractions, and so much more. By The Numbers 29,000 Room Nights Booked 160,000 Lead Room Nights 40 Leads Generated 6,162 Solicitations 3 In-Person Site Visits 1,537 Current Accounts (From March 2020- February 2021) New CRM In April 2020, TCM joined more than 170 destinations around the world in choosing to power their organization with iDSS, a cloud-based Customer Relationship Management (CRM) tool built for the travel and tourism industry. With the help of Tempest, staff members were quickly trained on this new platform from sales and service to marketing and finance. Two training sessions soon followed for our hotel partners so that they could answer leads directly. Since inception, 1,537 accounts have been loaded into the iDSS system resulting in 6,162 client connections. 31// TRAVEL COSTA MESA // Meeting Trends as the Pandemic Wanes  Road to Recovery: Nationwide optimism for the latter half of 2021 is growing as vaccinations are administered. Road Trip Meetings: Regional drive-to markets for the first half of the year are expected to progress towards fly-in markets. Technology Driver: Bandwidth is the most important for meetings, followed by virtual meeting capacity, and a dedicated tech support team. Year of the SMERF: Social, military, education, religious and fraternal (SMERF) business reign as the most important industry segments in 2021. Don’t Touch: Contactless technology is rapidly becoming the new standard in hospitality from arrival to entering guest rooms to ordering food. Dinner Reimagined: Meal service has changed dramatically with contactless menus, individually packaged menu selections (in eco-friendly containers), and attended buffets. Creative, Local & Sustainable—Some Things Never Change: Creativity, taste, and eco-appeal are important priorities to planners and guests when it comes to culinary choices. Size Matters: Event sizes range from 10-15 people to larger groups of 50-100 guests with an emphasis on social distancing. Shorter booking time of events is anticipated. A Fresh Perspective: Outdoor spaces are necessities for meetings: lawns, pool decks, outdoor pavilions, and tented rooms. Partners in Planning: Properties must have flexibility with cancellations, attrition, rebooking clauses and commission. The Importance of a Destination: Top priorities include transportation accessibility, local cultural amenities, and wellness programs. Spirit through Team Bonding: There is a yearning to come together to rebuild teams and reconnect colleagues. Source: meetingstoday.com/articles/142638/benchmark-meetings- trends (March 2, 2021) Revised Playbook The COVID-19 pandemic has had devastating impacts on the local tourism and hospitality industry as we witnessed dramatic losses in revenue and jobs. The need for response and recovery efforts shifted our role from being consultants for meeting planners and hotel partners to becoming a primary resource for the most updated city, county, and state guidelines pertaining to gatherings and safety. Group sales continued to concentrate on strengthening relationships with planners while strategies were adjusted to be sensitive to the current environment. The revised tactics included a Resource & Recovery Playbook, quarterly hotel partner meetings, educational webinars, and networking with local destination marketing organizations (DMOs). Tradeshows & Memberships Each year TCM actively participates in a variety of associations for business development, marketing, and educational opportunities. In 2020 staff members attended the following tradeshows (virtually): • Luxury Meetings presents Virtual Meetings Showcase: California’s Premier Hotels, Resorts and CVB’s (August 25, 2020) - virtual; 13 planners in attendance; five 1:1 appointments • Cvent CONNECT US (August 25-26, 2020) - virtual; educational • Teams (October 19-21, 2020) - virtual; over 1,000 attendees; 15 1:1 appointments • Seasonal Spectacular (December 15-16, 2020); virtual; 335 association professionals; 15 1:1 appointments 32 // 2020-2021 ANNUAL REPORT // GROUP SALES Along with Visit Anaheim, Visit Huntington Beach, Destination Irvine, Visit Laguna Beach, and other local attractions, TCM works closely with the Orange County Sports Commission (OCSC) to promote Costa Mesa fields and facilities that encourage overnight group hotel room nights. To date the OCSC has provided TCM with four leads representing 4,086 potential room nights. TCM is also a member of the California Society of Association Executives (CalSAE) and the Meeting Planners International (MPI). Target Markets While weekend business was always Costa Mesa’s year-round opportunity for growth, COVID-19 has shifted needs to include weekday business. With smaller, drive-to meetings expected to be the first to rebound, a strong concentration is being put on companies doing well during COVID-19 including DIY companies, telecommunications, medical devices, and other essential businesses. TCM sales actively solicits group, corporate, and small to mid-size meetings from the following markets: • Associations (State, Regional, and National) • Corporate • Educational • Fraternal and Ethnic The lack of state guidelines for meetings and events has made doing business in the Golden State difficult. As California rolled out its “Blueprint for a Safer Economy,” state officials omitted guidelines for the hospitality industry. Destination marketing organizations, convention and visitor bureaus, and hotels are losing business to neighboring states such as Nevada and Arizona, which have stipulated guidelines for meetings and events. Cal Travel Association is working on behalf of the industry with the state governor’s office to address this issue. Group Business Goals The following are our goals for fiscal year 2021-2022: • Create key marketing collateral for group business encompassing all segments • Develop an incentive plan in an effort to compete with local DMOs for small to mid-size group bookings based on contracted room night business through the end of 2021 • Ongoing search to identify key markets that will emerge as a result of the COVID-19 shutdown and to effectively reach out to these potential customers • January-June 2021 goal is to book 1,500 new overnight group room nights for our 11 partnering hotels. • Government and Military • Pharmaceutical and Medical • Religious and Faith-Based • Social and Special Interest • Sports 33 // TRAVEL COSTA MESA //33 EXECUTIVE COMMITTEE Ronnie Dalgado, Chairperson/General Manager/VP Operations, S3 Hotel Group, Holiday Inn Express & Suites Costa Mesa Hector Santa Cruz, VP/General Manager, Costa Mesa Marriott Sue Cooke, Treasurer/General Manager, Residence Inn by Marriott Costa Mesa Paul Sanford, Secretary/General Manager/Asset Manager, Avenue of the Arts, a Tribute Portfolio Hotel DIRECTORS Benito Benitez, General Manager, Hilton Orange County/Costa Mesa Dane Bora, Public Affairs Manager, City of Costa Mesa Naj Ekhlas, General Manager, Best Western Plus Newport Mesa Inn Katrina Foley, Mayor, City of Costa Mesa Mike Hall, General Manager, The Westin South Coast Plaza, Costa Mesa Timothy Hilario, General Manager, OC Hotel Costa Mesa Mitchell Hirschman, General Manager, Ramada by Wyndham Costa Mesa/Newport Beach Susan O’Brien Moore, General Manager, Ayres Hotel Costa Mesa OPEN, General Manager, Crowne Plaza Costa Mesa Orange County ADVISORS Carla Valenzuela, President/CEO, Costa Mesa Chamber of Commerce Brian Chuan, Senior Director of International & Domestic Markets, South Coast Plaza STAFF Paulette Lombardi-Fries, President Kim Glen, Vice President of Marketing Jessica Placentia, Operations Manager Jenny Wedge, Director of Public & Community Relations Tiffany Monroe, Social Media & Content Manager Debbie Megna, Destination Sales Executive TRAVEL COSTA MESA LEADERSHIP TRAVELCOSTAMESA.COM ATTACHMENT 2 TRAVEL COSTA MESA (A Non -Profit Organization) FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 With INDEPENDENT AUDITORS' REPORT THEREON 11 TRAVEL COSTA MESA (A Non -Profit Organization) Independent Auditors' Report ......................... Financial Statements: Statements of Assets, Liabilities and Net Assets — Cash Basis Statements of Revenue and Expenses — Cash Basis .............. Notes to Financial Statements..... TABLE OF CONTENTS ....................................1-2 ....................................... 3 ....................................... 4 .................................. 5 -13 S Compan KMJ1 y Business Advisors Tax and Audit INDEPENDENT AUDITORS' REPORT To the Board of Directors of Travel Costa Mesa We have audited the accompanying financial statements of Travel Costa Mesa (the "Organization'), which comprise the statements of assets, liabilities and net assets — cash basis as of June 30, 2020 and 2019, and the related statements of revenue and expenses — cash basis for the yeas then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the cash basis of accounting described in Note 1; this includes determining that the cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. p 949 431 0997 f 7145" 1034 2855 Michelle Dr Suite 350 Irvine CA 92606 kmlparinerscpa.com p 818 999 5885 f 818 436 2162 20720 Ventura Blvd Suite 160 Woodland Hills CA 91364 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and net assets of Travel Costa Mesa as of June 30, 2020 and 2019, and its revenue and expenses for the years then ended in accordance with the cash basis of accounting described in Note 1. Other Matter As discussed in Note 1 to the financial statements, the Organization changed its method for revenue recognition in 2020 as a result of the adoption of ASU 2018-08, Not -For -Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made effective July 1, 2019.Our opinion is not modified with respect to this matter. Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America Our opinion is not modified with respect to this matter. Kmj- &6"' t &", U-P KMJ Corbin & Company LLP Irvine, California January 29, 2021 4 TRAVEL COSTA MESA (A Non -Profit Organization) STATEMENTS OF ASSETS, LIABILITIES AND NET ASSETS - CASH BASIS ASSETS Cash Total assets LIABILITIES Current liabilities Commitments and contingencies NET ASSETS Net assets without donor restrictions Total liabilities and net assets June 30, 2020 2019 $ 2,166,138 $ 2,166,138 2,166,138 $ 2,166,138 $ 1,667,732 $ 1,667,732 1,667,732 $ 1,667332 See accompanying notes to financial statements 3 a TRAVEL COSTA MESA (A Non -Profit Organization) STATEMENTS OF REVENUE AND EXPENSES - CASH BASIS For The Years Ended June 30, 2020 2019 CHANGE IN NET ASSETS WITHOUT DONOR RESTRICTIONS Revenues: Business improvement area assessment, net of handling fees $ 2,300,254 $ 2,739,789 Interest income 2,657 3,531 Net revenues 2,302,911 2,743,320 Expenses: Hotel marketing funds 222,851 475,061 Marketing 839,435 1,182,829 Bank reserve projects - 459,961 Salaries and benefits 552,981 529,042 ART shuttle bus 10,500 40,000 General and administrative 178,738 238,312 Total expenses 1,804,505 2,925205 Increase (decrease) in net assets without donor restrictions 498,406 (181,885) Net assets without donor restrictions, beginning of year 1,667,732 1,849,617 Net assets without donor restrictions, end of year $ 2,166,138 $ 1,667,732 See accompanying notes to financial statements 4 TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 1 — NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities Travel Costa Mesa (the "Organization") is a California non-profit corporation formed in 1995 to market the City of Costa Mesa (the "City") as a leisure transient travel destination. The vision of the Organization is to be a destination -marketing leader by supporting and selling the City's distinct visitor brand experiences and advocating community tourism benefits. The Organization's mission is to enhance and promote the City's brand experience, thus increasing visitor spending for industry and community economic viability, sustainability and quality of life. The Organization is funded by the eleven member hotels that comprise the Business Improvement Area ("BIN') established by the City. The member hotels are Costa Mesa Marriott, Hilton Costa Mesa, Holiday Inn Express & Suites, Residence Inn by Marriott, Avenue of the Arts, A Tribute Portfolio Hotel, Ayres Hotel, The Westin South Coast Plaza, Ramada Inn and Suites Costa Mesa, Best Western Plus Newport Mesa Inn, Crowne Plaza, and BLVD Hotel. California state law provides that BIA assessments are to be used for the purposes specified in the authorizing resolution that established the assessment. The City's resolution that established the BIA stated that its purpose is to promote tourism to the City and to fund programs and activities that benefit the hotel and motel business within the City. Basis of Presentation The accompanying financial statements have been prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Consequently, revenues are recognized when received rather than when earned, and expenses are recognized when disbursed rather than when the obligation is incurred. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor -imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Without donor restrictions — Net assets that are not subject to donor -imposed stipulations. These assets are available to support the Organization's general activities and operations at the discretion of the Board of Directors. TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 1 — NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued With donor restrictions - Net assets that are subject to donor -imposed restrictions. Some donor - imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor -imposed restrictions are perpetual in nature, where the donor stipulates that such resources be maintained in perpetuity. Generally, the donors of these assets permit the Organization to use all or part of the income earned on related investments for general or specific purposes. As of and for the years ended June 30, 2020 and 2019, the Organization had no net assets with donor restrictions. Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions. Gains and losses on investments and other assets are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulations or by law. Tax Status The Organization qualifies as a tax-exempt organization for Federal income taxes under Section 501(c)(6) of the United States Internal Revenue Code and for California state income taxes under Section 23701(d) of the California Revenue and Taxation Code; therefore, the Organization has no provision for federal or state income taxes. During the years ended June 30, 2020 and 2019, the Organization had no unrelated business income. The Organization annually evaluates tax positions as part of the preparation of its exempt tax return. This process includes an analysis of whether tax positions the Organization takes with regard to a particular item of income or deduction would meet the definition of an uncertain tax position under current accounting guidance. The Organization believes its tax positions are appropriate based on current facts and circumstances. The Organization's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. At June 30, 2020 and 2019, the Organization did not have any unrecognized tax benefits. The Organization is no longer subject to US. Federal and state income tax examinations by tax authorities for tax years before 2016. 6 (9 TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 1 — NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. continued Use of Estimates The preparation of financial statements in conformity with the cash basis of accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates made by the Organization's management include, but are not limited to, the allocation of expenses to program expenses. Actual results could differ from those estimates. Revenue The City levies a special assessment on the eleven -member hotels in the BIA based on the sale of overnight guest room stays. For the fiscal years ended June 30, 2020 and 2019, the levy was three percent (3%). The levy is transmitted by the hotels to the City and is remitted to the Organization, net of a one percent (1%) handling fee. The net levy is 99.9% of the net revenues of the Organization for fiscal years ended June 30, 2020 and 2019, respectively. Allocated Expenses The costs of providing program activities and supporting services have been summarized on a functional basis in Note 7. The Organization incurs expenses that directly relate to, and can be assigned to, a specific program or supporting activity. The Organization also conducts a number of activities which benefit both its program objectives as well as supporting services. These costs, which are not specifically attributable to a specific program or supporting activity, are allocated by management on a consistent basis among program and supporting services benefited, based on either financial or nonfinancial data, such as headcount, occupancy or estimates of time and effort incurred by personnel. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU) No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 provides additional guidance to clarify the principles for recognizing revenue. The standard and subsequent amendments are intended to develop a common revenue standard for removing inconsistencies and weaknesses, improve comparability, provide more useful information to users through improved disclosure requirements, and simplify the preparation of financial statements. ASU No. 2014-09, as amended, is effective for the Organization for annual reporting periods K91 TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 1 — NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued beginning after December 15, 2019. It may be adopted either by restating all years presented in the financial statements or by recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption. Management is currently evaluating the impact of the adoption of this standard on its financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires organizations that lease assets (lessees) to recognize the assets and related liabilities for the rights and obligations created by the leases on the statement of financial position for leases with terms exceeding 12 months. ASU No. 2016-02 defines a lease as a contract or part of a contract that conveys the right to control the use of identified assets for a period of time in exchange for consideration. The lessee in a lease will be required to initially measure the right -of -use asset and the lease liability at the present value of the remaining lease payments, as well as capitalize initial direct costs as part of the right -of -use asset. ASU No. 2016-02, as amended, is effective for the Organization for fiscal year 2022. Early adoption is permitted. The Organization is currently evaluating the impact that the adoption of ASU No. 2016-02 will have on its financial statements. In June 2018, the FASB issued ASU No. 2018-08, Not -for -Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This standard provides a more robust framework for determining whether a transaction should be accounted for as a contribution or as an exchange as well as provides additional guidance to assist in determining whether a contribution is conditional and to better distinguish a donor -imposed condition from a donor -imposed restriction. The Organization adopted this standard on July 1, 2019 with no impact on the Organization's financial statements or related disclosures. NOTE 2 — LIQUIDITY AND AVAILABILITY At June 30, 2020, the Organization has $2,166,138 of financial assets available within one year of the date of the statement of assets, liabilities and net assets — cash basis to meet cash needs for general expenditures, all of which consist of cash. None of the financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditures within one year of the statement of assets, liabilities and net assets — cash basis. The Organization has a goal to maintain financial assets, which consist of cash, on hand to meet twelve months of normal operating expense. The Organization has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. We] TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 2 — LIQUIDITY AND AVAILABILITY, continued Funding for the Organization is dependent on the hotel room nights booked in the City of Costa Mesa each year and the subsequent portion of the levy that is allocated through the City to the Organization. Annual revenue fluctuates depending on annual visitors to the city of Costa Mesa. As a result, the Organization closely monitors the monthly projected and received revenue to determine if any change needs to be made to budgeted expenditures. In December 2019, a novel strain of coronavirus disease ("COVID-19") was first reported in Wuhan, China Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The extent of COVID-19's effect on the Organization's operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The Organization is currently analyzing the potential impacts to all of its business segments. At this time, it is not possible to determine the magnitude of the overall impact of COVID-19 on the Organization. However, it could have a material adverse effect on the Organization's financial condition, liquidity and results of operations. In the short term, one of the impacts of the pandemic is that the Organization's revenues have declined, but the Organization cannot predict whether this decline is temporary or not During the year ended June 30, 2020, the Organization took certain cost cutting measures including suspending marketing efforts, reducing other expenses, and reducing payroll through pay cuts. The Organization believes these measures, along with its existing cash, will be sufficient to cover its cash flow requirements for at least the next twelve months from the date of issuance of these financial statements (see Note 3). However, there can be no assurance that the Organization will not use its existing capital resources sooner than currently expected. NOTE 3 — CASH Cash consists of demand deposits at the following institutions as of June 30: Citizens Business Bank Pacific Premier Bank 2020 $ 951,262 1,214,876 2019 $ 1,090,046 577,686 $ 1,667,732 The Organization maintains cash deposits at institutions which are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. At various times during 2020 and 2019, the Organization maintained balances in excess of FDIC limits. The Organization periodically reviews the quality of the financial institutions it has deposits with to minimize risk of loss. Z I TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCUL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 4 — HOTEL MARKETING FUNDS EXPENSE During the fiscal years ended June 30, 2020 and 2019, the Organization allocated $200 per room to each BIA member hotel for hotel -specific marketing purposes. The allocation subsidizes hotel - specific advertising and marketing efforts that also include the Organization's logo. Vendor invoices are either paid by the hotel and reimbursed by the Organization or paid directly by the Organization. Samples of advertising and marketing material must be submitted showing the Organization's logo for reimbursement. For advertising or marketing material where the Organization's logo cannot be used, the Organization requests that the hotel partners use the following verbiage, "Hotel partner name is a proud partner of Travel Costa Mesa." During the last quarter of the year ended June 30, 2020 the Organization suspended all hotel marketing funds in a cost saving effort as a result of COVID-19. Hotel marketing funds expense totaled $222,851 and $475,061 for fiscal years ended June 30, 2020 and 2019, respectively. If the hotels do not use all their allocated funds, the funds revert to the Organization. NOTE 5 — MARKETING EXPENSE The Organization incurs marketing expenses related to its mission of promoting the City as a tourist destination. For the fiscal years ended June 30, 2020 and 2019, marketing expenses totaled $839,435 and $1,182,829, respectively. Marketing expenses include online marketing, video and photography production, community sponsorships, brochures, print advertising, various promotions, and tradeshow costs. NOTE 6 — BANK RESERVE PROJECTS EXPENSES During the year ended June 30, 2019, the Organization incurred bank reserve project expenses from cash available from its prior years' unexpended BIA hotel assessments. These projects include events and services to promote tourism in the City of Costa Mesa that in 2018 were part of the Organization's operating budgets. For the fiscal year ended June 30, 2019, these bank reserve project expenses were as follows: TASTE of Costa Mesa IPW in OC Video Website refresh $ 250,000 49,617 100,344 60,000 The Organization did not incur bank reserve project expenses during the year ended June 30, 2020. 10 TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 7 - STATEMENT OF FUNCTIONAL EXPENSES The statements of functional expenses for the years ended June 30 is as follows: Salaries and benefits Marketing Bank reserve projects Art shuttle bus Hotel marketing funds Online marketing Office lease Travel, meetings, conferences and mileage Accounting and fees Insurance Dues and subscriptions Office supplies Telephone and internet Professional services Recruiting services Bank charges Filing fee and state assessment Parking fees Postage Total functional expenses June 30, 2020 June 30, 2019 Program General and Activities Administrative Total Total $ 452,067 $ 100,914 $ 552,981 $ 529,042 145,281 - 145,281 514,188 - - - 459,961 10,500 - 10,500 40,000 222,851 - 222,851 475,061 694,154 - 694,154 668,641 57,357 13,624 70,981 66,619 31,372 - 31,372 82,907 - 11,658 11,658 10,900 - 15,027 15,027 18,047 - 24,300 24,300 20,589 - 5,997 5,997 6,887 8,688 6,214 14,902 14,093 - 1,879 1,879 15,625 - 1,580 1,580 891 - 79 79 121 - 258 258 261 - 183 183 467 - 522 522 905 $ 1,622,270 $ 182.235 W04,505 $=2.2 NOTE 8 - COMMITMENTS AND CONTINGENCIES Guarantees and Indemnities The Organization has made certain indemnities and guarantees, under which it may be required to malm payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Organization indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of California. In connection with its facility lease, the Organization has indemnified its lessor for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies and is generally tied to the life of the agreement These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Organization could be obligated to make. Historically, the Organization has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying statements of assets, liabilities and net assets - cash basis. 11 3 TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 8 — COMMITMENTS AND CONTINGENCIES, continued Operating Lease The Organization has a lease for office space through July 2021. The Organization also has a lease for a color copier through September 30, 2021. Total rent expense for fiscal years ended June 30, 2020 and 2019 totaled $70,981 and $66,600, respectively. Future minimum lease obligations as of June 30, 2019 consist of the following: Years Ending June 30, 2021 $ 69,854 2022 5,813 Litigation In the ordinary course of business, the Organization may face various claims brought by third parties and they may, from time to time, make claims or take legal actions to assert their rights. Any of these claims could subject the Organization to costly litigation and, while the Organization generally believes that it has adequate insurance to cover many different types of potential liabilities, its insurance carriers may deny coverage or its policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Organization's operations and financial position. Additionally, any such claims, whether or not successful, could damage the Organization's reputation and business. NOTE 9 — EMPLOYEE BENEFIT PLAN The Organization sponsors a defined contribution salary deferral plan (the "Plan') covering all employees. Beginning in April 2012, the Board of Directors agreed to Safe Harbor contributions of 3% of the eligible employee's salary. During the fiscal years ended June 30, 2020 and 2019, Safe Harbor contributions totaled $12,000 and $14,000, respectively, which are recorded in salaries and benefits in the accompanying statements of revenue and expenses — cash basis. 12 9 TRAVEL COSTA MESA (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS For The Years Ended June 30, 2020 and 2019 NOTE 10 — RISKS AND UNCERTAINTIES Due to the nature of the Organization's business, the Organization's revenue is entirely dependent on the City and the member hotels. The City established the BIA and collects the BIA levy from the eleven hotels in Costa Mesa and the member hotels are voluntary participants (see Note 1). A cancellation of the BIA or withdrawal of the member hotels would adversely and severely impact the Organization's financial position. NOTE 11— SUBSEQUENT EVENTS Management has evaluated and determined that no other events have occurred through January 29, 2021, the date that the financial statements were issued, which would require inclusion or disclosure in its financial statements except as disclosed herein. 13 6 Resolution No. 2021-xx Page 1 of 9 RESOLUTION NO. 2021-xx A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, DECLARING ITS INTENTION TO LEVY AN ANNUAL ASSESSMENT FOR FISCAL YEAR 2021-22 FOR A BUSINESS IMPROVEMENT AREA COVERING CERTAIN COSTA MESA HOTELS AND MOTELS AND SETTING THE TIME AND PLACE FOR A PUBLIC HEARING ON THE PROPOSAL THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY RESOLVE AS FOLLOWS: WHEREAS, in adopting the Parking and Business Improvement Area Law of 1989 (Streets & Highways Code §§ 36500 et seq.), the California Legislature authorized cities to levy assessments on businesses in order to promote economic revitalization and tourism, create jobs, attract new businesses, and prevent erosion of business districts; and WHEREAS, on July 5, 1995, by Ordinance No. 95-9, the City Council adopted a business improvement area, commonly known as the Costa Mesa Tourism & Promotion Business Improvement Area (the “BIA”), the purpose of which is to promote tourism to the City and to fund programs and activities that benefit the hotel and motel businesses within the City; and WHEREAS, the eleven (11) hotels and motels listed in Exhibit A, attached hereto and incorporated herein by this reference, are currently subject to the assessment; and WHEREAS, the City Council appointed the general managers of the 11 hotels and motels subject to the assessment to serve as the advisory board as required by California Streets and Highways Code Section 36530; and WHEREAS, said advisory board is known as Travel Costa Mesa (“TCM”); and WHEREAS, the City Council has voted to continue the special assessment for the BIA each year since its inception, and it has been levied upon the 11 hotel and motel businesses listed in Exhibit A; and WHEREAS, in January 2000, the City Council approved an increase in the assessment, raising the assessment from one percent (1%) to two percent (2%) based on the sale of overnight room stays; and WHEREAS, in November 2010, the City Council approved an increase in the Attachment 3 Resolution No. 2021-xx Page 2 of 9 assessment, raising the assessment from two percent (2%) to three percent (3%) based on the sale of overnight room stays; and WHEREAS, this Resolution of Intention will commence proceedings under the Parking and Business Improvement Area Law of 1989 to levy the annual assessment of the Costa Mesa Tourism & Promotion Business Improvement Area for the 2021-22 fiscal year; and WHEREAS, the Agenda Report and its attachments for the May 18, 2021 City Council meeting filed with the City Clerk set forth a detailed description of the activities to be provided in the 2021-22 fiscal year, the boundaries of the Business Improvement Area, the benefit zone of the area, and the proposed assessments to be levied upon the businesses within the area for the coming fiscal year. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Costa Mesa as follows: Section 1. Intention; Assessment. The City Council hereby declares its intention to levy and collect assessments in the Costa Mesa Tourism & Promotion Business Improvement Area for Fiscal Year 2021-22 pursuant to Streets & Highways Code §§ 36500 et seq. The boundaries of the Costa Mesa Tourism & Promotion Business Improvement Area are the 11 motels and hotels listed in Exhibit A. The proposed amount of the annual assessment is three percent (3%) based on the sale of overnight room stays. New hotel and motel businesses commenced after the effective date of the resolution levying the assessment will be exempt from the levy of assessment, pursuant to Streets & Highways Code § 36531. Section 2. Annual Report. An annual report on the Costa Mesa Tourism & Promotion Business Improvement Area has been prepared by TCM, acting as the advisory board, as required by Streets & Highways Code §§ 36533 and 36534. Said report is on file in the City Clerk’s Office. Section 3. Types of Activities to Be Funded. The proposed type or types of activities to be funded by and through the annual levy of assessments on businesses within the Costa Mesa Tourism & Promotion Business Improvement Area are specified in the referenced annual report and Exhibit B, attached hereto and incorporated herein by this reference. Resolution No. 2021-xx Page 3 of 9 Section 4. Method and Basis of Levy. To allow each business owner to estimate the amount of the assessment to be levied against his or her business, the proposed method and basis of levying the assessment is set forth in the TCM’s annual report relative to the Costa Mesa Tourism & Promotion Business Improvement Area. Section 5. Time and Place of Public Hearing. The time and place of the public hearing on the levy of an annual assessment for Fiscal Year 2021-22 shall be 7:00 p.m. on June 1, 2021, in the City Council Chambers located at 77 Fair Drive, Costa Mesa, California, which hearing may be conducted electronically if the City Council Chambers remain closed due to the COVID-19 pandemic. At the public hearing set forth above, the testimony of all interested persons for or against the annual levy of the assessment for the Business Improvement Area, the extent of the area, and/or the furnishing of specific types of improvements or activities will be heard by the City Council. Section 6. Protests. Consistent with Streets & Highways Code §§ 36524 and 36525, the following rules shall apply to all protests: (a) A protest may be made orally or in writing by any interested person. Any protest pertaining to the regularity or sufficiency of the proceedings shall be in writing and shall clearly set forth the irregularity or defect to which the objection is made. (b) Every written protest shall be filed with the City Clerk’s Office, Costa Mesa City Hall, 77 Fair Drive, Room 101, Costa Mesa, California 92626, at or before the time fixed for the public hearing as set forth above. (c) The City Council may waive any irregularity in the form or content of any written protest, and, at the public hearing, may correct minor defects in the proceedings. (d) Each written protest shall contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the City as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business. A written protest which does not comply with this section shall not be counted in determining a majority protest. Resolution No. 2021-xx Page 4 of 9 (e) If written protests are received from the owners of businesses in the proposed Business Improvement Area which will pay fifty percent (50%) or more of the assessments to be levied and protests are not withdrawn so as to reduce the protests to less than the fifty percent (50%), no further proceedings on the proposal to continue to levy the Business Improvement Area assessment, as specified by this Resolution, shall be taken by the City Council for a period of one year from the date of the filing of a majority protest. (f) If the majority protest is only against the furnishing of a specified type or types of improvement or activity within the Business Improvement Area, those types of improvements or activities shall be eliminated. PASSED AND ADOPTED this 18th day of May, 2021. _____________________________ John Stephens, Mayor ATTEST: APPROVED AS TO FORM: ________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney Resolution No. 2021-xx Page 5 of 9 THIS PAGE IS RESERVED FOR THE CITY CLERK’S OFFICE. STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF COSTA MESA ) I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 2021-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 18th day of May, 2021, by the following roll call vote, to wit: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 18th day of May, 2021. ___________________________ Brenda Green, City Clerk Resolution No. 2021-xx Page 6 of 9 EXHIBIT A The Business Improvement Area (“BIA”) benefit zone encompasses the entire City of Costa Mesa boundaries. It is anticipated that the entire City, including businesses and residents, will benefit from increased revenues generated by the activities financed by the BIA assessment. The following businesses will be included in the BIA that is established pursuant to Streets & Highways Code §§ 36500 et seq., the businesses commonly known as: Ayres Country Inn & Suites Property Address: 325 Bristol Street, Costa Mesa Business Owner: Newport Country Inn & Suites, Inc. 355 Bristol Street, Suite A Costa Mesa, CA 92626 Property Owner: Newport Country Inn & Suites, Inc. 355 Bristol Street, Suite A Costa Mesa, CA 92626 Best Western Plus Newport Mesa Inn Property Address: 2642 Newport Boulevard, Costa Mesa Business Owner: James Hsuen Shang-Pu Lee 2642 Newport Boulevard, Costa Mesa, CA 92627 Property Owner: James Hsuen Shang-Pu Lee 2642 Newport Boulevard, Costa Mesa, CA 92627 Hilton Property Address: 3050 Bristol Street, Costa Mesa Business Owner: Ashford TRS CM LLC 14185 Dallas Parkway, Suite 1100 Dallas, TX 75254 Property Owner: Remington Lodging & Hospitality LP 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 Resolution No. 2021-xx Page 7 of 9 Crowne Plaza Property Address: 3131 Bristol Street, Costa Mesa Business Owner: Brighton Management 1901 Main Street, Suite 150 Irvine, CA 92614 Property Owner: Bright Bristol Street, LLC 3131 Bristol Street Costa Mesa, CA 92626 Holiday Inn Express Hotel & Suites Property Address: 2070 Newport Blvd., Costa Mesa Business Owner: Narendra B. Patel 2070 Newport Blvd. Costa Mesa, CA 92667 Property Owner: Narendra B. Patel 2070 Newport Blvd. Costa Mesa, CA 92667 Costa Mesa Marriott Property Address: 500 Anton Boulevard, Costa Mesa Business Owner: Starwood Capital Group 591 West Putnam Avenue Greenwich, CT 06830 Property Owner: HEI Hotels & Resorts 101 Merritt 7 Corporate Park, 1st Floor Norwalk, CT 06851 Ramada Inn & Suites Costa Mesa Property Address: 1680 Superior Ave., Costa Mesa Business Owner: B.D. Inns Inc./Ramada Ltd. 1680 Superior Ave. Costa Mesa, CA 92627 Property Owner: B.D. Inns Inc./Ramada Ltd. 1680 Superior Ave. Costa Mesa, CA 92627 Resolution No. 2021-xx Page 8 of 9 Residence Inn by Marriott Property Address: 881 Baker Street, Costa Mesa Business Owner: Marriott International 10400 Fernwood Rd. Bethesda, MD 20817 Property Owner: BRE Select Hotels and Resorts 6201 15th Avenue Brooklyn, NY 11219 The Westin South Coast Plaza Hotel Property Address: 686 Anton Boulevard, Costa Mesa Business Owner: Host Hotels & Resorts 6903 Rockledge Dr., Suite 1500 Bethesda, JD 20817 Property Owner: CJ Segerstrom & Sons c/o South Coast Plaza 686 Anton Boulevard Costa Mesa, CA 92626 Avenue of the Arts, A Tribute Portfolio Hotel Property Address: 3350 Avenue of the Arts, Costa Mesa Business Owner: Rosanna Inc. 3350 Avenue of the Arts Costa Mesa, CA 92627 Property Owner: Rosanna Inc. 3350 Avenue of the Arts Costa Mesa, CA 92627 BLVD Hotel Property Address: 2430 Newport Blvd, Costa Mesa Business Owner: Hollywood Corner Inc. 2430 Newport Blvd. Costa Mesa, CA 92627 Property Owner: Shyamal Patel, CA 92782 16609 Honeybee Dr. Tustin, CA 92682 Resolution No. 2021-xx Page 9 of 9 EXHIBIT B The BIA assessment will be used to fund Travel Costa Mesa (“TCM”). TCM will fund activities to promote tourism in Costa Mesa and will sponsor related tourist events that benefit the hotel and motel businesses within the City. The specific improvements and activities to be funded by this assessment are outlined in the TCM’s 2020-2021 Annual Report. Revenue A three percent (3%) levy will be assessed against each of the 11 hotels listed in Exhibit A, based on the net revenue from the sale of overnight room stays. Business owners shall pay the assessment to the Costa Mesa City Finance Department on a monthly basis. A penalty and interest shall be assessed on late payments. Note: New hotel and motel businesses commenced after the effective date of this resolution will be exempt from the levy of assessment. Resolution No. 2021-xx Page 1 of 9 RESOLUTION NO. 2021-xx A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, DECLARING ITS INTENTION TO LEVY AN ANNUAL ASSESSMENT FOR FISCAL YEAR 2021-22 FOR A BUSINESS IMPROVEMENT AREA COVERING CERTAIN COSTA MESA HOTELS AND MOTELS AND SETTING THE TIME AND PLACE FOR A PUBLIC HEARING ON THE PROPOSAL THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY RESOLVE AS FOLLOWS: WHEREAS, in adopting the Parking and Business Improvement Area Law of 1989 (Streets & Highways Code §§ 36500 et seq.), the California Legislature authorized cities to levy assessments on businesses in order to promote economic revitalization and tourism, create jobs, attract new businesses, and prevent erosion of business districts; and WHEREAS, on July 5, 1995, by Ordinance No. 95-9, the City Council adopted a business improvement area, commonly known as the Costa Mesa Tourism & Promotion Business Improvement Area (the “BIA”), the purpose of which is to promote tourism to the City and to fund programs and activities that benefit the hotel and motel businesses within the City; and WHEREAS, the eleven (11) hotels and motels listed in Exhibit A, attached hereto and incorporated herein by this reference, are currently subject to the assessment; and WHEREAS, the City Council appointed the general managers of the 11 hotels and motels subject to the assessment to serve as the advisory board as required by California Streets and Highways Code Section 36530; and WHEREAS, said advisory board is known as Travel Costa Mesa (“TCM”); and WHEREAS, the City Council has voted to continue the special assessment for the BIA each year since its inception, and it has been levied upon the 11 hotel and motel businesses listed in Exhibit A; and WHEREAS, in January 2000, the City Council approved an increase in the assessment, raising the assessment from one percent (1%) to two percent (2%) based on the sale of overnight room stays; and WHEREAS, in November 2010, the City Council approved an increase in the Resolution No. 2021-xx Page 2 of 9 assessment, raising the assessment from two percent (2%) to three percent (3%) based on the sale of overnight room stays; and WHEREAS, this Resolution of Intention will commence proceedings under the Parking and Business Improvement Area Law of 1989 to levy the annual assessment of the Costa Mesa Tourism & Promotion Business Improvement Area for the 2021-22 fiscal year; and WHEREAS, the Agenda Report and its attachments for the May 18, 2021 City Council meeting filed with the City Clerk set forth a detailed description of the activities to be provided in the 2021-22 fiscal year, the boundaries of the Business Improvement Area, the benefit zone of the area, and the proposed assessments to be levied upon the businesses within the area for the coming fiscal year. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Costa Mesa as follows: Section 1. Intention; Assessment. The City Council hereby declares its intention to levy and collect assessments in the Costa Mesa Tourism & Promotion Business Improvement Area for Fiscal Year 2021-22 pursuant to Streets & Highways Code §§ 36500 et seq. The boundaries of the Costa Mesa Tourism & Promotion Business Improvement Area are the 11 motels and hotels listed in Exhibit A. The proposed amount of the annual assessment is three percent (3%) based on the sale of overnight room stays. New hotel and motel businesses commenced after the effective date of the resolution levying the assessment will be exempt from the levy of assessment, pursuant to Streets & Highways Code § 36531. Section 2. Annual Report. An annual report on the Costa Mesa Tourism & Promotion Business Improvement Area has been prepared by TCM, acting as the advisory board, as required by Streets & Highways Code §§ 36533 and 36534. Said report is on file in the City Clerk’s Office. Section 3. Types of Activities to Be Funded. The proposed type or types of activities to be funded by and through the annual levy of assessments on businesses within the Costa Mesa Tourism & Promotion Business Improvement Area are specified in the referenced annual report and Exhibit B, attached hereto and incorporated herein by this reference. Resolution No. 2021-xx Page 3 of 9 Section 4. Method and Basis of Levy. To allow each business owner to estimate the amount of the assessment to be levied against his or her business, the proposed method and basis of levying the assessment is set forth in the TCM’s annual report relative to the Costa Mesa Tourism & Promotion Business Improvement Area. Section 5. Time and Place of Public Hearing. The time and place of the public hearing on the levy of an annual assessment for Fiscal Year 2021-22 shall be 7:00 p.m. on June 151, 2021, in the City Council Chambers located at 77 Fair Drive, Costa Mesa, California, which hearing may be conducted electronically if the City Council Chambers remain closed due to the COVID-19 pandemic. At the public hearing set forth above, the testimony of all interested persons for or against the annual levy of the assessment for the Business Improvement Area, the extent of the area, and/or the furnishing of specific types of improvements or activities will be heard by the City Council. Section 6. Protests. Consistent with Streets & Highways Code §§ 36524 and 36525, the following rules shall apply to all protests: (a) A protest may be made orally or in writing by any interested person. Any protest pertaining to the regularity or sufficiency of the proceedings shall be in writing and shall clearly set forth the irregularity or defect to which the objection is made. (b) Every written protest shall be filed with the City Clerk’s Office, Costa Mesa City Hall, 77 Fair Drive, Room 101, Costa Mesa, California 92626, at or before the time fixed for the public hearing as set forth above. (c) The City Council may waive any irregularity in the form or content of any written protest, and, at the public hearing, may correct minor defects in the proceedings. (d) Each written protest shall contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the City as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business. A written protest which does not comply with this section shall not be counted in determining a majority protest. Resolution No. 2021-xx Page 4 of 9 (e) If written protests are received from the owners of businesses in the proposed Business Improvement Area which will pay fifty percent (50%) or more of the assessments to be levied and protests ar e not withdrawn so as to reduce the protests to less than the fifty percent (50%), no further proceedings on the proposal to continue to levy the Business Improvement Area assessment, as specified by this Resolution, shall be taken by the City Council for a period of one year from the date of the filing of a majority protest. (f) If the majority protest is only against the furnishing of a specified type or types of improvement or activity within the Business Improvement Area, those types of improvements or activities shall be eliminated. PASSED AND ADOPTED this 18th day of May, 2021. _____________________________ John Stephens, Mayor ATTEST: APPROVED AS TO FORM: ________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney Resolution No. 2021-xx Page 5 of 9 THIS PAGE IS RESERVED FOR THE CITY CLERK’S OFFICE. STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF COSTA MESA ) I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 2021-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 18th day of May, 2021, by the following roll call vote, to wit: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 18th day of May, 2021. ___________________________ Brenda Green, City Clerk Resolution No. 2021-xx Page 6 of 9 EXHIBIT A The Business Improvement Area (“BIA”) benefit zone encompasses the entire City of Costa Mesa boundaries. It is anticipated that the entire City, including businesses and residents, will benefit from increased revenues generated by the activities financed by the BIA assessment. The following businesses will be included in the BIA that is established pursuant to Streets & Highways Code §§ 36500 et seq., the businesses commonly known as: Ayres Country Inn & Suites Property Address: 325 Bristol Street, Costa Mesa Business Owner: Newport Country Inn & Suites, Inc. 355 Bristol Street, Suite A Costa Mesa, CA 92626 Property Owner: Newport Country Inn & Suites, Inc. 355 Bristol Street, Suite A Costa Mesa, CA 92626 Best Western Plus Newport Mesa Inn Property Address: 2642 Newport Boulevard, Costa Mesa Business Owner: James Hsuen Shang-Pu Lee 2642 Newport Boulevard, Costa Mesa, CA 92627 Property Owner: James Hsuen Shang-Pu Lee 2642 Newport Boulevard, Costa Mesa, CA 92627 Hilton Property Address: 3050 Bristol Street, Costa Mesa Business Owner: Ashford TRS CM LLC 14185 Dallas Parkway, Suite 1100 Dallas, TX 75254 Property Owner: Remington Lodging & Hospitality LP 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 Resolution No. 2021-xx Page 7 of 9 Crowne Plaza Property Address: 3131 Bristol Street, Costa Mesa Business Owner: Brighton Management 1901 Main Street, Suite 150 Irvine, CA 92614 Property Owner: Bright Bristol Street, LLC 3131 Bristol Street Costa Mesa, CA 92626 Holiday Inn Express Hotel & Suites Property Address: 2070 Newport Blvd., Costa Mesa Business Owner: Narendra B. Patel 2070 Newport Blvd. Costa Mesa, CA 92667 Property Owner: Narendra B. Patel 2070 Newport Blvd. Costa Mesa, CA 92667 Costa Mesa Marriott Property Address: 500 Anton Boulevard, Costa Mesa Business Owner: Starwood Capital Group 591 West Putnam Avenue Greenwich, CT 06830 Property Owner: HEI Hotels & Resorts 101 Merritt 7 Corporate Park, 1st Floor Norwalk, CT 06851 Ramada Inn & Suites Costa Mesa Property Address: 1680 Superior Ave., Costa Mesa Business Owner: B.D. Inns Inc./Ramada Ltd. 1680 Superior Ave. Costa Mesa, CA 92627 Property Owner: B.D. Inns Inc./Ramada Ltd. 1680 Superior Ave. Costa Mesa, CA 92627 Resolution No. 2021-xx Page 8 of 9 Residence Inn by Marriott Property Address: 881 Baker Street, Costa Mesa Business Owner: Marriott International 10400 Fernwood Rd. Bethesda, MD 20817 Property Owner: BRE Select Hotels and Resorts 6201 15th Avenue Brooklyn, NY 11219 The Westin South Coast Plaza Hotel Property Address: 686 Anton Boulevard, Costa Mesa Business Owner: Host Hotels & Resorts 6903 Rockledge Dr., Suite 1500 Bethesda, JD 20817 Property Owner: CJ Segerstrom & Sons c/o South Coast Plaza 686 Anton Boulevard Costa Mesa, CA 92626 Avenue of the Arts, A Tribute Portfolio Hotel Property Address: 3350 Avenue of the Arts, Costa Mesa Business Owner: Rosanna Inc. 3350 Avenue of the Arts Costa Mesa, CA 92627 Property Owner: Rosanna Inc. 3350 Avenue of the Arts Costa Mesa, CA 92627 BLVD Hotel Property Address: 2430 Newport Blvd, Costa Mesa Business Owner: Hollywood Corner Inc. 2430 Newport Blvd. Costa Mesa, CA 92627 Property Owner: Shyamal Patel, CA 92782 16609 Honeybee Dr. Tustin, CA 92682 Resolution No. 2021-xx Page 9 of 9 EXHIBIT B The BIA assessment will be used to fund Travel Costa Mesa (“TCM”). TCM will fund activities to promote tourism in Costa Mesa and will sponsor related tourist events that benefit the hotel and motel businesses within the City. The specific improvements and activities to be funded by this assessment are outlined in the TCM’s 2020-2021 Annual Report. Revenue A three percent (3%) levy will be assessed against each of the 11 hotels listed in Exhibit A, based on the net revenue from the sale of overnight room stays. Business owners shall pay the assessment to the Costa Mesa City Finance Department on a monthly basis. A penalty and interest shall be assessed on late payments. Note: New hotel and motel businesses commenced after the effective date of this resolution will be exempt from the levy of assessment. 1 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 18, 2021 ITEM NUMBER: CC-7 SUBJECT: BUSINESS IMPROVEMENT AREA (BIA) REAUTHORIZATION, RESOLUTION OF INTENTION, AND REVIEW OF ANNUAL REPORT DATE: APRIL 26, 2021 FROM: CITY MANAGER’S OFFICE PRESENTATION BY: ALMA REYES, ASSISTANT TO THE CITY MANAGER FOR FURTHER INFORMATION CONTACT: ALMA REYES, ASSISTANT TO THE CITY MANAGER (714) 754-5090 RECOMMENDATION: Staff recommends that the City Council: 1. Approve the 2020-21 Annual Report for the Business Improvement Area (BIA) (Attachment 1); 2. Receive and file the audited financial report for Fiscal Years 2019 and 2020 (Attachment 2); and, 3. Adopt the Resolution declaring the City’s intention to levy an annual assessment for Fiscal Year 2021-22 for the Business Improvement Area covering certain Costa Mesa hotels and motels and setting the time and place for a Public Hearing on the proposal (Attachment 3). BACKGROUND: The Parking and Business Improvement Area Law of 1989 (Streets and Highways Code §§ 36500 et seq.) enables cities to impose an assessment fee on businesses within an area designated by the city. On July 5, 1995, the City Council adopted Ordinance No. 95-9 to establish a Business Improvement Area (BIA) for the purpose of assisting the hotel and motel industry in its promotion of tourism within the City. The City Council authorized the City Manager to enter into an agreement with the Costa Mesa Tourism and Promotion Council to develop and administer the BIA. In 2001, the Costa Mesa Conference & Visitor Bureau (CVB), now known as Travel Costa Mesa (TCM), became the administrator of the BIA. 2 In accordance with TCM bylaws, TCM’s Board of Directors is currently comprised of eleven (11) General Managers from the eleven (11) participating hotels and motels, one member of the City Council, and the City Manager’s designee. Since November 2010, the City levies a three percent (3%) special assessment on the eleven (11) participating hotels in the BIA based on the sale of overnight guestroom stays in the partner hotels (2,375 total available rooms). The levy is transmitted by the hotels to the City and ninety-nine percent (99%) of the assessment is remitted to TCM. The remaining one percent is retained by the City to offset administrative costs. ANALYSIS: Currently, the number of properties included in the BIA assessment levy is limited to the eleven (11) hotels and motels that have expressed an interest in participating in the program as detailed in the proposed Resolution of Intention (Attachment 3). Upon adoption of the Resolution of Intention, property owners of the participating hotels will be notified in writing within seven (7) days of the assessment renewal. Subsequently, the Resolution will be published in the Daily Pilot at least seven days prior to the public hearing scheduled for June 151, 2021 at 7 p.m. City staff will also notify all the hotels and motels in the City not currently included in the BIA to allow them the opportunity to participate in the BIA. Property owners will be provided an opportunity to speak in support of, protest the annual assessment, and/or address any concerns regarding the BIA at the public hearing. The City Council will vote to adopt or deny the resolution levying an annual assessment for the upcoming fiscal year, and makes the ultimate decision as to the size of and the properties to be included in the BIA. Upon the approval of the annual assessment, the three percent (3%) assessment is collected along with the City’s Transient Occupancy Tax (TOT). The hotels and motels included in the BIA are required to itemize the BIA levy as a separate assessment. The staff at TCM manage the day-to-day activities and provide all services to administer the BIA. Per the agreement between the City of Costa Mesa and TCM and as required by Streets and Highways Code § 36533, TCM is required to provide an annual report describing the programs and activities implemented during the previous fiscal year as well as the status of the programs and activities implemented during the current fiscal year (Attachment 1). The City Council may approve the report as filed or modify the report and approve it as modified. Once the City Council approves the report, it may adopt the resolution of intention to levy the annual assessment. Further, in accordance with the agreement between the City and TCM, the annual audit for Fiscal Years 2019 and 2020 has been completed by KMJ Corbin & Company, an independent auditor, and paid for by assessment funds. The audit is intended to ensure that the assessment revenue is expended for public purposes as specified within the resolution and that no expenditures are made in a manner contrary to the agreement. The City Council is requested to receive and file the independent audit (Attachment 2). 3 Highlights of the 2019-2020 Fiscal Year In March 2020, the COVID-19 pandemic impacted the world and presented unforeseen challenges and an economic downturn. Prior to the pandemic, Travel Costa Mesa had been gearing up for a culinary and culture media tour for thirteen (13) international visitors which was canceled due to strict travel restrictions. With increasing COVID-19 cases and Statewide Health Orders restrictions including social distancing and shelter-in-place orders, TCM pivoted to a crisis communication plan. TCM created COVID-19 information pages on their website, provided travel and community-related business updates, and actively participated in the City’s COVID-19 response initiatives such as the Costa Mesa Business Assistance Collaborative (BAC) an d reStore Costa Mesa. Additionally, engaging in Statewide advocacy to bring relief to the travel and tourism industry became a priority. According to the United States Travel Association (USTA), the travel industry lost the most jobs approximating 4 million in 2020 or thirty nine percent (39%) of the total jobs lost in the country. In 2020, travel spending losses equated to more than $528 billion, which represents a forty percent (40%) decrease year-over-year. The largest losses were noted in the months of April and May. Travel-generated taxes in 2020 equated to $112 billion, down thirty-four percent (34%) from the previous year. International travel spending was severely impacted experiencing a seventy six percent (76%) decrease, domestic travel spending decreased by thirty four percent (34%), leisure travel spending declined by twenty seven percent (27%), and the business travel segment decreased by seventy percent (70%). As vaccination efforts continue and COVID-19 cases continue to decline, leisure trave l is expected to rebound quicker than business travel in the months to come. However, the travel industry is not expected to recover from the losses incurred in 2020 for another 4 to 5 years from now. Given its heavy reliance on travel, tourism and conferences, California has been one of the seven hardest hit states by the pandemic. The leisure and hospitality industry was the most impacted of all industries with 518,000 of hospitality and leisure related jobs eliminated. This equates to 38 percent of all California jobs lost. Additionally, the state suffered $85.9 billion in travel-related spending losses, and $6.3 billion in State and local tax revenue declines. During the pandemic, TCM was faced with making significant budget reductions, including a forty percent (40%) cut in staff salaries, terminating their ad agency contract and suspending all funds to support community/cultural arts programs and events. TCM has implemented a two-month versus a twelve-month budget approach. ALTERNATIVES: City Council may choose to deny the resolution of intention, which will prevent the public hearing from taking place to consider levying an annual assessment for the upcoming fiscal year. 4 FISCAL REVIEW: According to the audit report, TCM’s cash equity as of June 30, 2020 totaled $2,166,138. Based on the 2020-21 annual report, TCM is forecasting a $786,382 budget for fiscal year ending June 2021, a significant decrease from prior years. As of February 2021, BIA revenues were at $639,968.58 (a 63% decrease). TCM estimates a revenue loss of 66 percent (66%) from FY 2019-20 and a 71.5 percent (71.5%) decrease from FY 2018-19. The City receives one percent (1%) of the BIA revenue/assessment as partial reimbursement for its collection and administrative costs. The one percent (1%) allocated to the City for reimbursement is estimated at $7,800 for the 2020-2021 Fiscal Year. Since 2014, TCM has also provided funding to the City to support community-wide marketing and community events that attract many visitors to Costa Mesa under a Professional Services Agreement (PSA). The 2018-19 TCM community event funding to the City totaled approximately $144,000. All expenditures incurred under the PSA are on a reimbursement basis and adhere to the City’s purchasing policy guidelines. In March 2020, the COVID-19 pandemic triggered suspension of all community events and a majority of City programs. The on-going pandemic has had a significant financial impact on TCM’s operational budget. As a result, TCM’s community events budget for the City has been suspended since May 2020. The City began budgeting the TCM Community Events Programing for a total of $164,000 within the City’s financial system. This budget typically added annually as an addendum to the existing Professional Services Agreement between the City and TCM, approved by City Council at a public hearing. In prior years, the City has utilized TCM funding for community-wide marketing and support of community events such as ARTventure, Snoopy House, Summer Concerts in the Park and more. The current year’s Fiscal Year 2020-2021 adopted budget did not include an appropriation of $164,000 for the City’s community-wide marketing and event expenses due to the significant financial impacts of COVID-19 on TCM’s operational budget. Although the TCM community event funds were not available during FY 2020-21, City staff managed to host the long-standing community holiday event known as Snoopy House, following all State and Federal COVID-19 guidelines. The expenses for this event, which historically were funded by TCM, were absorbed in the General Fund from vacancy savings. The slow economic recovery and lack of State guidance for corporate meetings, events, and conventions continues to have significant impacts on the TCM budget. At this time, TCM has not resumed the allocation of community events funds to the City until further notice. As vaccinations are distributed and the State begins to reopen, the City will also develop plans to resume community events and assess the costs during the FY 2021-22 budget development process. 5 LEGAL REVIEW: The City Attorney’s Office reviewed this report and has reviewed and approved the resolution as to form. CONCLUSION: Adoption of the resolution of intent is the initial step in the reauthorization of the BIA assessment. State law mandates the specific procedure to be followed in the establishment of such an area. Staff will make a presentation to the City Council on the implementation of the BIA assessment at the public hearing on June 151, 2021; however, the City Council must approve the annual report and the proposed resolution of intention before the hearing can be scheduled to consider the levying of an annual assessment. Therefore, staff recommends that the City Council: 1. Approve the 2020-21 Annual Report for the Business Improvement Area (BIA) (Attachment 1); 2. Receive and file audited financial report for Fiscal Years 2019 and 2020 (Attachment 2); and 3. Adopt Resolution 21-xx, declaring the City’s intention to levy an a nnual assessment for Fiscal Year 2021-22 for business improvement area covering certain Costa Mesa hotels and motels and setting the time and place for a public hearing on the proposal (Attachment 3). ALMA L. REYES CAROL MOLINA Assistant to the City Manager Finance Director DISTRIBUTION: Travel Costa Mesa ATTACHMENTS: 1. Fiscal Year 2020-21 Annual Report for Travel Costa Mesa 2. Completed Audit Report for Fiscal Year 2019-20 3. Proposed Resolution of Intention LORI ANN FARRELL HARRISON KIMBERLY HALL BARLOW City Manager City Attorney