The URL can be used to link to this page

Home My WebLink About23 - PH-1 - Business Improvement Area (BIA) Reauthor - 6/15/20211 CITY COUNCIL AGENDA REPORT MEETING DATE: JUNE 15, 2021 ITEM NUMBER: PH-1 SUBJECT: BUSINESS IMPROVEMENT AREA (BIA) REAUTHORIZATION AND RESOLUTION TO LEVY ANNUAL ASSESSMENT DATE: MAY 18, 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. Conduct a public hearing regarding the Business Improvement Area (BIA) reauthorization and levy of the annual assessment for Fiscal Year 2021-2022; 2. Adopt Resolution No. 2021-xx, confirming the annual report filed by Travel Costa Mesa and levying an annual assessment for Fiscal Year 2021-2022 for a business improvement area covering certain Costa Mesa hotels and motels (Attachment 1). 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 (Attachment 4) 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. 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. 2 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. At the June 1, 2021 City Council meeting, the City Council approved a resolution declaring the intention to levy an annual assessment for Fiscal Year 2021-2022 and set a public hearing for June 15, 2021 at 7 p.m. A copy of the Resolution was mailed to every hotel and motel owner on file with the City, notifying them of the proposed assessment renewal and their opportunity to protest the annual assessment or raise other concerns regarding the BIA. ANALYSIS: 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 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. Travel Costa Mesa staff manages the day-to-day activities and provides 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 provided an annual report at the June 1, 2021 City Council meeting. The presentation highlighted 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. Highlights of the 2020-2021 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, 3 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. 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 due to the economic uncertainty. ALTERNATIVES: The 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. 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 is typically added annually as an 4 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. LEGAL REVIEW: The City Attorney’s Office reviewed this report and has reviewed and approved the resolution as to form. CONCLUSION: State law mandates the specific procedure to be followed in the establishment of such an area and the levying of a voluntary annual assessment. Adoption of the attached resolution is the final step in the reauthorization of the BIA assessment, and the City Council must adopt the proposed resolution before an annual assessment can be levied for the 2021-2022 fiscal year. Therefore, staff recommends that the City Council: 1. Conduct a public hearing regarding the Business Improvement Area (BIA) reauthorization and levy of the annual assessment for Fiscal Year 2021-2022. 2. Adopt Resolution No. 2021-xx, confirming the annual report filed by Travel Costa Mesa and levying an annual assessment for Fiscal Year 2021-2022 for a business improvement area covering certain Costa Mesa hotels and motels (Attachment 1). ALMA L. REYES CAROL MOLINA Assistant to the City Manager Finance Director 5 LORI ANN FARRELL HARRISON KIMBERLY HALL BARLOW City Manager City Attorney DISTRIBUTION: Travel Costa Mesa ATTACHMENTS: 1. Proposed Resolution levying annual assessment for FY 2021-2022