HomeMy WebLinkAbout28 - NB-3 - Costa Mesa Shop Local Financial Incent - 8/3/20211
CITY COUNCIL AGENDA REPORT
MEETING DATE: AUGUST 3, 2021 ITEM NUMBER: NB-3
SUBJECT: COSTA MESA SHOP LOCAL FINANCIAL INCENTIVE PROGRAM
DATE: July 26, 2021
FROM: ECONOMIC AND DEVELOPMENT SERVICES DEPARTMENT/
ECONOMIC DEVELOPMENT
PRESENTATION BY: DANIEL INLOES, ECONOMIC DEVELOPMENT
ADMINISTRATOR
FOR FURTHER INFORMATION
CONTACT:
DANIEL INLOES, AICP 714-754-5088
daniel.inloes@costamesaca.gov
RECOMMENDATION:
Staff recommends the City Council:
1. Authorize the City Manager and City Attorney to negotiate and execute an
agreement with Colu Technologies for the implementation and administration of
the Costa Mesa app-based Shop Local financial incentive platform for one year
for a not-to-exceed cost of $85,000 (with an option to extend the agreement for
up to four more years).
2. Authorize a use of funding of $170,000 for an incentive program to be distributed
to participating Costa Mesa small businesses based on local patron activities.
BACKGROUND:
Economic Impacts from COVID-19
For the last year, State and County regulations have directly modified, with varying
levels of restrictions, business operations in order to slow the spread of the COVID-19
virus. Business operations were restricted through the two Stay at Home orders, and
several gradual reopening programs from March 19, 2020 until June 15, 2021. As the
economy reopens to full operation, an economic incentive program encouraging local
business patrons is necessary to help overcome some of the online purchasing habits
that were necessary during the pandemic but are not beneficial to our local economy in
the long run. This includes reliance on online shopping which in most cases is not
conducive for local businesses. These cases do not support our small business
community and impacts retail sales tax revenue for the City. Staff is recommending the
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City Council provide incentive for local shoppers to promote in person shopping to
assist both patrons and the local businesses they know and love.
Demand Side Financial Incentive Program
To spur an increase in personal economic transactions, the City researched programs
that could accomplish three main tasks:
1. Ensure City investments have a direct impact to local Costa Mesa businesses
that have an active business license;
2. Leverage a program that would promote residents, workers, and visitors to
reactivate former purchasing habits and select City brick and mortar businesses,
to diminish the effects of economic leakage to online and into other cities as well;
and
3. Find a program that can produce a multiplier affect beyond a simple grant
program so that a single dollar from Costa Mesa could encourage multiple
transactions.
These goals were set with the intent that an incentive program could infuse fiscal
stimulus into an anesthetized economy and ultimately save jobs, retain local business,
and diminish the time that would be required to recover from the economic setback
caused by the COVID-19 pandemic. The pandemic has hurt local economies as it is
confronted with a different environment than before the pandemic. Most patrons,
whether they consider themselves tech savvy or not, have come to rely on new
consumption habits and they have become well acquainted with online ordering of
goods from home. The goal for the new program would be to use the community’s
newfound skillset while redirecting back to local businesses and encourage demand for
local goods and services while also boosting community relationships and social
interaction.
Request For Proposals
The City investigated the breadth and depth of this market by releasing a request for
proposals (RFP) on May 5, 2021. The RFP required prospective vendors to provide an
application-based financial incentive platform that can be easily used by businesses and
patrons and provide the necessary administrative services to fully launch and maintain
the program. The City required prospective vendors to operate within the following
parameters:
1. The incentive program would be for one year with the potential to extend services
for up to 4 years. The preparation of the launch of the program can take no more
than three months.
2. The platform must handle the distribution and auditing of a reward/point system,
which would allow customers to earn points for shopping at Costa Mesa
businesses, or participating in local events, while redeeming these points at
Costa Mesa businesses. Thereby potentially encouraging patronage of two
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businesses; as patrons goes to one store to earn the credit and another to
redeem the reward.
3. The vendor would complete the establishment and administration of the program.
This includes finding and bringing businesses on board, developing the branding
and outreach materials for the program, overseeing the system's maintenance,
and ensuring the funds' distribution is secure.
4. Any business recruited to accrue or redeem credits must be located within the
City of Costa Mesa. The service must focus on assisting local small businesses
and the City’s shop local campaign.
5. Patrons and businesses must be able to easily use the service on a personal
mobile device.
6. The service must provide a monthly reporting system to allow for the City to track
the program's progress and the types of businesses benefiting from the
program.
7. The service must provide flexibility to allow the City to adjust reward points by
type of business, business location, or other essential characteristics like female-
owned, minority-owned, location within an opportunity zone, or other
characteristics.
8. Provide the flexibility for credits to be awarded for attendance at public
engagement opportunities or for nonprofit/community-based organization events
or local business events like “The Taste of Costa Mesa”.
9. Integrate with the existing Costa Mesa BAC website so that participating
businesses can be identified in real time.
The City received three proposals. The vendor that received the highest score was Colu
Technologies.
ANALYSIS:
Shop Local Incentive Program
The development of a shop local incentive program is more critical now than ever
before. Local businesses provide personal services that benefit those who live and work
in the City, create local employment opportunities, and diversify the market options
which is healthy for the economy and the community. Local businesses were negatively
impacted from COVID-19 as it made digital shopping more essential and resulted in
those who conduct commerce online to do it more, almost exclusively. Those who did
not shop online were forced to learn and adapt. Due to the reopening of the economy as
of June 15th,, it benefits the City and all of its businesses to encourage customers to
come out in person again and shop locally. A shop local incentive program can help
encourage customers to focus on local businesses. An app-based program makes the
process simple, incentivizes the experience, and ensures the investment is directed
only to those businesses that are within the City of Costa Mesa. This type of program
not only helps businesses through the immediate effects of COVID-19, but also
addresses the long-term impacts of e-commerce platforms such as Amazon. If just 15%
of purchases made from Amazon per year are made instead with local businesses,
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estimated at $66.5 million, it would boost the local Costa Mesa economy, with $10.5
million returning to the local economy as income to local small businesses.
Another benefit that comes with this solution is that the incentive program can be
modified, tailored, or increased at any time. After the project is launched, the City can
choose to highlight businesses with certain characteristics, for example female-owned
businesses one month and minority-owned businesses another. The City can also
provide an incentive for people to attend community events or activities by providing city
credits to those who attend. This flexibility allows the application to move beyond a
demand side financial incentive platform into a platform that builds social capital for the
City.
Colu Technologies
Colu has shown to be a proactive and effective force for growing businesses using an
easy to use application. Colu proposed a city-branded mobile app and platform that will
enable the City to stimulate its local economy and promote diversity by rewarding
residents for taking actions that promote the City’s strategic goals. The platform is
driven by City Points; which business patrons earn by engaging in City-sponsored
actions such as shopping at local business. Business patrons later redeem these City
Points at participating local businesses, creating a circular economy. This maximizes
the social and economic impact of funds invested towards small business relief. It
directs funds to businesses our community members care most about. Furthermore, it
does so in real time; allowing the patron to cash out immediately on credits earned and
businesses who collect them to receive the real funds with minimum delay.
Colu has launched this same platform in multiple cities and it has consistently generated
an economic multiplier approximately nine times the funds allocated to the project. Colu
currently contracts with the following cities.
Boston, Massachusetts
Akron, Ohio
Rancho Cordova, California
Chula Vista, California
Monterey Park, California
Colu’s proposal meets or exceeds all scope of work requirements identified in the RFP.
In particular, Colu has committed to implementing the system and administering it once
it goes live with minimal effort by City staff, finding and bringing businesses onboard,
developing the branding and outreach materials for the program, overseeing the
system's maintenance, and ensuring the funds' distribution is secure. Colu provides the
City with 24/7 access to an economic data dashboard to allow for flexibility in displaying
reward offers, analyzing the success of different offers, and making accurate decisions
when it comes to assisting different segments of our business community. The system
does not require businesses to purchase additional hardware to implement the program
and is easy to use since it is app based for both the patron and the business.
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The app would be available for anyone to download and participate Citywide. Eligible
activities for receiving City credits could be adjusted based on the City’s goals.
However, during the initial launch, eligible businesses where patrons can earn credits
would meet the following criteria:
The business must be an independently owned and operated business that is
neither dominant in its field of operation, nor a franchise business;
The business must be legal and located in a commercial or industrial space;
The business must have an active Costa Mesa business license;
The business must be in good standing with the City, meaning it must be
current on its business license fees and it must not have any existing
municipal code violations;
Patrons could redeem the credits at any legal participating business within the City.
Program Cost
The cost to use Colu’s application and for them to launch and administer the program is
$85,000 for the first year (and $100,000 for each subsequent year, if the option for
additional years is exercised). Staff is recommending City Council approve To move
forward with the program and contract with Colu as well as approve the allocation of
City funds of $170,000 to distribute accordingly.
Once the program has been launched and implemented, staff will return to the City
Council to seek direction regarding the option to extend the agreement with Colu
beyond the first year.
ALTERNATIVES CONSIDERED:
The City Council could modify the staff recommended program or opt not to invest in a
Shop Local financial incentive program.
FISCAL REVIEW:
The cost for this one-year program is not-to-exceed $255,000 ($85,000 for the
administration of the program by Colu Technologies for the first year and set aside of
$170,000 for incentive funds to be distributed to participating Costa Mesa small
businesses based on local patron activities). Funds are available in the Development
Services Department’s FY 2021-22 Budget.
LEGAL REVIEW:
The City Attorney’s Office approves this report as to form. As part of Colu Technologies’
response to the RFP, Colu requested to utilize its Software Platform License Agreement in
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lieu of the City’s standard Professional Services Agreement (PSA). This office concurs that
the standard PSA may not be the appropriate form for this particular software platform
based project. As such, this office recommends that the City Council vest the City
Manager and City Attorney with the authority to negotiate the terms of, and subsequently
execute, a mutually acceptable agreement with Colu, in the amount of $85,000 for the first
year with the option to extend the agreement for up to four years at a cost of $100,000 per
each subsequent year.
CITY COUNCIL GOALS & OBJECTIVES:
Achieve long-term fiscal sustainability.
CONCLUSION:
Authorize the City Manager and City Attorney to negotiate and execute an agreement
with Colu Technologies for the implementation and administration of the Costa Mesa
app-based Shop Local financial incentive platform for one year for a not-to-exceed cost
of $85,000 (with an option to extend the agreement for up to four more years at
$100,000 per year). Authorize use of funding of $170,000 for an incentive program to be
distributed to participating Costa Mesa small businesses based on local patron
activities.
_________________________________ _________________________________
DANIEL INLOES, AICP JENNIFER LE
Economic Development Administrator Economic & Development
Services Director
________________________________ _________________________________
CAROL MOLINA KIMBERLY HALL BARLOW
Finance Director City Attorney
Attachments: 1. Request for Proposal #21-12 for Shop Local Incentive System
2. Colu Technologies Proposal without appendices