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HomeMy WebLinkAbout2012-07-10; City Council; 20966; Proposal Golf Lodging Business ImprovementCITY OF CARLSBAD - AGENDA BILL 13 AB# MTG. DEPT. 20.966 07/10/12 CM/CA Report on tlie proposal to form the Carlsbad Golf Lodging Business Improvement District DEPT. DIRECTOR CITY ATTY. CITY MGR. RECOMMENDED ACTION: Receive the Report on the Carlsbad Golf Lodging Business Improvement District and direct staff accordingly. ITEM EXPLANATION: Baci^qround: For almost 50 years the City of Carlsbad financially supported community promotion and visitor services as a way to develop tourism and assist Carlsbad visitors. Then in 2005, the City was approached by the Carlsbad Convention and Visitor's Bureau and Carlsbad hoteliers about the formation of a Carlsbad Tourism Business Improvement District (CTBID) as allowed under the Parking and Business Improvement Area Law of 1989 (Streets and Highway Code §36500 et seq.). Tourism Business Improvement Districts are special funding tools permitted under the California Streets and Highways Code § 36520, and can help hotels and other lodging businesses increase occupancy rates and revenues. The proposal to form the CTBID was based on the concept of collecting assessments from all hotel operators within the City to fund and support tourism promotion activities. The CTBID called for inclusion of all Carlsbad hotels in the District, with an assessment of ($1.00) per occupied room night. The assessment would be passed through to the hotel guest as opposed to being paid directly from the hotel's operating revenues. The levy would be imposed on all existing and any future hotels. Assessments would be collected each month based on revenues generated the previous month. Timeshares were to be exempted from the levy, if occupied by owners. However, all short-term, non-owner stays in timeshare units would be subject to the levy. As a part of the cost of the District, the City would charge an administrative fee equal to 2% of the revenues collected as reimbursement for collection services. The rationale behind formation of the CTBID was to allow greater control of marketing activities and expenditures by the local tourism industry. In addition, the district assessments would provide a higher level of funding for tourism promotion, than the City had been willing to provide, as well as the opportunity to grow revenues as new hotels were opened. On November 15, 2005 the City Council adopted Ordinance No. NS-778, establishing the Carlsbad Tourism Business Improvement District, and setting the boundaries, levy, and establishing an advisory board to provide oversight and recommendations to the City Council. The effective date for CTBID was January 1, 2006. DEPARTMENT CONTACT: Ron Ball 760-434-2891 Ron.Ball(S)carlsbadca.qov and Cynthia Haas 760-434-2821 By minute motion. Council approved to direct staff to initiate formation of a new tourism busmess improvement district based on the CGLBID proposal (See Minutes for details.) FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED • DENIED • WITHDRAWN • AMENDED • CONTINUED TO DATE SPECIFIC • CONTINUED TO DATE UNKNOWN • RETURNED TO STAFF • COUNCIL RECEIVED THE ^ REPORT/PRESENTATION OTHER - SEE MINUTES • Page 2 Tourism Business Improvement Districts have become very popular over the past decade as a way to provide a stable, dedicated funding source for destination marketing and promotion tied directly to the lodging industry. By and large they have proved to be a very successful partnership between local agencies and private industry. However, critics of tourism based BIDS argue that assessments levied constitute an additional tax on lodging guests, since assessments levied on the lodging industry are merely passed through as a governmental charge on a guest's room bill. They further argue that it is the visitor, who unwittingly funds the district, and not the hotel owners. Proposal: In April of this year. Grand Pacific Resorts, which includes the Carlsbad Sheraton Resort proposed formation of a new voluntary business improvement district for Carlsbad ; the Carlsbad Golf Lodging Business Improvement District (CGLBID). The purpose ofthe CGLBID would be to specifically promote golf-related overnight stays at participating hotels in Carlsbad. The CGLIB would be administered by the City and closely parallel the procedures of the existing CTBID. The CGLIB would not replace the CTBID, but be in addition to the existing CTBID. As proposed the CGLIB would include the following key provisions: 1. Term of the CGLBID would be for two years, renewable annually. 2. Membership in the CGLIB would be entirely voluntary. 3. The purpose of the CGLBID would be to administer marketing and visitor programs to promote participating lodging businesses. As proposed, the Crossings Golf Course may be featured as part of the marketing for the district to promote golf-related overnight stays in Carlsbad for the participating lodging businesses. 4. Oversight to the CGLIB would be provided by an advisory board appointed by the City Council. 5. The assessment to district participants would be $2.00 per occupied room night, collected monthly. 6. The City would charge an administrative fee of up to 4% of the revenues collected as reimbursement for collection services. 7. Assessment funds could only be used to promote golf-related tourism within the boundaries of the CGLBID, as well as marketing related capital improvements such as golf-related signage, golf-related equipment, and to pay for related administrative costs. 8. Funds remaining at the end of any term could be carried over to subsequent years, provided the CGLBID assessments are still being levied. 9. If a business should elect withdraw from the CGLBID at the end of the term, any remaining funds collected from that business will be forfeited by the business, but remain as district funds to be spent consistent with the provisions as established in the resolution and the advisory board. As proposed the CGLBID would, at formation of the district, be voluntary. Otherwise the district would operate very similar to the existing CTBID. As proposed the CGLBID would have its own advisory board that would consist of members from golf and lodging businesses, who would be appointed by the City Council. Participating businesses would submit for reimbursement of their eligible expenses from the assessments collected from their specific property. The district is proposed for a two year initial term. After the second year, the district would have to be renewed, and participant businesses would be given an opportunity to Page 3 voluntarily opt in, or opt out of the district for year two. As proposed, the CGLBID would be a two year pilot program, with re-evaluation at the end of the second year for its effectiveness. Under the proposal, if the program were deemed to be successful, it could be renewed annually thereafter. Should the City Council decide it has an interest pursuing a new CGLBID, then staff could be directed to evaluate the program as proposed, address the merits of the program, and return to the City Council with a recommendation. CGLBID Formation Process: Public Meeting: In addition to adoption of the ROI, the Parking and Business Improvement Area Law of 1989, requires a Public Meeting be held to provide public information and comments on the CGLBID, and the levy of assessments. At the Public Meeting, the public will be given an opportunity to hear a report on the CGLBID and provide their comments on the formation of the CGLBID. Public Hearing: Subsequent to the Public Meeting, the City Council will hold a Public Hearing on the CGLBID. The purpose of the Public Hearing is for the City Council to take the testimony of all interested persons for or against the establishment of the CGLBID, the extent of the areas for inclusion in the assessment, or the types of activities proposed for funding from the assessment. At the conclusion of the Public Hearing, a protest vote is conducted. A protest vote against the establishment of the CGLBID, the extent of the area, or the proposed activities must be in writing, and may only be accepted if the person signing is the business owner of record, or an authorized representative. If at the conclusion of the Public Hearing there are protests by the owners of businesses within the CGLBID that will pay fifty percent (50%) or more of the total assessments of the entire CGLBID, no further proceedings to create the CGLBID shall occur for a period of one-year from the date of the protest vote. If a majority of the written protests are related to a proposed activity ofthe CGLBID, then that activity shall not be included in the CGLBID. If there are no protest votes in excess of the 50% requirement, then the City Council may create the CGLBID. CGLBID Advisory Committee: The Parking and Business Improvement Area Law of 1989, requires an Advisory Board be appointed by the City Council. The Council may act as its own Advisory Board, appoint an existing board, or select other individuals to serve in that capacity. The CGLBID Advisory Board would advise the City Council on all issues related to the CGLBID. The CGLBID Advisory Board would be required to submit an annual report, which would include any proposed changes in the boundaries, assessment formula, estimated cost of conducting activities, the amount of surplus/deficit revenues to be carried over, contributions and other items of interest to the CGLBID for the upcoming year. The report may be approved as presented or amended by the City Council. Once the report has been approved for the upcoming year, the City Council adopts a resolution of intention to levy an annual assessment for the upcoming year. The City Council will then schedule and conduct a public hearing to set the assessment, take public comment, make modifications as necessary, and adopt the new resolution of intention. FISCAL IMPACT: There is no fiscal impact related to accepting the report. 3 Page 4 ENVIRONMENTAL IMPACT: The process leading to the potential formation of a Business Improvement District and the actual formation of the Business Improvement District is not a project within the meaning of the California Environmental Quality Act (CEQA). For CEQA purposes, a project does not included the creation of a government funding mechanism or other governmental fiscal activities that do not involve any commitment to any specific project that may result in potentially significant physical impact on the environment. No such specific projects are proposed and there is no known or foreseeable potentially significant physical impact on the environment. (CEQA Regulations, Regulation No. 15378(b)4)). EXHIBITS: 1. April 19, 2012, Letter from Tim Stripe, Co-President Grand Pacific Resorts. ^ GiiAMj PACIFIC IIESOKIS Time Away...Timc Together... April 19, 2012 The Honorable Mayor and Council Members Cliy of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 Dear Mayor and Council Members, I respectfully request your support for a voluntary Golf Lodging Business Improvement District (GLBID) for the city of Carlsbad. The following summarizes the newly proposed BID: OVERvihW This district would be similar to the existing Carisbad Tourism Business Improvement District (CTBID) in that it would place a specific benefit assessment on member hotels. The funds raised by the new GLBID would be used entirely to promote overnight stays associated with the golf courses in Carlsbad. The City's public purpose in forming the district would be similar to its public purpose in the CTBID - to increase economic activity related to travel to Carlsbad. This new BID will help increase annual city wide occupancy which is currently under 70%. BACKGROUND Throughout the State of California, BlDs have been used for a variety of projects to economically benefit a specific area, industry, or project Typically, a BID is established and subsequently funded by a group of like businesses, such as lodging, that come together and consent to having a fee levied against their business to fund expenses that are for the benefit of the industry. Currently, there are over 60 BID districts in California that are tourism related. The existing CTBID is city wide, has a mandatory contribution for every lodging property, and generates about $800,000 a year. The current assessment is $1 per occupied room night The revenues are spent primarily by contract with Visit Carlsbad - tlie Convention and Visitors Bureau here in Carlsbad. PROPOSAL A new BID would be created by the City of Carlsbad to promote golf-related overnight stays withm the City. The members of the GLBID would be lodging properties that voluntarily join the new district and agree to be assessed $2 per occupied room night The proposed district would be created pursuant to the Parking and Business Improvement Area Law of 1989, Streets and Highways Code section 36500 et seq. (the "89 Act"). The 89 Act has previously been utilized by the City to create the CTBID. Under the 89 Act the City of Carlsbad may establish a new GLBID for one or more hotels within the city limits. We would like area hotel participation in this district to bo voluntary, We propose that a notice be sent to all the hotels in Carlsbad and that only those lodging properties that affirmatively respond be included. The hotels would have 30 days to respond and those that did not respond in writing in the affirmative would not be affected. Under the 89 Act the city council can initiate formation proceedings of its own accord by adopting a Resolution of Intention. Once the Resolution of Intention has been adopted, a public meeting and public hearing will be scheduled and notice of those dates will be mailed to affected lodging businesses, OPERATING GUIDELINES OFTHE PROPOSED BID Tlie GLBID would be administrated by the city and closely follow the parameters of the existing )Q(X,)PASiHlK(:cHlKr, Sun'EiCX) • CARLSBAD. (A92(X:)8 • llimiONt 7604*8500 ^ |-ACSIMil.l:7(^>/{^|".lb«0 ^ www.grandpacilkrcMins.com 5 CTBID with some adjustments: 1. Membership would be voluntary - meaning only the lodging properties within the city that affirmatively agree to be part of the GLBID would be members; 2. Members that opt-in would be assessed $2 per occupied room night, paid to the city with the monthly transient occupancy tax statement; 3. Concurrent with the establishment of the GLBID, the City Council would establish an Advisory Board made up initially of three members, suggested to be (a) a golf course representative, (b) a member representative, and (c) a city staff member; 4. The city would be reimbursed for the administration of the GLBID at 4% of assessments collected; 5. Each assessed business would determine how to spend the funds collected by their respective property provided the expenditures are for an approved golf-related expense; 6. Funds could only be spent on approved expenses as per a budget submitted to the advisory board on an annual basis to include: a. Equipment related to golf such as golf transportation equipment, golf racks, golf signage, etc. (equipment related specifically to the promotion of golf) b. joint marketing related to the promotion of a member's propeiiy and a Carlsbad golf course, such as: i. A brand initiative such as Marriott, Hilton, Starwood, or Hyatt advertising the member's propert^^ in conjunction with a Carl.sbad Golf Course ii. A marketing promotion - radio, TV, or print advertising the member's property and a Carlsbad golf course iii. On-line / Internet promotions jointly advertising a member's property and a Carlsbad golf course c. Reimbursement for marketing and sales staff on time spent in joint marketing efforts d. Other expenses to promote golf-related tourism 7. Each quarter the assessed business submits to the advisory board a request for reimbursement of funds spent on approved expenses. The amount requested can never be more than the amount collected per property minus administrative fees; 8. All other administrative guidelines/proceedings set by the City of Carisbad for the GLBID; and 9. The GLBID is to be renewed on year-to-year basis solely at the discretion of the Carisbad Cit>' Council However, the initial term is proposed to be for two years. FORMATION OF THE GOLF BID Grand Pacific Resorts has consulted with Civitas on the GLBID, as they are the organization that formed the existing CTBID, Civitas has been involved in the formation of about 45 different tourism BlDs in the State of California. I have included a preliminary draft of a Council Resolution and related Ordinance for your review. CONCLUSION Grand Pacific Resorts is requesting that a GLBID be formed and is willing to participate with both the Sheraton Carlsbad Resort & Spa and Grand Pacific Palisades Hotel. Further, should no other properties want to participate. Grand Pacific Resorts proposes that these two properties be the test case for the initial two-year term of the BID. Based on past experience, Grand Pacific Resorts is confident that during the initial two-year term more than 5,000 rounds of additional golf play will be generated with 3,300 related additional room nights from additional tourists coming to the Carisbad area for just the Carisbad Sheraton Resort This should generate more than $600,000 in room night revenue, and approximately $60,000 in additional transient occupancy tax to the city. Attached for your review is a projection of the anticipated results from just the Sheraton Carisbad Resort Once this program gets established we are quite confident that many more hotel properties will want to participate in the program. I ask that you give this proposal your full consideration. Given the current economic climate and the many competing vacation destinations, this initiative is important for our Carisbad businesses. 1 look forward to working with you to ensure that our city remains a top tourism market Sincerely, Timothy J. Strspe' Co-President Grand Pacific Resorts Golf Lodging Business Improvement District (GLBID) Sheraton Carlsbad Resort & Spa Projected Revenues Year 1 Year 2 Years Year 4 Years Total Room Nights Average Daily Rate Golf Package- SCR Room Revenue 1500 1800 2160 2592 3110 170 $ 175 $ 180 $ 185 $ 190 11162 $ 255,000 $315,000 $388,800 $ 479,520 $ 590,976 $ 2,029,296 Additional Carlsbad Transient Occupancy Tax (TOT) $ 25,500 $ 31,500 $ 38,880 $ 47,952 $ 59,098 $ 202,930 Rounds at The Crossings at Carlsbad Average Green Fee Golf Package - Crossings Revenue 2250 2700 3240 3888 4666 55 $ 55 $ 60 $ 60 $ 65 16744 $ 123,750 $148,500 $194,400 $ 233,280 $ 303,264 $ 1,003,194 <f »^ CITY OF ^ CARLSBAD Memorandum June 26, 2012 To: Lisa Hildabrand, City Manager From: Cynthia Haas, Deputy City Manager Re: Proposed Carlsbad Golf Lodging Business Improvement District (CGLBID) - REVISED On April 19, 2012, Tim Stripe, Co-President of Grand Pacific Resorts submitted a request for consideration of a new Tourism Business Improvement District for Carisbad. A staff report on his request is scheduled to go before the City Council on July 10^^ Tourism Business Improvement Districts (TBIDs) are special funding tools permitted under the California Streets and Highways Code § 36520, and can help hotels and other lodging businesses increase occupancy rates and revenues. They have become very popular over the past decade as a way to provide a stable, dedicated funding source for destination marketing and promotion tied directly to the lodging industry. In 2006, Carisbad established the Carisbad Tourism Business Improvement District (CTBID) for that purpose. All hotel operators in Carisbad participate in the CTBID through special monthly assessments that are designated specifically for tourism promotion activities. Each hotel within the city is assessed one dollar ($1.00) per occupied room night, which is in turn passed on directly to the hotel guests as an additional "fee" on their room. Funds generated by the CTBID are collected by the City from each hotel, and an advisory Board appointed by the City Council directs how the funds will be used within the parameters established for the CTBID, for the benefit of all hotels within Carisbad. By and large TBIDs have created successful partnerships between local agencies and private industry. They provide a stable mechanism for local tourism groups to be financially self-sufficient, rather than depending on direct subsidy or support from local agencies. Prior to formation of the CTBID, the City of Carisbad contributed over $500,000 each year toward tourism promotion and marketing. Formation of the CTBID allowed hotels to fund tourism marketing independent of direct city contribution. As the number of hotel rooms within the city grows, so too does the funding amount generated from the assessments collected from hotel guests. Critics of tourism based BlDs argue that assessments levied really constitute an additional "tax" on lodging guests, since assessments levied on the lodging industry are merely passed through as a mandatory governmental fee or charge on a guest's room bill. They further argue that hotel owners receive the direct benefit from assessments, although it is the visitor who actually funds the district. They claim that this amounts to a form of "taxation without representation" or benefit. One question the City Council may want to consider is whether another TBID is desirable or necessary for Carisbad. The way the proposed CGLBID is structured it would be voluntary, unlike the CTBID which requires mandatory participation from hotels, which benefit equally. A distinguishing element ofthe proposed CGLBID is that assessments collected from each participant hotel, would be partitioned from use by other CGLBID participants. In other words, any funds collected by the district, would only be available for use by the hotel where the assessment was collected. Funds would only be eligible for marketing City Hall 1200 Carlsbad Village Drive I Carisbad, CA 92008 I 760-434-2820 I 760-720-9461 fax I www.carisbadca.gov activities at the participant hotel. In contrast, the CTBID assessments are collected by the City, where they are pooled together and administered by an advisory Board for the benefit of all Carlsbad hotels. Another question the City Council may want to consider is whether or not a similar funding mechanism could be set up without government assistance. In this case, such a mechanism or charge could be self- imposed by the lodging business that would benefit. Recently the new Hilton owners indicated they would be collecting an additional fee from their guests to fund improvements that would provide guests better access to the beach. In the case of the proposed CGLBID, there is no clear or apparent reason that government assistance is necessary to accomplish the marketing objectives as they have been outlined. Finally, the Council may want to consider whether these additional assessments created through TBIDs represent an impediment to possible increases in TOT in the future, should such an action be desirable. Currently, the City of Carlsbad imposes two lodging assessments or fees on Carlsbad hotel guests, a 10% Transient Occupancy Tax (TOT), and a $1.00 per night room charge for the CTBID assessment. Creating the Carisbad Golf Lodging Business Improvement District would add an additional $2.00 charge to guests of participant hotels. Proposal for New Tourism Business Improvement DistrictCynthia HaasDeputy City ManagerJuly 10, 2012 Tourism Business Improvement Districts•Tourism business improvement districts are allowed under  the California Parking and Business Improvement Area Law of 1989.–Defined assessment area–Annual assessment amount–Funding allowed for specific activities–Advisory Board–Public hearing process Special Benefit Assessments•Special public/private financing mechanism that can be used to solve municipal issues.–An assessment that business/property owners pay for a public improvement or service that provides a special and direct benefit to their property.–Over and above general benefits conferred on real property in the district or to the public at large.•Carlsbad Tourism Business Improvement District (CTBID)3 Carlsbad Golf LodgingBusiness Improvement District Proposal•Special assessment used to promote golf related overnight stays in Carlsbad.–Lodging businesses could join voluntarily.–Assessment would be $2.00 per occupied room night.–Three member Advisory Board–District will pay for administrative costs ‐4% of assessment collected.4 CGLBID Proposal–Funds collected/distributed  separately for each participating business.–Funds to be reimbursed to lodging businesses based on  eligible expenditures.–Reimbursement on a quarterly basis subject to Advisory Board approval.–Annual renewal/2 year pilot.5 Special Assessements/TaxesCarlsbad Lodging Guests•Transient Occupancy Tax (TOT) – 10%•CTBID Assessment – $1.00  per occupied room night.•Proposed CGLBID ‐$2.00 per occupied room night for guests at participating hotels.6 Council Action•Accept the report on the proposed CGLBID, take no action.•Direct staff to investigate the proposal further and return to the City Council with recommendations based on each of the nine (9) criteria outlined in the proposal •Direct staff to initiate formation of a new tourism business improvement district based on the CGLBID proposal7 Questions8