HomeMy WebLinkAbout2022-09-01; CTBID Governance Update (Districts - All); Rocha, LauraTo the members of the:
CITY COUNCIL
Date 9/2 /$CA V CC v
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Council Memorandum
September 1, 2022
To:
From:
Via:
Re:
Honorable Mayor Hall and Members of the City Council
Laura Rocha, Deputy City Manager, Administrative Services
David Graham, Chief Innovation Officer
Geoff Patnoe, Assistant City Manager@
CTBID Governance Update (Districts -All)
{city of
Carlsbad
Memo ID #2022098
This memorandum provides an update on Carlsbad Tourism Business Improvement District
(CTBID) actions to establish an alternate authorization and governance model consistent
with its existing mission while allowing for operational improvements.
Background
California's Tourism Business
Improvement Districts (TBIDs)
collectively raise over $300 million for
local destination marketing. With other
areas increasing their budgets, and
increasing competition for visitor
dollars, it is important that Carlsbad
lodging businesses continue to invest .in
stable, lodging-specific marketing
programs.
In November 2005, the Carlsbad City
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Council adopted an ordinance forming the Carlsbad Tourism Business Improvement District
(CTBID) pursuant to the Parking and Business Improvement Area Law of 1989 ('89 Act). The
ordinance authorized the levy of a $1.00 per room-night assessment on each occupied room
within the City of Carlsbad, effective January 1, 2006. In 2020, hotels supported a change in the
assessment rate from $1.00 per room night to 2% of room rental revenue, and the ordinance
was modified to reflect the change. On June 7, 2022 the City Council authorized the CTBID 2%
assessment for Fiscal Year 2022-23 which was estimated to generate $5. 7 million.
There are options in California state law for jurisdictions when it comes to authorizing
assessment districts to support tourism. An alternative in state law to using the current
authorization under the '89 Act is the Property and Business Improvement District Law of 1994
('94 Act).
Administrative Services Branch
Innovation & Economic Development Department
1635 Faraday Avenue I Carlsbad, CA 92008 I 442-339-2222
Council Memo -CTBID Governance Update (Districts-'-All}
September 1, 2022
Page 2
The CTBID Advisory Board has proposed to establish a 2% TBID, pursuant to the '94 Act. This
effort is designed to modernize the current TBID that was established under the '89 Act. It is
important to note that this effort would not result in an increase to the current 2% assessment
on lodging businesses. If successful, it would replace the current 2% assessment, meaning the
assessment level would remain constant to the current level. It would allow for some
operational improvements and the ability to authorize the TBID for a longer term than is
allowed under the '89 Act. This would allow for multi-year strategic planning.
The benefits of converting to a TBID under the '94 Act include an authorization period of five
years and subsequent renewal authorization periods of up to 10 years, allowing for greater
stability and long-term planning. Additionally, there would be greater efficiency of operations
as the '94 Act allows for the Advisory Board function and the destination marketing function to
occur within the same organization. Currently the CTBID contracts with Visit Carlsbad for the
execution of destination marketing services. The '94 Act also clarifies other regulations that are
not addressed in the '89 Act and requires the creation of a Management District Plan. Finally,
the TBID Advisory Board meetings would remain subject to the Brown Act, ensuring
transparency in operations and governance .
. Proposed CTBID
At the January 12, CTBID Advisory Board meeting, members considered and approved an item
to appropriate funding to explore a conversion to a '94 Act assessment district structure. From
January to July, due diligence was conducted by staff and Civitas Advisors -the consultant
retained to assist in the process -and a Management District Plan was drafted. At the
July 13, 2022, CTBID Advisory Board meeting, the Advisory Board adopted a resolution to
approve the proposed Management District Plan.
In conducting the due diligence for the proposed conversion, it was determined that a special
district within TBID boundaries could be established. The special district could be used for an
opt-in program for golf lodging businesses. The existing Golf Lodging Business Improvement
District could be folded into the TBID authorization as a special district program creating greater
efficiency and reducing duplicative districts. At the July 13, 2022, Carlsbad Golf Lodging
Business Improvement District (CGLBID} Advisory Board meeting, the CGLBID Advisory Board
considered the proposed TBID Management District Plan that includes the opt-in special
program and adopted a resolution to approve the proposed Management District Plan.
The summary of the authorization of a CTBID under the '94 Act and incorporating a program to
replace the CGLBID plan is reflected below.
Council Memo -CTBID Governance Update (Districts -All)
September 1, 2022
Page 3
Location:
Services:
Budget:
The CTBID would include all lodging businesses, existing and in the future,
available for public occupancy located within the boundaries of the City of
Carlsbad.
The CTBID would be designed to provide specific benefits directly to payors by
increasing demand for room night sales. Marketing and sales promotions, golf-
related programs and activities, and grants programs would increase demand for
overnight tourism and market payors as tourist, meeting and event destinations,
thereby increasing demand for room night sales.
The total CTBID annual budget for the initial year of its five-year operation would
be anticipated to be approximately $6,530,000. A similar budget would be
expected to apply to subsequent years, but this budget would be expected to
fluctuate as room sales do.
Cost: The annual assessment rate would be 2% of gross short-term room rental
revenue. Based on the benefit received, assessments would not be collected on
occupancies of any federal or State of California officer or employee when on
official business; and occupancies of any officer or employee of a foreign
government who is exempt by reason of express provision of federal law or
international treaty.
Collection:
Duration:
Lodging businesses may elect to pay an additional 1% assessment. The funds
raised through this additional lodging business assessment shall be used to
promote golf-related programs and activities, thereby increasing demand for
room night sales for those lodging businesses that opt-in to paying the additional
assessment. The proceeds of the additional assessment will pay for golf-related
programs and services specifically tailored only to those paying the additional
assessment.
The city would be responsible for collecting the assessment on a monthly basis
(including any delinquencies, penalties and interest) from each lodging business
located in the boundaries of the CTBID. The city would take all reasonable efforts
to collect the assessments from each lodging business. The city would collect an
estimated $130,600, or 2% of the total assessment, to cover the costs of
managing the assessment and collection of remittances.
The CTBID would have a five-year life, beginning January 1, 2023, or as soon as
possible thereafter, and end five years from its start date. Once per year,
Council Memo -CTBID Governance Update {Districts -All)
September 1, 2022
Page 4
beginning on the anniversary of CTBID formation, there would be a 30-day
period in which owners paying 50% or more of the assessment may protest and
initiate a City Council hearing on CTBID termination. After five years, the CTBID
may be renewed if business owners support continuing the CTBID programs.
Management: Carlsbad Convention and Visitors Bureau, dba Visit Carlsbad {VC), would serve as
the CTBID's Owners' Association. The Owners' Association would be charged
with managing funds and implementing programs in accordance with this plan
and must provide annual reports to the City Council.
The authorization of the CTBID under the '94 Act as outlined above should result in improved
operations, increased efficiencies, and a strategic approach to multi-year investment in
supporting the city's tourism and lodging industry.
Next Steps
The next step in this modernization process is for lodging businesses to sign a petition in
support of establishing the TBID at the 2% assessment rate for a five-year term. In September,
the TBID Advisory Board intends to petition lodging establishments, including hotels, motels,
short term vacation rentals, and other similar establishments. Should more than 50% of lodging
establishments, as measured by remittances generated to the TBID, petition to establish the
alternate governance structure, the option to establish the new CTBID would be presented to
the City Council for consideration. The process of petitioning the lodging businesses and the
necessary actions to establish a CTBID authorized under the '94 Act could be presented to the
City Council before the end of 2023.
cc: Scott Chadwick, City Manager
Cindie McMahon, City Attorney
Laura Rocha, Deputy City Manager, Administrative Services
Zach Korach, Finance Director
Jason Rosado, Finance Manager
Matt Sanford, Economic Development Manager