EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: June 20, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Melvin E. Gaines, City Manager
Greg Henry, Senior Management Analyst
SUBJECT: Consideration of Granting Consent to The City of Burlingame to Form The San Francisco Peninsula Tourism Marketing District (SFPTMD) Recommendation
Adopt a resolution granting the City of Burlingame consent to include the City of East Palo Alto in the SFPTMD, for the formation of the SFPTMD and future renewals.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Promote Housing, Economic and Workforce Development
Background
In 2001, the San Mateo County Tourism Business Improvement District (SMCTBID) was established under the Parking and Business Improvement Area Law of 1989, codified at Calif.
Streets & Highways Code Section 36500 et seq. (89 Law). To modernize the SMCTBID, the San Francisco Peninsula Tourism Marketing District (SFPTMD) is being proposed by the San Francisco Peninsula (SFP) and San Mateo County lodging businesses. The SFPTMD aims to create a new revenue source for marketing and sales promotion efforts in the San Francisco Peninsula area. Similar district models have been successfully implemented in other destination areas throughout the state, driving tourism and increasing room nights for participating lodging businesses. The proposed SFPTMD includes all lodging businesses within the cities of Belmont, Brisbane, Burlingame, East Palo Alto, Foster City, Half Moon Bay, Menlo Park, Millbrae, Pacifica, Redwood City, San Bruno, San Carlos, San Mateo, South San Francisco, and the unincorporated area of San Mateo County.
SFP and lodging business owners are pursuing the formation of the SFPTMD to establish a dedicated revenue source for marketing the San Francisco Peninsula area as a tourist, meeting, and event destination. If established, the SFPTMD is projected to generate approximately $10,895,479 annually for travel and tourism promotion specific to the San Francisco Peninsula area.
TOURISM MARKETING DISTRICTS:
Tourism Marketing Districts (TMDs) leverage private sector operations to promote tourism through market-based strategies. These special assessment districts enable lodging business owners to organize their efforts in increasing tourism. Lodging businesses within the TMD contribute funds that are then used to provide services beneficial to the participating businesses. Broadly the benefits of a TDM are:
• Enhanced Destination Marketing: A TMD allows for more comprehensive and effective marketing campaigns, attracting more visitors and increasing tourism revenue.
• Increased Tourism Spending: Through focused marketing efforts, a TMD stimulates economic growth by attracting tourists who spend on accommodations, dining, attractions, and local businesses.
• Collaboration and Partnership: A TMD fosters collaboration among stakeholders, leading to shared goals, resources, and the ability to address common challenges and opportunities in the tourism industry.
• Improved Destination Image and Branding: A TMD plays a vital role in shaping and enhancing the destination’s image and brand. By coordinating marketing initiatives, the TMD can create a consistent and compelling brand identity that distinguishes the destination from competitors, leading to increased recognition and visitor loyalty.
While TMDs are funded by an additional assessment, the structure of a TDM offers several advantages:
• Funds cannot be diverted for other government programs. • TMDs are created and governed by those who pay the assessment. • They provide a stable funding source for tourism promotion.
In California, TMDs are primarily established under the Property and Business Improvement District Law of 1994, codified at Calif. Streets & Highways Code Section 36600 et seq. (94 Law). This law allows the creation of special benefit assessment districts within specific geographic areas. Unlike other special benefit assessment districts, funds raised by TMDs are returned to the private non-profit corporation governing the TMD. TMDs allow for the funding of certain improvements (not relevant here) and services, including promotion of public events, furnishing music in public places, graffiti removal, promotion of tourism, marketing and economic development, in addition to various supplemental services such as security and sanitation, and other activities benefiting the businesses. Calif. Streets & Highways Code Sections 36513 and 36613.
Analysis
The Management District Plan (Attachment 3) outlines the SFPTMD, including its proposed boundary, service plan and budget, and governance structure. The SFPTMD encompasses all lodging businesses within the cities of Belmont, Brisbane, Burlingame, East Palo Alto, Foster City, Half Moon Bay, Menlo Park, Millbrae, Pacifica, Redwood City, San Bruno, San Carlos, San Mateo, South San Francisco, and the unincorporated area of San Mateo County.
The annual assessment rate varies depending on the size of the lodging business and is set at one and a half percent (1.5%) of gross short-term sleeping room rental revenue for lodging establishments with 5,000 square feet or more of dedicated meeting space, and 0.75% for all other lodging businesses within the SFPTMD boundaries. Assessments must be proportional to the estimated benefit received by the businesses, or zones of businesses. Calif. Streets & Highway Sections §§36528, 36536, 366628, and 36632. This proportionality requirement has been met given the tiered rates noted above.
A 94 Law TMD must be initiated by a written petition of the property owners and businesses proposed to pay more than 50 percent of the assessments, not counting a single owner and business paying more than 40 percent. See Calif. Streets & Highways Code Section 36621(a).
The initial petition meting this legal requirement has already been satisfied at a City Council meeting before the Burlingame City Council. See Attachment 1. The Burlingame City Council also adopted a resolution requesting consent from participating city councils in the proposed TMD. See Attachment 2. Staff have been in contact with management of the Seasons Hotel Silicon Valley at East Palo Alto, currently the only hotel in East Palo Alto, and they have submitted a petition (See Attachment 3) requesting to join the TMD and asking that the City Council approve the resolution granting consent to the City of Burlingame to form the SFPTMD.
Assessments will not be collected for stays exceeding thirty (30) consecutive days, stays provided to airline cockpit and/or cabin crews under an agreement between a hotel and an airline, stays of state or federal government employees whose room charges are paid directly by their employing agency with applicable travel orders, and stays by properly credentialed officers or employees of exempt foreign governments based on federal law or international treaty provisions.
The proposed SFPTMD will have a duration of five (5) years, commencing on October 1, 2023, or as soon as possible thereafter, and concluding five (5) years from its start date, with a renewal term of an additional five (5) years, for a total not-to-exceed term of 10 years. Calif.
Streets & Highways Section 36622(h). Implementation of the assessment will begin on October 1, 2023, or as soon as possible thereafter. Once a year, on the anniversary of SFPTMD formation, business owners contributing fifty percent (50%) or more of the assessment may protest and initiate proceedings to terminate the SFPTMD within a thirty (30) day period.
The City of Burlingame will be responsible for the monthly collection of assessments (including delinquencies, penalties, and interest) from each lodging business within the SFPTMD boundaries. The City of Burlingame will make reasonable efforts to ensure the collection of assessments from each lodging business. To cover its collection and administration costs, the City of Burlingame will receive a fee equal to one percent (1%) of the collected assessment amount or a flat fee of $60,000 per year, whichever is greater.
Fiscal Impact
There is no direct fiscal impact to the City of East Palo Alto as the City of Burlingame will manage the collection and administration of the proposed District. Should the District be successful, the City may see an increase in tax revenue due to the increase in business.
Public Notice
The public was provided notice by making the agenda and report available on the City’s website and on a bulletin board located at City Hall: 2415 University Avenue, East Palo Alto.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
Attachments
1. Resolution of Intention, No. 049-2023, City of Burlingame
2. Resolution of Consent, No. 050-2023, City of Burlingame
3. Petition to Join TMD (Four Seasons)
4. Draft Resolution