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CITY OF GLENDALE, CALIFORNIA
REPORT TO THE CITY COUNCIL
AGENDA ITEM
Report: Consideration for Adoption of Nonprofit Subsidy Policy
1.Motion Adopting a Nonprofit Subsidy Policy for User Fees
2.Resolution Deleting Certain Fees and Modifying Certain Existing Fees in Accordance to the Provisions Set by the Nonprofit Subsidy Policy, and Amending the Comprehensive Citywide Fee Schedule for the Fiscal Year 2024-25
COUNCIL ACTION
Item Type: Action Calendar
Approved for October 8, 2024 calendar
EXECUTIVE SUMMARY
To ensure clarity and consistency, it would be beneficial to develop a standardized policy for special events held in Glendale City facilities hosted by nonprofit organizations. A proposed “Nonprofit Rate” would provide a 50% subsidy for eligible nonprofit events using city facilities, services, or staff, aiming for consistency and fairness in the fee process. The policy excludes the Alex Theatre and requires organizations to show 501(c) status. For large events requiring city staffing, the subsidy would cover up to $10,000 of staffing costs. It is anticipated that if this policy were applied to last year’s statistics, the City would increase its subsidy from $261,000 to an estimated $445,000 for city-related costs associated with events organized by nonprofits. It is anticipated that the adoption of this policy may result in a greater number of events requesting staff resources due to a lower rate for providing event staffing, which may result in the need for additional appropriation of funds in the next fiscal year’s budget planning process. Such determination will be made following an analysis at the end of the current budget year.
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RECOMMENDATION
Approve a motion adopting a nonprofit subsidy policy discounting fees for rental facilities, equipment, and staffing costs as detailed in the staff report and a resolution amending the Citywide Fee Schedule.
ANALYSIS
Growth in Special Events
Special events offer opportunities for cultural and social enhancement. Furthermore, some special events benefit the citizens of the City of Glendale by creating unique venues for expression and entertainment not regularly present within the community.
Event costs vary depending on the type of event, the rental location, and the City services required. The City of Glendale provides facilities and services for a number of events, which require the rental of City facilities, police services for crowd and traffic control, and other staff support from various city departments. Examples include parades, carnivals, farmers markets, block parties, and various civic/cultural events at city parks.
Over the last few years, the City has experienced an increase in the quantity and scope of such events organized by the community. Furthermore, individual City Officials continue to receive a growing number of requests for fee reductions for facility rentals and City services. This increase in demand, lack of a formal citywide policy structure, and the inability to administratively reduce fees beyond the Council-approved citywide fee schedule have posed a challenge in balancing community partnership expectations.
Furthermore, due to the specific nature and operational needs of various City facilities, the City’s fees and policies differ from one facility to the other. Finally, various fees and policies are adopted by resolution by specific Commissions (i.e. Parks Commission).
In response to the growing number of special events held within City facilities, staff has identified a need to standardize policies and procedures for using City facilities, equipment, and staffing resources.
New Nonprofit Rate
Introducing a “Nonprofit Rate” would establish a new standardization of fee reductions across the organization while maintaining the current fee-setting mechanism. It would also establish a City subsidy related to events and meetings conducted by eligible organizations in the nonprofit sector when utilizing public rights-of-way, City facilities, and/or City services.
More specifically, such a policy would standardize the process of administering individual applications by establishing a standard nonprofit rate for all rentals and {{section.number}}a3
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services directly provided by the City. Implementing such a standard would help ensure the fee determination process is administered fairly, transparently, and consistently.
Staff recommends maintaining the current “standard rate” for events that are organized by a person or entity for the purposes of promoting or engaging in a commercial transaction unless they possess 501 (c) designation by the IRS. These nonprofit organizations would be offered a 50% subsidy on all city-administered costs, including facility rentals, equipment rentals, and staffing.
Event organizers would still be required to assume the total cost of non-city-provided rentals and services, such as the rental of waste bins from the relevant franchise waste hauler, and other required amenities, such as portable restrooms and security guards when needed.
Ex. 1. Current and Proposed Nonprofit Subsidies
Current
Nonprofit
Subsidy
Proposed
Universal
Subsidy
City-Admin & Facilities 25% 50%
Staffing1 0% 50%2
Third-Party Costs 0% 0%
1 See Exclusions from the Subsidy section below
2 Up to $10,000 per event
Eligibility Criteria
The intent of establishing a nonprofit subsidy is primarily to reduce the financial burden on nonprofit organizations hosting events for charitable or social benefit in the interest of the greater community and to provide an objective application of the subsidy regardless of an event’s content.
In order to qualify for the subsidized rate, an organizing entity must be a designated nonprofit or not-for-profit organization as recognized by subsection 501 (c) of the Internal Revenue Service (IRS) code. 501(c) is a subsection of the United States Internal Revenue Code (IRC) that confers tax-exempt status on nonprofit organizations. Specifically, it identifies which nonprofit organizations are exempt from paying federal income tax.
Specifically, a nonprofit organization is an entity that is created and operated for charitable or socially beneficial purposes rather than to make a profit, and the organizations may serve religious, scientific, charitable, educational, literary, or health purposes. Examples of nonprofit organizations include advocacy groups, hospitals, universities, charities, churches, and foundations. In the U.S., nonprofit organizations are granted tax-exempt status and don’t pay taxes on donations or on money earned {{section.number}}a4
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through other fundraising activities. Nonprofit organizations are sometimes called NPOs or 501(c)(3) organizations based on the section of the Internal Revenue Service (IRS) tax code that permits them to operate.
A nonprofit's mission is to contribute a benefit to society rather than make a profit. To qualify as a tax-exempt nonprofit, the entity must serve the public good, meet filing requirements, be established as a 501(c)(3) or similar type of organization, and avoid engaging in certain types of activities. Once registered and operating, the organization has to maintain compliance with the appropriate state agency that regulates charitable organizations.
The terms nonprofit organization (NPO) and not-for-profit organization (NFPO) are sometimes used interchangeably. There are, however, key distinctions as follows:
•A nonprofit must offer some social benefit. A not-for-profit may exist to serve its membership rather than society at large. For example, a sports club may be jointly managed by its members as a NFPO and financed by member fees. •NPOs and NFPOs are regulated by different sections of the IRS's 501(c) code.
Under subsection 501(c), there are multiple sections that delineate the different types of tax-exempt organizations according to their purpose and operations. The most common include:
•501(c)(1): Any corporation that is organized under an act of Congress that is exempt from federal income tax
•501(c)(2): Corporations that hold a title of property for exempt organizations •501(c)(3): Corporations, funds, or foundations that operate for religious, charitable, scientific, literary, or educational purposes •501(c)(4): Nonprofit organizations that promote social welfare •501(c)(5): Labor, agricultural, or horticultural associations •501(c)(6): Business leagues, chambers of commerce, and others that are not organized for profit
•501(c)(7): Recreational organizations
Based on the City’s historical practice, it is recommended that the proposed nonprofit subsidy policy be extended to all nonprofit and not-for-profit entities possessing either of the official IRS designations listed above.
Exclusions from the Subsidy
The overall cost incurred by the event’s organizers can vary depending on its size.
While a smaller event may not require city staffing resources, larger events that attract large crowds or require street closures can result in significant costs for the City. {{section.number}}a5
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The City’s current policy requires full reimbursement for staffing costs even though it offers a 25% subsidy on the rental of facilities and equipment. Under this subsidy initiative, staff proposes simplifying the program’s regulations by not only increasing the rental rate subsidy from 25% to 50%, but also applying the subsidy towards all direct City expenses, including staffing, apart from two exceptions as follows:
•In instances where an event requires the rental of services or equipment not provided by the City, event organizers will be responsible for the payment of the total cost of those services. Examples may include security, rental of portable restrooms and wash stations when existing city amenities do not suffice to serve event participants, or the rental/removal of trash bins serviced by independent franchise waste haulers.
•While reviewing the need for either security or police staffing, every attempt is made to reduce the financial burden on event organizers when such services are required. This includes both limiting the number of personnel required to safely manage large crowds as well as seeking alternatives to city staffing by allowing less expensive alternatives like private security, when applicable. At times however, the need for City staffing is unavoidable and can result in a financial hardship for the event organizer as well as the City. By adopting the proposed nonprofit subsidy policy, the City would subsidize these costs by 50%, up to a maximum of $10,000 per event. By establishing a per-event cap, the City would still offer a significant subsidy to nonprofit enterprises not currently offered. •This policy does not apply to the Alex Theatre, given that an existing Council adopted policy already exists for this facility.
•This policy does not apply to event organizers promoting or engaging in a commercial enterprise requiring paid admission.
•This policy does not apply to field rentals for sports use, as there currently exists a Field Reservation Policy, established and approved by the Parks, Recreation and Community Services Commission.
In fiscal year 2023, the primary costs associated with special events were borne by Community Services & Parks and the Police Department, totaling approximately $890,000. The City’s current policy only subsidizes rental of facilities/equipment and not staffing costs. As such, the City subsidized a total of approximately $261,000 towards nonprofits organizing special events. If adopted as proposed, the new nonprofit subsidy would increase from 25% to 50% and include a 50% reduction in staffing expenses, up to $10,000 per event. As such, it is anticipated that if this policy were applied to last year’s statistics, the City would have subsidized $445,000 of city-related costs associated with events organized by nonprofits. See below for an approximate breakdown:
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Ex. 2. Current and Proposed Subsidized Rate % for Nonprofits 2023-24
Cumulative
Costs
Current Nonprofit
Subsidy
Proposed
Universal
Subsidy
25% 50%
Police Staffing Costs1
$250,000 0% = $0 50%2 = $125,000
Facility Rental Costs $618,000 25%3 = $261,000 50% = $309,000 Park Staffing Costs1
$22,000 0% = $0 50%2 = $11,000
Total Subsidized Costs $890,000 $261,0003 $445,000
1 See Exclusions from the Subsidy section
2 Up to $10,000 per event
3 Does not equal 25% due to inconsistent application of current rate modifications It is anticipated that the adoption of this policy may result in a greater number of events requesting staff resources due to a lower rate for providing event staffing, which may result in the need for additional appropriation of funds in the next fiscal year’s budget planning process. Such determination will be made following an analysis at the end of the current budget year.
In order to adopt the proposed subsidy, Council must amend the Comprehensive Citywide Fee Schedule for Library, Arts & Culture, eliminating their non-profit specified fees (a total of 15 fees as illustrated under Attachment 1 to the Fee Resolution) so that they, too can apply the universal 50% subsidy for all of their applicable fees for Non- Profit organizations.
STAKEHOLDERS/OUTREACH
Extending a reduced rate to nonprofits would provide universal financial benefits to organizations city-wide in executing their mission.
FISCAL IMPACT
By adopting the Nonprofit Subsidy Policy is the City will experience a reduction in revenue associated with the impacted fees. At this stage, estimating the exact impact is difficult as it will depend significantly on the level of usage of the subsidized fees.
ENVIRONMENTAL REVIEW (CEQA/NEPA)
Not applicable.
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CAMPAIGN DISCLOSURE
This item is exempt from campaign disclosure requirements.
ALTERNATIVES TO STAFF RECOMMENDATION
Any other not proposed by staff.
ADMINISTRATIVE ACTION
Submitted by:
John Takhtalian, Assistant City Manager
Prepared by:
John Takhtalian, Assistant City Manager
Approved by:
Roubik R. Golanian, P.E., City Manager
EXHIBITS/ATTACHMENTS