CITY OF LAGUNA NIGUEL
CITY CoUnCIL AgENDA ITEM
To: Honorable Mayor and Council Members
FROM: Ron Rivera, Parks and Recreation Director
DATE: October 4, 2022
SUBJECT: Sea Country Festival 2022 Event Summary
RECOMMENDATION
Staff recommends that the City Council:
1. Determine if there should be an annual Sea Country Festival.
2. If there is to be a Sea Country Festival:
a. Determine if the City will remain as the lead agency for this event; and, b. Provide direction to staff on developing a policy for the allocation of community booths at the event in the future.
BACKGROUND
The City of Laguna Niguel hosted the three-day Sea Country Festival from Friday, August 26, 2022, through Sunday, August 28, 2022. An estimated 15,000 people attended the event which included a variety of entertainment, games, rides, food, booths, and a beer & wine garden. Laguna Niguel restaurants, businesses and non-profit organizations participated in the event.
This post-event report is being provided as was requested by the City Council on October 19, 2021, to assist with making a recommendation on hosting a future Sea Country Festival.
ANALYSIS
The festival attracted patrons from Laguna Niguel and the surrounding communities. This year there was an opportunity for local restaurants to participate as well, which added a popular feature to the festivities.
Annual Festival:
The festival is a showcase for the City. If the City Council desires to have an annual festival, City staff needs to start the planning process for the 2023 festival as soon as
possible. Committing to an annual festival will allow the City to enter into multi-year contracts with the vendors and create a multi-year sponsorship package.
Community Booths:
At the City's last two festivals, community booths have been available for rent by various community organizations. The City has made booths available on a first-come-first- served basis, but they are limited by the space available for the booths at the festival. At this time, the City does not have a policy reserving the booths for specific types of organizations at the festival or at other City-sponsored events. If the City Council determines that an annual festival should be held, staff recommends that the City Council also provide direction regarding a policy that prioritizes or reserves the booth space for certain types of organizations, such as non-profit organizations and businesses that are based in Laguna Niguel. The City Council may also provide direction on the types of businesses and organizations that can sponsor the festival. If the Council would like staff to prepare such a policy, it should be brought to the City Council well in advance of the next festival event.
Community Foundation Information:
A suggestion was previously made that future festivals could be operated through a community foundation. This topic was discussed at the Strategic Plan Workshop in February 2022. Staff has researched options for the formation of a Laguna Niguel Community Foundation. Below are several options for consideration.
Option 1: Formation of a Non-profit Public Benefit Corporation (e.g., Foundation) Through extensive research and discussions with the City Attorney's Office, the California Community Foundation Executive Director and several others with experience in this field, staff was able to learn about the foundation formation process. The steps to form a non- profit corporation is as follows:
• Select a corporate name.
• Determine who the incorporator is (e.g. person responsible for signing the documents).
• Draft the articles of incorporation.
• File the articles of incorporation with the Secretary of State. • Draft the bylaws.
• Adopt the bylaws.
• File a Statement of Information with the Secretary of State. • Apply for an Employer Identification Number.
• Register with the Attorney General's Registry of Charitable Trusts. • File the application for tax exemptions with the IRS. • File applications for tax exemptions with the California Franchise Tax Board. • Submit a "Notice of Intention to Solicit" and related documentation in accordance with the City's Municipal Code Article 1, Division 10.
It is estimated that to complete the steps outlined above it will take a minimum of 2 years to establish a foundation for the City, with a cost of a minimum of $11,000 in legal fees, not including City staff time.
Advice: Throughout the last several months, staff has been in conversations with individuals and organizations who have a great deal of expertise in both establishing and dissolving community foundations. The first piece of advice we were provided in each of these conversations is not to pursue the formation of a community foundation. Some of the reasons listed include, but are not limited to:
• The length of time it takes to establish a foundation; • Risk and investment of time and financial resources; and, • Many that are established are dissolved after only a few years.
Further, the City Attorney's office has noted that forming a foundation solely for the purpose of raising funds for and operating a festival may not meet the legal definition of a tax-exempt charitable organization established by the IRS and that further analysis on this fact-intensive issue should be conducted if this option is pursued. Thus, there is a risk of pursuing this option in this manner as the foundation may not receive the benefit of tax-exempt status, which may undermine the financial benefits of this option after investing years of time and resources into this option.
Option 2: OneOC
Another option available to the City of Laguna Niguel, is to establish a charitable giving fund through OneOC. The mission of OneOC is "to accelerate nonprofit success by connecting non-profits and companies together." Through OneOC, the City would utilize the existing 501(c)(3) status of OneOC to create what can be known as the 'Laguna Niguel Fund'. OneOC would be responsible for all the administrative paperwork, filing tax returns etc. Those in the community who donate to the fund would be able to have their donations tax deductible.
The fund can be established by a majority vote of the City Council. The expenditure of the funds would also require approval by a majority of the City Council. However, a requirement of the fund is that funds can only be withdrawn and distributed to another 501(c)(3) organization. If the goal of the fund is to pay for the annual festival, the City would have to partner with a local non-profit to host the festival. Then the City's OneOC funds could be provided to that local non-profit and the non-profit would then pay for the festival expenses directly.
The cost to establish the fund is $1,000 for the initial setup. The annual cost to maintain the fund is $2,500 for accounts less than $250,000. For accounts greater than $250,000, the annual cost is 2% of the annual gross deposits.
Establishing a non-profit account through OneOC is the most cost-effective solution for the City. In addition, there is significant savings in staff time in maintaining and staffing a formal community foundation. However, both options will take significant time to come to
fruition, which may very well likely not be before a festival in 2023, if scheduled.
Planning, organizing, and implementing an annual festival takes the work of the entire Parks and Recreation Department and much of the City's additional staff. It takes many months of planning to make this event successful. Given the amount of time and coordination involved, it would be extremely challenging for a local non-profit with volunteers to invest the amount of time required in lieu of City staff. Although it is possible, the local non-protit would need to tully commit to such an event and have a large volunteer base. Based on the information and research that staff has done, staff recommends that if the City Council would like to have an annual festival that the City continue to take the lead planning, organizing, and leading the effort and continue to work to increase revenues and decrease expenditures to reduce the financial commitment to the City in future years.
ALTERNATIVES CONSIDERED
The City Council may decide not to host an annual festival.
FISCAL REVIEW
The tables below demonstrate the difference between the estimated costs and the actual costs of the 2022 Sea Country Festival.
2022 Estimated 2022 Actual
Revenue Category Revenue Revenue
Sponsorships $15,000 $18,500
Booth Spaces $6,300 $4,900
Net Ticket Sales $18,700 $15,200
TOTAL REVENUE $40,000 $38,600
2022 Estimated 2022 Actual
Expenditure Category Expenditures Expenditures
(9/12/22)
Entertainment $20,000 $16,560
(Bands, DJs,
Entertainers)
Professional Services $36,500 $46,400
(Police Services, Public
Works)
Marketing/Promotion $5,000 $5,100
Rentals $41,500 $38,880
Supplies $5,000 $3,030
Staffing Costs $12,000 $7,000
TOTAL $120,000 $116,970
EXPENDITURES
The actual costs of the event were $116,970. Staff estimated revenue (ticket sales, sponsorships, and sales from booth spaces) to be $40,000. The actual revenue was $38,600. This resulted in a total expense to the City of $78,370.
If the City Council directs staff to move forward with a Sea Country Festival, staff will begin to secure sponsorships to reduce the City's costs as much as possible. Staff anticipates that as the festival grows in size and notoriety, revenue from sponsorships, booths, and ticket sales are also likely to increase. This will likely result in additional reduction of festival event costs.
LEGAL REVIEW
No legal review is required for this report.
CONCLUSION
Staff recommends that the City Council:
1. Determine if there should be an annual Sea Country Festival.
2. If there is to be a Sea Country Festival:
Determine if the City will remain as the lead agency for this event; and, b. Provide direction to staff on developing a policy for the allocation of community booths at the event in the future
Jamara dEptonnau
Tamara S. Letourneau Eric Hendrickson
City Manager Finance Director
Ron Rivera
Parks and Recreation Director