CITY OF OAKLAND
TO: Jestin D. Johnson
City Administrator
SUBJECT: Oakland Tourism Business
Improvement District 2024
City Administrator Approval
RECOMMENDATION
AGENDA REPORT
FROM: Ashleigh Kanat
Director, Economic and
Workforce Development
Department
DATE: April 24, 2024
Date:
Staff Recommends That The Oakland City Council Adopt An Ordinance Of The City Council Establishing The Oakland Tourism Business Improvement District.
EXECUTIVE SUMMARY
The proposed Ordinance would initiate the establishment of the Oakland Tourism Business Improvement District (OTBID) in the City of Oakland (City) to continue and update the current OTBID
2018. The introduction of the Ordinance to establish the OTBID (in addition to pursuing the traditional Resolution of Formation which was approved the City Council on April 16. 2024) and is recommended due to the new potential requirement if the Taxpayer Protection & Government Accountability Act (TPGAA) is approved by voters on the November 2024 ballot.
That proposed law would require all districts formed after January 1, 2022 to be formed via ordinance within 12 months of the TPGAA passing. Because the California Property and Business Improvement District Law of 1994 requires formation and renewal of Business Improvement Districts (BIDs) by resolution, the establishment of the OTBID via both resolution and ordinance is proposed.
The
proposed introduction and first reading of the Ordinance to establish the OTBID and levy the assessments is related legislation to the scheduled Public Meeting to be conducted by the City Council at the May 7, 2024 City Council meeting, pursuant to California Streets and Highways Code Section 36623 and Government Code Section 54954.6, which require one Public Meeting and one Public Hearing to be conducted during the process of forming the proposed OTBID via resolution. The purpose of both the Public Meeting and the Public Hearing is to provide an opportunity for affected business owners to file a formal protest to the formation and/or
to provide public testimony regarding the proposed formation of the above special assessment district. If, at the close of the June 4, 2024 Public Hearing, written protests are received from owners of affected lodging businesses who represent 50 percent (50%) or more of the estimated annual assessments to be levied, then a majority protest will exist, and the CED Committee
April 9, 2024
April 26, 2024
Jestin D. Johnson, City Administrator
Subject: Oakland Tourism Business Improvement District 2024 Date: April 24, 2024 Page2
OTBID shall not be established and the assessment shall not be imposed. If, however, there is insufficient protest to stop formation, then the district may be formed by the City Council by conducting a second reading and adopting the proposed Ordinance as well as by adopting a Resolution of Formation to establish the district at the close of the June 4, 2024 Public Hearing, resulting in the assessment taking effect on August 1, 2024 and ending on June 30, 2035.
A resolution to modify the current management plan will be brought to Council for consideration on June 4, 2024, in order to dissolve the OTBID 2018 on July 31, 2024 in time for the new OTBID to begin assessments and services on August 1, 2024. Accordingly, in January 2024, a proposed OTBID Management District Plan was finalized (Exhibit A to this report) and the required petition drive initiated in February 2024.
If formed, the district anticipates generating revenues of $3,040,269 per year, or approximately $43,830,543 over a proposed term of nine (9) years and eleven (11) months beginning August 1, 2024 and ending June 30, 2034.
The proposed assessment rate is two percent (2%) of gross short-term sleeping room rental revenue for lodging businesses with 50 or more rooms located within the City. During the OTBID term, the assessment rate may be increased by a maximum of one percent (1 %) per year after the initial eleven (11) months. If the increase is less than one percent (1 %) the minimum increment would be one quarter of a percent (0.25%). There will be some years where no increase is implemented. The assessment cannot exceed three percent (3%) during the term of the district. Exemptions to the assessment include the portion of stays that exceed 30 consecutive days, stays by any office or employee of a foreign or domestic government agency-provided billing is made directly to and payment is received from the government agency qualifying for this exemption, and room occupancies resulting from stays pursuant to contracts executed prior to August 1, 2024.
Monies generated will be administered by Visit Oakland, acting as the OTBID's Owners' Association, to coordinate and to provide enhanced special benefit marketing, advertising, sales and special events intended to increase room occupancy for assessed lodging businesses over the proposed term of nine (9) years and eleven (11) months of the district.
A list of affected businesses and the proposed service plan can be found in Appendix 2 and Section IV, respectively, of the OTBID Management District Plan (Exhibit A to the attached ordinance).
BACKGROUND/ LEGISLATIVE HISTORY
Tourism Business Improvement Districts (TBIDs) are an evolution of the traditional Business Improvement District (BID). The first TBID was formed in West Hollywood, California, in 1989.
Since then, over 100 California destinations have followed suit, resulting in California's TBIDs collectively generating over $300 million per year for local destination marketing. In recent years, other U.S. cities and states have adopted-or are in process of adopting-their own TBID legislation based on the California model (e.g. Washington, Montana and Texas).
City Council
May 7, 2024
Jestin D. Johnson, City Administrator
Subject: Oakland Tourism Business Improvement District 2024 Date: April 24, 2024 Page 3
In California, Streets and Highways code section 36600 et seq. (Property and Business Improvement District Law of 1994) allows for TBIDs to be established undertaking a range of special benefit services, independent from government, to utilize the efficiencies of private sector operation in the market-based promotion of tourism districts and allow lodging business owners to organize their efforts to increase commerce. Lodging business owners within the TBID pay an assessment and those funds are used to provide services that increase commerce.
In November 2008, a Resolution of Intention to form a citywide TBID was adopted by the City Council (Resolution No. 81641 C.M.S.); however, formation efforts were subsequently withdrawn due to the inclusion of Measure C on the local ballot. Measure C (which passed in July 2009 and became effective in January 2010) provided that one half of a three percent (3%) increment to the local Transient Occupancy Tax (TOT) could be used to fund Oakland Convention and Visitors Bureau (Visit Oakland) operations. In 2014, to leverage Measure C funds and keep pace with marketing initiatives in neighboring Bay Area jurisdictions, local hotel industry stakeholders revisited the effort to form a TBID. Pursuant to those efforts, the City Council adopted Resolution No. 85725 C.M.S. on July 21, 2015 to form the OTBID for a period of three years beginning August 1, 2015, and ending July 31, 2018. The OTBID was then renewed by City Council on June 19, 2018, in Resolution No. 87242 C.M.S., for a seven (7) year term beginning August 1, 2018 and ending July 31, 2025.
Prior to 2015, Visit Oakland's only dedicated consistent funding was received from Measure C, with annual budget ranging from $1.5 million to $1.9 million, and an average occupancy rate of 75% for lodging businesses with 50 or more rooms in Oakland. The first year of receiving BID assessments in Fiscal Year 2015-16, Visit Oakland received a combined $3,985,992 of Measure C and OTBID 2015 funds ($2,727,324 and $1,258,668, respectively) to market Oakland to visitors and overnight guests. In 2017, Visit Oakland received $1.3 million in BID assessments and 3.7 million visitors came to Oakland with 41% or 1.5 million staying overnight, representing a 20% increase since 2010. Visitors generated $827 million in total business sales, representing an increase of 3.4% over 2016. By 2019, Visit Oakland's TOT and BID annual revenue had increased to $3,719,393 and $1,563,638, respectively, allowing Visit Oakland to provide over $5,283,031 in marketing, sales and promotion services for Oakland tourism.
However, in 2020, the first year of the pandemic total revenue from the BID and TOT decreased by 56% in one year to $2.3 million from over $5 million in 2019. From 2020 to 2023, both OTBID and TOT revenues slowly increased, but in 2023 annual revenue still remained at 75% of 2019 revenue levels. In addition, during this time, 5 hotels closed permanently or converted to transitional housing for unhoused residents, decreasing TOT and OTBID assessment revenues, as well as limiting future potential increases by removing lodging businesses from TOT and OTBID assessment rolls. Despite the decrease in revenues, in 2022, there were 3.3 million visitors to Oakland and direct visitor spending was $590 million. Tourism generated 5,377 jobs, $86 million in state and local taxes, and had a total economic impact of $784 million in Oakland.
To build on OTBID 2018 accomplishments, support post-pandemic recovery of tourism in Oakland, and to enable continued marketing and sales services, OTBID 2018 representatives desire to replace OTBID 2018 a year before it expires at the end of July 2024, in order to form the next generation renewed district, OTBID. The proposed OTBID changes calculation of BID assessments to a progressive model that also will increase OTBID revenues, in order to City Council
May 7, 2024
Jestin D. Johnson, City Administrator
Subject: Oakland Tourism Business Improvement District 2024 Date: April 24, 2024 Page 8
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The Oakland City Council Adopt An Ordinance Of The City Council Establishing The Oakland Tourism Business Improvement District For questions regarding this report, please contact Shifra de Benedictis-Kessner, Urban Economic Analyst, at 510-238-6230.
Respectfully submitted,
ASHLEIGH KANAT
Director, Economic & Workforce Development
Department
Reviewed by:
Cristy Johnston-Limon,
Deputy Director & Business Development
Manager, Economic & Workforce Development
Department
Prepared by:
Shifra de Benedictis-Kessner,
Urban Economic Analyst Ill
Economic & Workforce Development
Department
City Council
May 7, 2024