CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
5/8/2023
1 SUBJECT:
Resolution of Intention to Amend the Pacifica Hotel Business Improvement District (BID) by amending the Pacifica Municipal Code to remove provision for allocation of funds within thirty days and transition the Managing Agency role of the BID to the City of Pacifica.
RECOMMENDED ACTION:
Adopt the resolution entitled "A resolution of the City Council of the City of Pacifica declaring the City Council's intention to amend the Pacifica Hotel Business Improvement District (BID) by amending Section 3-17.03 (administration) of Chapter 17 (hotel business improvement district) within Title 3 (Finance) of the Pacifica Municipal Code to remove provision for allocation of funds within thirty days and to replace the Pacifica Chamber of Commerce as the Managing Agency of the BID with the City of Pacifica", and set the date of June 12, 2023, for the Public Hearing on these changes in the BID administration and continuation of annual levy of assessments on hotels within the BID at the same rate as in Fiscal Year 2022-23.
STAFF CONTACT:
Yulia Carter, Assistant City Manager
(650) 738-7402
[email protected]
BACKGROUND / DISCUSSION:
Pacifica Hotel Business Improvement District
The Pacifica Hotel Business Improvement District (BID) was established in 2004 pursuant to California Streets and Highways Code sections 36500 et. seq., the City Council of the City of Pacifica adopted Ordinance No. 714-C.S creating the Pacifica Hotel Business Improvement District and levying an annual assessment of $1.00 per room per day of occupancy on the hotels within the City.
The intent of creating the BID was to develop a mechanism of funding for the hotels in the City to self-fund activities that would promote occupancy through funds derived from the annual assessment of $1.00 per room per day of occupancy. Business Improvement Districts are selfbenefiting assessment districts where business owners voluntarily self-impose a fee to fund their daily business-related activities, advertising, or promotional opportunities. By California law, it is not a tax. Therefore, BIDs are most commonly encouraged and supported because they allow the business to self-fund and self-promote. Additionally, unlike Transient Occupancy Taxes (TOT), which go into the City's General Fund, the participating hotels allocate and control BID assessment funds.
The assessment from the funds levied by the businesses must be used "to promote lodging at the hotels within the district, administer marketing programs that increase overnight lodging, and to fund related activities, staffing, and administration for the district." (Pacifica Municipal Code § 3-17.02(b)). The revenue from the levy cannot be used to provide improvement or activities outside the district or for any purpose other than those specified in the resolution of intent.
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The Pacifica BID was established under the authority of the Parking and Business Improvement Area Law of 1989, which does not require identifying a "managing agency." Therefore, many Bay Area Cities with BIDs established under the same law manage their BID operations internally (e.g., the City of South San Francisco and Brisbane). However, the Pacifica City Council previously appointed the Chamber of Commerce as the BID Managing Agency.
Currently, the Advisory Committee comprises one representative from each hotel, the managing director of the Pacifica Chamber of Commerce and Visitor Center, and one from the Chamber of Commerce Board of Directors.
The BID funds are solely managed by the Chamber of Commerce, which represents the interests of each BID member. The City collects the BID assessments with the Transient Occupancy Taxes and remits the BID funds to the Chamber monthly as a pass-through.
Therefore, the City has no control over the BID funds.
The assessment generated approximately $75,000 per year (pre-COVID), dropping as an average to a little under $50,000 over the last three years. This year's assessment is projected to return to the pre-COVID level. Since the beginning of the current fiscal year, the City remitted $51,697 of the BID assessments to the Chamber. Due to a two-month lag in the City receiving TOT revenues (and the BID assessments), this number represents about eight months of assessments (July 2022-Feb, 2023).
Council Direction to Staff in 2022
During 2022, and as part of the broader Vision 2025 & Beyond Strategic Financial Sustainability project, the City presented to Council a two-year Marketing Plan to help improve the local economy and facilitate post-COVID recovery. Marketing efforts focused on programs such as Shop Pacifica and Workation. The Workation program is designed to improve hotel occupancy rates mid-week and off-season to ultimately benefit the hotels and the City, as higher occupancy rates would lead to higher TOT and Sales Tax revenues generated by Pacifica visitors. During the development and launch of these programs, City staff reached out to the Chamber of Commerce to communicate these programs to BID members and collaborate with the Chamber on implementation. However, after months of unsuccessful attempts at collaboration, the City had to proceed with the program launch without the Chamber's cooperation and only using Cityowned social media channels. In addition, the City had to create its own website landing pages for the Shop Pacifica and Workation marketing programs instead of using the Visit Pacifica platform administered by the Chamber, as was initially planned, due to the inability to reach support and cooperation from the Chamber for the use of the Visit Pacifica website.
These multiple issues related to the BID program management by the Chamber prompted City Council discussions in May-June 2022 about how to proceed. During the City Council public hearing on June 27, 2022, City Council adopted a resolution continuing to levy the assessment for FY 2022-23. However, City Council also directed staff to hold quarterly meetings with the BID members, Chamber representatives, and Council liaisons to try to build collaboration between the City and the BID, ensure compliance with the BID regulations, review performance measures and BID budget, unify marketing efforts and report back to Council at mid-year with recommendations.
On September 30, 2022, the City held the Q1 meeting, where the City Manager and Council liaisons communicated the Council's direction for quarterly BID meetings to the members. In addition, city staff presented the Workation campaign, a City-sponsored marketing program directly benefitting hotels. The Chamber of Commerce also reported on marketing programs and the use of BID funds to date. The meeting revealed that the BID members were unaware of the City's marketing programs and were generally confused about the purpose and benefit of Pacifica City Council 3
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the BID.
In January 2023, two BID members expressed concerns over the effectiveness and value of the BID. In response, City staff placed the BID governance structure item for discussion at the Q2 BID meeting that was held on February 3, 2023, with BID representatives from Fairfield Inn & Suites; Inn at Rockaway; Lighthouse Hotel; Anchor Inn; Sea Breeze Motel; and the Chamber of Commerce present at the meeting. The Council liaisons, Sue Beckmeyer and Mary Bier, and staff also attended the meeting. Representatives from America's Best Value Inn and Pacifica Beach Hotel were absent.
During the meeting, City staff presented the Workation program details and the marketing materials in preparation for the program launch the following week. The majority of the meeting discussion was spent on the BID Governance structure and whether the BID program and assessment should continue.
The City staff facilitated the discussion among the BID members, including the Chamber of Commerce, and offered the following three options for discussion, making clear that any other desired option would be evaluated and reported to the City Council to help in their decisionmaking regarding the BID.
Option 1 - Dissolution of the BID
A majority of BID members could decide that the BID should be dissolved either because it was no longer serving its intended purpose or for some other reason. The process for the BID disestablishment was also discussed. It would require the Council to adopt a resolution of intent to disestablish the BID before the notice of the disestablishment and public hearing in accordance with Streets and Highways Code section 36550. The resolution must state the reason for the disestablishment, the time and place of a public hearing to consider the disestablishment and provide a proposal to dispose of any assets acquired with the revenues of the assessments levied within the business improvement area. Upon the disestablishment of the BID, the remaining revenues derived from the assessments, or any revenues derived from the sale of assets acquired with the revenues, must be refunded to the owners of the businesses.
Option 2 - Continue the assessment but change the BID governance structure.
The BID members also discussed changing the BID governance structure to require specific procedural standards, such as creating by-laws or changing the managing agency from the Chamber to the City or any other non-profit organization (e.g., Coastal Chamber, The San Francisco Peninsula, etc.). This option would require an amendment of the Pacifica Municipal Code in the same way that the Ordinance was originally adopted by the City Council (i.e., resolution of intent, notice, public hearing) as identified in Streets and Highways Code section 36500 et. seq.
The chart below provides more detail on the process and timeline that the City would need to follow to amend the BID governance structure set forth in section 3-17.03 of the Pacifica municipal code:
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1. The City Council adopts a resolution of intention setting forth the details of the BID - May 8, 2023 program, a date and time for a public hearing. (S&H 36522)
2. Within seven days of adopting the resolution of intention, a complete copy of the May 15, 2023 Resolution must be mailed to each business owner in the territory of the proposed BID. (S&H 36523(b))
3. The City must mail to each business a joint notice of public meeting and public hearing. (S&H 36523.5 and Gov. Code 54954.6(a)(2),54954.6(c))
by May 15, 2023
This joint notice is typically mailed along with a copy of the resolution of intention.
4. No earlier than ten days after mailing the joint notice, the City Council must hold at least June 12, 2023 one public meeting at which the City Council shall allow public testimony regarding the proposed new assessment (or amendment). (Gov. Code 54954.6(a)(1), 54954.6(c)(1))
5. No earlier than forty-five days after mailing the joint notice, and no earlier than seven days after the public meeting, the City Council must hold a public hearing. (Gov't Code 54954.6(a)(2), 54954.6(c)(1))
July 10, 2023
6. At the public hearing, the City Council must consider oral and written protests. If written July 10, 2023 protests meeting the requirements of Section 36524 of the Streets & Highways Code are received (and not withdrawn) from the owners of businesses in the proposed area which will pay 50 percent or more of the assessments proposed to be levied, then proceedings must be abandoned for no less than one year (S&H 36525(a))
7. If a 50%/+ protest is not received, the City Council may adopt (or amend) an ordinance establishing (or amending) the BID. (S&H 36527)
July 10, 2023
(introduction of the
Ordinance) July 24,
2023 (adoption of
the Ordinance)
Option 3 - Continue with the current assessment and governance structure The "status quo" option was also offered for discussion when the Chamber of Commerce would continue as the Managing Agency of the BID to continue making decisions on BID activities, such as the retention of consultants and other allocations of BID funds. This option would require the same annual process to continue the assessment in the new fiscal year (effective July 1, 2023) with no changes to the BID's assessment, boundaries, or governing structure (notice of intent, notice to businesses, and public hearing process still applies to levy of assessment).
Because the City of Pacifica is not a BID member, staff made no recommendation for the future of the BID program and only helped to facilitate the discussion. However, City staff expressed its commitment to working with the BID to collaborate and identify a solution that serves Pacifica's hotels best.
After the open discussion, the majority of the BID hotel representatives voted for option two and expressed their desire to: 1) continue the assessment at the current rate, 2) for the City of Pacifica to assume the role of the Managing Agency for the BID moving forward, and 3) for the City to safeguard the assessed funds until the BID decides how it would like to proceed.
Based on the recommendation of the majority of BID members at the February 3, 2023, meeting City Manager recommends that the Council adopts a resolution of intent to amend the City's Municipal Code to remove provision for allocation of funds within thirty days and transition the Managing Agency role of the BID to the City of Pacifica.
If the Council adopts this resolution, staff will proceed with issuing the notice for the public meeting and hearing in accordance with the Streets and Highway Code Section 36522 and 36523. In addition to following this process for the ordinance amendment, staff will bring forward a resolution of intent to levy the assessment at the current rate of $1 per night per stay at the Pacifica City Council 5
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May 22nd City Council meeting, along with the annual BID report prepared by the Chamber of Commerce. Upon adoption of this resolution of intent, the City will follow its normal annual process of levying the assessment, which includes issuing the notice and scheduling a public hearing in accordance with the Streets and Highway Code Section 36534. The public hearing for the assessment will be scheduled for June 12, 2023, so the collection of the assessment will continue with no break or interruption. If the Ordinance amendment is adopted, the City will implement the amendments 30 days after the adoption or by August 23, 2023.
ALTERNATIVE ACTION:
The City Council may elect not to renew the Pacifica Hotel BID for FY2023-24 or provide alternative recommendations to staff.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
"Fiscal Sustainability" includes investing in economic development to increase revenues, funding a reserve/emergency fund, and being well-prepared for grant opportunities.
FISCAL IMPACT:
No significant fiscal impact is associated with this action, except for savings related to eliminating the administrative cost of processing BID pass-through payments. The City currently collects no fee for administering the BID.
ORIGINATED BY:
City Manager's Office
ATTACHMENT LIST:
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RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA DECLARING THE
CITY COUNCIL'S INTENTION TO AMEND THE PACIFICA HOTEL BUSINESS IMPROVEMENT DISTRICT (BID) BY AMENDING SECTION 3-17.03 (ADMINISTRATION) OF CHAPTER 17 (HOTEL BUSINESS IMPROVEMENT DISTRICT) WITHIN TITLE 3 (FINANCE)
OF THE PACIFICA MUNICIPAL CODE TO REMOVE PROVISION FOR ALLOCATION OF
FUNDS WITHIN THIRTY DAYS AND TO REPLACE THE PACIFICA CHAMBER OF
COMMERCE AS THE MANAGING AGENCY OF THE BID WITH THE CITY OF PACIFICA WHEREAS, pursuant to California Streets and Highways Code sections 36500 et. seq., the City Council of the City of Pacifica adopted Ordinance No. 714-C.S. in 2004, creating the Pacifica Hotel Business Improvement District and levying an annual assessment of $1.00 per room per day of occupancy on the hotels in the City; and WHEREAS, the Pacifica Hotel Business Improvement District ("BID") has been operating and levying an annual assessment of $1.00 per room per day of occupancy on the hotels in the City continuously since 2004; and
WHEREAS, Ordinance No. 714-C.S. is codified in Pacifica Municipal Code (“PMC”) Chapter 17, “Hotel Business Improvement District” within Title 3, “Finance”; and WHEREAS, PMC section 3-17.03(a), “Administration” currently provides that funds will be collected by the City of Pacifica on the same schedule as, but independently from, the collection of transient occupancy taxes and that funds shall be allocated from the City to the district within thirty (30) days of collection; and WHEREAS, PMC section 3-17.03(c) also provides that the Pacifica Chamber of Commerce and Visitor Center is designated as the managing agency for district related activities, staffing and administration; and
WHEREAS, during the Council meeting on June 13, 2022, City Council directed staff to hold quarterly meetings with the BID members, Chamber representatives, and Council liaisons to build collaboration between the City and the BID, ensure compliance with the BID regulations, review performance measures and BID budget, unify marketing efforts, and report back to Council at mid-year with recommendations; and WHEREAS, at the second quarter meeting of the BID on February 3, 2023, the members of the BID and the Pacifica Chamber of Commerce and City staff discussed the governance structure and improvements that could be made to the BID and recommended by the majority vote of the BID members who were present to replace the Chamber of Commerce as the managing agency and identify the City of Pacifica as the managing agency for the BID; and
WHEREAS, the BID members expressed interest to align the BID’s and City’s Marketing Plans and ensure collaboration in achieving the same goals of promoting Pacifica as overnight destination, assisting hotels with improving occupancy rates throughout the year and improving the hospitality industry and local economy in general.
The BID members expressed their desire to continue with the assessment but hold Pacifica City Council 7
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allocating the BID funds until the City’s limited-term ARPA-funded marketing budget is exhausted at the end of 2023; and
WHEREAS, the City Council will need to amend the existing provisions of Chapter 17 to make the requested improvements to the BID, and the BID has expressed support for and recommended this amendment.
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Pacifica, California, that:
1. Pursuant to Streets and Highways Code section 36500 et seq., the City Council declares its intention to amend the BID by amending Subsections (a) and (c) of PMC Section 3-17.03 to remove provision for the allocation of funds to the district within thirty (30) days and to replace the Pacifica Chamber of Commerce as the Managing Agency for the district for the City of Pacifica.
2. Public Meeting. The City Council hereby sets Monday, June 12, 2023, as the date for the public meeting on the proposal to amend the BID. The public meeting will be held at 7:00 p.m. or as soon thereafter as practicable and shall be for the purpose of allowing public testimony on the proposal to amend the BID. At the public meeting the testimony of all interested persons, for or against the amendment of the BID or any of the matters included in the amendment will be heard.
3. Pursuant to Streets and Highways Code section 36523(b), within seven (7) days of adoption of this Resolution of Intention, the City Clerk is hereby directed to mail a complete copy of the Resolution to each business owner in the territory of the BID.
4. A public hearing to amend the BID shall be held on Monday, July 10, 2023, before the City Council. The public hearing will be held at 7:00 p.m. or as soon thereafter as practicable and shall be for the purpose of allowing testimony of all interested persons, for or against the amendment of the BID by amending Subsections (a) and (c) of PMC Section 3-17.03 and to receive any protests collected.
5. Protest Procedures. Written and oral protests to the levy of the annual assessments may be made at the public hearing in the form and manner prescribed in Sections 36624 and 36625 of the California Streets and Highways Code. 6. At the public hearing, the City Council must consider oral and written protests. If written protests meeting the requirements of Section 36524 of the Streets & Highways Code are received (and not withdrawn) from the owners of businesses in the BID totaling less than fifty percent (50%), then the City Council may amend Subsections (a) and (c) of PMC Section 3-17.03.
4. The City Clerk is hereby directed to provide joint notice of the public meeting and public hearing on the proposed amendment to the BID and publish any necessary notice in the manner prescribed by California Streets and Highways Code section 36534.
5. The City Clerk is directed to certify the adoption of this Resolution. The Resolution shall take effect immediately upon its adoption by the City Council. • • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 8th day of May 2023, by the following vote:
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AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
Tygarjas Twyrls Bigstyck, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney