CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
3/10/2025
1 SUBJECT:
Resolution of Intention to Establish the Pacifica Tourism Marketing District RECOMMENDED ACTION:
Adopt the resolution entitled " A Resolution Of The City Council Of The City Of Pacifica Declaring Its Intention To Establish The Pacifica Tourism Marketing District (PTMD) And Fixing The Time And Place Of A Public Meeting And A Public Hearing Thereon And Giving Notice Thereof" and set the date of March 24, 2025 for the Public Meeting and April 28, 2025, for the final Public Hearing on the formation of the '94 BID District.
STAFF CONTACT:
Yulia Carter, Assistant City Manager
(650) 738-7402
[email protected]
BACKGROUND/DISCUSSION
In 2004, the Pacifica Hotel Business Improvement District (PHBID) was formed pursuant to the Parking and Business Improvement Area Law of 1989 (‘89 Law). The City of Pacifica and Pacifica lodging businesses now seek to modernize the PHBID by forming a new Pacifica Tourism Marketing District (PTMD) pursuant to the Property and Business Improvement District Law of 1994, Streets and Highways Code section 36600 et seq. (‘94 Law) and allowing the PHBID formed under the ‘89 Law to expire at the end of its current 1-year term on June 30, 2025, by not undergoing the annual renewal process at City Council.
In early 2024, the process to form the ’94 District and develop a Management District Plan (MDP) was initiated based on feedback from the PHBID Advisory Board (Board). At that time, the Board had decided on a 1% assessment rate for the new ’94 District.
In April 2024, petitions to form the ’94 District were distributed to all hotels owners (which also make up the PHBID Board) with the proposed 1% assessment rate. Six signed petitions were received out of a total of eight eligible PHBID members to reach the necessary majority to move forward with forming the new district.
Although the required legal threshold had been met, the City did not move forward with the formation of the ’94 district at that time. On April 22, 2024, City Council adopted a Resolution of Intention to Continue the ‘89 PHBID.
On June 24, 2024, City Council conducted a Public Hearing and adopted a Resolution Confirming the Annual Report from the PHBID and Assessing the Levy for the Fiscal Year 2024-25 at the same rates as in the Fiscal Year 2023-24, which was $1 per room per night.
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With the ’89 PHBID approaching the end of its current term, staff brought the continuation of the ’94 district formation as an agenda item at the January PHBID Board meeting. At the meeting, the BID expressed concerns about the financial burden of the 1% assessment rate on their guests. While the Board agreed to continue with the ’94 district formation, they proposed to modify the 1% assessment rate that they approved previously.
Since the circulation of the petitions, the Board has indicated a preference to maintain the current rate of $1 per room, per day of occupancy rather than 1% of gross revenue. Since this substantial change from the previously approved Board direction on the assessment was raised during the meeting, staff did not have the financial analysis for this newly proposed option at that time. The Board moved forward and voted for $1 per room per day of occupancy assessment. Since that meeting, staff has completed the financial analysis comparing the difference between a $1 assessment and a variety of % assessments, which is summarized in the Alternatives section of this report for transparency about this analysis.
Staff is recommending that the City follow steps to complete the formation of the new ‘94 PTMD following a mailed notice to all lodging businesses, a public meeting on March 24, 2025, and a public hearing on April 28, 2025.
At the conclusion of the ’94 PTMD formation process, the City Council may adopt, revise, change, reduce, or modify the proposed assessment pursuant to Streets and Highways Code section 36624.
Proposed assessments may only be revised by reducing any or all of them.
The PHBID will expire on June 30, 2025, and the new ’94 PTMD, if approved, will begin collecting assessments on July 1, 2025.
Purpose of PTMD
The PTMD is a benefit assessment district proposed to create a revenue source to help fund marketing and sales promotion efforts for Pacifica hotels and short-term vacation rentals. This approach has been used successfully in other destination areas throughout the state to improve tourism and drive additional room nights to assessed hotels and lodging businesses. The proposed PTMD includes all hotels and all short-term vacation rental businesses (hereinafter referred to collectively as “lodging businesses”), existing and in the future, available for public occupancy located within the boundaries of the City of Pacifica.
Lodging business owners decided to pursue formation of the PTMD in order to create a revenue source devoted to marketing Pacifica as a tourist, meeting and event destination. If established, the PTMD would generate between approximately $100,000 - $200,000+ on an annual basis (depending on the decision on the final assessment rate) for the promotion of travel and tourism specific to Pacifica.
TOURISM MARKETING DISTRICTS
Tourism Marketing Districts (TMDs) utilize the efficiencies of private sector operation in the marketbased promotion of tourism. These special assessment districts allow lodging business owners to organize their efforts to increase tourism. Lodging business owners within the TMD fund the TMD, and those funds are used to provide services that are desired by and benefit the lodging businesses within the TMD.
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TMD benefits:
➢ Funds cannot be diverted for other government programs; ➢ They are customized to fit the needs of each destination; ➢ They allow for a wide range of services; including: destination marketing, tourism promotion, and sales lead generation;
➢ They are designed, created and governed by those who will pay the assessment; and ➢ They provide a stable funding source for tourism promotion.
In California, TMDs are primarily formed pursuant to the ‘94 Law. The key difference between ’94 districts and ’89 districts is that majority petition is required to form a ’94 district and they may be formed for an initial 5-year term, rather than needing to renew annually. ’89 Districts
o City Council can form district without petitions requesting it o Council-appointed Advisory Board
o District governed by Advisory Board
o 1 year term - must renew annually
’94 Districts
o Majority petition required to form
o Managed by “Owners’ Association”, a private, nonprofit corporation assigned to manage the programs
o Management District Plan provided for details of service and budget parameters o Provided for 5-year term, with ten years upon renewal o Requires Brown Act & Public Records Act compliance
o Annual Report to Council required
Written and oral protests to the levy of the annual assessment may be made at the public hearing in the form and manner prescribed in Sections 36625 and 36626 of the California Streets and Highway Code up until the close of the public hearing.
MANAGEMENT DISTRICT PLAN (MDP)
The 2024 MDP includes the proposed boundary of the PTMD, a service plan and budget and a proposed means of governance. The PTMD will include lodging businesses, existing and in the future, available for public occupancy located within the boundaries of the City of Pacifica.
The 2024 MDP outlines an annual assessment rate of one percent (1%) of gross short-term sleeping room rental revenue. Annually, the Owner’s Association may increase or decrease the assessment rate by a maximum of one-quarter of one percent (0.25%) of gross short-term sleeping room rental revenue.
Based on the benefit received, assessments will not be collected on: stays of more than thirty (30) consecutive days; any officer or employee of a foreign government, which officer or employee is exempt by reason of express provision of Federal law or international treaty.
The proposed PTMD will have a five (5) years year term, beginning July 1, 2025 or as soon as possible thereafter, and ending five (5) years from its start date. The assessment will be implemented beginning July 1, 2025 or as soon as possible thereafter. Once per year beginning on the anniversary of PTMD formation there is a thirty (30) day period in which business owners paying fifty percent (50%) or more of the assessment may protest and begin proceedings to terminate the PTMD.
The City of Pacifica will be responsible for collecting the assessment on a monthly basis from each assessed lodging business located in the boundaries of the PTMD. The City shall forward the Pacifica City Council 4
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assessments collected to the Owners’ Association, less any estimated costs associated with administering the assessment. If actual costs exceed the estimated amount withheld then the PTMD shall reimburse the City of Pacifica. The Owners’ Association will be a non-profit organization charged with managing funds and implementing programs in accordance with the Plan. ’94 PTMD FORMATION PROCESS
March 10, 2025 RESOLUTION OF INTENTION
Upon the submission of a written petition, signed by the business owners in the proposed district who will pay more than fifty percent (50%) of the assessments proposed to be levied, the City Council (Council) may initiate proceedings to establish a district by the adoption of a resolution expressing its intention to establish a district.
Petition Status: Petitions in favor of PTMD formation were submitted by 6 lodging businesses, which represent 50.10% of the total PTMD assessment, not counting a single business proposed to pay more than 40 percent (40%),pursuant to California Streets and Highways Code section 36621(a). This majority petition allows the Council to initiate proceedings for PTMD formation at the March 10, 2025 meeting.
No later than
March 14, 2025 NOTICE
The ‘94 Law requires the City to mail written notice to the owners of all businesses proposed to be within the PTMD. Mailing the notice begins a mandatory forty-five (45) day period in which owners may protest PTMD formation.
March 24, 2025 PUBLIC MEETING
Allow public testimony on the formation of the PTMD and levy of assessments.
No Council action required.
April 28, 2025 FINAL PUBLIC HEARING
If written protests are received from the owners of businesses in the proposed PTMD which will pay fifty percent (50%) or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than fifty percent (50%), no further proceedings to levy the proposed assessment against such businesses shall be taken for a period of one (1) year from the date of the finding of a majority protest by the Council. At the conclusion of the public hearing to establish the district, the City Council may adopt, revise, change, reduce, or modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with the revenues from the assessments pursuant to Streets and Highways Code section 36624.
Proposed assessments may only be revised by reducing any or all of them.
The adoption of the Resolution of Formation shall establish the PTMD and levy of the assessment in each of the fiscal years referred to in the Plan.
If the ’94 PTMD is approved after the foregoing process, the City will need to amend Chapter 17, “Hotel Business Improvement District” within Chapter 17, Title 3 of the Pacifica Municipal Code.
ALTERNATIVE ACTION:
As described above, since the last Board meeting on January 24, 2025, staff has prepared the financial Pacifica City Council 5
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analysis for the $1 per room per day assessment option as voted on by the Board.
The analysis indicates that the Board-preferred option of $1 per night would generate approximately $125,000 per year. For comparison, lowering the previously approved 1% assessment down to 0.5% would generate approximately $143,000 while also reducing the average cost to hotel guests to lower than $1 per night (approx. $0.75 per night). In other words, the percentage-based model generates more money at a lower impact to hotel guests than the $1 per night model.
This difference arises because percentage-based projections are tied to current TOT collections, reflecting variations in gross rent between a hotel stay and a more costly STR stay.
Additionally, a percentage-based assessment provides the BID with maximum future flexibility to increase or decrease the assessment in any given year to respond to changing economic conditions and BID member needs.
Staff has described this alternative for the Council because this information was not available at the time of the BID’s decision. The City Manager is seeking the Council’s direction on whether staff should present this new financial information to the BID Board after the resolution of intent is adopted and before the final public hearing on the 94’ district formation, at which time the Council may adopt, revise, change, reduce or modify the proposed assessment.
Another alternative is that the City Council may elect not to form the Pacifica Hotel TMD assessment for FY2025-26 or delay the adoption of the resolution to levy the assessment until a later date.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
"Enhancing Organizational and Fiscal Sustainability" includes investing in economic development to increase revenues for tourism and marketing that will directly benefit the hospitality industry and improve the local economy.
FISCAL IMPACT:
There is no significant fiscal impact associated with this action. The City collects no fee for administering the district assessments at this time.
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 ITS
INTENTION TO ESTABLISH THE PACIFICA TOURISM MARKETING DISTRICT (PTMD)
AND FIXING THE TIME AND PLACE OF A PUBLIC MEETING AND A PUBLIC HEARING
THEREON AND GIVING NOTICE THEREOF
WHEREAS, the Property and Business Improvement Law of 1994, Streets and Highways Code § 36600 et seq., authorizes the City of Pacifica (City), upon the submission of a petition signed by the property or business owners in the proposed district, to establish business improvement districts for the purposes of promoting tourism; and WHEREAS, the proposed PTMD includes all hotels and all short-term vacation rental businesses (hereinafter referred to collectively as “lodging businesses”, existing and in the future, available for public occupancy located within the boundaries of the City of Pacifica; and WHEREAS, lodging business owners and representatives from the City have met to consider the formation of the PTMD; and
WHEREAS, a Management District Plan (Plan) has been prepared which sets forth the proposed boundary of the PTMD, a service plan and budget, and a proposed means of governance and was circulated with a petition pursuant to California Streets and Highways Code section 36621; and
WHEREAS, lodging businesses who will pay more than fifty percent (50%) of the assessment under the PTMD have petitioned the City Council to establish the PTMD, pursuant to California Streets and Highways Code section 36621(a).
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL THAT:
1. The recitals set forth herein are true and correct and material to this Resolution.
2. The City Council finds that lodging businesses that will pay more than fifty percent (50%) of the assessment proposed in the Plan have signed and submitted petitions in support of the formation of the PTMD. The City Council accepts the petitions and adopts this Resolution of Intention to establish the PTMD and to levy an assessment on all lodging businesses, existing and in the future, within the PTMD boundaries in accordance with the Property and Business Improvement District Law of 1994.
3. The City Council finds that the Plan satisfies all requirements of Streets and Highways Code § 36622.
4. The City Council declares its intention to establish the PTMD and to levy and collect assessments on lodging businesses within the PTMD boundaries pursuant to the Property and Business Improvement District Law of 1994.
5. The PTMD shall include all lodging businesses, existing and in the future, located within the boundaries of the City of Pacifica, as shown in the map attached as Exhibit A.
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6. The name of the district shall be “Pacifica Tourism Marketing District” or referred to as “PTMD”.
7. The annual assessment rate is one percent (1%) of gross short-term sleeping room rental revenue. Annually, the Owner’s Association may increase or decrease the assessment rate by a maximum of one-quarter of one percent (0.25%) of gross shortterm sleeping room rental revenue. Based on the benefit received, assessments will not be collected on: stays of more than thirty (30) consecutive days; any officer or employee of a foreign government, which officer or employee is exempt by reason of express provision of Federal law or international treaty.
8. The assessments levied for the PTMD shall be applied toward marketing and sales promotion programs to market assessed lodging businesses in Pacifica as tourist, meeting, and event destinations, as described in the Plan. Funds remaining at the end of any year may be used in subsequent years in which PTMD assessments are levied as long as they are used consistent with the requirements of this resolution, the Ordinance and the Plan.
9. The proposed PTMD will have a five (5) years year term, beginning July 1, 2025 or as soon as possible thereafter, and ending five (5) years from its start date unless renewed pursuant to Streets and Highways Code § 36660.
10. Bonds shall not be issued.
11. The time and place for the public meeting to hear testimony on establishing the PTMD and levying assessments are set for March 24, 2025, at 7:00 PM, or as soon thereafter as the matter may be heard, at the Council Chambers located at 2212 Beach Blvd., Pacifica, CA 94044.
12. The time and place for the public hearing to establish the PTMD and the levy of assessments are set for April 28, 2025, at 7:00 PM, or as soon thereafter as the matter may be heard, at the Council Chambers located at 2212 Beach Blvd., Pacifica, CA 94044. The City Clerk is directed to provide written notice to the lodging businesses subject to assessment of the date and time of the meeting and hearing, and to provide that notice as required by Streets and Highways Code § 36623, no later than March 14, 2025.
13. At the public meeting and hearing, the testimony of all interested persons for or against the establishment of the PTMD may be received. If at the conclusion of the public hearing, there are record of written protests by the owners of the lodging businesses within the proposed PTMD that will pay fifty percent (50%) or more of the estimated total assessment of the entire PTMD, no further proceedings to establish the PTMD shall occur for a period of one (1) year.
14. At the conclusion of the public hearing to establish the district on April 28, 2025 held at Council Chambers located at 2212 Beach Boulevard, Pacifica California, the City Council may adopt, revise, change, reduce, or modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with the revenues from the assessments pursuant to Streets and Highways Code section 36624.
Proposed assessments may only be revised by reducing any or all of them. The adoption of the Resolution of Formation shall establish the PTMD and levy of the assessment in each of the fiscal years referred to in the Plan.
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15. The complete Plan is on file with the City Clerk and may be reviewed upon request.
16. This resolution shall take effect immediately upon its adoption by the City Council. • • • • •
I HEREBY CERTIFY that the foregoing Resolution of Intention was introduced and adopted at a regular meeting of the City Council on the 10th day of March 2025 by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Sue Beckmeyer, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney
EXHIBIT A
District Boundaries
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