City Council
Report
City Council Meeting: November 1, 2016
Agenda Item: 9.A
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To: Mayor and City Council
From: Andy Agle, Director, Housing and Economic Development, Economic Development Division
Subject: Renewal of the Santa Monica Tourism Marketing District and Amended and Restated Services Agreement
Recommended Action
Staff recommends that the City Council:
1. Hold a final public hearing and adopt a Resolution renewing the Santa Monica Tourism Marketing District (SMTMD); and
2. Authorize the City Manager to negotiate and execute an Amended and Restated Services Agreement with Santa Monica Travel and Tourism, a California-based organization.
Executive Summary
Recognizing that tourism is a mainstay economic driver in the community, and that strategic marketing provides an opportunity to increase local benefits from tourism while reducing external impacts, Santa Monica Travel and Tourism (SMTT) and the City’s lodging businesses are seeking a renewal of the Santa Monica Tourism Marketing District (SMTMD). Council’s consideration of the adoption of a Resolution renewing the SMTMD represents the third and final step in the multi-step public hearing process required to renew the SMTMD. If the SMTMD is renewed, an additional nine and one-half years would be added to the term of the SMTMD and the additional responsibilities related to the management of the SMTMD would be reflected in the Amended and Restated Services Agreement (Services Agreement) between the City and SMTT. As the existing Services Agreement is set to expire on December 31, 2017, an extension of nine and one-half years to the Services Agreement is recommended in order to continue SMTT’s existing services, programs and responsibilities related to renewing the SMTMD.
Background
The proposed Santa Monica Tourism Marketing District (SMTMD) renewal was initiated by the Santa Monica Travel and Tourism (SMTT) in conjunction with Santa Monica lodging businesses for the purpose of extending a self-assessment on qualifying hotels to generate additional revenues for tourism promotion and marketing. The original 2 of 5
SMTMD is effective for five years commencing on January 1, 2013 and expiring on December 31, 2017. The renewal of the SMTMD would extend the term by nine and one-half years beginning in January 1, 2018 through June 30, 2027. The renewal requires submittal of petitions from lodging businesses representing more than 50 percent of the total annual assessment.
On August 23, 2016 (Attachment A), Council accepted petitions from qualified lodging businesses representing 70 percent of the proposed assessments and adopted Resolution No. 10987 (CCS) declaring its intent to consider renewal of the SMTMD and setting a public hearing for October 25, 2016, to receive additional public testimony on the renewal of the SMTMD. In addition, Council heard testimony from district members representing lodging businesses with an average daily rate of $100 to $199.99 (Tier 3 businesses), who provided input regarding the proposed assessments. Specifically, it was requested that the assessment formula for the Tier 3 businesses be reevaluated to address equity concerns.
Based on the input received from the Tier 3 lodging businesses, the SMTMD Management District Plan was revised to reflect changes to the Tier 3 assessments.
The SMTMD representative of the Tier 3 lodging businesses is supportive of the proposed changes. On September 28, 2016, the SMTMD Committee and the Santa Monica Travel and Tourism Board of Directors unanimously voted to support the modifications to the proposed SMTMD Management District Plan. On October 25, 2016 (Attachment B), Council reviewed and considered the revised SMTMD Management District Plan and held a public meeting to receive additional testimony on the renewal of the SMTMD.
Discussion
The proposed Resolution of Renewal (see Attachment C) sets forth the assessments that would be levied on lodging businesses in the SMTMD. The assessment rate is a fixed amount per occupied room, per night. The amount charged per occupied room per night is based on the business’s average daily rate during the previous year.
In accordance with the revised SMTMD Management District Plan that was reviewed by 3 of 5
Council on October 25, 2016, the assessments rates are as follows:
Tier Average Daily Rate Assessment Per Occupied Room Per Night 1 $300 and above $5.25
2 $200 - $299.99 $4.25
3 $100 - $199.99 $1.50
Lodging businesses with an average daily rate less than $100 are not assessed and not included in the SMTMD. The assessments may be subject to an annual increase of no more than $0.10 per year for the Tier 3 lodging businesses and not more than $0.25 per year for the Tier 1 and 2 lodging businesses. The maximum assessment rate for each tier is summarized below:
Fiscal
Year
Tier 3
$100 - $199.99
Tier 2
$200 - $299.99
Tier 1
$300 and Above
2018* $1.50 $4.25 $5.25
2018-19 $1.60 $4.50 $5.50
2019-20 $1.70 $4.75 $5.75
2020-21 $1.80 $5.00 $6.00
2021-22 $1.90 $5.25 $6.25
2022-23 $2.00 $5.50 $6.50
2023-24 $2.10 $5.75 $6.75
2024-25 $2.20 $6.00 $7.00
2025-26 $2.30 $6.25 $7.25
2026-27 $2.40 $6.50 $7.50
*Fiscal year 2018 covers a 6-month period (January - June).
The SMTMD is estimated to generate approximately $4,130,000 in the first full year of operation. SMTMD assessment funds are intended to supplement, not supplant, existing City funding. The City would continue to allocate base funding to SMTT for tourism marketing through its annual budget process. The proposed assessments would be used to continue enhanced services of international marketing and sales campaigns to promote Santa Monica and its lodging establishments. An administrative fee is retained by the City to cover the City’s administrative cost associated with monthly collection and transmittal of the SMTMD assessments to SMTT ($19,101 for FY 2015- 4 of 5
16). The administrative fee would continue to be subject to an annual increase of five percent.
In addition to adopting the attached resolution, staff recommends Council authorize modifications to the existing Amended and Restated Services Agreement with Santa Monica Travel and Tourism (SMTT) to incorporate the additional responsibilities related to the renewal of the SMTMD and to maintain the services provided by SMTT.
SMTT would continue to provide tourism and marketing programs, operate Visitor Centers, organize summits, conferences, and community events, and promote Santa Monica through print and social media outlets. The additional responsibilities related to the renewal of the SMTMD include providing enhanced sales and marketing services to promote assessed businesses as tourist, meeting and event destinations with the goal of increasing overnight visitation and room night sales. The modified Amended and Restated Services Agreement would become effective on January 1, 2018, concurrent with the commencement of the adopted SMTMD Management District Plan.
Financial Impacts & Budget Actions
The City would retain $20,056 of the SMTMD assessments as an administrative fee to cover the City’s costs associated with the monthly collection and transfer of the SMTMD assessments. A revenue budget of $20,056 is included in the FY 2016-17 Adopted Budget.
Prepared By: Nia Tang, Senior Development Analyst
Approved Forwarded to Council
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Attachments:
A. August 23, 2016 Staff Report
B. October 25, 2016 staff report
C. Tourism Marketing District Resolution