REPORT TO COUNCIL
SUBJECT
Title
Public Hearing: Adoption of a Resolution Declaring Results of Majority Protest Proceedings and Renewing the Santa Clara Tourism Improvement District (District), and Action on an Agreement with Silicon Valley/Santa Clara DMO, Inc. d/b/a Discover Santa Clara for the Administration of the District
Report
BACKGROUND
Tourism Improvement Districts
Tourism Improvement Districts (“TIDs”) utilize the efficiencies of private sector operation in the market-based promotion of tourism. These special assessment districts allow assessed business owners to organize their efforts to increase tourism. Business owners within the TID fund the TID, and those funds are used to provide services that are desired by and benefit the assessed businesses within the TID.
In California, TIDs are primarily formed pursuant to the Property and Business Improvement District Law of 1994 (“94 Law”). This law allows for the creation of special benefit assessment districts to raise funds within a specific geographic area. The key difference between TIDs and other special benefit assessment districts is that funds raised are intended to fund services or improvements that benefit the assessed businesses pursuant to an adopted plan. The law permits a nonprofit organization, often called an “owners’ association” to provide the services and improvement required to implement the plan.
Santa Clara Tourism Improvement District (SCTID)
The City of Santa Clara (“City”) originally formed the SCTID in 2005 under the 1989 Parking and Business Area Law, covering eleven lodging businesses near the Convention Center with a $1.00 per occupied room night assessment. Beginning in FY 2019/20, lodging businesses pursued reconstitution under the 1994 Law to transition to a percentage-based assessment, through COVID-19 prompted Council to temporarily postpone conversion and renew the district under the 1989 Law in April 2020. Following renewed Council direction in January 2021 and approval by petitions representing 76.51% of the total assessment, Council adopted a Resolution of Formation on May 25, 2021, establishing the current SCTID under the 1994 Law for a five-year term (July 1, 2021 through June 30, 2026) with an initial assessment of 1.5% of gross short-term room rental revenue and the option to increase to 2% in year two. That option was exercised and the assessment is currently at 2.0% of gross short-term room rental revenue.
The Silicon Valley/Santa Clara DMO, Inc. dba Discover Santa Clara (‘the “DMO”) currently serves as the SCTID’s Owners’ Association and implements the programs in accordance with the Council approved 2021-2026 Management District Plan (“2021-2026 Plan”). The current agreement with Discover Santa Clara is set to expire on June 30, 2026.
On May 5, 2026, the City Council adopted a resolution of the City’s intent to renew the Santa Clara Tourism Improvement District (“SCTID”) for five years starting July 1, 2026. As part of the May 5, 2026 item to adopt a resolution of the City’s intent to renew the SCTID, the proposed 5-year for the renewal term of July 2026 through June 2031 (“2026-2031 Plan”) was included with the report (Attachment 1). Following that meeting, a public meeting was held on June 9, 2026, to allow for public testimony. The public hearing scheduled for June 23, 2026 provides the public another opportunity for final comment and to submit protests before the City Council considers approval of the resolution to renew the SCTID and 2026-2031 Plan. In addition, the City Council will consider approval and authorization to execute an agreement with Discover Santa Clara for the same term for the administration of the 2026-2031 Plan.
DISCUSSION
The proposed 2026-2031 Plan includes all lodging businesses with ten (10) rooms or more, existing and in the future, available for public occupancy, located within the boundaries of a portion of the City as more particularly identified on the map in Section IV (BOUNDARY) of the 2026-2031 Plan.
Authorized representatives of lodging business within the SCTID submitted a petition to the City to initiate proceedings to renew the SCTID for the purpose of providing the services described in the 2026-2031 Plan. If renewed, the SCTID would generate approximately $4,047,912 on an annual basis for promotion of travel and tourism specific to the assessed businesses.
Management District Plan
The 2026-2031 Plan (Attachment 1) includes the proposed boundary of the SCTID, a service plan and budget and a proposed means of governance. The SCTID will include all lodging businesses with ten (10) rooms or more, existing and in the future, available for public occupancy, located within the boundaries of a portion of the City as shown on the map included in Section IV (BOUNDARY) of the 2026-2031 Plan.
The annual assessment rate proposed is two percent (2%) of gross short-term sleeping room rental revenue. During the 2026-2031 Plan term, the assessment rate may be increased to a maximum rate of three percent (3%) of gross short-term sleeping room rental revenue for assessed lodging businesses. The 2026-2031 Plan authorizes the Silicon Valley / Santa Clara DMO, Inc. dba Discover Santa Clara Board of Directors (“Board”) to increase the rate to a maximum assessment rate of three percent (3%). If the assessment rate is increased, it may subsequently be decreased, subject to Board approval as described in Section V of the 2026-2031 Plan, but shall not be decreased below a minimum of two percent (2%) of gross short-term sleeping room rental revenue. The maximum assessment increase or decrease permitted in any year shall be one-half percent (0.5%). Increases to the assessment rate shall be subject to the approval of the Board and assessed lodging business owners, as described in Section V of the 2026-2031 Plan.
The renewed SCTID will have a five (5) year term, beginning July 1, 2026, and ending June 30, 2031.
Each assessed lodging business located in the boundaries of the SCTID shall be responsible for remitting the assessments to the City in accordance with the 2026-2031 Plan. The City will collect the assessment on a monthly basis (including any interest and overdue charges) from each assessed lodging business located in the boundaries of the SCTID.
It is anticipated that the SCTID will generate $4,047,912 annually and the proposed first year annual budget is outlined in Table 1.
Table 1 - Initial Annual Budget
|
Program |
Description |
Budget |
|
Marketing, Communications, and Convention Center and Partner Sales (70%) |
Position Santa Clara as a premier destination for meetings, events, and leisure tourism. |
$2,833,538 |
|
Administration (25%) |
Provides management, coordination, and support to all organizational services and functions |
$1,011,978 |
|
Contingency (3%) |
Used to account for uncollected assessments, and a reserve fund for program administration or renewal costs at the discretion of the Board. |
$121,437 |
|
City Administration Fee (2%) |
Retained fee to cover costs of collection and administration of the SCTID assessment. |
$80,959 |
|
Total |
|
$4,047,912 |
SCTID Renewal Process
May 5, 2026 - Resolution of Intention Hearing (COMPLETED)
Upon the submission of a written petition, signed by the authorized representatives of businesses in the renewed SCTID who will pay more than fifty percent (50%) of the assessments proposed to be levied, the City Council declared intention to renew the SCTID and fixed the time and place of a public meeting and hearing by the adoption of a resolution.
Petition Status: Petitions in favor of SCTID renewal were submitted by assessed businesses, which represent more than fifty percent (50%) of the total SCTID assessment. This majority petition allowed the Council to adopt the aforementioned resolution. As of June 18, 2026, 100% of the petitions were received in favor of the SCTID renewal by assessed businesses.
No later than May 9, 2026 - Public Notice (COMPLETED)
The 94 Law requires the City to mail written notice to the owners of all businesses proposed to be assessed within the SCTID. Mailing the notice begins a mandatory forty-five (45) day period in which assessed business owners may protest SCTID renewal. The City mailed and postmarked the required notices on May 7, 2026 and also published the notice in the local printed publication.
June 9, 2026 - Public Meeting (COMPLETED)
Allow public testimony on the renewal of the SCTID and levy of assessments. On June 9, 2026, the City Council held a public meeting to receive testimony regarding the Renewal of the SCTID and related assessments.
June 23, 2026 - Final Public Hearing
If written protests are received from the authorized representatives of assessed businesses in the SCTID 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.
If the City Council, following the public hearing, decides to establish the renewed SCTID, the Council shall adopt a resolution of formation, provided the City Council receives confirmation from the City Clerk that the City did not receive written protests from businesses which will pay 50% or more of the assessment proposed to be levied.
Discover Santa Clara Agreement
The proposed 2026-2031 Plan, requires an Agreement for the DMO to administer the SCTID between the City and the DMO (“Agreement”). The proposed Agreement is for a five-year term commencing July 1, 2026, and continuing through June 30, 2031.
Under the new Agreement, the DMO, as the SCTID’s Owners’ Association, will be responsible for managing SCTID funds and for implementing programs in accordance with the 2026-2031 Plan.
Pursuant to the terms outlined in the Agreement, the City shall disburse SCTID funds actually received to the DMO, less applicable administrative fees to cover City costs of collection and administration, and less any overdue charges or interest.
ENVIRONMENTAL REVIEW
The proposed action does not constitute a “project” within the meaning of the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378(a), as it has no potential to result in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
None immediately. The City will receive a fee of two percent (2%) of the amount collected to cover its cost of administration. The amount is approximately $80,958.24 based on the annual SCTID revenue estimate of $4,047,912. Because the SCTID programs are intended to increase visitation to the City, there may be an increase in transient occupancy tax and sales tax collections.
COORDINATION
This report has been coordinated with the City Attorney’s Office and Finance Department.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Adopt a Resolution of the City of Santa Clara, California Declaring Results of Majority Protest Proceedings and Renewing the Santa Clara Tourism Improvement District;
2. Approve and authorize the City Manager to execute the proposed Agreement with Silicon Valley/Santa Clara DMO, Inc. d/b/a Discover Santa Clara for the Administration of the Santa Clara Tourism Improvement District on the terms presented, in a final form approved by the City Attorney; and
3. Authorize the City Manager to make minor and administrative modifications to the Agreement, approved as the form by the City Attorney, if necessary.
Staff
Reviewed by: Aracely Azevedo, Assistant City Manager
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. SCTID Management District Plan
2. Agreement for the Administration of SCTID
3. Resolution of the City of Santa Clara, California Declaring Results of the Majority Protest Proceedings and Renewing the Santa Clara Tourism Improvement District