REPORT TO COUNCIL
SUBJECT
Title
Adopt a Resolution to Declare the City of Santa Clara’s Intention to Renew the Santa Clara Tourism Improvement District (SCTID) and fix the time and place for a public meeting and public hearing
Report
BACKGROUND
The SCTID is a benefit assessment district proposed to continue a revenue source to help fund Marketing, Communication, and Convention Center and Partner Sales efforts for certain Santa Clara lodging businesses. This approach has been used successfully in other destination areas throughout the state to improve tourism and drive additional room nights to assessed businesses.
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.
TID 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, TIDs are primarily formed pursuant to the Property and Business Improvement District Law of 1994 (94 Law). TIDs formed under the 94 Law can be funded by assessments against businesses, assessments against property or a combination of the two. TIDs are not entities that have a separate legal existence from the entities that establish them, nor are they political subdivisions that have their own governing boards. The TID is not, itself, a unit of government, rather, it is a program of the City.
A management district plan serves as the “constitution” of the TID. An owners’ association may be retained to provide the improvements, maintenance, and activities described in the management district plan. If the management district plan designates an owners’ association, the city must contract with the designated owners’ association to provide the services. The owners’ association is a private entity and may not be considered a public entity for any purpose, though it is required to comply with the Ralph M. Brown Act at all times when matters within the subject matter of the TID are heard, discussed, or deliberated.
SANTA CLARA TOURISM IMPROVEMENT DISTRICT HISTORY
The SCTID was originally formed in 2005 pursuant to the Parking and Business Improvement Area Law of 1989 (1989 Law). On January 11, 2005, City Council (Council) approved Ordinance No. 1797, amending the Santa Clara Municipal Code and establishing the tourism improvement district with boundaries covering eleven (11) lodging businesses near the Santa Clara Convention Center. Under the 1989 Law, the district was administered by a Council-appointed Advisory Board, required annual renewal, and collected a fee of $1.00 from hotel guests on each occupied hotel/motel room night.
Beginning in Fiscal Year 2019/20, the lodging businesses expressed interest in reconstituting the district under the 94 Law and transitioning the assessment method from $1.00 per occupied room night to a percentage of gross short-term room rental revenue. On November 12, 2019, the Council approved the SCTID’s request to pursue conversion (RTC 19-920), and on February 11, 2020, the Council directed staff to proceed with a change to 1.5% of gross short-term room rentals with the future option to increase to no more than 2% (RTC 20-1394). The onset of the COVID-19 pandemic and the resulting uncertainty regarding economic impacts to the lodging industry prompted Council to temporarily postpone the conversion, and on April 8, 2020, Council directed staff to renew the existing district under the 1989 Law with the $1.00 per occupied room night assessment while economic conditions stabilized (RTC 20-452).
On January 26, 2021, the Council approved the lodging businesses’ request to pursue formation of the district under the 94 Law and directed staff to proceed with an initial assessment of 1.5% of gross short-term room rental revenue, with the option to increase to 2% in year two (RTC 21-3589). Petitions in favor of formation were submitted by six (6) lodging businesses representing 76.51% of the total assessment. On April 6, 2021, the Council adopted Resolution No. 21-8955, declaring the City’s intention to establish the SCTID under the 94 Law (RTC 21-153). A public meeting to receive testimony was held on April 20, 2021 (RTC 21-154), and on May 25, 2021, following a public hearing at which no protests were received, the Council adopted a Resolution of Formation establishing the current SCTID for a five (5) year term beginning July 1, 2021 through June 30, 2026 (RTC 21-155).
The Silicon Valley/Santa Clara DMO, Inc. (dba Discover Santa Clara) serves as the SCTID’s Owners’ Association and implements the programs in accordance with the Council approved Management District Plan. As the current five-year term approaches its scheduled expiration on June 30, 2026, the lodging businesses have requested that the City initiate proceedings under the 94 Law to renew the SCTID, sustain and expand the marketing, communications programs, and convention center and partner sales that have been funded through the district.
DISCUSSION
The renewed SCTID includes all lodging businesses with ten (10) rooms or more, existing or in the future, available for public occupancy, located within the boundaries of a portion of the City as more specifically identified on the map included as Attachment 1 . Lodging businesses do not include short-term rentals, including units within multi-family buildings that are permitted to operate as short-term rentals.
The current SCTID, established effective July 1, 2021 for a five-year term, is scheduled to expire on June 30, 2026. Under the existing Management District Plan, assessments have funded convention sales and incentives, destination marketing, and tourism promotion activities administered by the Silicon Valley/Santa Clara DMO, Inc. (dba Discover Santa Clara) as the SCTID’s Owners’ Association. With the approaching expiration of the current term and continued lodging-industry support for a dedicated funding source for tourism promotion, the assessed lodging businesses have submitted petitions requesting that the Council initiate renewal proceedings for the SCTID under the 94 Law for a new five-year term.
Lodging business owners have decided to pursue renewal of the SCTID to continue a dedicated revenue source devoted to marketing Santa Clara as a tourist, meeting and event destination. If renewed, the SCTID would generate approximately $4,047,912 on an annual basis for promotion of travel and tourism specific to Santa Clara.
MANAGEMENT DISTRICT PLAN
The Management District Plan (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 or in the future, available for public occupancy, located within the boundaries of a portion of the City as more particularly shown on Attachment 1.
The annual assessment rate is two percent (2%) of gross short-term sleeping room rental revenue. During the SCTID 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 Silicon Valley/Santa Clara DMO, Inc. dba Discover Santa Clara Board of Directors (the “Board”) shall have the authority 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 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 Plan.
Based on the benefit received, assessments will not be collected on: stays of more than thirty (30) consecutive days; or stays by any officer or employee of a foreign government who is exempt by reason of express provision of Federal law or international treaty. Additionally, assessments will not be collected on stays by any Federal or State of California officer or employee on official business who shall provide one of the following: a warrant or check drawn on the Treasury of the United States; a copy of the official travel orders indicating the issuing governmental agency and the employee’s full name; or, a copy of a letter on the official letterhead of an exempt governmental agency requesting exemption and listing the employee’s name and stating that the stay is for official government business. The dates of occupancy must also be included. These requirements must be demonstrated by the guest at the time of registration. Failure to satisfy these requirements will result in no assessment exemption. Copies of the documentation for each exemption claimed must be submitted to the City’s Director of Finance with each remittance of assessments.
The renewed SCTID will have a five (5) year term, beginning July 1, 2026 and ending five (5) years from its start date.
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 Plan. The City will be responsible for collecting the assessment on a monthly basis (including any interest and overdue charges) from each assessed lodging business located in the boundaries of the SCTID. The City shall forward the assessments to Silicon Valley/Santa Clara DMO, Inc. dba Discover Santa Clara, which will have the responsibility of managing SCTID programs as provided in the Plan. The City shall retain a fee equal to two percent (2%) of the amount of assessment collected to cover its costs of collection and administration.
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. |
$121,438 |
|
City Administration Fee (2%) |
Retained fee to cover costs of collection and administration of the SCTID assessment. |
$80,958 |
|
Total |
|
$4,047,912 |
SCTID Formation Process
May 5, 2026 - Resolution of Intention Hearing
Upon the submission of a written petition, signed by the business owners in the renewed SCTID who will pay more than fifty percent (50%) of the assessments proposed to be levied, the Council may initiate proceedings to renew the SCTID by the adoption of a resolution of intention (Attachment 3) to express its intention to renew the SCTID.
Petition Status: At the date of this agenda publication, eight (8) of the 11 TID lodging businesses (AC Hotel Santa Clara, Delta by Marriott, Hilton Santa Clara, Hyatt House, Hyatt Regency, Element Santa Clara, Marriott Santa Clara, Townplace Suites), submitted petitions totaling 81.13% of the lodging businesses (Attachment 4). This majority petition allows the Council to initiate proceedings for SCTID renewal at the May 5, 2026 meeting.
No later than May 9, 2026 - Public Notice
The 94 Law requires the City to mail written notice to the owners of all businesses proposed to be assessed within the SCTID. The notice must be provided forty-five (45) days before the public hearing to allow a period in which assessed business owners may protest SCTID renewal. The notice must include notice of the public meeting, and the public meeting shall occur before the public hearing.
June 9, 2026 - Public Meeting
Allow public testimony on the renewal of the SCTID and levy of assessments. No Council action required.
June 23, 2026 - Final Public Hearing
If written protests are received from the owners of businesses in the renewed 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 renew the SCTID, the Council shall adopt a resolution of renewal that renews the district.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on 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 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 was coordinated with the City Manager’s Office, 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
Adopt a Resolution of Intention declaring the City’s intent to renew the Santa Clara Tourism Improvement District (SCTID) for five (5) years starting July 1, 2026.
Staff
Reviewed by: Aracely Azevedo, Assistant City Manager
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. TID Boundaries Map
2. SCTID Management District Plan
3. Resolution of Intention
4. Signed Petitions