REPORT TO COUNCIL
SUBJECT
Title
Discussion and Direction on the Santa Clara Tourism Improvement District [Council Pillar: Promote and Enhance Economic and Housing Development]
Report
BACKGROUND
The existing Santa Clara Tourism Improvement District (TID) was formed in 2005 pursuant to the Parking and Business Improvement Area Law of 1989 (1989 Law). On January 11, 2005, City Council approved Ordinance No. 1797 (the “Ordinance”) amending the Santa Clara Municipal Code and establishing the TID. The Ordinance established the boundaries of the TID, which currently includes eleven hotels near the Santa Clara Convention Center: AC Hotel Santa Clara, Avatar Hotel, Biltmore Hotel & Suites, Element Santa Clara, Embassy Suites, Hilton Santa Clara, Hyatt House, Hyatt Regency, Marriott Santa Clara, The Plaza Suites, and TownePlace Suites by Marriott.
In 1994, the State Legislature passed the Property and Business Improvement Law (1994 Law), adding Sections 36600 et seq. to the California Streets and Highways Code. The 1994 Law is based upon the belief that there is a particular local benefit to be derived from allowing business districts to fund business related improvements, maintenance, and activities through the levy of assessments upon the businesses or real property that receive benefits from those improvements. The 1994 Law includes procedural differences for the District, as compared with the 1989 Law.
Lodging businesses in the Santa Clara Tourism Improvement District (TID) decided to pursue the formation of the District under the 1994 Law and on November 12, 2019, Council consented to the TID’s request (RTC 19-920). On February 11, 2020, City staff returned to Council with additional information on the potential assessment rate and for the purposes of preparing the necessary documents and Resolutions for future Council consideration as to the formation of the District, Council provided direction to proceed with a change to the TID assessment method from $1.00 per occupied room night to 1.5% of gross short-term room rentals, with the future option to increase the assessment to no more than 2% (RTC 20-1394).
On March 24, 2020, staff presented signed petitions submitted by the lodging businesses to initiate the formation process of the new District (RTC 20-416). The petition included several provisions including an initial five-year term, management of District funds and implementation of District programs by the Silicon Valley/Santa Clara DMO, Inc. and the initial annual assessment rate of 1.5%. In light of the COVID-19 pandemic already resulting in the closure of several businesses and hotels in the community and the unknown extent of the economic impacts to the City, Council reconsidered the percent assessment and directed staff to return with a flat rate assessment option for Council’s consideration. This report provides information as requested by Council.
DISCUSSION
Previous discussions with Council focused on the formation of a new tourism improvement district under the 1994 Law and outlined target actions and dates for the new district to take into effect July 1, 2020. The approval process began with the development of the proposed Management District Plan (MDP) and the submission of signed petitions from the lodging businesses who would collectively pay more than fifty percent (50%) of the 1.5% assessment proposed to be levied. In order to proceed with a flat rate assessment at this point in the process, the proposed MDP would need to be updated to reflect a flat rate assessment and an updated annual budget. Additionally, the lodging businesses would need to restart the petition process and submit the signed petitions to the City reflecting the flat rate assessment proposed to be levied.
If Council chooses to continue with the current process, an aggressive target schedule would be as follows:
May 19, 2020 - Resolution of Intention
Upon the submission of petitions from the lodging business, the Council would adopt a Resolution expressing its intention to form a district. Petitions must be received from affected lodging businesses collectively paying more than 50% of the levy proposed to be assessed.
May 20, 2020 - Notices
The City would mail notices to the lodging businesses affected by the proposed district. If the Council adopts the Resolution of Intention, the notices would be mailed on this date.
June 2, 2020 - Public Meeting
Council would conduct a public meeting to receive comments regarding the formation of the new district. No Council action required.
July 7, 2020 - Public Hearing
Council would conduct a public hearing to obtain public testimony or comment before adopting the Resolution of Formation.
July 8, 2020 - New district begins
Adherence to this schedule will highly depend upon the time it takes for the MDP to be updated, reviewed and finalized and the time it takes the lodging businesses to complete the new petition process. With this timeline, as the current District expires June 30, 2020, there would be a minimum of one week (longer, if there are delays) where there is no assessment collected. Once the new District is established, the Council, at a future date, can propose to levy a new or increased assessment in adherence to hearing procedures outlined in the 1994 Law.
As an alternative, Council can consider deferring the formation of the new District and proceed with the annual renewal of the existing District, as originally formed under the 1989 Law with the current assessment of $1.00 per occupied room night. If Council elects to proceed with this alterative, the target schedule would be as follows:
May 19, 2020 - Public Hearing
The TID Advisory Board would present an Annual Report and proposed FY 20/21 TID budget to Council. Council would adopt a Resolution of Intention to levy an annual assessment for FY 20/21.
May 20, 2020 - Notices
If the Council adopts the Resolution of Intention, the notices City would mail notices to the lodging businesses affected by the proposed levy on this date.
June 23, 2020 - Public Hearing
Council would conduct a public hearing on the levy of a proposed assessment within the TID for FY 20/21.
July 1, 2020 - Renewed district begins
While this option and a flat rate assessment is not consistent with the work effort of the TID over the past year, this may be the most feasible option to ensure a District is in place by July 1, 2020, allow time for staff to assess the City’s overall economic situation and outlook, and will be considered only temporary until such a time to proceed with the formation of the new District and percent assessment, is determined. If at any time the City and TID later determine that a new District was in the parties’ collective best interest, the formation process could resume.
If Council’s direction is to continue with the current assessment, the TID lodging businesses and the DMO Board of Directors would collaborate on executing an interim plan that is similar to the “phase one” approach that has been presented to Council previously. This would initiate the hiring of a sales team and launching a proactive sales and marketing strategy.
The CEO recruitment process is in the final phase and “final candidates” have been screened to be presented to the DMO Board of Directors. The decision to continue the current assessment could potentially impact the ability to recruit the candidates that are currently being considered.
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
The City currently holds the TID reserve fund. As of April 3, 2020, the balance is $1.56 million.
COORDINATION
This report has been coordinated with the City Attorney’s Office and the 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. <mailto:clerk@santaclaraca.gov>
ALTERNATIVES
1. Direct staff to proceed with the formation of a new tourism improvement district and the levy of a flat rate assessment under the 1994 Law.
2. Direct staff to proceed with the renewal of the current Santa Clara Tourism Improvement District.
3. Any other actions as determined by Council.
RECOMMENDATION
Recommendation
Alternative 2: Direct staff to proceed with the renewal of the current Santa Clara Tourism Improvement District.
Staff
Reviewed by: Ruth Mizobe Shikada, Assistant City Manager
Approved by: Deanna J. Santana, City Manager