HomeMy WebLinkAboutResolution 2014-72 declaring results of majority protest pro�x7q/ 6- / '-�-
RESOLUTION NO. 2014 - 72
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON
BEACH DECLARING RESULTS OF MAJORITY PROTEST PROCEEDINGS
AND ESTABLISHING THE HUNTINGTON BEACH TOURISM BUSINESS
IMPROVEMENT DISTRICT
WHEREAS, the Property and Business Improvement District Law of 1994 (Streets and
Highways Code §36600 et. seq.) as well as the Huntington Beach Charter authorizes the City to
establish business improvement districts upon petition by a weighted majority of the business
owners located within the boundaries of the district; and
Lodging business owners who will pay more than fifty percent (50%) of the proposed
assessment, as weighted according to the amount of the assessment to be paid by the petitioner,
within the boundaries of the Huntington Beach Tourism Business Improvement District
("HBTBID") have petitioned the City Council to establish the HBTBID; and
Included with the petitions was a Management District Plan summary that describes the
proposed assessment to be levied on lodging businesses within the HBTBID that will be used to
pay for sales promotion and marketing activities and other improvements and activities set forth
in a Management District Plan; and
The assessed lodging businesses within the HBTBID will be specifically benefited by the
activities and improvements described in the Management District Plan; and
On July 21, 2014 at 6:00 PM at 2000 Main Street, Huntington Beach, CA 92648, the City
Council adopted a Resolution of Intention, A Resolution of the City of Huntington Beach
Declaring its Intention to Establish the Huntington Beach Tourism Business Improvement
District (HBTBID) and Fixing the Time and Place of a Public Meeting and a Public Hearing
Thereon and Giving Notice Thereof Resolution No. 2014-43; and
The public meeting and public hearing to consider the establishment of the HBTBID
have been properly noticed in accordance with Streets and Highways Code §36623; and
On August 18, 2014 at 6:00 PM at 2000 Main Street, Huntington Beach, CA 92648, the
City Council held a public meeting regarding the establishment of the HBTBID, and the City
Council heard and received objections and protests, if any, to the establishment of the HBTBID
and the levy of the proposed assessment; and
On September 15, 2014 at 6:00 PM at 2000 Main Street, Huntington Beach, CA 92648,
the City Council held a public hearing regarding the establishment of the HBTBID, and the City
Council heard and received all objections and protests, if any, to the establishment of the
HBTBID and the levy of the proposed assessment; and
14-4313/112515
Resolution No. 2014-72
The City Clerk has determined that there was no majority protest. A majority protest is
defined as written protests received from owners of businesses in the proposed district which
would pay fifty percent (50%) or more of the assessments proposed to be levied. Protests are
weighted based on the assessment proposed to be levied on each lodging business.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL THAT:
1. The recitals set forth herein are adopted by the City Council as findings and they
are true and correct.
2. The Huntington Beach Tourism Business Improvement District is hereby
established for a term not to exceed five (5) years, beginning October 1, 2014 through September
30, 2019. At the end of five years, the District may expire or be renewed pursuant to Streets and
Highways Code section 36660.
3. The activities to be provided to benefit businesses in the district will be funded by
the levy of the assessment. The revenue from the assessment levy shall not be used to provide
activities that directly benefit businesses outside the district; to provide activities or
improvements outside the HBTBID; for any purpose other than the purposes specified in this
Resolution, the Resolution of Intention, and the Management District Plan.
4. The activities funded by the assessment will provide a specific benefit to assessed
businesses within the HBTBID that is not provided to those not paying the assessment.
5. The assessment is a charge imposed for a specific benefit conferred or privilege
granted directly to the payor that is not provided to those not charged and which does not exceed
the reasonable costs to the City of providing the benefit or granting the privilege.
6. The assessment is a charge imposed for a specific City service or product
provided directly to the payor that is not provided to those not charged, and which does not
exceed the reasonable costs to the City of providing the service or product.
7. Assessments are levied solely upon business located within the district, and the
business owner is solely responsible for payment of the assessment when due. If the owner
chooses to collect any portion of the assessment from a transient, that portion shall be
specifically called out and identified for the transient in any and all communications from the
business owner as the HBTBID Assessment.
S. The assessments shall be used for sales, promotions and marketing programs to
market Huntington Beach lodging businesses as tourist, meeting and event destinations, and
other improvements and activities as set forth in the Management District Plan,
9. Assessments levied on lodging businesses pursuant to this resolution shall be
levied on the basis of benefit to the respective business. Because the services provided are
intended to increase room rental revenue, the assessment will be based on room rental revenue.
Room night revenue is an appropriate measure of the proportionate benefit to each business
because it reflects the degree of benefit each business will receive relative to the District's
14-4313/112515
Resolution No. 2014-72
services. For instance, a smaller business with fewer rooms and a lower room rate will benefit
from the programs, but will experience a smaller increase in the actual dollar amount of revenue
than a larger business with a higher room rate.
10. The assessments for the District will total approximately $2,400,000 in year one.
11. Bonds shall not be issued to fund the HBTBID.
12. The HBTBID shall include all lodging business located within the boundaries of
the city of Huntington Beach. A boundary map is attached hereto as ExhibitA and incorporated
herein by reference.
13. Any funds remaining at the end of any year may be carried forward and used in
subsequent years in which the HBTBID assessment is levied. Any carryover funds must be used
to fund activities and improvements as set forth in this resolution, the management district plan
as exist or as amended.
14. The assessments will be collected at the same time and a similar manner as the
City collects its transient occupancy taxes.
15. It is the intent of the City that Visit Huntington Beach be the Owners' Association
as described in state law upon the execution of a contract to administer the funds and implement
the activities and improvements specified herein and in the Management District Plan.
16. As part of its statutory and contractual duties, Visit Huntington Beach, will cause
to be prepared a report for each fiscal year, except the first year, for which assessments are to be
levied and collected to pay the costs of the improvement and activities described in the report.
The first report shall be due after the first year of operation of the district and shall be filed with
the Clerk on or before July 15of 2015 and each year thereafter. In the event the report is not
timely filed or does not provide information in accordance with the in the 1994 Law, the
Management District Plan, the Resolution of Intention, this Resolution and the contract between
the City and the Owners' Association, the City may designate another non profit or the City to be
the Owners' Association upon 60 days written notice to the Owners' Association and an
opportunity to remedy any deficiencies in the report.
17. The HBTBID established pursuant to this resolution will be subject to any
amendments to the Property and Business Improvement District Law of 1994 (California Streets
and Highways Code §36600 et. seq.).
18. The City Clerk, or his or her designee, is directed to take all necessary actions to
complete the establishment of the HBTBID.
19. City Council, pursuant to its charter authority, may take any actions for which
procedures do not exist in State Law, or not specifically preempted by State law with regard to
this Business Improvement District including modifying this resolution, the Management District
14-4313/112515
Resolution NO. 2014-72
Plan or any portion thereof. City shall follow all petition, notice, and hearing requirements set
forth by State Law related to modification.
20. The Management District Plan on file with the City Clerk dated September 8, 2014 is
hereby approved.
21. This Resolution shall take effect immediately upon its adoption by the City
Council.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular
meeting thereof held on September 15 , 2014.
REVIEWED AND APPROVED:
City a r
14-4313/112515
W. _
APPROVED AS TO FORM:
City Attorney
INITIATED AND APPROVED:
t
Deputy Directo Economic Development
Resolution No. 2014-72
Exhibit A
Boundary Map
144313/112515
Res. No. 2014-72
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of
Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby
certify that the whole number of members of the City Council of the City of
Huntington Beach is seven; that the foregoing resolution was passed and adopted
by the affirmative vote of at least a majority of all the members of said City Council
at a Regular meeting thereof held on September 15, 2014 by the following vote:
AYES: Katapodis, Hardy, Shaw, Harper, Boardman, Sullivan, Carchio
NOES: None
ABSENT: None
ABSTAIN: None
0
City Cork and ex-officio Crerk of the
City Council of the City of
Huntington Beach, California
MANAGEMENT DISTRICT PLAN
`VISIT
` HUNTINGTON
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SurfCit�l.��A'
2014-2019
CONTENTS
I.
OVERVIEW........................................................................................................................................... 2
II.
IMPETUS................................................................................................................................................
4
III.
BACKGROUND...................................................................................................................................
7
IV.
BOUNDARY..........................................................................................................................................8
V.
BUDGET AND SERVICES................................................................................................................
9
A.
Annual Service Plan............................................................................................................ 9
B.
Determination of Specific Benefit....................................................................................
11
C.
Assessment........................................................................................................................12
D.
Penalties and Interest........................................................................................................
13
E.
Time and Manner for Collecting Assessments.................................................................
13
F.
Annual Budget..................................................................................................................
13
VI.
GOVERNANCE..................................................................................................................................14
A.
Owners' Association.........................................................................................................
14
B.
Brown Act and California Public Records Act Compliance ............................................
14
C.
Annual Report...................................................................................................................
14
VII.
APPENDIX 1 — LAW.........................................................................................................................15
VIII.
APPENDIX 2 — ASSESSED BUSINESSES...................................................................................
26
Prepared by
Civitas
C I V I T A S
(800)999-7781
www.civitasadvisors.com
I. OVERVIEW
The Huntington Beach Tourism Business Improvement District (HBTBID) is an assessment
district proposed to provide specific benefits to assessed businesses, by funding marketing and sales
as well as promotional efforts and capital improvements for the benefit of assessed businesses. This
approach has been used successfully in other destination areas throughout the country to provide
the benefit of additional room night sales directly to assessed businesses.
Location: The proposed HBTBID includes all lodging businesses located within the
boundaries of the city of Huntington Beach. A list of assessed businesses is included
in Appendix 2.
Services. The HBTBID is designed to provide specific benefits directly to assessed businesses
by increasing room night sales revenue, via increases in both room nights sold and
room rates. The district will fund marketing, sales promotions, and destination
product development to increase overnight stays in hotels. The district programs will
market the assessed businesses as tourist, meeting and event destinations, thereby
increasing room night sales revenue.
Budget: The total of the HBTBID annual assessments for the initial year of its five (5) year
operation is anticipated to be approximately $2,400,000. This total is expected to
fluctuate with room sales and as businesses begin or cease operating in the district,
but is not expected to exceed $5,000,000 in any year.
Source of Financing: The source of financing will be an assessment charged to each hotel
in the district a rate of three percent (3%) of gross short-term (stays less than 31
days) room rental revenue (assessment rate). The formula will not include stays of
more than thirty (30) consecutive days, or on stays by any federal or State of
California officer or employee when on official business, or on stays by any officer
or employee of a foreign government who is exempt by reason of express provision
of federal law or international treaty. Assessments will not include room rental
revenue resulting from stays pursuant to contracts executed prior to October 1,
2014.
Collecfion: The City will be responsible for collecting the assessment on a monthly basis
(including any delinquencies, penalties and interest) from each lodging business
located in the boundaries of the HBTBID. The City at its sole discretion will use
reasonable efforts to collect the assessments from each lodging business.
Duration. The proposed HBTBID is will have a five (5)-year life beginning October 1, 2014
and continuing through September 30, 2019, unless otherwise terminated. During
the five years, the this Management District Plan will be fully implemented and then
completed.
As required by Streets and Highways Code section 36670(a)(2), during the operation
of the district there shall be a 30-day period each year in which the assessed
businesses may request disestablishment of the district.
Final Management District Plan 2
September 8, 2014 /&-.V
Management: Visit Huntington Beach (VHB) will serve as the HBTBID's Owners' Association
upon the execution of a contract with the City to implement this Plan including any
activities and improvements contemplated herein as well as state law. In general, the
Owners' Association is charged with managing funds and implementing programs in
accordance with this Plan, and must provide annual reports to the City Council.
Final Management District Plan 3
September 8, 2014 H �TINGTON
II. IMPETUS TO INCREASE THE ASSESSMENT
The existing Huntington Beach Hotel/Motel Business Improvement District (HBHMBID) was
established in 2002 with an assessment rate of one percent on overnight lodging revenues in
Huntington Beach. The HBHMBID assessment was modified from one percent to two percent in
2010. While the HBHMBID has been successful, there is still opportunity for growth in overnight
visitation and room night sales revenue, especially during non -peak periods. The new assessment
district will be called the Huntington Beach Tourism Business Improvement District (HBTBID) and
with creation of this new form of District, the assessment on businesses will be increased. There are
several reasons to dissolve the existing HBHMBID; and create a new BID pursuant to a different
state law and more importantly increase the assessment. The most compelling reasons are:
L The Need to Maintain/Increase Competitiveness, Occupancy and Overall Visitation
As the number of overnight accommodations grow in Orange County, as well as in
competitive California cities and counties, it is crucial that Huntington Beach maintains and
increases its competitiveness, occupancy levels and visitation from targeted markets.
These goals can be accomplished by increasing the HBTBID assessment from two percent
(20/6) to three percent (3%), which will generate an additional $1 million in dedicated funding
for new improvements and activities to increase room rentals for businesses located within
the new BID. The proposed programs are estimated to generate an additional $13 million
dollars of room revenue for assessed lodging businesses — without causing price resistance.'
Additional HBTBID funds will be used to implement new programs above and beyond
those that are currently provided with the existing funding level:
1. Increase funding for destination sales and marketing programs, which will
target key visitor markets, including markets that generate substantial
overnight visitation to Huntington Beach throughout the year, especially
during non -peak seasons;
2. Establish an innovative Surf City USA Destination Product Development
program that add new and/or repurposed capital development projects to
Huntington Beach's current brand offerings, which will increase year around
overnight visitation, the number of reasons for visitors to stay longer, and
offer more reasons for visitors to return more often to Surf City USA;
3. Launch a Visitor Services Enhancement program that improves the overall
Surf City USA brand experience for overnight visitors.
2. An Opportunity for Increasing City Revenues
As an indirect result of the new BID, it is expected that as occupancy rates and overall visitation
numbers increase, so too will the City's Transient Occupancy Tax revenue. Greater occupancy rates
will also generate an indirect increase in sales tax revenues from tourist spending. It is estimated that
the increase in room night sales revenue will cause an indirect increase in TOT generated of up to $3
million per year.'
' Strategic Marketing Group —Travel Spending Impact Study and Analysis
' Strategic Marketing Group —Travel Spending Impact Study and Analysis
Final Management District Plan 4
September 8, 2014 /&iv-
3. Stable Funding for Destination Marketing
The current HBHM 3ID was formed under the authority of the Parking and Business
Improvement Area Law of 1989. The HBHMBID must prepare an annual report to be
approved by city council. This method could cause uncertainty from year-to-year by placing
the the Districts funding of an ever -changing political body. The 1994 law allows a 5-year
term where the assessments will be levied every year without need for City Council approval.
This may provide stable funding for destination marketing, product development, visitor
services enhancements and management. The modification will provide a stable source of
funding for a five-year strategic sales and marketing initiatives, capital improvement projects,
and visitor services enhancements. Many of Huntington Beach's competitors have
undergone a similar modification to convert from the 1989 Law to 1994 Law and increase
their assessment rates. The table below shows just a few examples.
District Name
Old Rate
New Rate
Old
Budget
New
Bud et
Sacramento 2012
$1.50 - $2.00 per night
1% - 3% room revenue
$3,200,000
$5,200,000
Fairfield 2013
2% room rental
3% room revenue
$400,000
$540,000
Newport Beach 2013
2% room revenue
3% room revenue
$1,700,000
$2,500,000
Stockton 2010
2% room revenue
4% room revenue
$500,000
$1,000,000
West Hollywood 2013
1.5% room revenue
3% room revenue
$2,100,000
$4,388,000
Many of Huntington Beach's competitors are at or exceeding the level of funding available
for destination marketing in Huntington Beach. The table below lists the funding raised by
tourism improvement districts for several other competitors.
Location
Amount Raised
Assessment Rate
TOT
Rate
Total Guest
Charge
Newport Beach
$2,500,000
3% room revenue
10%
13%
Costa Mesa
$1,100,000
3% room revenue
8%
11%
Laguna Beach
$950,000
2% room revenue
10% 1
12%
Irvine
$1,600,000
2% room revenue
8%
10%
Anaheim
$9,000,000
2% room revenue
15%
17%
Long Beach
$4,000,000
3% room revenue
12%
15%
Torrance
$630,000
1 % room revenue
11 %
12%
Santa Monica
$3,350,000
$2.25 - $4.25 per night
14%
14% + $4.25
Oceanside
$472,500
1.5% room revenue
10%
11.5%
Santa Barbara
$1,800,000
$0.50 - $2.00 per night
14%
14% + $2.00
4. Surf City USA Destination Product Development
An increasing number of Destination Marketing Organizations (DMOs) such as VHB are
becoming fully engaged in the planning and funding assistance for Destination Product
Development (DPD). DPD was listed as one of the top priorities by DMO CEOs in 2013.
Being part of the capital planning solution, as well as providing funds to assist in the building
of financing of well -vetted DPD's (new, improved or repurposed) is vital to the growth of
Final Management District Plan 5
September 8, 2014 /„ �r;N�TON
G.ICnyIASA'
the Huntington Beach brand. This program, which will be funded by revenue from the
HBTBID, will help maintain Surf City USA's competitiveness and relevancy to potential and
repeat overnight visitors for many years to come.
DPD will be 12.5 percent or $300,000 of the annual HBTBID budget. As the total number
of rooms sold and room prices increase over time, the amount of available funds for projects
will increase. During the 5 year term of this District, a minimum of 12.5% of the TBID
budget shall be used for DPD projects. If a DPD project is contemplated and set forth in
this plan, part of the 12.5% could be set aside in a separate account to be used in a future to
a larger DPD project. A future DPD project and associated funding must be agreed to by
VHB and the City. Working collaboratively with the City Manager, VHB will develop
specific DPD funding criteria. The City and VHB shall have equal input to make
recommendations to the VHB Board for final project approval. However, the award of any
public works project contract DPD must be done in accordance with City Charter and
Municipal Code requirements. Policies and procedures acceptable to both VHB and the
City will be developed to implement this DPD program.
Final Management District Plan 6
September 8, 2014 H �TINGTON
III. BACKGROUND
so
70
60
so
as
30
20
10
Number of T1Ds Operating Per Year
Qz
'i
The first TBID was formed in
West Hollywood, California in
1989. Since then, over eighty
California destinations have
followed suit.
California's TBIDs collectively
raise over $150 million for local
destination marketing creation.
With competitors raising their
budgets, and increasing rivalry
for visitor dollars, it is important
that Huntington Beach lodging
businesses invest in stable,
lodging -specific marketing
programs.
o
FFN N N N N N N N N N N N N N N TBIDs utilize the efficiencies of
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private sector operation in the
market -based promotion of tourism districts. TBIDs allow lodging business owners to organize their
efforts to increase room night sales. Lodging business owners within the TBID pay an assessment
and those funds are used to provide services that increase room night sales.
In California, TBIDs are formed pursuant to the Property and Business Improvement District Law
of 1994. This law allows for the creation of a benefit assessment district to assess businesses within
a specific geographic area.
There are many benefits to TBIDs:
• Funds must be spent on services and improvements that provide a specific benefit only to those
who pay;
• Funds cannot be diverted to general government programs;
• They are customized to fit the needs of assessed businesses in each destination;
• They allow for a wide range of services;
• They are designed, created and governed by those who will pay the assessment; and
• They provide a stable, long-term funding source for tourism promotion.
Final Management District Plan 7
September 8, 2014 To,,
&11Cryll9A'
IV. BOUNDARY
The HBTBID will include all lodging businesses, existing and in the future, available for public
occupancy within the boundaries of the city limits of Huntington Beach.
The boundary, as shown in the map below, currently includes twenty-two (22) lodging businesses.
A complete listing of lodging businesses within the proposed HBTBID can be found in Appendix 2.
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Final Management District Plan 8
September 8, 2014 'N �TINGTON
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V. BUDGET AND SERVICES
A. Annual Service Plan
Assessment funds will be used to provide specific benefits conferred or privileges granted directly to
the assessed businesses that are not provided to those not charged, and which do not exceed the
reasonable cost to the City of conferring the benefits or granting the privileges. The privileges and
services provided with the HBTBID funds are sales, marketing, advertising, destination product
development, visitor services enhancements, and promotional programs available only to assessed
businesses.
A service plan budget has been developed to deliver services that benefit businesses throughout the
District. A detailed annual budget will be developed and approved by the Owners' Association with
review from the City. The table below illustrates the initial annual budget allocations:
Category
%
$
Sales and Marketing
54.2%
$1,300,000
Destination Product Development
12.5%
$300,000
Administration
19.2%
$460,000
Visitor Services Enhancements
5%
$120,000
Shortfall/Opportunity
8.1%
$196,000
City Administration Fee
1%
$24,000
Total Annual Budget
100%
$2,400,000
The budget is expected to change significantly during the five (5) year term as new businesses open.
Any significant changes will be outlined in the annual report. Even with expected significant budget
increases, the budget in any given year is not expected to exceed $5,000,000.
Although actual revenues will fluctuate due to market conditions, the proportional allocations of the
budget shall remain the same. However, the City and the VHB board shall annually have the
authority to adjust budget allocations between the categories by no more than fifteen percent (15%)
of the total budget per year; not including the amount in Destination Project Development or City
Administrative Costs, those percentages cannot be decreased. A description of the proposed
improvements and activities for the initial year of operation is below. The same activities and
improvements are proposed for subsequent years. In the event of a legal challenge against the
HBTBID, any and all assessment funds may be used for the costs of defending the HBTBID.
Sales and Marketing
A sales and marketing program, created and executed by Visit Huntington Beach, will promote local
assessed businesses as tourist, meeting, and event destinations. The sales and marketing program
will have a central theme of promoting the Surf City USA brand and Huntington Beach location as a
desirable place to visit and stay overnight for both the domestic and international markets. The goal
of the program is to increase overnight visitation and room night sales at assessed businesses, and
may include the following activities:
• Increased advertising and promotional programs in print, online, social media, and television
targeted at potential visitors;
• Website enhancement(s) and updates;
Final Management District Plan 9
September 8, 2014 4.9
• Strategic advertising and marketing agency support;
• Brand marketing efforts to increase awareness;
• Contracts with third party marketing and sales partners;
• Public relations and sales blitzes, missions and calls;
• Familiarization tours targeting key decision makers;
• Preparation and production of collateral promotional materials such as visitor guides,
brochures, flyers and maps;
• Attendance at professional industry conferences and affiliation events;
• Lead generation activities designed to attract tourists, leisure visitors, and group events to
Huntington Beach;
• Partnerships with targeted special events that attract overnight visitors; and
• Cooperation with local agencies, sports and film commissions' programs that attract
overnight visitors.
Surf City USA Destination Product Development
Destination Product Development will be 12.5 percent or $300,000 of the annual budget. As the
total number of rooms sold and room prices increases over time, the amount of available funds for
projects will increase. During the 5-year term of this District, a minimum of 12.5% of the BID
budget shall be used for DPD projects. If a DPD project is contemplated and set forth in this plan,
part of the 12.5% could be set aside in a separate account to be used in a future to a larger DPD
project. A future DPD project and associated funding must be agreed to by VHB and the City.
Working collaboratively with the City Manager, VHB will develop specific DPD funding criteria.
The City and VHB shall have equal input to make recommendations to the VHB Board for final
project approval. The award of any public works project contract DPD must be done in accordance
with City Charter and Municipal Code requirements. Policies and procedures acceptable to both
VHB and the City will be developed.
These DPD projects may include:
• Comprehensive and integrated wayfinding signage system including signage to parking decks
and lots;
• Rubber tire trolley transportation program connecting hotels with downtown and other
attractions, to increase room night sales;
• Art and cultural projects, to attract overnight visitors;
• Gateway enhancements including Pacific Coast Highway, to attract overnight visitors;
• Enhancements to wetlands experiences which attract overnight visitors, such as the Bolsa
Chica Ecological Reserve and the Huntington Beach Wetlands (between Newland Street and
the Santa Ana River) that expose visitors to the value of the vital ecosystems;
• Improvements to existing parks and sports facilities utilized by overnight visitors;
• Safe and fun entertainment complex for young teens and adults utilized by overnight
visitors;
• Live music venue which attracts overnight visitors;
• Infrastructure improvements that enhance Huntington Beach's competitive position to
attract desirable special events year around and attract overnight visitors; and
• Improvements to the City's downtown parking deck that make the overnight visitor
experience more desirable.
Final Management District Plan 10
September 8, 2014 '' �^
Administration and Operations
The administrative and operations portion of the budget shall be utilized for some administrative
staffing costs, office costs, and other general administrative costs such as insurance, legal, and
accounting fees.
Visitor Services Enhancements
The Visitor Services Enhancement (VSE) program will provide potential funding for programs and
initiatives based on criteria to be developed by VHB. The focus of the VSE program will be on the
entire destination brand footprint to ensure a consistent brand experience throughout Huntington
Beach. VSE may include:
• A long term ambassador program with trained staff that supplements the current level of
police presence around assessed businesses and encourages overnight visitation;
• Welcome Center and Kiosk improvements including new technology -driven visitor
information enhancements; and
• Brand -centric visitor services training program for both public and private sector staff.
Shortfall/ Opportunity
A portion of the assessment collected will be used to replace actual revenue shortfalls from previous
years improvements and activities, for opportunities that may arise, or for cost increases within
existing budget line items.
The utilization of these funds will be at the discretion of the Owners' Association Board of
Directors but within the approved scope of services to be provided according to this Plan and the
Annual Report.
The annual allocation to the contingency/shortfall fund will not exceed ten percent (10%) of the
total budget; unless and until the cumulative revenue from assessments designated for the
contingency shortfall fund reaches $650,000. Once the cap is reached, any assessment revenue that
would otherwise be designated for the contingency/renewal fund will instead be designated for
current programs.
If at the expiration of the district, there are existing funds in the contingency/shortfall fund, and the
district is proposed to be renewed, the remaining contingency/shortfall fund may be used for
renewal costs.
City Administration Fee
The City of Huntington Beach shall be paid a fee equal to one percent (10/6) of the amount of
assessment collected to cover its costs of collection and administration. This fee may be increased if
the City determines that the cost of administration exceeds the 1% but shall not exceed the actual
cost to the City.
B. Determination of Specific Benefit
State law requires that assessment funds be expended on specific benefits conferred directly to the
assessed businesses that are not provided to those not charged, (and which do not exceed the
reasonable cost to the City of conferring the benefits). The services in this Management District
Plan are designed to provide targeted benefits directly to assessed lodging businesses. These services
are tailored not to serve the general public, but rather to serve the specific lodging businesses within
Final Management District Plan 11
September 8, 2014
the District, e.g., the proposed activities are specifically targeted to increase room night sales for
assessed lodging businesses within the boundaries of the District, and are tailored to increase room
night sales revenue. HBTBID funds will be used exclusively to provide the specific benefit of
increased room night sales directly to the assessees. For example, non -assessed businesses will not
be featured in HBTBID programs and will not receive sales leads from them. The activities paid for
from assessment revenues are business services constituting and providing specific benefits to the
assessed businesses.
Further, the assessment may be utilized to provide specific government services directly to the
assessed businesses that are not provided to those not charged, and which do not exceed the
reasonable costs to the City of providing the services. The budget will be carefully managed by
VHB to ensure services are provided such that the amount assessed will not exceed the cost to
provide the services; the cost of services will be included in the Annual Report to the City. The
legislature has recognized that marketing and promotions services like those to be provided by the
HBTBID are, in the context of assessment districts, government services. Destination product
developments like those to be provided have long been provided by government agencies. Further,
the amount of the assessment is no more than necessary to cover the reasonable costs of the
proposed activities and improvements, and the manner in which the costs are allocated to a business
owner bear a fair share or reasonable relationship to the businesses' benefits received from the
proposed activities. A specific benefit is not excluded from classification as a "specific benefit"
merely because an indirect benefit to a nonpayor occurs incidentally and without cost to the payor as
a consequence of providing the specific benefit to the payor. To the extent that other, non -District,
lodging businesses may receive incremental room nights, that portion of the promotion or program
generating those room nights shall be paid with non -District funds.
District services will be implemented carefully to ensure they do not exceed the reasonable cost of
such services. Funds will be managed by the Owners' Association, and reports submitted on an
annual basis to the City. Only assessed businesses will be featured in marketing materials, receive
sales leads generated from district -funded activities, be featured in advertising campaigns, and
benefit from other district -funded services. Non -assessed businesses will not receive these, nor any
other, district -funded services and benefits.
C. Assessment
The annual assessment rate on hotels within the district is three percent (3%) of gross short term
(stays less than 31 days) room rental revenue. Assessments will not be collected on stays of more
than thirty (30) consecutive days, nor on stays by any federal or State of California officer or
employee when on official business, not on stays by any officer or employee of a foreign
government who is exempt from transient occupancy taxes by reason of express provision of federal
law or international treaty. Assessments pursuant to the HBTBID shall not include room rental
revenue resulting from stays pursuant to contracts executed prior to October 1, 2014.
The term "gross room rental revenue" as used herein means: the consideration charged, whether or
not received, for the occupancy of space in a hotel valued in money, whether to be received in
money, goods, labor or otherwise, including all receipts, cash, credits and property and services of
any kind or nature, without any deduction therefrom whatsoever. Gross revenue shall not include
any federal, state or local taxes collected, including but not limited to transient occupancy taxes.
The amount of assessment, if passed on to each transient, shall be disclosed in advance and
separately stated from the amount of rent charged and any other applicable taxes, and each transient
Final Management District Plan 12
September 8, 2014^
shall receive a receipt for payment from the business. The assessment shall be disclosed as the
"HBTBID Assessment." The assessment shall not be considered revenue for any purposes,
including calculation of transient occupancy taxes.
Bonds may not be issued.
D. Penalties and Interest
1. Any business which fails to remit any assessment imposed within the time required shall pay
a penalty of ten percent (10%) of the assessment in addition to the amount of assessment.
2. Any business which fails to meet any delinquent remittance on or before a period of 30 days
following the date on which the remittance first became delinquent shall pay a second
delinquency penalty of ten percent (10%) of the amount of the assessment in addition to the
amount of the assessment and the ten percent (10%) penalty first imposed.
3. If the City determines that the non-payment of any remittance due is due to fraud, a penalty
of twenty-five percent (25%) of the amount of the assessment shall be added thereto in
addition to the penalties stated in subsections 1 and 2 of this section.
4. In addition to the penalties imposed, any business which fails to remit any assessment
imposed shall pay interest at the rate of one-half of one percent (0.5%) per month, or
fraction thereof, on the amount of the assessment, exclusive of penalties, from the date on
which the remittance first became delinquent until paid.
5. Every penalty imposed and such interest as accrues under the provisions of this section shall
become a part of the assessment herein required to be paid.
E. Time and Manner for Collecting Assessments
The City will be responsible for collecting the assessment on a monthly basis (including any
delinquencies, penalties and interest) from each lodging business located in the boundaries of the
HBTBID. The City at its sole discretion will use reasonable efforts to collect the assessments from
each lodging business.
F. Annual Budget
The total five year improvement and service plan budget is projected at approximately $2,400,000
annually, or $12,000,000 through 2019. This budget is expected to fluctuate as room sales do and as
businesses begin and/or cease operating in the district. The budget is expected to change
significantly during the five (5) year term. Any significant changes will be outlined in the annual
report. Even with expected significant budget increases, the budget in any given year is not
expected to exceed $5,000,000.
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September 8, 2014 iN �rrINGTON
VI. GOVERNANCE
A. Owners' Association
The City Council, pursuant to Streets and Highways Code §36651, may identify the body that will
implement the proposed improvements and activities. Visit Huntington Beach will serve as the
Owners' Association for the HBTBID, upon execution of a contract between the City and VHB.
B. Brown Act and California Public Records Act Compliance
The Owners' Association is considered a legislative body under the Ralph M. Brown Act
(Government Code �54950 et seq.). Thus, meetings of the VHB board and certain committees
must be held in compliance with the public notice and other requirements of the Brown Act. The
Owners' Association is also subject to the record keeping and disclosure requirements of the
California Public Records Act.
C. Annual Report
VHB shall present an annual report at the end of each year of operation to the City Council
pursuant to Streets and Highways Code section 36650.
The annual report will include:
• Any proposed changes in the boundaries of the tourism improvement district or in any
benefit zones or classification of businesses within the district.
• The improvements and activities to be provided for that fiscal year.
• An estimate of the cost of providing the improvements and the activities for that fiscal year.
• The method and basis of levying the assessment in sufficient detail to allow each business
owner, to estimate the amount of the assessment to be levied against his or her business for
that fiscal year.
• The amount of any surplus or deficit revenues to be carried over from a previous fiscal year.
• The amount of any contributions to be made from sources other than assessments levied
pursuant to this part.
Pursuant to Streets and Highways Code section 36650, the City Council may approve the report as
filed by the Owners' Association or may modify any particular contained in the report and approve
it as modified. Any modifications made shall be pursuant to Streets and Highways Code sections
36635 and 36636.
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September 8, 2014 i„ NTING70N
APPENDIX 1 - LAW
Property And Business Improvement District Law of 1994
Cal Sts & Hy Code § 36600 (2013)
*** This document is current through the 2014 Supplement ***
(All 2013 legislation)
0 36600. Citation of part
This part shall be known and may be cited as the "Property and Business Improvement District Law of 1994."
l3 36601. Legislative findings and declarations
The Legislature finds and declares all of the following:
(a) Businesses located and operating within the business districts of this state's communities are economically
disadvantaged, are underutilized, and are unable to attract customers due to inadequate facilities, services, and
activities in the business districts.
(b) It is in the public interest to promote the economic revitalization and physical maintenance of the business
districts of its cities in order to create jobs, attract new businesses, and prevent the erosion of the business districts.
(c) It is of particular local benefit to allow cities to fund business related improvements, maintenance, and
activities through the levy of assessments upon the businesses or real property that benefits from those
improvements.
(d) Assessments levied for the purpose of providing improvements and promoting activities that benefit real
property or businesses are not taxes for the general benefit of a city, but are assessments for the improvements and
activities which confer special benefits upon the real property or businesses for which the improvements and
activities are provided.
13 36602. Purpose of part
The purpose of this part is to supplement previously enacted provisions of law that authorize cities to levy
assessments within a business improvement area. This part does not affect or limit any other provisions of law
authorizing or providing for the furnishing of improvements or activities or the raising of revenue for these
purposes.
0 36603. Preemption of authority or charter city to adopt ordinances levying assessments
Nothing in this part is intended to preempt the authority of a charter city to adopt ordinances providing for a
different method of levying assessments for similar or additional purposes from those set forth in this part. A
property and business improvement district created pursuant to this part is expressly exempt from the provisions of
the Special Assessment Investigation, Limitation and Majority Protest Act of 1931 (Division 4 (commencing with
Section 2800)).
0 36603.5. Part prevails over conflicting provisions
Any provision in this part that conflicts with any other provision of law shall prevail over the other provision of
law.
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September 8, 2014
0 36604. Severability
This part is intended to be construed liberally and, if any provision is held invalid, the remaining provisions
shall remain in full force and effect. Assessments levied under this part are not special taxes.
0 36605. [Section repealed 2001.1
B 36606. "Assessment"
"Assessment" means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements
and promoting activities which will benefit the properties or businesses located within a property and business
improvement district.
b 36607. "Business"
"Business" means all types of businesses and includes financial institutions and professions.
B 36608. "City"
"City" means a city, county, city and county, or an agency or entity created pursuant to Article 1 (commencing
with Section 6500) of Chapter 5 of Division 7 of Title I of the Government Code, the public member agencies of
which includes only cities, counties, or a city and county, or the State of California.
13 36609. "City council"
"City council" means the city council of a city or the board of supervisors of a county, or the agency,
commission, or board created pursuant to a joint powers agreement and which is a city within the meaning of this
part.
0 36610. 'Improvement"
"Improvement" means the acquisition, construction, installation, or maintenance of any tangible property with
an estimated useful life of five years or more including, but not limited to, the following:
(a) Parking facilities.
(b) Benches, booths, kiosks, display cases, pedestrian shelters and signs.
(c) Trash receptacles and public restrooms.
(d) Lighting and heating facilities.
(e) Decorations.
(f) Parks.
(g) Fountains.
(h) Planting areas.
(i) Closing, opening, widening, or narrowing of existing streets.
(j) Facilities or equipment, or both, to enhance security of persons and property within the area.
(k) Ramps, sidewalks, plazas, and pedestrian malls.
(1) Rehabilitation or removal of existing structures.
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