TITLE:
title
BUSINESS IMPROVEMENT AREA (BIA) REAUTHORIZATION TO LEVY ANNUAL ASSESSMENT
end
DEPARTMENT: CITY MANAGER’S OFFICE
PRESENTED BY: ALMA REYES, DEPUTY CITY MANAGER
CONTACT INFORMATION: ALMA REYES, DEPUTY CITY MANAGER, (714) 754-5090
RECOMMENDATION:
recommendation
Staff recommends the City Council:
1. Conduct a public hearing regarding the Business Improvement Area (BIA) reauthorization and levy of the annual assessment for Fiscal Year 2023-2024.
2. Adopt Resolution No. 2023-XX, confirming the annual report filed by Travel Costa Mesa and levying an annual assessment for Fiscal Year 2023-2024 for the Business Improvement Area covering certain Costa Mesa hotels and motels.
end
BACKGROUND:
The Parking and Business Improvement Area Law of 1989 (Streets and Highways Code §§ 36500, et seq.) enables cities to impose an assessment fee on businesses within an area designated by the City.
On July 5, 1995, the City Council adopted Ordinance No. 95-9 to establish a Business Improvement Area (BIA) for the purpose of assisting the hotel and motel industry in its promotion of tourism within the City.
The City Council authorized the City Manager to enter into an agreement with the Costa Mesa Tourism and Promotion Council to develop and administer the BIA. In 2001, the Costa Mesa Conference & Visitor Bureau (CVB), now known as Travel Costa Mesa (TCM), became the administrator of the BIA.
In accordance with TCM bylaws, TCM’s Board of Directors is currently comprised of eleven (11) General Managers from the eleven (11) participating hotels and motels, one member of the City Council, and the City Manager’s designee.
Since November 2010, the City levies a three percent (3%) special assessment on the eleven (11) participating hotels in the BIA based on the sale of overnight guestroom stays in the partner hotels (2,375 total available rooms). The levy is transmitted by the hotels to the City and ninety-nine- percent (99%) of the assessment is remitted to TCM. The remaining one percent is retained by the City to offset administrative costs.
At the May 2, 2023, City Council meeting, the City Council approved a resolution declaring the intention to levy an annual assessment for Fiscal Year 2023-2024 and set a public hearing for June 6, 2023, at 7 p.m. Staff mailed out notices, including a copy of the resolution, to all hotel and motel owners on file with the City. Hotel and motel owners were notified of the proposed assessment renewal and their opportunity to protest the annual assessment or raise other concerns regarding the BIA.
ANALYSIS:
During the public hearing, property owners are provided an opportunity to speak in support of, protest the annual assessment, and/or address any concerns regarding the BIA. The City Council will vote to adopt or deny the resolution levying an annual assessment for the upcoming fiscal year, and makes the ultimate decision as to the size of and the properties to be included in the BIA. Upon the approval of the annual assessment, the three percent (3%) assessment is collected along with the City’s Transient Occupancy Tax (TOT). The hotels and motels included in the BIA are required to itemize the BIA levy as a separate assessment. The staff at TCM manage the day-to-day activities and provide all services to administer the BIA.
Per the agreement between the City of Costa Mesa and TCM and as required by Streets and Highways Code section 36533, TCM is required to provide an annual report describing the programs and activities implemented during the previous fiscal year as well as the status of the programs and activities implemented during the current fiscal year (Attachment 1). The City Council may approve the report as filed or modify the report and approve it as modified. Once the City Council approves the report, it may adopt the resolution of intention to levy the annual assessment.
Highlights of the 2022-2023 Fiscal Year
Travel Costa Mesa continues its dedication to showcasing the City of Costa Mesa as the City of the Arts and further enhancing the City’s brand as a premier destination in Orange County. The celebration of the City’s most anticipated opening of the decade, the Orange County Museum of Art (OCMA), was one of the year’s highlights. In addition, TCM continued an “always-on” marketing strategy in 2022-23, mixing brand awareness campaigns with promotions to help increase hotel occupancy during times of need. Website traffic increase, with new website users increased by 28.8% and page views increased by 27.8%. Successful campaigns included the Create Your Escape Close to Home, Road Trip, What If, What Will You See Next in Costa Mesa, and other sub-campaigns.
Leisure travel during the summer was substantial due to continued pent-up demand and group business travel was on an upward trajectory. Overall occupancy grew 7% and average daily rate grew 22% compared to 2021. Compared to 2019 levels, the overall weekend occupancy segment was 81.1%, almost fully recovered, and the transient weekday occupancy segment was 47.5% of the overall business, down only one percentage point. The weekday contract occupancy segment was 7%, approximately half of what it was in 2019. However, Costa Mesa’s weekday group segment exceeded 2019 numbers by 2%. TCM pursued group sales success by attending 12 industry trade shows in FY 2022-23, with 254 leads generated and 73,899 lead room nights of these leads generated.
ALTERNATIVES:
City Council may choose not to adopt the resolution, which will prevent the City from levying an annual assessment for the upcoming fiscal year.
FISCAL REVIEW:
According to the audit report, TCM’s cash equity as of June 30, 2022 totaled $2,599,536. Based on the 2022-23 annual report, TCM is forecasting to come in at $2.9 million for the current fiscal year, a 121% increase from the prior fiscal year. As of February 2023, BIA revenues were at $2.1 million.
The City receives one percent (1%) of the BIA revenue/assessment as partial reimbursement for its collection and administrative costs. The one percent (1%) allocated to the City for reimbursement is estimated at $29,000 for the 2022-2023 Fiscal Year.
Since 2014, TCM has also provided funding to the City to support community-wide marketing and community events that attract many visitors to Costa Mesa under a Professional Services Agreement (PSA). The City began budgeting the TCM Community Events Programing for a total of $164,000 within the City’s financial system. This budget typically added annually as an addendum to the existing Professional Services Agreement between the City and TCM, approved by City Council at a public hearing. Although the TCM community event funds were not available during FY 2020-21 and FY 2021-22, the City intends to resume all special community events and marketing efforts to pre-pandemic levels and reinstate this funding in FY 2023-24.
LEGAL REVIEW:
The City Attorney’s Office reviewed this report, and has reviewed and approved the resolution as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item supports the City Council’s continuous efforts to promote the City of Costa Mesa for its rich and vibrant community that offers many attractions for residents, visitors and businesses.
CONCLUSION:
State law mandates the specific procedure to be followed in the establishment of business improvement areas and the levying of a voluntary annual assessment. Adoption of Resolution No. 2023-XX is the final step in the reauthorization of the BIA assessment, and the City Council must adopt the proposed resolution before an annual assessment can be levied for Fiscal Year 2023-2024.
Therefore, staff recommends that the City Council:
1. Conduct a public hearing regarding the Business Improvement Area (BIA) reauthorization and levy of the annual assessment for Fiscal Year 2023-2024.
2. Adopt Resolution No. 2023-XX, confirming the annual report filed by Travel Costa Mesa and levying an annual assessment for Fiscal Year 2023-2024 for the Business Improvement Area covering certain Costa Mesa hotels and motels.