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CC 2014-12-09_09a Adopt Ord_Amend TBIDMEMORANDUM TO: CITY COUNCIL FROM: DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVElV" SERVICES SUBJECT: CONSIDERATION OF ORDINANCE AMENDING CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO EXEMPTIONS AND VACATION RENTALS AND HOMESTAYS DATE: DECEMBER 9, 2014 RECOMMENDATION: It is recommended the City Council adopt an Ordinance amending Chapter 3.46 of the Arroyo Grande Municipal Code to provide that the same exemptions that apply to the Transient Occupancy Tax apply to Arroyo Grande Tourism Business Improvement District (AGTBID) assessments and amend the definition of "lodging" to include vacation rentals and homestays. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The AGTBID will experience a small increase in revenue from expansion to include vacation rentals and homestays, as well as a small decrease from the exemptions. It is anticipated the net result will be a minor increase. The only impact on staff time is the process of establishing the ordinance. BACKGROUND: In May 2013, the City Council adopted an Ordinance establishing the AGTBID. The District was formed under the Parking and Business Improvement Law of 1989, Sections 36500 et seq. of the Streets and Highways Code and incorporated into the Arroyo Grande Municipal Code in Title 3, Chapter 3.46. It was recently renewed for FY 2014-15. At the September 9, 2014 meeting, the City Council adopted a Resolution of Intention to amend the AGTBID. At the November 25, 2014 meeting, the Ordinance was introduced by the City Council. ANALYSIS OF ISSUES: The provisions in the Arroyo Grande Municipal Code relating to the AGTBID assessments do not include exemptions for governmental officials. Section 3.24.040 of the Arroyo Grande Municipal Code relating to the transient occupancy tax includes the following exemptions: any person as to whom, or any occupancy as to which, it is beyond the power of the City to impose the tax provided for in this chapter; any federal and state officer or employee when on Item 9.a. - Page 1 CITY COUNCIL CONSIDERATION OF ORDINANCE AMENDING CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO EXEMPTIONS AND VACATION RENTALS AND HOMESTAYS DECEMBER 9, 2014 PAGE2 official business; or any officer or employee of a foreign government who is exempt by reason of an express provision of federal law or international treaty. Since the assessment for the AGTBID is applied to occupied rooms for all transient occupancies, it would be appropriate to have the same exemptions that apply to the transient occupancy tax applied to the AGTBID assessments. The intent when the TBID was established was to maintain consistent regulations and procedures to minimize the effort of compliance by lodging businesses. However, this discrepancy was brought to the City's attention after it had taken effect. In addition, regulations for vacation rentals and homestays were recently established. Direction was provided to apply both transient occupancy tax and AGTBID assessments to permitted vacation rentals and homestays. Currently, the definition of "lodging" subject to the AGTBID assessment expressly excludes vacation rentals. This change has been recommended by the AGTBID Advisory Committee. Streets and Highways Code Section 36541 provides the procedure to modify the basis and method of levying the assessment. It requires the City Council to adopt a Resolution of Intention, then hold a public meeting that must be noticed 45 days in advance, and finally hold a public hearing. Since the "public meeting" requirement applies to a "new or increased assessment", it applies to the application of the assessment to vacation rentals and homestays, which would constitute a "new" assessment on such businesses. At the November 25, 2014 Council meeting, the public meeting to introduce the Ordinance was held. During the public hearing, if written protests are received from business owners representing fifty percent (50%) or more of the assessments to be levied, no further proceedings to modify the assessment may be taken for a period of one year. If an insufficient number of protests are received, the City Council then may proceed to adopt the Ordinance. For purposes of determining the applicable majority protest figure, the proposed assessment to be levied will be calculated based on the assessment rate multiplied by the most recent available data for the lodging operations' gross lodging rent. ALTERNATIVES: The following alternatives are provided for the Council's consideration: 1. Adopt the Ordinance; 2. Do not propose expanding the AGTBID to include vacation rentals and homestays and/or to include government employee exemptions; 3. Do not adopt the Ordinance; or 4. Provide staff other direction. Item 9.a. - Page 2 'I CITY COUNCIL CONSIDERATION OF ORDINANCE AMENDING CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO EXEMPTIONS AND VACATION RENTALS AND HOMESTAYS DECEMBER 9, 2014 PAGE3 ADVANTAGES: The recommendations will enable the City to expand the AGTBID, which provides a mechanism to generate funding to promote hotel stays and tourism in the City, which increases transient occupancy tax revenue and supports local businesses. It will also make compliance with the AGTBID requirements eqsier for lodging businesses by making the exemptions consistent with transient occupancy tax requirements. DISADVANTAGES: No disadvantages with the recommended action are identified. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: Pursuant to State law, on September 11, 2014, staff mailed a letter to each lodging business located within the City with a certified copy of the City Council's Resolution of Intention to modify the Tourism Business Improvement District. A summary of the Ordinance was published in the Tribune on December 3, 2014. The agenda was posted in front of City Hall on Thursday, December 4, 2014 and on the City's website on Friday, December 5, 2014. No comments were received. Attachment: 1. Notice of Public Meeting and Public Hearing Item 9.a. - Page 3 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE AMENDING CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO THE TOURISM BUSINESS IMPROVEMENT DISTRICT LAW WHEREAS, the Parking and Business Improvement Area Law of 1989, sections 36500 et seq. of the Streets and Highways Code, authorizes cities to establish business improvement districts for several purposes, one of which is promotion of tourism; and WHEREAS, the Arroyo Grande Tourism Business Improvement District (AGTBID) was established in May, 2013 and incorporated into the Arroyo Grande Municipal Code under Chapter 3.46 which provides for the imposition of an assessment on lodging businesses; and WHEREAS, the City also imposes a Transient Occupancy Tax and that tax includes exemptions that are contained in Section 3.24.040 of the Arroyo Grande Municipal Code as follows: any person as to whom, or any occupancy as to which, it is beyond the power of the city to impose the tax provided for in this chapter; any federal and state officer or employee when on official business; or any officer or employee of a foreign government who is exempt by reason of an express provision of federal law or international treaty; and · WHEREAS, since the assessment for the AGTBID is applied to occupied rooms for all transient occupancies, it would be appropriate to have the same exemptions that apply to the Transient Occupancy Tax applied to the AGTBID assessments; and WHEREAS, the City has also developed regulations for vacation rentals and homestays, and currently the definition of "lodging" subject to the AGTBID assessment expressly excludes vacation rentals and it would be equitable and appropriate to impose the assessment on any vacation rentals or homestays that are permitted under the new regulations. NOW, THEREFORE BE IT ORDAINED by the City Council of the City of Arroyo Grande as follows: SECTION 1. Section 3.46.050 of the Arroyo Grande Municipal Code is hereby amended to read as follows: "3.46.050 Levy of assessment, reporting and exemptions. The AGTBID shall include all lodging businesses located within the AGTBID boundaries. The assessment to be levied on all lodging businesses within the AGTBID boundaries shall be based upon two percent of the rent Item 9.a. - Page 4 ORDINANCE NO. PAGE2 charged by the operator per occupied room per night for all transient occupancies. The assessment shall be collected quarterly, based on two percent of the rent charged by the operator per occupied room per night in revenues for the previous quarter. New lodging businesses within the boundaries shall not be exempt from the levy of assessment authorized by Section 36531 of the law. Assessments pursuant to the AGTBID shall not be included in rent revenue for purpose of determining the amount of the assessment. The value of extended stays of more than thirty (30) consecutive calendar days shall be exempt from the levy of assessment. Stays by persons who are otherwise exempt from the imposition of a transient occupancy tax as defined in AGMC Section 3.24.040 shall be exempt from the assessment. Each operator shall, on or before the last day of the month following the close of each calendar quarter, or at the close of any shorter reporting period which may be established by the director of administrative services, make a return to the director of administrative services, on forms provided by him or her, of the total rents charged and received and the amount of assessment collected for transient occupancies. At the time the return is filed, the full amount of the assessment collected shall be remitted to the director of administrative services. The director of administrative services may establish shorter reporting periods for any operator if he or she deems it necessary in order to insure collection of the assessment, and he or she may require further information in the return." SECTION 2. The definition of "Lodging" contained in Section 3.46.020 of the Arroyo Grande Municipal Code is hereby amended to read as follows: "'Lodging' means any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes, and includes any hotel, motel, inn, bed and breakfast or vacation rental, vacation room rentals or homestay that pays transient occupancy tax. For purposes of this chapter the definition of "lodging" shall not include RV parks" SECTION 3. If any section, subsection, subdivision, paragraph, sentence, or clause of this Ordinance or any part thereof is for any reason held to be unlawful, such decision shall not affect the validity of the remaining portion of this Ordinance or any part thereof. The City Council hereby declares that it would have passed each section, subsection, subdivision, paragraph, sentence, or clause thereof, irrespective of the fact that any one or more section, subsection, subdivision, paragraph, sentence, or clause be declared unconstitutional. SECTION 4. A summary of this Ordinance shall be published in a newspaper published and circulated in the City of Arroyo Grande at least five (5) days prior to the Item 9.a. - Page 5 ORDINANCE NO. PAGE3 City Council meeting at which the proposed Ordinance is to be adopted. A certified copy of the full text of the proposed Ordinance shall be posted in the office of the City Clerk. Within fifteen (15) days after adoption of the Ordinance, the summary with the names of those City Council Members voting for and against the Ordinance shall be published again, and the City Clerk shall post a certified copy of the full text of such adopted Ordinance. SECTION 5. This Ordinance shall take effect thirty (30) days after its adoption. On motion by Council Member ___ , seconded by Council Member ___ , and by the following roll call vote to wit: AYES: NOES: ABSENT: the foregoing Ordinance was adopted this __ day of ___ , 2014. Item 9.a. - Page 6 ORDINANCE NO. PAGE 4 ___________________________________ JIM HILL, MAYOR ATTEST: ___________________________________ KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: ________________________________________ DEBBIE MALICOAT, ACTING CITY MANAGER APPROVED AS TO FORM: ___________________________________ TIMOTHY J. CARMEL, CITY ATTORNEY Item 9.a. - Page 7 NOTICE OF PUBLIC MEETING AND PUBLIC HEARING CITY OF ARROYO GRANDE CITY COUNCIL MODIFYING THE ARROYO GRANDE TOURISM BUSINESS IMPROVEMENT DISTRICT (AGTBID) The purpose of the NOTICE is to provide you with information about a proceeding that will include a public meeting and public hearing being conducted by the City Council of the City of Arroyo Grande regarding modification of the Arroyo Grande Tourism Business Improvement District (AGTBID) and its effect on the business that you own. This Notice is being sent to you in accordance with Resolution No. 4622 passed by the City Council on September 9, 2014 (a copy of which is enclosed), The Parking and Business Improvement Area Law of 1989 (California Streets and Highways Code Sections 36500 et. seq.,), and Government Code Section 54954.6 The purpose of the public meeting and public hearing is to consider an Ordinance making two modifications to the Arroyo Grande Tourism Business Improvement District. The first is to amend Chapter 3.46 of the Arroyo Grande Municipal Code to provide for the imposition of the AGTBID assessment on any vacation rentals or homestays that are permitted by the City. The second would provide that the same exemptions that apply to the Transient Occupancy Tax apply to the AGTBID assessments. The Transient Occupancy Tax includes exemptions that are contained in Section 3.24.040 of the Arroyo Grande Municipal Code, which includes the following: any person as to whom, or any occupancy as to which, it is beyond the power of the city to impose the tax provided for in this chapter; any federal and state officer or employee when on official business; or any officer or employee of a foreign government who is exempt by reason of an express provision of federal law or international treaty .. Please be advised of the following: The City Council will hold a Public Meeting on the proposed assessment and Tourism Business Improvement District on November 25, 2014. The City Council meeting will begin at 6:00 p.m., in the City Council Chambers located at 215 East Branch Street, Arroyo Grande. The City Council will hold a Public Hearing on the proposed assessment and Tourism Business Improvement District on December 9, 2014. The City Council meeting will begin at 6:00 p.m., in the City Council Chambers located at 215 East Branch Street, Arroyo Grande. PROTEST PROCEDURES: Pursuant to Streets and Highways Code Section 36524, at the public hearing the City Council will hear and consider all protests against the modification of the proposed Arroyo Grande Tourism Business Improvement District to include vacation rentals and homestays, as well as to modify exemptions to be consistent with existing exemptions for transient occupancy taxes. Protests may be made orally or in writing by any interested person. Any protest pertaining to the regularity or sufficiency of the proceedings shall be in writing and clearly state the irregularity or defect to which objection is made. In order to count as a protest as part of the determination of a majority protest against the Arroyo Grande Tourism Business Improvement District, a protest must be in writing. Pursuant to the statute, written protests must be received by the City Clerk before the close of the public hearing and may be delivered or mailed to the City Clerk at City Hall, 300 East Branch Street, Arroyo Grande, CA 93420. Written protests shall contain a written description of the business in which the person signing he protest is interested sufficient to identify the business. If the person signing the protest is not shown on the ATTACHMENT 1 Item 9.a. - Page 8 official records of the City as the owner of the business, then the protest shall contain or be accompanied by written evidence that the person is the owner of the business. If, at the conclusion of the public hearing, written protests are received from owners of businesses in the proposed AGTBID 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 protest to less than 50 percent (i.e., there is a majority protest), no further proceedings to modify the AGTBID, as contained in the resolution of intention, shall be taken for a period of one year from the date of the finding of a majority protest by the City Council. DOCUMENTS AVAILABLE FOR REVIEW: The staff report and other supporting documents regarding this matter will be available for public review at City Hall by November 21, 2014. It will also be available on the City's website www.arroyogrande.org once the Agenda for the November 25, 2014 City Council meeting has been posted, which 1s expected to be by Friday, November 21, 2014. COMMENT ON THIS PUBLIC HEARING: Response to this notice can be made orally at the Public Hearing and/or in writing before the hearing. Written comments can be made to the City Council by mail or hand delivery to: City Clerk, 300 East, Branch Street, Arroyo Grande, CA 93420. ADDITIONAL INFORMATION: The telephone number and address of the individual that interested persons may contact to receive additional information about the assessment is the City Clerk, 300 East, Branch Street, Arroyo Grande, CA 93420, (805) 473-5404. Item 9.a. - Page 9 THIS PAGE INTENTIONALLY LEFT BLANK Item 9.a. - Page 10