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CC 2024-04-23_10a Resolutions Levying Annual Assessment_AGTBIDItem 10.a. MEMORANDUM TO: City Council FROM: Sheridan Bohlken, Recreation Services Director SUBJECT: Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 DATE: April 23, 2024 SUMMARY OF ACTION: Conduct the public hearing to levy an annual assessment for Fiscal Year (FY) 2024 -25 to cover the costs of services, activities, and programs promoting tourism for the benefit of lodging businesses within the Arroyo Grande Tourism Business Improvement District (AGTBID) and approve the FY 2024-25 operating budget for the AGTBID. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: Based on the anticipated year-end results for Fiscal Year 2023-24, the assessments expected to be collected total approximately $318,270 for FY 2024-25. The AGTBID budget provides $5,000 to the City to cover a portion of the City’s cost associated with supporting a Community Services Specialist position for vacation rental code compliance. The AGTBID budget also provides $45,000 to the City for administration of the AGTBID. The budget proposes $500,500 in expenditures, which is an increase of $175,000 compared to the FY 2032-24 AGTBID operating budget. RECOMMENDATION: 1) Conduct a public hearing to receive public comment and protests regarding the City Council’s intention to continue the AGTBID and levy an annual assessm ent for FY 2024- 25; 2) Determine whether a legally sufficient number of protests have been made; 3) If a legally sufficient protest is not made, adopt a Resolution levying an annual assessment for the AGTBID for FY 2024-25; 4) Adopt a Resolution approving the FY 2024-25 operating budget for the AGTBID; and 5) Determine that conducting a public hearing to adopt a Resolution to levy and collect assessments and adopting a Resolution to approve the AGTBID operating budget is not subject to the California Environmental Quality Act (“CEQA”) because it has no potential Item 10.a. City Council Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 April 23, 2024 Page 2 to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, §§ 15061, subd. (b)(2)-(3), 15378.). BACKGROUND: In May 2013, the City Council adopted an Ordinance establishing the AGTBID. The AGTBID 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 (AGMC) in Title 3, Chapter 3.46. The purpose of forming the AGTBID was to provide revenue to defray the cost of services, activities, and programs promoting lodging businesses in the AGTBID through the promotion of scenic, recreational, cultural, and other attractions in the AGTBID as a tourist destination. An assessment is levied on all lodging businesses within the AGTBID boundaries and is based upon two percent of the rent charged by the operator per occupied room per night for all transient occupancies. In December 2014, the City Council adopted an Ordinance amending Chapter 3.46 of the AGMC to provide that the same exemptions that apply to the Transient Occupancy Tax apply to AGTBID assessments and amended the definition of "lodging" to include vacation rentals and homestays. In accordance with the provisions in the Streets and Highways Code (SHC) and AGMC Section 3.46.100, the City Council appointed an Advisory Board (AGTBID) Pursuant to SHC Section 36533, the AGTBID is to prepare an annual report, which is to be submitted to the City Council for its review and approval. AGMC Section 3.46.060 also provides that the assessments for the AGTBID are to be reviewed annually by the City Council based upon the Annual Report of the Advisory Board, and after approval of the Annual Report, the City Council is to follow the hearing process outlined in SHC Section 36534 for the annual assessment for the upcoming fiscal year. Section 36534 provides for the adoption of a Resolution of Intention to levy an annual assessment for that fiscal year. The Resolution of Intention also sets a public hearing date in order to receive any written or oral protests against the continuation of the AGTBID as required by the applicable statute. On February 20, 2024, the AGTBID Advisory Board reviewed and approved the Annual Report prepared by Verdin Marketing. The report was forwarded to the City Council for consideration and was approved at the March 26, 2024 meeting. At this meeting, the City Council also adopted a Resolution of Intention to provide for a levy of the assessment for FY 2024-25. A public hearing was scheduled for April 23, 2024, to consider protests and complete the process to continue collecting and utilizing the AGTBID revenue for the promotion of activities that will support lodging businesses within the City. Item 10.a. City Council Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 April 23, 2024 Page 3 The AGTBID Advisory Board is also responsible for developing an annual preliminary budget, detailing anticipated expenditures, and submitting the proposed budget to City Council for approval. At the AGTBID meeting on April 16, 2024, the Advisory Board reviewed and approved a preliminary budget for recommendation to the City Council. ANALYSIS OF ISSUES: Public Hearing to Continue Levying Assessment As noted above, following approval of the Annual Report and adoption of the Resolution, of Intent to Levy the Assessment, the next step in the process for collecting assessments over the next year is to conduct a public hearing to consider public comment and protests regarding the continued imposition of the assessment. This public hearing will allow lodging businesses subject to the assessment an opportunity to submit comments, voice concerns, and protest the assessment. As set forth in Sections 36524 and 36525 of the SHC, the City Council has the ability to continue to levy the AGTBID assessment for the next fiscal year at this public hearing, unless written protests are received from the lodging businesses that pay 50% or more of the proposed assessments. In that event, the City Council cannot consider continuation of the AGTBID for at least one year. If the required number of written protests is not received, SHC Section 36535 provides that at the conclusion of the hearing, a Resolution levying an annual assessment for the AGTBID for FY 2024-25 may be adopted. The statute further provides that the adoption of this Resolution constitutes the levy of the assessment for the fiscal year. A Resolution has been prepared for the City Council’s consideration and adoption if there is no legally sufficient protest and is provided as Attachment 1. Fiscal Year 2024-25 Operating Budget The FY 2024-25 adopted operating budget provided $500,500 for expenditures and included the following funding categories: Item 10.a. City Council Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 April 23, 2024 Page 4 FY 2024-25 AGTBID Budget Beginning Fund Balance 328,350$ 405,833$ 436,489$ 420,739$ FY 2021-22 Actuals FY 2022-23 Actuals FY 2023-24 Adopted Budget FY 2024-25 Proposed Budget TBID Assessments 295,271$ 303,626$ 309,000$ 318,270$ Interest (5,257) 4,078 750 750 Total Revenue 290,014$ 307,704$ 309,750$ 319,020$ Expenditures FY 2021-22 Actuals FY 2022-23 Actuals FY 2023-24 Adopted Budget FY 2024-25 Proposed Budget Advertising Marketing Services 144,762$ 196,254$ 200,000$ 250,000$ Photo/Video Assets 10,000 11,595 15,000 25,000 Promotional Product - - 5,000 5,000 Website 7,765 16,695 - - Travel and Trade Shows - - 7,500 7,500 Coop Advertising - - 15,000 50,000 Sub-total Advertising 162,527$ 224,544$ 242,500$ 337,500$ Contractual Services Chamber - Contract admin. 42,000$ 44,500$ -$ -$ Sub-total Contractual Services 42,000$ 44,500$ -$ -$ Membership & Subscriptions CCTC -$ -$ 500$ 500$ Sub-total Membership & Subs.-$ -$ 500$ 500$ Public Relations Event Sponsorships - - 20,000 100,000 Influencers - - - 10,000 Official AG Merch - Contest - - 5,000 - Official AG Merchandise - - 5,000 - Sub-total Public Relations -$ -$ 30,000$ 110,000$ Services & Supplies City - administrative 3,000$ 3,000$ 45,000$ 45,000$ Supplies/Domains - - 2,500 2,500 Vacation rental code compliance 5,004 5,004 5,000 5,000 Sub-total Services & Supplies 8,004$ 8,004$ 52,500$ 52,500$ Total Expenditures 212,531$ 277,048$ 325,500$ 500,500$ Ending Fund Balance 405,833$ 436,489$ 420,739$ 239,259$ Revenue Item 10.a. City Council Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 April 23, 2024 Page 5 The allocation to the AGTBID budget for FY 2024-25 is recommended to be $500,500, which reflects an increase of $175,000. The increased budget provides the following:  $50,000 increase in Marketing Services  $10,000 increase in Photo/Video Assets  $35,000 increase in Co-op Advertising  $80,000 increase in Event Sponsorship  $10,000 addition for the new sub-category of Influencers  $10,000 reduction for Merchandise In ongoing efforts to optimize the existing fund balance, budget allocations are proposed to temporarily increase spending in specific categories, thereby spending down the current fund balance until expenditures are in line with anticipated revenues. This approach ensures that the fund’s utilization is both strategic and sustainable. ALTERNATIVES: The following alternatives are provided for the Council’s consideration: 1. Conduct a public hearing to receive public comment and protests regarding the City Council’s intention to continue the AGTBID and levy an annual assessment for FY 2024-25; 2) Determine whether a legally sufficient number of protests have been made; 3) If a legally sufficient protest is not made, adopt a Resolution levying an annual assessment for the AGTBID for FY 2024-25; 4) Adopt a Resolution approving the FY 2024-25 operating budget for the AGTBID; and 5) Determine that conducting a public hearing to adopt a resolution to levy and collect assessments and adopting a resolution to approve the AGTBID operating budget are not subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (b)(2)-(3), 15378.). 2. Conduct a public hearing to receive public comment and protests regarding the City Council’s intention to continue the AGTBID and levy an annual assessment for FY 2024-25; 2) Determine whether a legally sufficient number of protests have been made; 3) If a legally sufficient protest is made, (a) do not adopt the Resolution levying an annual assessment for the AGTBID for FY 2024-25, (b) do not adopt the Resolution approving the FY 2024-25 Budget, and (c) direct staff to return next year with an item to consider whether to levy the assessment in FY 2025 -26. 3. Provide other direction to staff . ADVANTAGES: Levying the annual assessment will enable the City to extend the AGTBID, which provides a mechanism to generate funding to promote lodging stays and tourism in the City. These efforts, in turn, increase transient occupancy tax revenue and supports local businesses. Approving the AGTBID FY 2024-25 operating budget will allow the Item 10.a. City Council Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 April 23, 2024 Page 6 continuation of the momentum of the Visit Arroyo Grande’s tourism marketing efforts, and to fund anticipated additional marketing opportunities. DISADVANTAGES: Levying the assessment will continue to impose a cost to tourists and visitors to Arroyo Grande who pay the assessment. There are no other disadvantages identified by levying the assessment for another year. There are no disadvantages identified with adopt ing the Resolution to adopt the AGTBID FY 2024-25 operating budget. ENVIRONMENTAL REVIEW: Conducting a public hearing to adopt a Resolution to levy and collect assessments and adopting a Resolution to approve the AGTBID operating budget are not subject to CEQA because these actions have no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. Moreover, the action merely constitutes an administrative activity of the City and is additionally exempt from CEQA on that basis. (State CEQA Guidelines, §§ 15060, subd. (b)(2)-(3), 15378.) PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. ATTACHMENTS 1. Proposed Resolution of Intention to Levy Assessment 2. Proposed Resolution AGTBID FY 2024-25 Budget ATTACHMENT 1 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE LEVYING AN ANNUAL ASSESSMENT FOR THE ARROYO GRANDE TOURISM BUSINESS IMPROVEMENT DISTRICT FOR THE 2024-25 FISCAL YEAR 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 the promotion of tourism; and WHEREAS, the Arroyo Grande Tourism Business Improvement District (“AGTBID” or “District”) was established in May 2013 and incorporated into the Arroyo Grande Municipal Code in Chapter 3.46; and WHEREAS, in accordance with the requirements of Streets and Highways Code Section 36530 and Arroyo Grande Municipal Code Section 3.46.100, the City council appointed an Advisory Board to provide oversight, guidance, and recommendations regarding the use of the assessment funds; and WHEREAS, the Arroyo Grande Municipal Code and the Parking and Business Improvement Area Law of 1989 require the Advisory Board to prepare and submit an annual report stating proposed changes, improvements, and activities for the fiscal year; and WHEREAS, the Advisory Board annual report was considered and approved by the Arroyo Grande City Council at its March 26, 2024 meeting; and WHEREAS, in accordance with the procedures contained in Streets and Highways Code Section 36534, on March 26, 2024, the City Council adopted a Resolution of Intention to levy an annual assessment for the Arroyo Grande Tourism Business Improvement District for the 2024-25 fiscal year and set a public hearing for April 23, 2024, to consider the annual assessment and hear any oral testimony and receive any written protests; and WHEREAS. The City Council held a duly noticed public hearing on April 23, 2024, to allow for protests, as required by Streets and Highways Code Section 36524, and sufficient written protests were not received from lodging businesses in the District which pay fifty percent of more of the assessment. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arroyo Grande, as follows: 1. The foregoing recitals are true and correct and are incorporated herein. RESOLUTION NO. PAGE 2 2. The City Council hereby continues the established Arroyo Grande Tourism Business Improvement District in accordance with Arroyo Grande Municipal Code Chapter 3.46 and California Streets and Highways Code Sections 36500 et seq. (Parking and Business Improvement Area Law of 1989) and levies assessments for fiscal year 2024-25 as further contained herein. 3. The report of the Arroyo Grande Tourism Business Improvement District Advisory Board is hereby confirmed. 4. The location and boundaries of the Arroyo Grande Tourism Business Improvement District are the boundaries of the City of Arroyo Grande. 5. The assessment levied by the Arroyo Grande Tourism Business Improvement District shall be used for activities and programs promoting lodging businesses in the District through the promotion of scenic, recreational, cultural, and other attractions in the District as a tourist destination, and as further set forth in Arroyo Grande Municipal Code Sections 3.46.030 and 3.46.080. 6. The assessment will be levied and allocated by the City of Arroyo Grande. 7. The assessment is to be levied on all “lodging” businesses, as that term is defined in Arroyo Grande Municipal Code Section 3.46.020. 8. The assessment for fiscal year 2024-25 shall be levied on all lodging businesses within the ATBID boundaries and shall be based upon two percent of the rent 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. 9. New lodging businesses shall not be exempt from immediate assessment. On motion of , seconded by , and on the following roll call vote, to wit: AYES: NOES: ABSENT: The foregoing Resolution was passed and adopted this 23rd day of April, 2024. RESOLUTION NO. PAGE 3 CAREN RAY RUSSOM, MAYOR ATTEST: JESSICA MATSON, CITY CLERK APPROVED AS TO CONTENT: MATTHEW DOWNING, CITY MANAGER APPROVED AS TO FORM: ISAAC ROSEN, CITY ATTORNEY ATTACHMENT 2 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE ADOPTING THE FISCAL YEAR 2024- 25 BUDGET FOR THE ARROYO GRANDE TOURISM BUSINESS IMPROVEMENT DISTRICT WHEREAS, on February 26, 2013, the City Council adopted Resolution No. 4516 establishing the Advisory Board (“Advisory Board”) to the Arroyo Grande Tourism Business Improvement District (“AGTBID” or “District”); and WHEREAS, on May 14, 2013, the City Council adopted Ordinance No. 651 establishing the AGTBID; and WHEREAS, the purpose of the Advisory Board is to consult with and advise the City Council on those matters dealing with the method and basis of levying assessments within the AGTBID; expenditures of revenues derived from such assessments; and programs, services, improvements, and activities intended to promote lodging establishments within the District; and WHEREAS, on February 20, 2024, the Advisory Board approved the FY 2023-24 AGTBID Annual Report; and WHEREAS, on March 26, 2024, the City Council approved the Advisory Board’s Annual Report and adopted a Resolution of Intention to levy and collect assessments for the 2024-25 fiscal year and to set a date for a public hearing for April 23, 2024; and WHEREAS, on April 23, 2024, the City Council adopted a Resolution levying an annual assessment for the AGTBID for the 2024-25 fiscal year; and WHEREAS, the budget recommendations attached hereto as Exhibit A are based upon City revenue projections and will fund a work plan that meets the objectives, goals, and responsibilities of the AGTBID. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arroyo Grande, as follows: 1. The foregoing recitals are true and correct and are incorporated herein. 2. The City Council hereby adopts the FY 2024-25 budget for the Arroyo Grande Tourism Business Improvement District attached hereto as Exhibit A. RESOLUTION NO. PAGE 2 On motion of , seconded by , and on the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this 23rd day of April, 2024. RESOLUTION NO. PAGE 3 CAREN RAY RUSSOM, MAYOR ATTEST: JESSICA MATSON, CITY CLERK APPROVED AS TO CONTENT: MATTHEW DOWNING, CITY MANAGER APPROVED AS TO FORM: ISAAC ROSEN, CITY ATTORNEY RESOLUTION NO. PAGE 4 EXHIBIT A FY 2024-25 AGTBID Budget Beginning Fund Balance 328,350$ 405,833$ 436,489$ 420,739$ FY 2021-22 Actuals FY 2022-23 Actuals FY 2023-24 Adopted Budget FY 2024-25 Proposed Budget TBID Assessments 295,271$ 303,626$ 309,000$ 318,270$ Interest (5,257) 4,078 750 750 Total Revenue 290,014$ 307,704$ 309,750$ 319,020$ Expenditures FY 2021-22 Actuals FY 2022-23 Actuals FY 2023-24 Adopted Budget FY 2024-25 Proposed Budget Advertising Marketing Services 144,762$ 196,254$ 200,000$ 250,000$ Photo/Video Assets 10,000 11,595 15,000 25,000 Promotional Product - - 5,000 5,000 Website 7,765 16,695 - - Travel and Trade Shows - - 7,500 7,500 Coop Advertising - - 15,000 50,000 Sub-total Advertising 162,527$ 224,544$ 242,500$ 337,500$ Contractual Services Chamber - Contract admin. 42,000$ 44,500$ -$ -$ Sub-total Contractual Services 42,000$ 44,500$ -$ -$ Membership & Subscriptions CCTC -$ -$ 500$ 500$ Sub-total Membership & Subs.-$ -$ 500$ 500$ Public Relations Event Sponsorships - - 20,000 100,000 Influencers - - - 10,000 Official AG Merch - Contest - - 5,000 - Official AG Merchandise - - 5,000 - Sub-total Public Relations -$ -$ 30,000$ 110,000$ Services & Supplies City - administrative 3,000$ 3,000$ 45,000$ 45,000$ Supplies/Domains - - 2,500 2,500 Vacation rental code compliance 5,004 5,004 5,000 5,000 Sub-total Services & Supplies 8,004$ 8,004$ 52,500$ 52,500$ Total Expenditures 212,531$ 277,048$ 325,500$ 500,500$ Ending Fund Balance 405,833$ 436,489$ 420,739$ 239,259$ Revenue MEMORANDUM TO: City Council FROM: Jessica Matson, Legislative & Information Services Director/City Clerk SUBJECT: Supplemental Information Agenda Item 10.a. – April 23, 2024 City Council Meeting Public Hearing to Consider Adoption of Resolutions Levying an Annual Assessment for the Arroyo Grande Tourism Business Improvement District (AGTBID) and Approving the AGTBID Budget for FY 2024-25 DATE: April 23, 2024 Attached is correspondence received by 4 PM for the above referenced item. cc: City Manager Assistant City Manager/Public Works Director Recreation Services Director City Attorney City Clerk City Website and Public Review Binder Enc From:Linda Drummy To:public comment Subject:TOT Fees Date:Tuesday, April 16, 2024 12:38:54 PM I am writing to protest the annual TOT fees. I feel that those who annually make less than $500 should not be assessed the same fees as those that make more on a consistent basis. So I am protesting this annual assessment. Regards, Linda Drummy Arroyo Grande