Honorable Mayor and Members of the City Council

Transcription

1 DATE: July 16, 2018 TO: Honorable Mayor and Members of the City Council FROM: SUBJECT: John C. Brown, City Manager Discussion and Possible Direction Regarding Creation of a Tourism Improvement District for the City of Petaluma RECOMMENDATION It is recommended that the City Council provide direction as appropriate regarding creation of a Tourism Improvement District (TID) for the City of Petaluma. BACKGROUND The Property and Business Improvement District Law of 1994 ( the 1994 Act) grants cities and counties the authority to establish and renew business improvement districts. The purpose of such districts is to levy assessments against property or businesses in the district, and to pay for the cost of certain activities and improvements benefitting property or businesses paying the assessment. Districts can be customized to meet the needs of the district and are designated, created and governed by businesses paying the assessment. An adopted District Management Plan governs the District and outlines boundaries, assessment, improvements and activities to be funded along with the term of the District. Funds are collected by businesses, paid to the City, and disbursed to an Owners' Association to administer per the Management Plan. Funds cannot be redirected to other programs and must be utilized in conformance with the Management Plan. In July, 2004 the Petaluma City Council approved a resolution consenting to the inclusion of the City of Petaluma within the bounds of the then -proposed Sonoma County Tourism Business Improvement Area ( SCTBIA). In November 2004, the Sonoma County Board of Supervisors approved the establishment of the SCTBIA in certain cities and in the unincorporated county. Seven cities joined the SCTBIA: Santa Rosa, Rohnert Park, Petaluma, Cloverdale, Cotati, Sebastopol, and Windsor. The SCTBIA was formed to create a source of funding to market Sonoma County as an overnight tourism destination, by imposing an assessment on certain lodging establishments, to augment then -existing tourism program funding sources. The resulting funds are, designated specifically to activities that market overnight stays in the Business Improvement Area. Assessments were placed on lodging operators who generated over 350, 000 a year; the assessment is equal to two ( 2) percent of the rent charged to guests.

2 This funding has been used to market Sonoma County and member cities, including Petaluma, since It is estimated that Petaluma will convey $ 606, 000 to the SCTBIA for FY 2017/ 18. Petaluma lodging establishments subject to the assessment have charged this fee to their guests in addition to the ten ( 10) percent Transient Occupancy Tax (TOT) levied by the City, and forward these monies to the City with their TOT payments. The cities of Sonoma and Healdsburg established their own tourism benefit assessment districts, in 2012 and in 2013, respectively. These cities charge a two ( 2) percent assessment on all room rentals collected on stays of 30 days or less, for all lodging establishments within their jurisdictions, in addition to their individual TOT rates. Exclusive of their two percent benefit assessments, Sonoma' s TOT is ten ( 10) percent, Healdsburg' s is 14 percent. Exclusive of the two percent collected for the SCTBIA, Petaluma' s TOT is ten ( 10) percent. Of the TOT collected in Petaluma, $ 248, 000 is spent annually in support of the Petaluma Visitors Program, managed by the Petaluma Downtown Association. In March, 2018 Councilmembers received correspondence from representatives of the Petaluma lodging industry and the Petaluma Downtown Association, encouraging the Council to establish a benefit assessment district in Petaluma to support tourism marketing ( Attachment 1). The correspondence offered to use some of the new funding to pay for the Petaluma Visitors Program, freeing up to $ 248, 000 annually for other City uses. Pursuant to Rule II (A)(3) of the Council' s Rules, Policies and Procedures, before the posting of an agenda for a City Council meeting, additional items shall be placed on the agenda when the City Manager receives a request by two Councilmembers, either verbally or in writing, that an item be added to the agenda. DISCUSSION On June 21, 2018, Vice Mayor Healy and Councilmembers Kearney and Miller requesting discussion and possible direction regarding the creation of a TID for the City of Petaluma Attachment 2). Their request asked the Council to consider a TID that includes the following features: 1. TID to be comprised of all hotels and lodging establishments within the City of Petaluma, created by their mutual consent. 2. Lodging establishments to fund TID with an assessment of 2. 0% of room rental charges. 3. TID to be governed by a board of directors comprised of representatives of stakeholders, including one representative from the City. 4. TID to fund the Petaluma Visitors Program in a minimum annual amount of $248, 000, relieving the General Fund of that responsibility. 5. TID to provide the City with $ 100, 000 annually dedicated to periodic dredging of the Petaluma River; such funds to be used only for that purpose. 6. Remaining TID funds to be utilized for events, programs and improvements intended to encourage visitors to Petaluma, in the discretion of the TID board. 7. TID to be modeled to the extent possible on the existing City of Healdsburg TID. 01

3 As noted, the Healdsburg City Council established the Healdsburg Tourism Improvement District (HTID) in In doing so, they approved a management plan entitled the Healdsburg Tourism Improvement District Management District Plan for a five year period; and designated the Healdsburg Chamber of Commerce as the Owners' Association responsible to implement the programs and activities designated by the Plan. The District provides a stable funding source for marketing and sales promotion efforts of lodging businesses in Healdsburg, and for physical improvements that support tourism. In FY , the District collected an estimated $ 577, 000 from 31 lodging businesses. Under the 2012 Plan, 60 percent of this was directed to marketing, 20 percent to district development, ten percent to Chamber administration, five ( 5) percent to City administration, and five ( 5) percent to contingencies. In November, 2017 Healdsburg renewed the HTID, and Owners' Association Agreement, for 5 more years. Healdsburg' s revenue estimate for 2017/ 18 ranged from $ 600, 000 to $ 660, 000. The allocation of revenues the revised Plan allowed 60% for sales and marketing, 22. 5% for district development projects, 10% for Chamber administration with a $ 65, 000 cap; 2. 5% for City Administration, and a five 5) percent contingency. More information regarding the HTID, the approval and renewal process, and the guiding law are provided in Attachment 3. Lodging industry representatives approached City staff approximately a year ago to discuss an early version of their proposal following the Council' s July 2017 discussion on the City' s expenditure pressures and revenue needs, and consideration of increasing the City' s Real Property Transfer and TOT rates. Staff did not support the industry proposal as it left the City with approximately $ 400, 000 less new revenue using present estimates - than increasing the City' s TOT from ten ( 10) to 12 percent. Staff's primary concern was that the proposal does not maximize the City' s ability to generate revenue at a time when the City is under steadily increasing pressure from, and is in need of new revenue to fund, the costs of labor. Staff also expressed concerns over the time required for TID program administration and oversight. Staff continues to have these concerns, and is further concerned with the time required for participating in and managing the formation process should the Council determine it wishes to pursue a Petaluma -specific TID. This matter is not included in the City Council' s goals for 2017 and 2018, and as such would redirect staff time away from work on current goals. The City Council will need to determine if it wishes to support the present request. If it does, several process steps are required to establish the TID. Pursuant to the 1994 Act, a petition asking the Council to form the TID is required of the lodging owners who will pay more than 50 percent of the proposed assessment. A summary of the district Management Plan must accompany the petition; the Management Plan needs to be developed before the Council can take action on a petition. The Management Plan will define the boundaries of the district, the timing and method of assessments, improvements and activities to be financed, the number of years for which the District levy will assessed, and include any rules or regulations applicable to the district. The Plan would also identify the organization responsible for managing funds, administering programs, and reporting to the City, on behalf of the TID Owner' s Association. That organization will need to have legal status to enable the City to contract with it, pursuant to the 1994 Act. in

4 Upon receipt of the petition and Management Plan, the Council would then need to adopt a resolution of intention to form the district, and set the time and date for a public meeting and a public hearing, where the request to form a TID would be further considered. The Council would then need to conduct the public meeting, to allow the public testimony on the request, and to conduct a separate public hearing to take additional testimony, and to take legislative action on the request. Based on the testimony received, the Council may approve or deny the request, or modify the district bounds, the proposed assessment, or work plan. Finally, the City will need to enter into an agreement with the organization representing the Owner' s Association. As noted, this would need to be an organization with legal status to enter into a binding agreement with the City, and with the ability to meet the City' s various insurance and indemnification requirements. In 2017 the City of Healdsburg conducted this process to renew the HTID. The process began in January and was concluded in November. That did not include the time needed to update the Management Plan, which was completed by the Healdsburg Chamber prior to January, but did include the time necessary to complete a City -initiated study of the HTID. The costs of that study were borne by the HTID. Petaluma staff has not analyzed the need for such a study, but would recommend that any City money expended on a potential TID formation be limited to staff time only. FINANCIAL IMPACTS The City currently charges a TOT of 10 percent, which is estimated to yield approximately $ 3. 3 Million in 2018/ 19. This is exclusive of SCTBIA assessments, which as previously noted, are estimated at $ 606, 000 for FY2017/ 18. An additional two ( 2) percent assessment would increase the rates charged to Petaluma lodgers to 14 percent, and would net an estimated $ 660, 000 for a Petaluma TID. Under the current lodging proposal, the City would retain $ 248, 000 that is used to support the Petaluma Visitors Program and $ 100, 000 per year would be provided to support City dredging activities. Should the City Council wish to establish a Petaluma - specific TID, the accompanying Management Plan should also include five ( 5) percent for City Administration, to compensate for the costs of City administration and oversight of the TID, and which is estimated at approximately $30, 000 using current TOT estimates. ATTACHMENTS 1. March 2018 Letter from Petaluma Lodging Establishments and Petaluma Downtown Association 2. June 2018 Memorandum from Vice Mayor Healy and Councilmembers Kearney and Miller 3. November 20, 2017 City of Healdsburg staff report and resolution renewing Healdsburg' s TID and the Owners' Association Agreement which includes Exhibit B, the Healdsburg Tourism Improvement District Management District Plan, and the Streets and Highways Code, Part 7, Property and Business Improvement District Law of

5 ATTACHMENT 1 March 27, 2018 Subject: Growing Tax Revenue by Supporting Economic Vitality and Business Community Health Dear Mayor Glass and Members of the Petaluma City Council, We, the undersigned, understand that the Petaluma City Council is searching for ways to increase City Tax Revenue to fund City of Petaluma budget needs by looking at various models for increasing taxes. We believe that a TID ( Tourism Improvement District) program will help grow City tax revenue while also supporting critical programs that ensure economic vitality. The undersigned Petaluma Lodging and Downtown Business community leaders feel that a TOT Tourism Occupancy Tax) increase is not the way to grow City Revenue but rather introducing a TID program will grow tax revenues in a sustainable way. By investing in Petaluma' s business vitality and destination marketing, Petaluma' s tax revenue will grow. We believe that a TID program will do that. Cities such as Healdsburg, Sonoma, and Santa Rosa all have TID programs to fund their community branding initiatives. As a result, their businesses are healthy, their city tax revenue is healthy. We urge the Petaluma City Council to stand with us. Community branding is an investment into the future of a community' s economic stability and vitality. It helps create community pride, which in turn supports " Buy Local" efforts. Tourism grows when a community offers a unique local experience that they cannot replicate in their own communities. That type of collaborative community messaging requires stable long- term funding and a continuous flow of brand messaging. Strong community branding also helps stabilize tax revenue when local businesses need to ride economic downturns. In an economic down cycle, healthy community branding becomes even more vital, because a healthy community with an established brand identity will more readily retain its loyal customer base against our competition. A TID program will provide the long- term stable funding we need to ensure our collective community vitality. We support the idea of creating a Petaluma lodging TID, where the hotels in Petaluma will charge a 2% self- assessment fee. Those funds would be collected by the City and in turn be used to fund the Petaluma Visitors Program and support sustainable economic development programs that ensure business health and vitality. The City will work closely with Petaluma Lodging, PVP ( Petaluma Visitors Program), and PDA ( Petaluma Downtown Association), and economic development to develop programs that support tourism -related businesses including retail, hospitality, food and beverage. The City Council currently uses a portion of TOT to fund the PVP. Under our proposal, the PVP will no longer need City funds from TOT, because the TID would fund PVP and possibly other local promotions. The TID will free up the full amount of TOT ( 10%) for the City Council to use for General Fund purposes.

6 We have already identified a consulting company which has helped Healdsburg and Sonoma develop and execute their TID. We would like to have further discussions with the Petaluma City Council regarding next steps. The sooner we execute on a TID, the sooner we can grow Petaluma tax revenue by growing Petaluma community business vitality. Sincerely, Richard Papera, General Manager Kirkman Lok, President/ CEO Lok Group of Companies Quality Inn Petaluma Dustin Groff, General Manager Dipak Patel, Owner Satish Patel, Owner 20S Kentucky Street, LLC Hotel Petaluma Max Childs, General Manager Perry Patel, Managing Partner BPR Properties, LLC Hampton Inn Shila Hitesh Patel, Manager Desk, Owner America' s Best Value Inn Marie Saint -Clair, Owner Metro Hotel Bob Everhart, Manager Richard DeCarli, President, Owner James Palmer, Owner Richard Myers, Owner Petaluma Properties, Inc. Best Western Petaluma Inn James Wu, Owner/ General Partner Sheraton Sonoma County Petaluma Holly Wick, Board President Petaluma Downtown Association Petaluma Visitors Program

7 ATTACHMENT 2 JUN To: John Brown Subject: Agenda Request CITY CLERK Pursuant to Rule II( A)( 3) of the Council' s Rules, Policies and Procedures, the undersigned hereby request that the following item be added to the agenda for the July 16, 2018 meeting of the Petaluma City Council and Petaluma Community Development Successor Agency: Discussion and possible direction regarding creation of a Tourism Improvement District for the City of Petaluma, including the following features: 1. TID to be comprised of all hotels and lodging establishments within the City of Petaluma, created by their mutual consent. 2. establishments to Lodging fund TID with an assessment of 2. 0% of room rental charges. 3. TID to be governed by a board of directors comprised of representatives of stakeholders, including one representative from the City. 4. TID to fund the Petaluma Visitors Program in a minimum annual amount of 248, 000, relieving the General Fund of that responsibility. 5. TID to provide the City with $100, 000 annually dedicated to periodic dredging of the Petaluma River; such funds to be used only for that purpose. 6. Remaining TID funds to be utilized for events, programs and improvements intended to encourage visitors to Petaluma, in the discretion of the TID board. 7. TID to be modeled to the extent possible on the existing City of Healdsburg TID. Dated: June Dated: June' L Dated: June), -) 2018.

8 ATTACHMENT 3 CITY OFHEALDSBURG CITY COUNCIL AGENDA STAFF REPORT MEETING DATE: November 20, 2017 SUBJECT: Renewal of the Healdsburg Tourism Improvement District PREPARED BY: Heather Ippoliti, Assistant City Manager STRATEGIC INITIATIVE( S): Quality of Life Economic Diversity & Innovation Effective & Efficient Government RE,CONIMENDED ACTION( S): I. Hold a public hearing to receive public testimony on the request to renew the Healdsburg TOLII- Ism Improvement District; and 2. Adopt a Resolution declaring results of the Majority Protest Proceedings; renewing the Healdsburg Tourism Improvement District; and approving the Owners' Association Agreement between the City of Healdsburg and Healdsburg Chamber of Commerce BACKGROUND: The Property and Business Improvement District Law of 1994 grants cities and counties the authority to establish and renew " property and business improvement districts" for the purpose of levying assessments against businesses in the district to pay for the cost of certain improvements and activities benefiting those businesses paying the assessment. Funds raised are returned to the private non- profit entity governing the district. Under the 1994 Act, a Business Improvement District (` BID") can only be established or renewed by the submission of a written petition signed by the business owners in the proposed district who \-vill pay more than 50% of the assessments. Petitioners are required to prepare and submit a Management District Plan along with their petition. The contents of the Ivtanagement Plan lay out the boundaries of the district, the timing and method of assessments, and the improvements and activities to be financed. In addition, the Management Plan must designate the number of years the assessment will be levied. A BID can only be renewed for no more than 10 years; unless certain other processes are followed. Activities and improvements allowed under the 1994 Act include:

9 A rt v t Pc 1. Promotion of public events which benefit businesses or real property in the district 2. Furnishing of music in any public place \- vithin the district 3. Promotion of tourism within the district 4. Marketing and economic development, including retail retention and recruitment 5. Providing security, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services supplemental to those normally provided by the municipality within the district 6. Other services provided for the purpose of conferring special benefit upon assessed businesses and real property located in the district Improvements 1. Parking facilities 2. Benches, booths, kiosks, display cases, pedestrian shelters and signs 3. Trash receptacles and public restrooms 4. Lighting and heating facilities 5. Decorations 6. Parks 7. Fountains 8. Planting areas 9. Closing, opening, widening or narrowing of existing streets 10. Facilities and/ or equipment to enhance security of persons and property within the district 11. Ramps, sidewalks, plazas and pedestrian malls 12. Rehabilitation or removal of existing structures In 2013 the Healdsburg Chamber of Commerce, working with the hoteliers in the City, developed and formed the Healdsburg Tourism Improvement District (" HTID") in compliance with the 1994 Act. The HTID is an assessment district that funds the marketing and sales promotion efforts of Healdsburg lodging businesses. The HTID was initially formed. for a five 5) year term which will end on December 31, 2017, unless renewed. On January 23, the City received notice from the HTID that the lodging businesses wished to renew the HTID for an additional ten ( 10) years, beginning January 1, 2018 through December 31, At that time, the HTID also submitted the draft Healdsburg Improvement District Management Plan (" Management Plan") which outlined the activities to be financed with the assessment revenue. Fri

10 At the April 17, 2017 City Council meeting, Council considered the request, and after receivin( T feedback from the community, Council directed staff to work with the HTID to get signed petitions from the HTID members and bring the results to the Council for further consideration and setting dates for future action. Subsequent to the April City Council meeting, the City hired Robert Eyler ( HTID reimbursed the City' s cost), Economic Forensics and Analylics, to undertake an assessment of the HTID, including a forecast of HTID revenues and how those revenues might be utilized to offset tourism impacts on local residents and resources. The assessment analyzed three potential growth scenarios for HTID revenues and determined that HTID revenues are anticipated to grow from approximately $ 600, $ 660, 000 in FY to $ 1. 12M - $ 1. 81V1 in FY , depending upon the growth scenario. The assessment also concludes that under each growth scenario, HTID revenue is expected to exceed HTID expenses ( assuming a 5% growth rate for expenses). The more prosperous, scenario provides more HTID revenue, where HTID can fund district development projects that provide community benefits that can help offset tourism impacts on residents and local resources. DISCUSSION/ ANALYSIS: Based upon the information contained in the assessment, the HTID is proposing to allocate 20% of the HTID annual budget to district development projects including services, improvements and activities which the HTID suggests will improve the quality of life in the community. As proposed, for 2018, approximately $ support services and projects in the community. 120, 000 of HTID revenue would be made available to In FY , depending budget is anticipated on the growth scenario, the 20% allocation of the HTID annual to yield approximately $ 224, 000-$ 361, 000 for district development projects that improve the quality of life in the community. To ensure the future use of funds continues to align with the community' s needs, the HTID is proposing to create a sub -committee made up of a member of the HTID board, a City Council representative and a community representative to allocate future fiends. The attached draft Management Plan has been prepared by the District' s consultant and reflects the HTID' s proposal to allocate 20% of the HTID annual budget to district development projects that improve the quality of life in the community for the life of the. HTID ( through 2027). The Management Plan also identifies the location of the District encompassing all existing and future lodging businesses within the boundaries of the City, proposes to continue the annual assessment rate of 2% of gross short- term room rental revenue, and identifies all of the activities to be financed including sales and marketing, district development projects, administration and operations, City administration fee and contingency/ reserve. In addition, the Management Plan designates the assessments will be levied for a period of 10 years, beginning January 1, 2018 through December 31, The draft Management Plan has been accepted by the lodging businesses. Under the Management Plan, the Healdsburg Chamber of Commerce would continue to serve as the HTID' s Owners' Association and be responsible for managing funds and implementing programs in accordance with the Management Plan, as well as providing annual reports to the

11 City. The total HTID annual budget for the initial year of its ten ( 10) year operation is anticipated to be approximately $ Signed petitions in favor of renewing the HTID have been received from business owners in the proposed district who will pay more than 50 percent of the assessments proposed to be levied. On September 18, the City Council adopted a resolution of intention which contained a brief description of the proposed activities and improvements, exterior boundaries, the amount of the proposed assessment, a statement that the assessment will be levied on business owners and that no debt financing will be ISSUed. The resolution also included the time and place for a public meeting and a public hearing. The City Cleric provided written notice to the lodging businesses subject to the assessment, as required by the Streets and Highways Code, which included the process for filing protests to the renewal of the HTID. To date no written protests have been received. Per the Management Plan, after adoption, the Council may adjust budget allocations between the categories by no more than 15% of the total budget per year. Renewal of the HTID is a three step process, as follows: Step 11 ( Resolution of Intention to renew the HTID and set the date and time of a public meeting and a public hearing where the request for renewal will be considered further. completed) Council elected to move forward with the renewal, and adopted a 2. Step 2 ( completed) Council held a public meeting to allow public testimony on the request to renew the HTID. 3. Step 3 ( Proposed for November 20th) Council will hold a public hearing to allow public testimony on the request to renew the HTID and to allow` the Council to consider approval of the renewal. At the conclusion of the public hearing, the City Council may adopt, revise, change, reduce, or modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with the revenues from the assessments.' Proposed assessments may be revised by reducing any oi- all of them. If the Council elects to renew the HTID, following the public hearing, they will adopt a Resolution of District Renewal and approve the Owners' Association Agreement with the Chamber of Commerce to administer and implement the improvements and activities of the HTID. Assuming the Council would like to renew the District, it should reach consensus on each of these provisions of the Management Plan: 1. Term 2. Sales and Marketing/ District Development allocation 3. City' s administration allowance 4. Chamber administration allowance

12 Based on input from the last meeting, some possible choices are listed below: Current Plan Additional choices for each detail: Term: 10 years 6 years 5 years I year 10% with Chamber cap at Administration: 10% 0 65, , 000 City 2. 5% ( est. plus annual Administration: 5% 15, 000) CPI increase District Development: 20% 5% 40% Marketing: 60% 75% 40% Contingency: 5% reduced The The District District has has also also proposed proposed that that any any reduction reduction in in Chamber Chamber and/ and/ or or City City Administration Administration be be used used to to increase increase District District Development. Development. If If the the Council Council chose chose the the 75%: 75%: 5% 5% Sales Sales and and Marketing/ Marketing/ District District Development Development allocation allocation for for the the first first year, year, the the allocation allocation could could be be revised revised to to 60%: 60%: 20% 20% in in the the second second year year aa change change of of 15%. 15%. The The draft draft Management Management Plan Plan defines defines " " Contingency" Contingency" as as aa percentage percentage of of uncollected uncollected assessments. assessments. If If there there are are contingency contingency funds funds collected, collected, they they may may held held in in aa reserve reserve fund fund or or utilized utilized for for other other program, program, administration administration or or renewal renewal costs costs at at the the discretion discretion of of the the Owners' Owners' Association. Association. Policies Policies relating relating to to contributions contributions to to the the reserve reserve fund, fund, the the target target amount amount of of the the reserve reserve fund, fund, and and expenditure expenditure of of monies monies from from the the reserve reserve fund fund shall shall be be set set by by the the Board Board of of Directors Directors of of the the Owners' Owners' Association. Association. Contingency/ Contingency/ reserve reserve funds funds may may be be spent spent on on District District programs programs or or administrative administrative and and renewal renewal costs costs in in such such proportions proportions as as determined determined by by the the Owners' Owners' Association. Association. The The reserve reserve fund fund may may be be used used for for the the costs costs of of renewing renewing the the District. District. ALTERNATIVES: ALTERNATIVES: Council Council may may choose choose to to revise revise the the proposed proposed details details as as mentioned mentioned above, above, or or not not adopt adopt the the resolution, resolution, in in which which case, case, staff staff asks asks for for additional additional direction. direction. FISCAL FISCAL IMPACT: IMPACT: The The proposed proposed assessment assessment is is 2% of of the the - - gross gross rental rental receipts receipts from from all all overnight overnight stays stays in in the the City. City. Similar Similar to to our our current current TOT TOT regulation, regulation, all all types types of of lodging lodging consecutive consecutive calendar calendar days days or or less less are are proposed proposed to to be be included included in in the the assessment. assessment. Lodging Lodging operators operators would would collect collect the the assessment assessment fi- fi- om om their their guests guests and and report report and and pay pay the the assessment assessment when when they they pay pay their their Transient Transient Occupancy Occupancy Tax. Tax. The The assessment assessment estimates estimates the the HTID HTID would would generate generate approximately $ approximately $ 600, 600, $ - $ 660, 660, in in FY FY The The City City would would function function as as the the fiscal fiscal agent agent for for the the FITID, FITID, with with responsibility responsibility for for collecting collecting proceeds proceeds to to the the Owners' Owners' Association_ Association_ The City City would retain two revenue/ revenue/ payment payment and and remitting remitting would retain two

13 and one- half percent ( 2. 5%) of the amount of the assessment collected to cover its costs of collection and administration. ENVIRONMENTAL ANALYSIS: Pursuant to Title 14, the California Code of Regulations, Section 15302( c) of the California Environmental Quality Act (" CEQA") Guidelines, the proposed action is an administrative activity of the City that will not result in direct or indirect physical changes to the environment. ATTACHMENT( S): Resolution Exhibit A - District Map Exhibit B - District Management Exhibit C - Owners Association Plan Agreement 1. 4

14 CITY OF FIEALDSBURG RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HEALDSBURG DECLARING RESULTS OF THE MAJORITY PROTEST PROCEEDINGS; RENEWING THE HEALDSBURG TOURISM IMPROVEMENT DISTRICT; AND APPROVING THE OWNERS' ASSOCIATION AGREEMENT BETWEEN THE CITY OF HEALDSBURG AND HEALDSBURG CHAMBER OF COMMERCE WHEREAS, the Property and Business Improvement District Law of 1994 ( Streets and Highways Code et. seq.) authorizes cities and counties to establish property and business improvement districts upon petition by a weighted majority of the lodging business owners located within the boundaries of the district; and WHEREAS, on October, 1, 2012, the City Council adopted a resolution establishing the Healdsburg Tourism Improvement District for a term of five year, expiring December 31, 2017; and WHEREAS, 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 HealdsburgTourism Improvement District (" HTID") have petitioned the City Council to renew the HTID; and WHEREAS, included with the petitions was a Management District Plan summary that describes the proposed assessment to be levied on lodging businesses within the HTID to pay for sales promotion and marketing activities, and other improvements and activities set forth in the Management District Plan; and WHEREAS, the assessed lodging businesses within the HTID will be benefited by the activities and improvements set forth in the Management District Plan; and WHEREAS, on September 18, 2017 at 6: 00 p. m. at 401 Grove Street, Healdsburg, CA 95448, the City Council adopted a Resolution of Intention, Resolution No ; and WHEREAS, the public meeting and public hearing to consider the establishment of the HTID have been properly noticed in accordance with Streets and Highways Code 36623; and WHEREAS, on November 6, 2017 at 6: 00 p. m. at 401 Grove Street, Healdsburg, CA 95448, the City Council held a public meeting regarding the establishment of the HTID, and on November 20, 2017 the City Council held a public hearing, heard and received objections and protests, if any, to the establishment of the HTID and the levy of the proposed assessment; and WHEREAS, 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

15 district which would pay percent ( fifty 50%) or more of the assessments proposed to be levied. Protests are \- veighted based on the assessment proposed to be levied on each lodging business; and WHEREAS, the 1994 Act permits the City to designate a private nonprofit entity, known as the " owners' association," to administer or implement the improvements and activities specified in the management district plan; and WHEREAS; if the City elects to have the " owners association" implement the management plan it must enter into a contract with the owners association to administer and carry out the programs and activities; and WHEREAS, the City Council of the City of Healdsburg wishes to designate the Healdsburg Chamber of Commerce as the Owners' Association to administer and implement the improvements and activities specified in the management district plan; and WHEREAS, the Owners' Association shall form a HTID subcommittee, comprised of representatives of assessed lodging businesses plus one City Council appointed city representative, to direct the Chamber in matters pertaining to the expenditure of funds and the implementation of activities and improvements of the management district plan. that: NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Healdsburg 1. The recitals set forth herein are adopted by the City Council as findings and they are true and correct. term. 2. The Healdsburg Tourism Improvement District is hereby renewed for a ten- year The Management District Plan dated November 2, 2017, attached Hereto as Exhibit B, is hereby adopted. 3. The assessments levied for the HTID shall be applied toward sales, promotions and marketing programs to market Healdsburg lodging businesses as tourist, meeting and event destinations as set forth in the ManagementDistrict Plan. 4. The revenue from the levy of the assessments on lodging businesses within the HTID may not be used to provide for activities or improvements outside the HTID or for any purpose other than those specified herein, in the Management District Plan, and in the Resolution of Intention. 5. Assessments levied on lodging businesses pursuant to this resolution shall be levied on the basis of benefit Because the services provided are intended to increase room rentals, an assessment based on room rentals is the best measure of benefit.

16 6. The amount of assessment, if passed on to each transient, shall be disclosed in advance, separately stated Froin the amount of rent charged and any other applicable taxes, and each transient shall receive a receipt for payment from the business. 7. The assessments for the entire District will total approximately $ 600, 209 in year one of the renewed term. 8. The activities and improvements set forth will be funded by the levy of an assessment on lodging businesses within the I- ITID as described in the Management District Plan as attached hereto as Exhibit B. 9. Bonds shall not be issued to fund the HTID. 10. The boundaries of the HTID shall be the boundaries of the City of Healdsburg. Please see the attached map, incorporated herein as Exhibit A. 11. The assessments shall be used for the purposes set forth above and any funds remaining at the end of any year may be used in subsequent years in which the HTID assessment is levied as long as they are used consistent with the requirements set forth herein. 12. The assessments to fund the activities and improvements for the HTID will be collected at the same time and in the same manner as are transient occupancy taxes, and in accordance with Streets and Highways Code Healdsburg Chamber of Commerce shall be the Owners' Association pursuant to Streets and Highways Code As Owners' Association, the Healdsburg Chamber of Commerce, pursuant to Streets and Highways Code 36650, shall cause to be prepared a report for each fiscal year for which assessments are to be levied and collected to pay the costs of the improvernent and activities described in the report. The first report shall be due after the first year of operation of the district. 15. The HTID 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 et. seq.). 16. The City Cleric, or his or her designee, is directed to take all necessary actions to complete the establishment of the HTID and to levy the assessments. 17. The City Council authorizes the City Manager to execute the Owners' Association agreement, attached as Exhibit C, between the City of Healdsburg and Healdsburg Chamber of Commerce for the implementation of the Management District Plan, attached hereto as Exhibit B, subject to any non -substantive changes approved by the City Attorney. 0

17 Council This Resolution shall take effect immediately upon its adoption by the City PASSED, APPROVED, AND ADOPTED this 20` x' day of November 2017 by the followinb vote: AYES: Councilmembers: NOES: Councilmembers: ABSENT: Councilmembers: ABSTAINING: Councilmembers: SO ORDERED: ATTEST: Shaun F. McCaffery, Mayor Maria Cui' iel, City Clerk 0

18 Exhibit A District Map LYTTON SPRINGS RD,' c C x mo', p - MARCH AYE c' J 4 t,

19 m

20 CONTENTS LOVERVIEW L BACKGROUND ID. BOUNDARY y V. BUDGET AND SERVICES A. Annual Set -vice Plan... 5 O. Annual Budget... 7 C. California Constitutional Compliance... 8 D. Assessment... 9 E. Penalties and Interest... i0 F. Time and Manner for Collecting, Assessments... V.(() VE1LNA[ Cii A. Owners'/\ sxooiodon I B. Brown Act and California Public Records Act Compliance... '... C. Annual Report APPENDIX1_ LAW l2 0 Prepared Civitas by v ' ` 7- /\ ( A M 800) vwv/. oivitasudvison. conn 01

21 1. OVERVIEW Developed by Healdsburg Chamber of Commerce ( the Chamber), the Healdsburg Tourism Improvement District ( HTID) is an assessment district proposed to provide specific benefits to payors, by funding marketing and sales promotion efforts and district development programs for assessed businesses. The HTID was formed in 2013 for a five ( 5) year term-, businesses now wish to renew it for an additional ten ( 10) )- ears- Location: The renewed HTID includes all lodging businesses located within the boundaries of the City of Healdsburg, as shown on the map in Section III. Services: The HTID is designed to provide specific benefits directly to payors by increasing room night sales. N-Tarketing and sales promotions and district development programs will increase overnight tourism and market payors as tourist, meeting and event destinations, thereby increasing room night sales. Budget: The total HTID annual budget for the initial year of its ten ( 10) year operation is anticipated to be approximately $ 600, 209. This budget is expected to fluctuate as room sales do and as businesses open and close. The estimated budget for each year n n. of the HTID' s ten ( 10) year operation is provided in Section IV(B). rn Cost. The annual assessment rate is two percent ( 2%) of gross short- term room rental revenue. Based on the benefit received, assessments will not be collected on: stays of f more than thirty ( 30) consecutive days; stays by any federal; or state officer or employee when on official business; stays by any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty; and stays by any person who has signed an agreement in writing for occupancy in a lodging business for more than thirty ( 30) days. Collection: The City will be responsible for collecting the assessment on a monthly basis ( including N_ o any delinquencies, penalties and interest) from each lodging business located in the boundaries of the HTID. m The City shall take all reasonable efforts to collect the assessments from each lodging business. Duration: The renewed HTID will have a ten( 10) year life beginning January 2018 through Y g gi Y 1 g W December 31, Once per year, beginning on the anniversary of district renewal, there is a 30- dalt period in which owners paying more than fifty percent ( 50%) of the E ti ti m CU g x assessment may protest and initiate a City Council hearing on district termination_ Y llilanagement: The Healdsburg Chamber of Commerce will continue to serve as the FITID' s Owners' Association. 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. Q HTID Management District Plan NoN, ember 2, '

22 Fi IL BACKGROUND T[ Ds are an evolution of the traditional Business Improvement District. The first IID was formed in West Hollywood, California in 1989_ Since then, one hundred California destinations have followed suit. In recent years, other states have begun adopting the California model Montana, South Dakota, Washington, Colorado, Texas and Louisiana have adopted TID laws. Several other states are in the process of adopting their own legislation. The cities of Wichita, Kansas and Newark, New Jersey used an business improvement district law to form a TBID. And, some cities, like Portland, existing Oregon and Memplus, Tennessee have utilized their home rule powers to create TIDs without a state lay Number of Districts CIDerating in California California' s TIDs collectively raise over $ 250 million for local destination competitors marketing. raising With their budgets, and increasing rivalry for visitor dollars, it is important that Healdsburg lodging businesses continue to invest in stable, lodging - specific marketing programs. p N N N N N N N TIDs utshze the efficiencies of t0l0 O O O O O O O O O O CDC) O O O O O O Ca ld O O O O O O O O O O N W A Vl M v private sector operation to the td Ul O F-' N W A Ql J CO W C) market- based promotion of tourism districts. TIDs allow lodging business owners to organize their efforts to increase room night sales. Lodging business owners within the TID pay an assessment and those funds are used to provide services that increase room night sales. In California, TIDs are formed pursuant to the Property and Business Improvement District Law of This law allows for the creation of a benefit assessment district to raise funds within a specific geographic area. The kq! difference between TIDs and other benefit assessivent districts is that frndr raised are returned to the Inivate non- Proft coworationgoverning the district. There are many benefits to TIDs: o Funds must be spent on services and improvements that provide a specific benefit to those who o Pay, Funds cannot be diverted to general government programs; They are customized to fit the needs of payors in each destination; They allow for a wide range of services, They are designed, created and governed by those who nullpap the assessment; and 0 They provide a stable, long- term funding source for tourism promotion. HTID Management November 2, 2017 District Plan

23 y III. BOUNDARY The HTLD will include all lodging businesses, existing and in the future, available for public occupancy within the boundaries of the City of Healdsburg. Lodging business means: any structure or any portion of any structure that is occupied or intended or designed for occupant} by transients for sleeping purposes, including any inn, home or house, motel, studio hotel, bachelor hotel, lodging house, rooming house, apartment house, dormitory, public or private club, mobile home or house trailer at a fixed location, or other similar structure or portion thereof that is used for occupancy by transients, even if such use is on a part- time basis. The boundary, as shown in the map below, currently includes twenty-nine (29) lodging businesses_ A complete listing of lodging businesses within the renewed HTID can be found in Appendix 2. Healdsburg TID Boundary 5 / 9123/ 2016 CIV;. AS tai 11`rs_ t C ifr.+ + sin t, l - P;; `';;-...-':',; t! 1' 1 0" I V s! / 3 91: O TIC 8cu!}aary ( CiPy LiniitsF ' t' nao<,,. HTID Management District Plan November 2, 2017 y

24 IV. BUDGET AND SERVICES A. Annual Service Plan assessment funds will be spent to provide specific benefits conferred or privileges granted directly to the payors that are not provided to those not charged, and which do not exceed the reasonable cost to the Cite of conferring the benefits or granting the privileges_ The privileges and services provided with the HTID funds are sales and marketing programs available only to assessed businesses. A service plan budget has been developed to deliver services that benefit the assessed businesses. detailed annual budget will be developed and approved by the Chamber' s FITID subcommittee. The table below illustrates the initial annual budget allocations. The total initial budget is $ 600, 209. A Initial Annual Budget - $ 600, 209 Contingency / City Admin. Fee, 30; Reserve, $ 30, 010, Administration & Operations, 60, 021, 10% District Development, 120, 042, 2094 Although actual revenues will fluctuate due to market conditions, the proportional allocations of the budget shall remain the same. However, the City and the Chamber' s HTID subcommittee shall have the authority to adjust budget allocations between the categories by no more than fifteen percent 15%) of the total budget per year. A description of the proposed improvements and activities for the initial year of operation is below. The same activities are proposed for subsequent years. In the event of a legal challenge against the HTID, any and all assessment funds may be used for the costs of defending the HTID. Each budget category includes all costs related to providing that service, in accordance with Generally Accepted _recounting Procedures ( GAAP). For example, the sales and marketing budget includes the cost of staff time dedicated to overseeing and implementing the sales and marketing program. Staff time dedicated purely to administrative tasks is allocated to the administrative portion of the budget. The costs of an individual staff member may be allocated to multiple budget categories, as appropriate in accordance with GAAR The staffing levels necessary to provide the services below will be determined by the Chamber' s HTID subcommittee on an as -needed basis HTID Management November 2, 2017 District Plan

25 Sales and Marketing sales and marketing program will promote assessed businesses as tourist, meeting, and event destinations. The sales and marketing program will have a central theme of promoting FIealclsburg as a desirable place for overnight visits. The program will have the goal of increasing overnight visitation and room night sales at assessed businesses, and may include the following activities: Internet marketing efforts to increase awareness and optimize internet presence to drive overnight visitation and room sales to assessed businesses; Print ads in magazines and newspapers, television ads, and radio ads targeted at potential visitors to drive overnight visitation and room sales to assessed businesses; Attendance of trade shows to promote assessed businesses; Sales blitzes for assessed businesses; Familiarization tours of assessed businesses; o Preparation and production of collateral promotional materials such as brochures, flyers and maps featuring assessed businesses', _ Attendance_ ofprofessional industry conferences and affiliation events to promote assessed businesses: Lead generation activities designed to attract tourists and group everits to assessed businesses; p Director of Sales and General Manager meetings to plan and coordinate tourism promotion = efforts for assessed businesses; Cn Development and maintenance of a website designed to promote assessed businesses; and ti Education of hospitality staff on service and safety ( related to alcohol and food) designed to c create a visitor experience that will bring repeat, Tisits to assessed businesses; and a. Education of lodging businesses management and the Owners' Association on marketing strategies best suited to meet s needs Flealdsburg' designed to increase overnight visitation and E room night sales and assessed. businesses. c ca Q n 0- District Development District Development ( DD) projects will be designed to improve the visitor experience in an effort to increase overnight visitation at assessed lodging businesses. As the total number of rooms sold and room prices increase over time, the amount of available funds for DD projects will increase. During the ten ( 10) year term of the District, a minimum of twenty percent ( 20%) of the annual budget shall be used for DD projects. Working collaboratively with the City, the Chamber' s HTID subcommittee will develop specific DD funding criteria. The City and the Chamber staff shall have equal input to make recommendations to the Chamber' s HTID subcommittee for final project approval. The award of any public works contract for an approved DD project must be done in accordance with Municipal Code requirements. Policies and procedures acceptable to both the Chamber and the City will be developed. DD projects may include: Sel vices designed to improve the visitor experience, such as but not limited to, transportation and parking solutions, Improvements designed to improve the visitor experience, such as but not limited to, benches, restrooms, and lighting improvements, and Activities designed to improve the visitor experience, such as but not limited to, Tuesday Music on the Plaza, Healdsburg Farmers Market, Healdsburg Center to the Arts, and/ or creation of new Arts, Cultural and Educational activities. HTID Management District Plan November 2, 2017 IU

26 Administration and Operations The administration and operations portion of the budget shall be utilized for administrative staffing costs, office costs, advocacy, and other general administrative costs such as insurance, legal, and accounting fees. City Administration Fee The City of shall retain five percent ( 5%) of the amount of assessment collected, to cover Healdsburg its costs of collection and administration. Anv amount of the CM, Administration Fee in excess of the actual cost of collecting and administering the assessment shall be Association to be used for District programs. forwarded to the Owners' Contingency/ Reserve The budget includes a contingency line item to account for uncollected assessments, if any. If there are contingency funds collected, they may be held in a reserve fund or utilized for other program, _ administration or renewal costs at the discretion of the Owners' Association. Policies relating to contributions to the reserve fund, the target amount of the reserve fund, and expenditure of monies from the reserve fund shall be set by the Board of Directors of the Owners' Association. o Contingency/ reserve funds may be spent on District programs or administrative and renewal costs in = such proportions as determined by the Owners' Association. The reserve fund may be used for the rn costs of renewing the District. ti ti B. Annual Budget The total ten ( 10) year improvement and service plan budget is projected at approximately $ 600, 209 annually, or approximately $ 9, 019, 806 through This amount may fluctuate as sales and revenue increase or decrease at assessed businesses and as businesses open and close. The table below portrays the estimated annual assessment budget'_ Estimated Annual Assessment Budget ` Sales & District Admin. & City Admin. Contingency Year MarketinDevelopment Operations Fee Reserve TOTAL , , 042` 60, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , 814 1, 056, , , , , , 870 1, 077, , , , , , 948 1, 098, , , , , , 047 1, 120, 936 TOTAL 5, 411, 884 1, 803, , , , 990 9, 019, 806 Estimated annual budget protections developed by Robert Eyler, President & Head of Research, Economic Forensics & Analytics HTID Management District Plan November 2, I

27 C. California Constitutional Compliance The HTID assessment is not a property -based assessment subject to the requirements of Proposition 218. Courts have found Proposition 218 limited the term ` assessments' to levies on real property.' Rather, the HTID assessment is a business - based assessment, and is subject to Proposition 26. Pursuant to Proposition 26 all levies are a tax unless they lit one of seven exceptions_ Two of these exceptions apply to the HTID, a " specific benefit" and a " specific government service." Both require that the costs of benefits or services do not exceed the reasonable costs to the Cir) of conferring the benefits or providing the services. 1. Specific Bertefrt Proposition 26 requires that assessment funds be expended on, " 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 local government of conferring the benefit or granting the = privilege." 3 The services in this Plan are designed to provide targeted benefits directly to assessed lodging businesses, and are intended only to provide benefits and services directly to those businesses paying the assessment. These services are tailored not to serve the general public, businesses in o general, or parcels of land, but rather to serve the specific lodging businesses within the District. The r activities described in this Plan are specifically targeted to increase room night sales for assessed lodging businesses within the boundaries of the District, and are narrowly tailored. HTID funds will be used exclusively to provide the specific benefit of increased room night sales directly to the assessees. Assessment funds shall not be used to feature non -assessed lodging businesses in HTID programs, or to directly generate sales for non -assessed businesses. The activities paid for from w assessment revenues are business services constituting and providing specific benefits to the assessed businesses. c E The assessment imposed by this District is for a specific benefit conferred directly to the payors that is not provided to those not' eharged: The specific benefit conferred direcd). to the payors is an increase in room night sales. The specific benefit of an increase in room night sales for assessed lodging businesses will be provided only to lodging businesses paying the district assessment, with marketing and sales programs promoting lodging businesses paying the district assessment. The marketing and sales programs will be designed to increase room night sales at each assessed lodging businesses. Because they are necessary to provide the marketing and sales programs that specifically benefit the assessed lodging businesses, the administration and contingence services also provide the specific benefit of increased room night sales to the assessed lodging businesses. Although the District, in providing specific benefits to payors, may produce incidental benefits to non- paying businesses, the incidental benefit does.not preclude the services from being considered a specific benefit. The legislature has found that, " 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 pa) -or as a consequence of providing the specific benefit to the payor." 2.. Specific Goverliniew Service The assessment may also be utilized to provide, " a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the 3 Jari4s r. the City QfSan Diego 72 Cal App. 4"' 230 Cal. Const. art XI I I C I ( e)( 1 ) Government Code 53758( a) HTID Management District Plan November 2, 2017 VO

28 reasonable costs to the local government of the service or product" The legislature has providing recognized that marketing and promotions services Like those to be provided by the HTID are of proposition? G`'. Further, the legislature has determined government services within the meaning that " a specific government service is not excluded from classification as a ` specific government service' merely because an indirect benefit to a nonpayor occurs incidentally and without cost to the payor as a consequence of providing the specific government service to the payor."' 3. Rerrso«able Cost District services will be implemented carefully to ensure they do not exceed the reasonable cost of such seivices. The full amount assessed will be used to provide the services described herein. Funds will be managed by the Chamber and reports submitted on an annual basis to the City. Only assessed lodging 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 lodging businesses will not receive these nor any other, district - funded services and CU benefits. _ U Q The District - funded programs are all targeted directly at and feature only assessed businesses. It is, d however, possible that there will be a spill over benefit to non -assessed businesses. If non -assessed p lodging businesses receive incremental room nights, that portion of the promotion or program = generating those room nights shall be paid with non -District funds. HTID funds shall only be spent to benefit the assessed businesses, and shall not be spent on that portion of any program which directly generates incidental room nights for non -assessed lodging businesses. D. Assessment The annual assessment rate is two percent ( 2%) of gross short term room rental revenue. Based on the benefit received, assessments will not be collected on: stays of more than thirty ( 30) consecutive days; stays of more than thirty ( 30) consecutive days; stays by any federal or state officer or employee when on official business; stays by any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty; and stays by any person who has signed an agreement in writing for occupancy in a lodging business for more than thirty ( 30) days. The term " gross room rental revenue" as used herein means: the actual consideration charged, whether or not received, for the occupancy of space in a lodging business valued in money, whether to be received in money, goods, labor or othelavise, including all receipts, cash, credit and property and services of any kind or nature without any deduction therefrom whatsoever. Gross room rental revenue shall not include any federal, state or local taxes collected, including but not limited to transient occupancy taxes. The assessment is levied upon and a direct obligation of the assessed lodging business. However, the assessed lodging business may, at its discretion, pass the assessment on to transients. 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 shall receive a receipt for payment from the business. The assessment shall be disclosed as the " HTID Assessment." The assessment is imposed solely upon, and is the sole obligation of the assessed lodging business even if it is passed on to transient_,. The assessment shall not be considered revenue for any purposes, including calculation of transient occupancy taxes. Cal. Const. art XIII C C I( e)( 2) Government Code ti 53758( b) Government Code S 53758( b) HTID Management District Plan November 2, 2017

29 Bonds shall not be issued. C. Penalties and Interest The HTID shall reimburse the City of Healdsburg for any costs associated with collecting unpaid assessments. If sums in excess of the delinquent HTID assessment are sought to be recovered in the same collection action by the City, the HTID shall bear its pro rata share of such collection costs. Assessed businesses which are delinquent in paying the assessment shall be responsible for paying: 1. Oriainnl Delinqueng: Any lodging business which fails to remit any assessment imposed within the time required shall pay a penalty of ten percent ( 10%) of the amount of the assessment owning in addition to the amount of the assessment 2. Continued Delingaeng: Any lodging business which fails to remit any delinquent remittance on or before a period of thirty ( 30) days following the date on wliicl-i 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. F' zmd: If the City determines that the nonpayment of any remittance due was willful, a penalty of percent ( fifty 50%) of the amount of the assessment shall be added thereto in addition to the penalties stated in subsection ( 1) and ( 2) of the section. 4. Interest. In addition to the penalties imposed, any lodging 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. S. Penaltief Mewed with Assessment: 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. F. Time and Manner for Collecting Assessments The HTID assessment will be implemented beginning_ January 1, 2018 and will continue for ten ( 10) years through December 31, The City will be responsible for collecting the assessment on a monthly basis ( including any delinquencies, penalties and interest) from each lodging business. The City shall take all reasonable efforts to collect the assessments from each lodging business. The City shall Forward the assessments collected to the Owners' Association. HTID Management District Plan Novem be.r 2, 2017

30 V. GOVERNANCE A. Owners' Association The Cita Council, through adoption of this Management District Plan, has the right, pursuant to Streets and Highways Code , to identity the body that shall implement the proposed program, which shall be the Owners' Association of the HTID as defined in Streets and Highways Code The Citv Council has determined that the Healdsburg Chamber of Commerce ( the Chamber) will serve as the Owners' Association for the HTID. The Chamber' s HTID subcommittee, comprised of representatives of assessed lodging businesses plus one City Council appointed city representative, shall continue to direct the Chamber in matters pertaining to the expenditure of funds and the implementation of activities and improvements. rn B. Brown Act and California Public Records Act Compliance S L An Owners' Association is a private entity and may not be considered a public entity for any purpose, M nor may its board members or staff be considered to be public officials for any purpose. The Owners' Association is, however, subject to government regulations relating to transparency, namely the Ralph M. Brown Act and the California Public Records Act. These regulations are designed to promote a public accountabili The Owners' Association acts as a legislative body under the Ralph M. Brown Q Act ( Government Code j54950 et seq.). Thus, meetings of the Chamber 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 ti requirements of the California Public Records Act. Accordingly, the Owners' Association shall publicly report any c action taken and the vote or abstention on that action of each member present for the action. o.. C. Annual Report The Chamber shall present an annual report at the end of each year of operation to the City Council pursuant to Streets and Highways Code ( see Appendix 1). The annual report shall. include: Any proposed changes in the boundaries of the 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 estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year. The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this part. HTID Management District Plan November 2, 2017

31 APPENDIX 1- LACK/ This document is current through the? 017 Supplement **' All 2016 legislation) STREETS AND HIGHWAYS CODE Division 18. Parking Part 7. Property and Business Improvement District Law of 1994 Cal Sts & Hy Code Div. 18, Pt. 7 ( 2017) CHAI DTER 1. General DiGJisiGiS I7 ARTICLE 1. Declarations [ ] c Citation of part This part shall be known and may be cited as the " Property and Business Improvement District Law of 1994." L Legislative findings and declarations;, Legislative guidance a The Legislature finds and declares all of the following: a) Businesses located and operating within business districts in some 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 business districts 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 business districts to fund business related improvements, maintenance, and activities through the levy of assessments upon the businesses or real property that receive benefits from those improvements. y d) Assessments levied for the purpose of conferring special benefit upon the real property or a specific E benefit upon the businesses in a business district are not taxes for the general benefit of city, even if property, businesses, or persons not assessed receive incidental or collateral effects that benefit them. m e) Property and business improvement districts formed throughout this state have conferred special benefits upon properties and businesses within their districts and have made those properties and businesses more 2 useful by providing the following benefits: v 1) Gime reduction. A study by the Rand Corporation has confirmed a 12 - percent reduction in the incidence of robbery and an 8 - percent reduction. in the total incidence of violent crimes within the p 30 districts studied. 2) Job creation. T 3) Business attraction. Q 4) Business retention. x w 5) Economic growth. 6) New investments. c f) With the dissolution of redevelopment agencies throughout the state, property and business improvement E districts have become even more important tools with which communities can combat blight, promote v economic opportunities, and create a clean and safe environment. g) Since the enactment of this act, the people of California have adopted Proposition 218, which added Q Article XIII D to the Constitution in order to place certain requirements and restrictions on the formation of, and activities, expenditures, and assessments by property -based districts. Article XIII D of the Constitution provides that property - based districts may only levy assessments for special benefits. h) The act amending this section is intended to provide the Legislature' s guidance with regard to this act, its interaction with the provisions of Article XIII D of the Constitution, and the determination of special benefits in property - based districts. 1) The lack of legislative guidance has resulted in uncertainty and inconsistent application of this act, which discourages the use of assessments to fund needed improvements, maintenance, and activities in property - based districts, contributing to blight and other underutilization of property. 2) Activities undertaken for the purpose of conferring special benefits upon property to be assessed inherently produce incidental or collateral effects that benefit property or persons not assessed. Therefore, for special benefits to exist as a separate and distinct category from general benefits, the HTID Management District Plan November 2, 2017 M a

32 incidental or collateral effects of those special benefits are inherently part of those special benefits. The mere fact that special benefits produce incidental or collateral effects that benefit property or persons not assessed does not convert any portion of' those special benefits or their incidental or collateral effects into general benefits. 3) It is of the utmost importance that property -based districts created under this act have clarity regarding restrictions on assessments they may levy and the proper determination of special benefits. Le«islative clarity with regard to this act will provide districts with clear instructions and courts with legislative intent regarding restrictions on property -based assessments, and the manner in which special benefits should be determined Purpose of part The purpose of this part is to supplement previously enacted provisions of law that authorize cities to levy assessments within property and business improvement districts, to ensure that those assessments conform to all constitutional requirements and are determined and assessed in accordance with the guidance set forth in this act. This part does not affect or limit any other provisions of law authorizing or providing for the furnishing of improvements or activities or 0) the raising of revenue for these purposes 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 2500)). t Part prevails over conflicting provisions 0) Any provision of this part that conflicts with any other provision of law shall prevail over the other provision of law, as to districts created under this part. 2 p 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. ARTICLE 2. Definitions " Activities" - Activities" means, but is not limited to, all of the following that benefit businesses or real property in the district: a) Promotion of public events. b) Furnishing of music in any public place_ c) Promotion of tourism within the district. d) Marketing and economic development, including retail retention and recruitment. e) Providing security, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services supplemental to those normally provided by the municipality. 0 Other services provided for the purpose of conferring special benefit upon assessed real property or specific benefits upon assessed businesses located in the district " Assessment" Assessment" means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements and providing activities that will provide certain benefits to properties or businesses located within a property and business improvement district ` Business' Business" means all types of businesses and includes financial institutions and professions " 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 " City council" HTID Management District Plan November 2,

33 City council" means the city council ofa city or the board ofsupervisors of 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 " Clerk" Clerk" means the clerk of the legislative body " General benefit" General benefit" means, for purposes of a property - based district, any benefit that is not a " special benefit" as defined in Section " Improvement" improvement" means the acquisition, construction, installation, or maintenance of any tangible property estimated useful life of five years or more including, but not limited to, the following: a) Parking facilities. with an b) Benches, booths, kiosks, display cases, pedestrian shelters and signs. 01 c) Trash receptacles and public restrooms. L d) Lighting and heating facilities. 17 e) Decorations. c U g) Fountains. n h) Planting areas. Q i) Closing, opening, widening, or narrowing of existing streets. F j) Facilities or equipment, or both, to enhance security of persons and property within the district. _ k) Ramps, sidewalks, plazas, and pedestrian malls. m 1) Rehabilitation or removal of existing structures " Management district plan"; " Plan" Management district plan" or " plan" means a proposal as defined in Section " Owners' association" Owners' association" means a private nonprofit entity that is tinder contract with a city to administer or implement improvements, maintenance, and activities specified in the management district plan. An owners' association maybe an existing nonprofit entity or a newly formed nonprofit entity. An owners' association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to" b'e public officials for any purpose. Notwithstanding this section, an owners' association shall comply with the Ralph M. Brown Act Chapter 9 ( commencing with Section 54950) of Part I of Division 2 of Title 5 of the Government Code), at all times when matters within the subject matter of the district are heard, discussed, or' deliberated, and with the California Public Records Act ( Chapter 3. 5 ( commencing with Section 6250) of Division 7 of Title 1 of the Government Code), for all records relating to activities of the district " Property" Property" means real property situated within a district " Property and business improvement district"; " District" Property and business improvement district," or " district,". means a property and business improvement district established pursuant to this part " Property -based assessment" Property -based assessment" means any assessment made pursuant to this part upon real property " Property - based district" Property - based district" means any district in which a city" levies a property - based assessment " Property owner"; " Business owner"; " Owner" Property owner" means any person shown as the owner of land on the last equalized assessment roll or otherwise known to be the owner of land by the city council. ' Business owner' means any person recognized by the city as the owner of the business. " Owner" means either a business owner or a property owner. The city council has no obligation to obtain other information as to the ownership of land or businesses, and its determination of ownership shall be final HTID Management District Plan November 2, 2017 CIO

34 and conclusive for the purposes of this part_ Wherever this part requires the signature of the property owner. the signature of the authorized agent of the property owner shall be sufficient. Wherever this part requires the signature of the business owner, the signature of the authorized agent of the business owner shall be sufficient " Special benefit" Special benefit" means, for purposes of a property - based district, a particular and distinct benefit over and above general benefits conferred on real property located in a district or to the public at large. Special benefit includes incidental or collateral effects that arise from the improvements, maintenance, or activities of property -based districts even if those incidental or collateral effects benefit property or persons not assessed. Special benefit excludes general enhancement of property value " Tenant" Tenant" means an occupant pursuant to a lease of commercial space or a dwelling unit, other than an owner ARTICLE 3. Prior Law s' Alternate method of financing certain improvements and activities; Effect on other provision This part provides an alternative method of financing certain improvements and activities. The provisions of this part shall 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. Every improvement area established pursuant to the Parking and Business Improvement Area Law of 1989 ( Part 6 ( commencing with Section 36500) of this division) is valid and effective and is unaffected by this part. p CHAPTER 2. Establishment [ Establishment of property and business improvement district A property and business improvement district may be established as provided in this chapter. _ ti ra d Requirement of consent of city council A county may not form a district within the territorial jurisdiction of a city without the consent of the city council of E that city. A city may not form a district within the unincorporated territory of a county without the consent of the board of supervisors of that county. A city may not form a district within the territorial jurisdiction of another city without the consent of the city council of the other city Initiation of proceeding; Petition of property or business owners in proposed district a) Upon the submission of a written petition, signed by the property or business owners in the proposed district who will pay more than 50 percent of the assessments proposed to be levied, the. city council may initiate proceedings to form a district by the adoption of resolution expressing its intention to form a district. The amount of assessment attributable to property or a business owned by the same property or business owner that is in excess of 40 percent of the amount of all assessments proposed to be levied, shall not be included in determining whether the petition is signed by property or business owners who will pay more than 50 percent of the total amount of assessments proposed to be levied. b) The petition of property or business owners required under subdivision ( a) shall include a summary of the management district plan. That summary shall include all of the following: 1) A map showing the boundaries of the district. 2) Information specifying where the complete management district plan can be obtained. 3) Information specifying that the complete management district plan shall be furnished upon request. c) The resolution of intention described in subdivision ( a) shall contain all of the following: 1) A brief description of tile proposed improvements, maintenance, and activities, the amount of the proposed assessment, a statement as to whether the assessment will be levied on property or businesses within the district, a statement as to whether bonds will be issued, and a description of the exterior boundaries of the proposed district. which may be made by reference to any plan or map that is on file with the clerk. The descriptions and statements do not need to be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements, maintenance, and activities, and the location and extent of the proposed district. HTID Management November- 2, 2017 District Plan IN

35 2) A time and place for a public hearing on the establishment of" the property and business improvement district and the levy of assessments, which shall be consistent with the requirements of' Section Contents of management district plan The management district plan shall include, but is not limited to, all of the following a) If the assessment will be levied on property, a map of the district in sufficient detail to locate each parcel of property and, if businesses are to be assessed, each business within the district. If the assessment will be levied on businesses, a map that identifies the district boundaries in sufficient detail to allow a business owner to reasonably determine whether a business is located within the district boundaries. If the assessment will be levied on property and businesses, a map of the district in sufficient detail to locate each parcel of property and to allow a business owner to reasonably determine whether a business is located within the district boundaries. b) The name of the proposed district. c) A description of the boundaries of the district, including the boundaries of benefit zones, proposed for c establishment or extension in a manner sufficient to identify the affected property and businesses included, which may be made by reference to any plan or map that is on file with the clerk. The boundaries of a proposed property assessment district shall not overlap with the boundaries of another existing property assessment district created pursuant to this part. This part does not prohibit the boundaries of a district created a pursuant to this part to overlap with other assessment districts established pursuant to other provisions of law, n. including, but not limited to, the Parking and Business Improvement Area Law of 1989 ( Part 6 ( commencing Q with Section 36500)). This part does not prohibit the boundaries of a business assessment district created t- pursuant to this part to overlap with another business assessment district created pursuant to this part. This part does not prohibit the boundaries of a business assessment district created pursuant to this part to overlap with a property assessment district created pursuant to this part. d) The improvements, maintenance, and activities' proposed` for' each year of operation of the district and the maximum cost thereof. If the improvements, maintenance, and activities proposed for each year of operation are the same, a description of the first year' s proposed improvements, maintenance, and activities and a n statement that the same improvements, maintenance, and activities are proposed for subsequent years shall c satisfy the requirements of this subdivision. e) The total annual amount proposed to be expended for improvements, maintenance, or activities, and debt a) service in each year of operation of the district. If the assessment is levied on businesses, this amount may be estimated based upon the assessment rate. If the total annual amount proposed to be expended in each year of operation of the district is not significantly different, the amount proposed to be expended in the initial 2E Y year and a' stateme' ntthat a similar amount applies to subsequent years shall' satisfy the requirements of this Y subdivision'. I) The proposed source or sources of financing, including the proposed method and basis of levying the assessment in sufficient detail to allow each property or business owner to calculate the amount of the assessment to be levied against his or her property or business. The plan also shall state whether bonds will be issued to finance improvements. g) The time and manner of collecting the assessments. tj h) The specific number of years in which assessments will be levied. In a new district, the maximum number of years shall be five. Upon renewal, a district shall have a term not to exceed 10 years. Notwithstanding these limitations, a district created pursuant to this part to finance capital improvements with bonds may levy E assessments until the maximum maturity of the bonds. The management district plan may set forth specific increases in assessments for each year of operation of the district - i) ( The proposed time for implementation and completion of the management district plan. j) Any proposed rules and regulations to be applicable to the district. k) ( 1) A list of the properties or businesses to be assessed, including the assessor' s parcel numbers for properties to be assessed, and a statement of the method or methods by which the expenses of a district will be imposed upon benefited real property or businesses, in proportion to the benefit received by the property or business, to defray the cost thereof. 2) In a property -based district, the proportionate special benefit derived by each identified parcel shall be determined exclusively in relationship to the entirety of the capital cost of a public improvement, the maintenance and operation expenses of a public improvement, or the cost of the activities. An assessment shall not be imposed on any parcel that exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits are assessable, and a property -based district shall separate the general benefits, ifany, from the special benefits conferred p C: E N a HTID Management District Plan November 2, 2017 Nv

36 on a parcel. Parcels within a property -based district that are owned or used by any city, public agency, the State of California, or the United States shall not be exempt from assessment unless the governmental entity can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit. The value of any incidental, secondary, or collateral effects that arise from the improvements, maintenance, or activities of' a property - based district and that benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit or affect the proportionate special benefit derived by each identified parcel. 1) In a property - based district, the total amount of all special benefits to be conferred upon the properties located within the property -based district. m) In a property - based district, the total amount of general benefits, if any. n) In a property - based district, a detailed engineer' s report prepared by a registered professional engineer certified by the State of California supporting all assessments contemplated by the management district plan. o) Any other item or matter required to be incorporated therein by the city council Procedure to levy assessment a) if a city council proposes to levy a new or increased property assessment, the notice and protest and hearing procedure shall comply with Section of the Government Code. b) If a city council proposes to levy a new or, increased business assessment, the notice and protest and hearing procedure shall comply with Section of the Government Code, except that notice shall be mailed to the owners of the businesses proposed to be assessed. A protest may be made orally or in writing by any interested person. Every written protest shall be filed with the clerk at or before the time fixed for the public hearing. The city council may waive any irregularity in the form or content of any written protest. A written protest may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest shall contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the city as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business or the authorized representative. A written protest that does not comply with this section shall not be counted in determining a majority protest. If written protests are received from the owners or authorized representatives of businesses in the proposed district that will pay 50 percent or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than 50 percent, no further proceedings to levy the proposed assessment against such businesses, 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. e) If a city council proposes to conduct a single proceeding to levy both a new or increased property assessment and a new or increased business assessment, the notice and protest and hearing procedure for the property assessment shall comply with subdivision ( a), and the notice and. protest and hearing procedure for the business assessment shall comply with subdivision ( b). If a majority protest is received from either the property or business owners, that respective portion of the assessment shall not be levied. The remaining portion of the assessment may be levied unless the improvement or other special benefit was proposed to be funded by assessing both property and business owners Changes to pi-oposed assessments At the conclusion of the public hearing to establish the district, the city council may adopt, revise, change, reduce, or modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with the revenues from the assessments. Proposed assessments may only be revised by reducing any or all of them. At the public hearing, the city council may only make changes in, to, or from the boundaries of the proposed property and business improvement district that will exclude territory that will not benefit fi-om the proposed improvements, maintenance, and activities. Any modifications, revisions, reductions, or changes to the proposed assessment district shall be reflected in the notice and map recorded pursuant to Section Resolution of formation a) If the city council, following the public hearing, decides to establish a proposed property and business improvement district, the city council shall adopt a resolution of formation that shall include, but is not limited to, all of the following: I) A brief description of the proposed improvements, maintenance, and activities, the amount of the proposed assessment, a statement as to whether the assessment will be levied on property, businesses, or both within the district, a statement on whether bonds will be issued, and a description of the exterior boundaries of the proposed district, which may be made by reference to any plan or HTID Management November 2, 2017 District Plan

37 map that is on file with the clerk. The descriptions and statements need not be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements, maintenance, and activities and the location and extent of the proposed district. 2) The number, date of adoption, and title of the resolution of intention. 3) The time and place where the public hearing was held concerning the establishment of the district. 4) A determination regarding any protests received. The city shall not establish the district or levy assessments if a majority protest was received. 5) A statement that the properties, businesses, or properties and businesses in the district established by the resolution shall be subject to any amendments to this part. 6) A statement that the improvements, maintenance, and activities to be conferred on businesses and properties in the district will be funded by the levy of the assessments. The revenue from the levy of assessments within a district shall not be used to provide improvements, maintenance, or activities outside the district or for any purpose other than the purposes specified in the resolution of intention, as modified by the city council at the hearing concerning establishment of the district. Notwithstanding the foregoing, improvements and activities that must be provided outside the district boundaries to create a special or specific benefit to the assessed parcels or businesses may a) be, provided, but shall be limited to marketing or signage pointing to the district. U 7) A finding that the property or businesses within the area of the property and business improvement district will be benefited by the improvements, maintenance, and activities funded by the proposed assessments, and, for a property - based district, that property within the district will p receive a special benefit. 8) in a property - based district, the total amount of all special benefits to be conferred on the properties within the property -based district. b) The adoption of the resolution of formation and, if required, recordation of the notice and map pursuant to Section 36627' shall constitute the levy of an assessment in each of the fiscal years referred to in the management district plan. ti r` Resolution establishing district if the city council, following the public hearing, desires to establish the proposed property and business improvement district; and the city council has not made changes pursuant to Section 36624, or has made changes that do not substantially change the proposed assessment, the city council shall adopt a resolution establishing the district. The resolution shall contain all of the information specified in Section Notice and assessment diagram Following adoption of thè resolution establishing district assessments on properties pursuant to Section or Section 36626, the clerk shall record a notice and an assessment diagram pursuant to Section No other provision of Division 4. 5 ( commencing with Section 3100) applies to an assessment district created pursuant to this part Establishment of separate benefit zones within district; Categories of businesses The city council may establish one or more separate benefit zones within the district based upon the degree of benefit derived from the improvements or activities to be provided within the benefit zone and may impose a different assessment within each benefit zone. if the assessment is to be levied on businesses, the city council may also define categories of businesses based upon the degree of benefit that each will derive fi-0111 the improvements or activities to be provided within the district and may impose a different assessment or rate of assessment on each category of business, or on each category of business x"vithin each zone Assessments on businesses or property owners The city council may levy assessments on businesses or on property owners, or a combination of the two, pursuant to this part. The city council shall structure the assessments in whatever manner it determines corresponds with the distribution of benefits from the proposed improvements, maintenance, and activities, provided that any property - based assessment conforms with the requirements set forth in paragraph ( 2) of subdivision ( k) of Section Provisions and procedures applicable to benefit zones and business categories All provisions of this part applicable to the establishment, modification, or disestablishment of property and business improvement district apply to the establishment, modification, or disestablishment of benefit zones or categories of business. The city council shall, to establish, modify, or disestablish a benefit zone or category of business, follow the procedure to establish, modify, or disestablish a property and business improvement district. HTID Management District Plan November 2, 2017 y

38 Expiration of district; Creation of' new district I f a property and business improvement district expires due to the time limit set pursuant to subdivision ( h) of' Section 36622, a new management district plan may be created and the district may be renewed pursuant to this part. CEIAPTER 3. Assessments Time and manner of collection of assessment; Delinquent payments The collection of the assessments levied pursuant to this part shall be made at the time and in the manner set forth by the city council in the resolution levying the assessment. Assessments levied on real property may be collected at the same time and in the same manner as for the ad valorem property tax, and may provide for the same lien priority and penalties for delinquent payment. All delinquent payments for assessments levied pursuant to this part may be charged interest and penalties Assessments to be based on estimated benefit; Classification of real property and businesses; Exclusion c of residential and agricultural property ' a) The assessments levied on real property pursuant to this part shall be levied on the basis of the estimated benefit to the real property within the property and business improvement district. The city council may classify properties for purposes of determining the benefit to property of the improvements and activities provided pursuant to this part. d b) Assessments levied on businesses pursuant to this part shall be levied on the basis of the estimated benefit p to the businesses within the property and business improvement district. The city council may classify F- businesses for purposes of determining the benefit to the businesses of the improvements and activities = provided pursuant to this part. ' c) Properties zoned solely for residential use, or that are zoned for agricultural use, are conclusively ti presumed not to benefit from the improvements and service funded through these assessments, and shall not be subject to any assessment pursuant to this part Time for contesting validity of assessment The validity of an assessment levied under this part shall not be contested in any action or proceeding unless the action or proceeding is commenced within 30 days after the resolution levying the assessment is adopted pursuant to Section Any -appeal from a final judgment in an action or proceeding shall be perfected within 30 days after the entry ofjudgment Service contracts authorized to establish levels of city services The city council may execute baseline service contracts that would establish levels of city services that. would continue after a property and business improvement district has been formed Request to modify management district plan The owners' association may, at any time, request that the,city council modify the management district plan. Any modification of the management district plan shall be made pursuant to this chapter Modification of plan by resolution after public hearing; Adopting of resolution of intention a) Upon the written request of the owners' association, the city council may modify the management district plan after conducting one public hearing on the proposed modifications. The city council may modify the improvements and activities to be funded with the revenue derived fi-om the levy of the assessments by adopting a resolution determining to make the modifications after holding a public hearing on the proposed modifications. If the modification includes the levy of a new or increased assessment, the city council shall comply with Section Notice of all other public hearings pursuant to this section shall comply with both of the following: 1) The resolution of intention shall be published in a newspaper of general circulation in the city once at least seven days before the public hearing. 2) A complete copy of the resolution of intention shall be mailed by first class mail, at least 10 days before the public hearing, to each business owner or property owner affected by the proposed modification. b) The city council shall adopt a resolution of intention which states the proposed modification prior to the public hearing required by this section. The public hearing shall be held not more than 90 days after the adoption of the resolution of intention. HTID Management November 2, 2017 District Plan 0

39 Reflection of modification in notices recorded and maps Any subsequent modification of the resolution shall be reflected in subsequent notices and maps recorded pursuant to Division 4. 5 ( commencing with Section 3 100), in a manner consistent with the provisions of Section CHAPTER Financing Bonds authorized; Procedure; Restriction on reduction or termination of assessments a) The city council may, by resolution, determine and declare that bonds shall be issued to finance the estimated cost of some or all of the proposed improvements described in the resolution of formation adopted Pursuant to Section 36625, if the resolution of formation adopted pursuant to that section provides for the issuance of bonds, under the Improvement Bond Act of 1915 ( Division 10 ( commencing with Section 8500)) or in conjunction with Nlarks- Roos Local Bond Pooling Act of 1985 ( Article 4 ( commencing with Section 6584) of Chapter 5 of Division 7 of Title I of the Government Code). Either act, as the case may be, shall govern the proceedings relating to the issuance of bonds, although proceedings under the Bond Act of 1915 M may be modified by the city council as necessary to accommodate assessments levied upon business pursuant to this part. b The resolution adopted pursuant to subdivision ( a) shall generally describe the proposed improvements = v specified in the resolution of formation adopted pursuant to Section 36625, set forth tie estimated cost of s those improvements, specify the number of annual installments and the fiscal years during which they are to a be collected. The amount of debt service to retire the bonds shall not exceed the amount of revenue estimated to be raised from assessments over 30 years. c) Notwithstanding any other provision of this part, assessments levied to pay the principal and interest on any bond issued pursuant to this section shall not be reduced or terminated if doing so would interfere with the timely retirement of the debt. p CHAPTER 4. Governance Report by owners' association; Approval or modification by city council a) The owners' association shall 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 improvements, maintenance, and activities described in the report. The owners' association' s first report shall be due after the first year of operation of the district. The report may propose changes, including, but not limited to, the boundaries of the property and business improvement district or any benefit zones within the district, the basis and method of levying the assessments, and any changes in the classification of property, including any categories of business, if a classification is used. b) The report shall be filed with the clerk and shall refer to the property and business improvement district by name, specify the fiscal year to which the report applies, and, with respect to that fiscal year, shall contain all of the following information: 1) Any proposed changes in the boundaries of the property and business improvement district or in any benefit zones or classification of property or businesses within the district. 2) The improvements, maintenance, and activities to be provided for that fiscal year. 3) An estimate of the cost of providing the improverilents, maintenance, and activities for that fiscal year. 4) The method and basis of levying the assessment in sufficient detail to allow each real property or business owner, as appropriate, to estimate the amount of the assessment to be levied against his or her property or business for that fiscal year. S) The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year. 6) The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this part. c) 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 modification shall be made pursuant to Sections and The city council shall not approve a change in the basis and method of levying assessments that would impair an authorized or executed contract to be paid from the revenues derived from the levy of assessments, including any commitment to pa -y principal and interest on any bonds issued on behalf of the district. HTID Management District Plan November 2, 2017 MA

40 3665L Designation of owners' association to provide improvements, maintenance, and activities The management district plan may, but is not required to, state that an owners' association will provide the improvements, maintenance, and activities described in the management district plan. If the management disuict plan designates an owners' association, the city shall contract with the designated nonprofit corporation to provide services. CHAPTER S. Renewal Renewal of district; Transfer or refund of' remaining revenues; District term limit a) Any district previously established whose term has expired, or will expire, may be renewed by following the procedures for establishment as provided in this chapter. b) Upon renewal, any remaining revenues derived from the levy of assessments, or any revenues derived from the sale of assets acquired with the revenues, shall be transferred to the renewed district. if the renewed district includes additional parcels or businesses not included in the prior district, the remaining revenues shall be spent to benefit only the parcels or businesses in the prior district, if the renewed district does not include parcels or businesses included in the prior district, the remaining revenues attributable to these parcels shall be refunded to the owners of these parcels or businesses. c) Upon renewal, a district shall have a term not to exceed 10 years, or, if the district is authorized to issue bonds, until the maximum maturity of those bonds. There is no requirement that the boundaries, assessments, improvements, or activities of a renewed district be the same as the original or prior district. CHAPTER 6. Disestablishment Circumstances permitting disestablishment of district; Procedure a) Any district established or extended pursuant to the provisions ofthis part, where there is no indebtedness, outstanding and unpaid, incurred to accomplish any of the purposes of the district, may be disestablished by resolution by the city council in either of the following circumstances: 1) ifthe city council finds there has been misappropriation of funds, malfeasance, or a violation of law in connection with the management of the district, it shall notice a hearing on disestablishment. 2) During the operation of the district, there shall be a 30 -day period each year in which assessees may request disestablishment of the district. The first such period shall begin one year after the date of establishment; of the district and shall continue for 30 days. The next such 30- day' period shall begin two years after the date of the establishment of the district. Each successive year of operation of the district shall have such a 30 - day period. Upon the written petition of the owners or authorized representatives of real property or the owners or authorized representatives of businesses in the district who pay 50 percent or more of the assessments levied, the city council shall pass a resolution of intention to disestablish the district. The city council shall notice a hearing on disestablishment. b) The city council shall adopt a resolution of intention to disestablish the district prior to the public hearing required by this section. The resolution shall state the reason for the disestablishment, shall state the time and place of the public hearing, and shall contain a proposal to dispose of any assets acquired with the revenues of the assessments levied within the property and business improvement district. The notice of the hearing on disestablishment required by this section shall be -given by mail to the property owner of each parcel or to the owner' of each business subject to assessment in the district, as appropriate. The city shall conduct the public hearing not less than 30 days after mailing the notice to the property or business owners. The public hearing shall beheld not more than 60 days after the adoption of the resolution of intention Refund of remaining revenues upon disestablishment or expiration without renewal of district; Calculation of refund; Use of outstanding revenue collected after disestablishment of district a) Upon the disestablishment or expiration without renewal of a district, any remaining revenues, after all outstanding debts are paid, derived from the levy of assessments, or derived from the sale of assets acquired with the revenues, or fi-om bond reserve or construction funds, shall be refunded to the owners of the property or businesses then located and operating within the district in which assessments were levied by applying the same method and basis that was used to calculate the assessments levied in the fiscal year in which the district is disestablished or expires. All outstanding assessment revenue collected after disestablishment shall be spent on improvements and activities specified in the management district plan. b) if die disestablishment occurs before an assessment is levied for the fiscal year, the method and basis that was used to calculate the assessments levied in the immediate prior fiscal year shall be used to calculate the amount of any refund. HT1D Management District Plan November 2,

41 APPENDIX 2 - ASSESSED BUSINESSES All Seasons Vacation Suites 414 Foss St. & 415A Heaidsburg Ave Healdsburg ' CA' America' s Best Value Inn & Suites 74 Healdsburg Ave. Healdsburg, CA Bella Luna Inn'' S30' Healdsburg_ Ave. " ' Healdsburg, CA Belle de Jour inn 16276_ Healdsburg Ave. Healdsburg, CA Calderwood, lnn ; 25,.W. Grant; St. Healdsburg, C& 95452' Camellia Inn 211 North St. Healdsburg, CA anr. R. Al nd-, ratai Creek Inn 198 Dry Creek Rd. Healdsburg, CA Grandma' s Victorian Cottage 607 Johnson St. Healdsburg, CA HTID Management November 2, 2017 District Plan 4