Patrick Prescott, Community Development Director By: Mary Hamzoian, Economic Development Manager

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1 DATE: May 24, 2016 TO: FROM: Ron Davis, Interim City Manager Patrick Prescott, Community Development Director By: Mary Hamzoian, Economic Development Manager SUBJECT: Burbank Tourism Business Improvement District Renewal Public Hearing and Resolution of Renewal RECOMMENDATION Adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURBANK DECLARING RESULTS OF MAJORITY PROTEST PROCEEDINGS AND RENEWING THE BURBANK TOURISM BUSINESS IMPROVEMENT DISTRICT (T-BID) (Exhibit A). BACKGROUND The T-BID is a self-imposed, special benefit assessment district designed to generate funds for marketing and promotional efforts for the hospitality industry. The T-BID utilizes resources from the hotel industry to market and promote Burbank as a tourist destination to increase hotel room occupancy rates, average daily rates, and local sales tax revenues. Hotel owners within the boundaries of the T-BID vote to fund its operations. This approach has been successful in California with 97 T-BIDs currently in operation, and most importantly in Burbank over the past five years. Burbank s hoteliers support the T-BID because of the economic value that it provides to their businesses. Many small hoteliers do not have the necessary resources to market and promote their hotels, and rely on the T-BID to provide marketing and promotional opportunities on their behalf. In California, T-BIDs are formed pursuant to the Property and Business Improvement District Law of This law allows for the creation of a special benefit assessment district to raise funds within a specific geographic area. The assessments from the district are managed by the non-profit corporation governing the district, which for the T-BID is the Burbank Hospitality Association (BHA). The City s Economic Development team staffs the T-BID and the Community Development Director is a voting member on the BHA Board. On September 20, 2011, City Council approved the Resolution of Renewal to establish Burbank s first T-BID for a five-year term, effective October 1, 2011 through September 30, Now in its fifth year of operation, the T-BID is a successful mechanism creating

2 economic vitality through tourism by helping increase occupancy rates, tourism related jobs, and visitor spending in Burbank. DISCUSSION Renewal Process Staff began the renewal process for the T-BID in Fall Since then, the following steps have been completed: In October of 2015, staff began working with Civitas Advisors; the BHA s consulting firm specializing in the establishment and renewal of business improvements districts. Civitas worked with the hoteliers to draft the Management District Plan (MDP) (Exhibit B) outlining all operational activities and components for the renewal of the T-BID. In January 2016, the BHA Board approved the draft version of the MDP, which initiated the petition process. The draft MDP and petition was sent out to all hotel property owners in the district for their review. In February, 2016, staff began receiving petitions (Exhibit C) from hotels in favor of renewing the T-BID. A total of 12 of 17 hotels submitted their petition in favor of renewing the T-BID. These 12 hotels represent percent of the total district s assessments. This is calculated based on the hotels total gross revenue from Fiscal Year (FY) The percent greatly exceeds the legally required approval threshold of more than 50 percent of the total assessment amount. On April 5, 2016, the City Council took the first legislative step required by adopting the Resolution of Intention to renew the T-BID (Exhibit D). On April 6, 2016, the public notice (Exhibit E) and approved Resolution of Intention was mailed to all Burbank hoteliers in the T-BID notifying them of the public meeting on April 26, 2016 and public hearing on May 24, On April 26, 2016, the City Council took the second legislative step by conducting a public meeting to invite oral or written testimony regarding the renewal of the T- BID. Tony Garibian, Vice-Chair of the BHA, spoke on behalf of the entire BHA Board in favor of renewing the T-BID for a 10 year term. No additional members of the public provided oral testimony, nor was there any written testimony. On May 2, 2016, staff mailed another copy of the public notice to all Burbank hoteliers in the T-BID reminding them of the public hearing on May 24, On May 7, 2016, the City Clerk s Office published the public notice in the Burbank Leader informing the public of the public hearing. 2

3 May 24, 2016 Public Hearing for the Resolution of Renewal The final legislative step involved in the T-BID renewal process is a public hearing for the Resolution of Renewal. The final public hearing allows the public another opportunity to offer testimony regarding the renewal of the T-BID. The public testimony can be in the form of oral or written communication. However, in order for the public testimony to be accepted as part of the decision process to renew the T-BID, it must be in written format and submitted by the hotels within the proposed district. Additionally, if the written public testimony received is in the form of a protest against the T-BID, it must equate to over 50 percent of the total weighted assessment amount. If the written protest amounts to over 50 percent, the assessment shall not be imposed and the district cannot be formed for a period of one year. Hotels within the district that choose to submit written protest, must submit their protest to the City Clerk s Office or attend the public hearing and submit one at that time. If there is no majority protest, and the City Council approves the Resolution of Renewal, the renewal of the T-BID will be effective as of July 1, There are currently 17 hotels represented in the T-BID. Of those 17 hotels, 12 have signed in support of renewing the district. As previously mentioned, these 12 hotels make up percent of total district assessments. Staff and BHA Board members have made numerous attempts to set-up meetings, telephone calls, and arrange site visits to the hotels to discuss the T-BID renewal with the five remaining hotels; however, the five hotels have been unresponsive. Despite the fact that the five remaining hotels have not signed a petition, no verbal or written protest has been received from any of the hotels. As previously stated, all hotel property owners have received numerous correspondence and public notices regarding the renewal. Management District Plan The MDP is the legal document which provides the framework for the T-BID s operations. It is designed and tailored to serve the hotels within the district by incorporating the proposed marketing and advertising activities specifically targeted to increase hotel room occupancy. It also ensures that the funds are used exclusively for the elements that the hotels have voted on and are found in the MDP. The key components of the MDP (Exhibit B) are as follows: Boundaries - All lodging businesses with 25 or more rooms located within the city (Exhibit B-7); Services Marketing/sales promotions and destination development to increase overnight room sales (Exhibit B-9); Term 10 year life beginning July 1, 2016 through June 30, 2026 (previously a fiveyear term) (Exhibit B-25); Assessment The initial annual assessment rate is one percent of gross short-term room rental revenue. Assessments will not be collected on revenue derived from stays of more than 30 consecutive days, stays by any Federal or State officer or employee while on official business; and stays by any officer or employee of a foreign government who is exempt by reason of express provision of Federal law or international treaty. During the 10 year term, the assessment rate may be increased by 3

4 a vote from the BHA Board and formal approval from the City Council 1 to a maximum of three percent of gross short-term room rental revenue. The assessment rate may also be decreased by a vote from the BHA Board and approval from City Council, but shall not drop below one percent (Exhibit B-13). Updated Responses to City Council Comments from April 5, 2016 City Council Meeting At the April 5, 2016 City Council meeting, staff received several questions and comments from City Council regarding the operations of the T-BID. Staff responded to those comments in the April 26, 2016 staff report (Exhibit F). Additional updates were to be provided for two of the comments. The following information is an update regarding the audit of the BHA and partnering with Burbank s Sister City of Incheon Korea to promote tourism to Burbank. 1. City Council requested that an audit of the T-BID s financials be conducted annually. The City of Burbank Agreement for Services (Exhibit G) states that the BHA shall be audited in accordance with the City s policy and funding guidelines. Staff will work with the Financial Services Department to audit the BHA. A memo regarding the findings of the audit will be sent to the City Council once the audit is completed. 2. City Council requested that staff partner with Burbank s Sister City of Incheon Korea to market Burbank as a visitor destination in Korea. Staff will be attending the June 2016 Sister Cities Commission Meeting to better understand how the T-BID can collaborate with the Sister Cities program in all four of Burbank s sister cities: Incheon Korea; Ota Japan; Solna Sweden; and Gaborone Botswana. Annual Budget The MDP proposes an estimated annual budget of $789,000, dervied from the T-BID assessments generated during FY The following is a break-down of services provided and the percentage of funds allocated for each service. A more detailed description of the budget can be found in Exhibit B-8: SERVICES PROVIDED PERCENTAGE TOTAL Sales and Marketing 55% $433,950 Administration and Operations 20% $157,800 Destination Development 20% $157,800 Contingency/Renewal 5% $39,450 TOTAL T-BID ANNUAL BUDGET 100% $789,000 FISCAL IMPACT There is no fiscal impact related to the final legislative step in the T-BID renewal process. However, should the process ultimately conclude with the renewal of the T-BID, a continued increase in revenue generated through Transient Occupancy Tax (TOT), along with an 1 The assessment rate may be increased by one percent in any given year and may also be decreased by a vote from the BHA Board and City Council approval, but cannot go below the original one percent. Any increase or decrease authorized by the BHA Board shall be included in the Annual Report and approved by the City Council during the Annual Report review. Thereafter the increase or decrease shall be effective the following FY. 4

5 increase in sales tax revenue is anticipated. During FY 14-15, the T-BID assessment increased seven percent 2 from $733,211 in FY to $789,086. CONCLUSION Burbank hotels view the T-BID as an economic benefit for their business. The presence of the T-BID reinforces the City Council s ongoing policy of supporting existing businesses in the community. The T-BID works to increase TOT and sales tax revenue by attracting visitors to Burbank s hotel, restaurants, and retailers. More specifically, the T-BID is expected to continue to: Increase or maintain high hotel room occupancy rates; Allow Burbank to remain competitive in the tourism/visitor market; Increase TOT revenues; and Generate additional business for local restaurants, stores, theatres, and services. By renewing the T-BID for a 10 year term, hotel General Managers, the Burbank Bob Hope Airport, Warner Bros. Studio Tours Hollywood, and Universal Studios Hollywood will continue to work together to grow Burbank s tourism identity in the coming years. As a whole, the BHA is helping strengthen Burbank s tourism sector which contributes significantly to the overall economic vitality of the City. EXHIBITS Exhibit A Resolution of Renewal Exhibit B Management District Plan Exhibit C Signed Petitions Exhibit D Approved Resolution of Intention Exhibit E Public Notice Exhibit F April 26, 2016 Staff Report Exhibit G City of Burbank Agreement for Services 2 Calculations based on year over year comparison of assessments received by the T-BID. 5