CITY OF SIMI VALLEY MEMORANDUM

CITY OF SIMI VALLEY MEMORANDUM AGENDA ITEM NO. 6A March 31, 2014 TO: FROM: City Council Office of the City Manager SUBJECT: RECEIPT OF PETITIONS FROM SIMI VALLEY LODGING BUSINESSES REQUESTING TO FORM A TOURISM MARKETING DISTRICT, CONSIDERATION OF ADOPTION OF A RESOLUTION OF INTENTION TO FORM A TOURISM MARKETING DISTRICT, AND FIXING THE TIME AND PLACE FOR A PUBLIC HEARING TO CONSIDER DISTRICT FORMATION STAFF RECOMMENDATION It is recommended the City Council: 1. Accept the signed petitions (Attachment A, page 8) from Simi Valley lodging businesses; 2. Adopt a Resolution (Attachment C, page 50) declaring the City s intent to establish a Simi Valley Tourism Marketing District and fixing the time and place for a public hearing to consider the District s formation. CITY MANAGER S RECOMMENDATION The formation of a Tourism Marketing District would be consistent with other cities in the region. The formation of this District would assist in placing the City s tourism market and hospitality industry in a place where they can better market the attractions of Simi Valley. This action is before you due to the signing of the area hotels petitioning for its approval. I recommend adoption of the Resolution. BACKGROUND AND OVERVIEW Over the past several years, outside forces have impacted the ability of cities and chambers of commerce to fund various activities related to increasing tourism. A growing trend to support local business and increase community tourism is the formation of tourism improvement or marketing districts (District). A District raises revenue through an additional charge on room nights at lodging locations within a defined area with all proceeds to be spent to increase business to those assessing the additional charge. The impetus to form a District is via a request

2 from the lodging businesses. On September 30, 2013, the City Council authorized staff to initiate the process to form a District and approved a contribution of $9,000 to partner with the Simi Valley Chamber of Commerce for consultant costs related to the District s formation. Petitions have been submitted by Simi Valley lodging businesses requesting the City form the District. The first step to forming the District is to accept the petitions and adopt a resolution of intention to form the District. FINDINGS AND ALTERNATIVES Throughout California, over eighty municipalities have formed Districts in order to provide a stable funding source for tourism marketing. In 1994, the California Legislature passed the Property and Business Improvement District Law of 1994 (1994 State Law). This law allows for the creation of special benefit assessment districts to raise funds within a specific geographical area with the purpose of providing information and promoting activities that benefit real property or business within the district. One method to raise funds is by the assessment of an additional charge, either a percentage of the room rate or a flat amount, on all room nights at hotels and motels located within the boundary of the district. All funds raised within the district are returned to a private, non-profit corporation charged with governing the district. Funds generated through the assessment must be used for activities and programs that benefit the assessed businesses, i.e. by increasing room night sales. The driving force to form a District is normally through a request from the businesses that will be subject to the assessment, in this case, the lodging businesses. However, as only cities and counties are allowed to form such Districts, requests for the formation of a District is made to the local legislative body. The legislative body then follows the process dictated by the 1994 State law to form a District. Locally, the cities of Oxnard, Camarillo, and Ventura jointly formed a District, named Ventura County West, in 2011 and have assessed a charge of 1.5% of the gross short term (less than 31 days) room rental rate at all hotels, motels, RV parks, and inns located within the District boundary (which is defined as the City limits of the three cities). Additionally, the cities of Thousand Oaks and Agoura Hills jointly formed a District in 2013 which assesses a $1.00 assessment per gross room rental. Other nearby jurisdictions that have formed Districts include Santa Clarita (2% of gross room rate), Burbank (1% of gross room rate), Lancaster (2% of gross room rate), Pasadena (2.89% of gross room rate), Torrance (1% of gross room rate), Santa Monica ($2.25 - $4.25 per occupied room per night), Long Beach (3% of gross room rate), West Hollywood (3% of gross room rate), and Los Angeles (1.5% of gross room rate). The Simi Valley Chamber of Commerce previously received input from several lodging businesses regarding the formation of a District in Simi Valley. Subsequently, City representatives and the Chamber of Commerce engaged in discussions regarding the formation of a District. Creating a District in Simi Valley would establish a revenue stream to fund activities that will increase tourism and room nights at the six lodging

3 locations (Best Western Posada Royale; Grand Vista; Courtyard By Marriott; Holiday Inn Express; Motel 6; and Extended Stay America) in the community. While the main focus of a District tends to be the increase in tourism lodging (general vacation/visitation, youth/sports tournaments, family visits), the Chamber of Commerce and its lodging members are also cognizant of the amount of room nights created by business travelers. In their research, the Chamber of Commerce determined the need for a consultant to perform much of the work to form a District. To that end, the Chamber of Commerce contacted a consulting firm to assist the District formation process and prepare the requisite Management District Plan. Civitas Advisors, a Sacramento based company with extensive experience in forming Districts, submitted a proposal to the Chamber in the amount of $18,000. On September 30, 2013, the City Council considered a request from the Chamber of Commerce to initiate the process to form a District in Simi Valley. The Chamber also requested the City partner with the Chamber in funding 50% of the consultant costs. At the conclusion of the City Council s discussion, the Council approved a $9,000 contribution to partner with the Chamber of Commerce and authorized staff to initiate the process to form a District. The first step in forming a District is for the lodging businesses within the proposed boundary of the District to petition the City to form a District. Upon the submission of the written petitions signed by the business owners in the proposed District who will pay more than 50% of the assessments proposed to be levied, the City Council may initiate proceedings to form a District by adopting a Resolution of Intention. The Resolution of Intention declares the City s intention to form a District and sets a time and place for a public hearing to receive testimony regarding the formation of the District. On March 12, 2014, the Chamber of Commerce submitted to the City petitions from five of the six of Simi Valley lodging businesses totaling 83% of the lodging businesses (Attachment A, page 8; Extended Stay America has elected not to submit a petition requesting the formation of a District). These petitions request the City Council to initiate special assessment proceedings to form a District in accordance with the 1994 State Law. As provided in Exhibit A of the petitions, located on page 13, the following are the key provisions of the District: Assessment of 2% of gross short term room rental revenue for all rooms at lodging businesses in Simi Valley. Funds will be used for marketing and sales promotions to increase room nights and to market Simi Valley lodging businesses. District will be in place for five years (July 1, 2014 June 20, 2019). Annual budget is estimated at $230,000. City shall collect the assessment from the lodging businesses and transfer the funds to the Simi Valley Chamber of Commerce, who will serve as the owners association of the lodging businesses.

4 The City shall receive 1% of the total collections as reimbursement for City services. The District shall be known as the Simi Valley Tourism Marketing District (SVTMD). Attached to the petitions is the Management District Plan (Attachment B, page 15). As required by the 1994 State Law, all Districts must have a Management District Plan (MDP) which acts as the governing document for the District. The MDP details the reasons for the District, the boundary of the District, governance of the District, and a proposed budget. As the boundary of the proposed District would be the Simi Valley city limits, any lodging business that opens after the formation of the District would be subject to the District. The 1994 State Law provides that a District is operated through an owners association. As proposed in the MDP, the Chamber of Commerce will act as the owners association of the District. To carry out the activities and programs of the District, the Chamber of Commerce will form a new standing advisory committee to be known as the Simi Valley Tourism Alliance (SVTA). The SVTA will be responsible for developing and approving marketing, promotional activities, and the program budget for the District and the Chamber of Commerce will be responsible for the implementation of the SVTA s budget and activities. The SVTA is comprised of the following: 1. Five Simi Valley hotel representatives with a maximum of one representative from each hotel. 2. One representative from the City of Simi Valley designated by the City Council. 3. One Simi Valley Chamber of Commerce representative designated by the Simi Valley Chamber of Commerce Board of Directors. 4. Two at large representatives selected by the SVTA. Preference shall be given to hotel representatives. The 1994 State Law considers the owners association a legislative body and is therefore subject to the Ralph M. Brown Act and the California Public Records Act. As such, all activities and meetings of the Chamber of Commerce Board of Directors, as it relates to the SVTMD activities, and activities and meetings of the SVTA, must be in compliance with the Brown Act. Additionally, the Chamber of Commerce must also provide an annual report to the City Council at the end of each year of operation of the SVTMD. Based on the reported room revenue by the Simi Valley lodging businesses, it is anticipated that the SVTMD will generate $230,000 annually. The MDP proposes a first year annual budget as follows: Sales, Marketing & Operations (76%) $174,800 Administration (20%) $46,000 Contingency/Renewal Account (3%) $6,900 City Collection Fee (1%) $2,300 TOTAL $230,000

5 The City would collect the assessment from the lodging businesses at the same time that the City collects the Transient Occupancy Tax from the businesses. As part of the District and noted above, the City receives 1% of the District collections to offset its administrative costs. The City would forward the assessment collected, less 1%, to the Chamber of Commerce for programs and activities of the SVTMD. The sales and marketing of the District will have a central theme of promoting Simi Valley as a desirable place for lodging. Some of the typical activities of a District include: Internet marketing to increase awareness and optimize internet presence for Simi Valley lodging businesses; Advertisements on television, radio, magazines, and newspapers; Attendance at trade shows and professional industry conferences; Sales promotions; Familiarization tours; Use of collateral material such as brochures, flyers, and maps; Lead generation activities to attract tourism and group events; Education of hospitality staff at lodging businesses to create positive visitor experiences; and Education of management at lodging businesses on marketing strategies. The City s role in the formation includes the following steps: 1. Upon the submittal of petitions from the lodging businesses in Simi Valley, the City would adopt a resolution expressing its intention to form a District. Petitions must be received from more than 50% of the affected properties (lodging businesses) proposed to be assessed. This action is under consideration this evening. 2. Mail notices to all businesses affected by the proposed district. If the City Council adopts the Resolution of Intention to form the District this evening, the notices are scheduled to be mailed on April 1, 2014. 3. Conduct a public meeting to receive comments regarding the formation of the District. This public meeting is tentatively scheduled for May 5, 2014. 4. Conduct a public hearing no less than 45 days after the mailing of the notices. At this public hearing, lodging businesses may protest the formation of the District and if more than 50% of the lodging businesses protest the District s formation, the formation cannot move forward. If less than 50% of the lodging businesses protest, then the City Council may move forward and adopt a resolution which forms the District. This action is tentatively scheduled for June 9, 2014. The City Council may, in their discretion, decide to form or not form a District. Should the City Council move forward with creation of the SVTMD, it would go into effect on July 1, 2014. Based on the City s collection of the Transient Occupancy Tax

6 from the lodging businesses, funds would not flow to the SVTMD until the second quarter of 2014. A successful SVTMD would likely translate to increased revenue to the City through an increase in Transient Occupancy Tax. Additionally, increasing room nights has a secondary effect wherein restaurants, auto rental businesses, fuel stations, and general retail businesses can see an increase in business. Staff recommends the City Council accept the petitions from Simi Valley lodging businesses and adopt a Resolution which declares the City intention to establish a District and set a public hearing date (tentatively June 9, 2014) to consider the formation of the District. Adoption of the Resolution of Intention at this time does not bind the City Council into forming the District. The action merely allows the process to continue to a public meeting (May 5, 2014) and a public hearing (June 9, 2014). The following alternatives are available to the City Council: 1. Accept the signed petitions (Attachment A, page 8) from Simi Valley lodging businesses; 2. Adopt a Resolution (Attachment C, page 50) declaring the City s intent to establish a Simi Valley Tourism Marketing District and fixing the time and place for a public hearing to consider the District s formation. 3. Elect not to proceed with the District process at this time. 4. Provide staff with further direction. Staff recommends Alternative Nos. 1 and 2. SUMMARY A growing trend to support local business and increase community tourism is the formation of tourism improvement districts (District). A District raises revenue through an assessment on room nights at lodging locations within a defined area with all proceeds to be spent to increase business to those assessing the additional charge. The Chamber of Commerce previously received input from lodging businesses regarding the formation of a District in Simi Valley. On September 30, 2013, the City Council considered a request from the Chamber of Commerce to initiate the process to form a District in the Simi Valley community. The Chamber also requested the City partner with the Chamber in funding 50% of the consultant costs. At the conclusion of the City Council s discussion, the Council approved a $9,000 contribution to partner with the Chamber of Commerce and authorized staff to initiate the process to form a District. On March 12, 2014, the Chamber of Commerce submitted to the City petitions from five of the six (83%) lodging businesses in Simi Valley. These petitions request the City

7 Council to initiate special assessment proceedings to form a District in accordance with the 1994 State Law. Following the protocol outlined in the 1994 State law, upon the submittal of petitions from the lodging businesses, the City would adopt a resolution expressing its intention to form a district. Staff recommends the City Council accept the signed petitions from Simi Valley lodging businesses and adopt a Resolution declaring the City s intent to establish a Simi Valley Tourism Marketing District and fixing the time and place for a public hearing to consider the District s formation. Brian P. Gabler, Director of Economic Development/Assistant City Manager INDEX Page Attachment A - Petitions from Simi Valley lodging businesses... 8 Attachment B - Draft Management District Plan... 15 Attachment C - Resolution of Intention to Form a District... 50

p.3 PErm ON TO THE CITY OF SIMI VALLEY TO FORM THE SIMI VAllEY TOURISM MARKETiNG DISTRICT We petition you to initiate special assessment proceedings to form a Tourism Marketing District in accordance with the Property and Business Improvement District Law of 1994, Streets and Highways Code Section 36600 et seq., for the purpose of undertaking and implementing the Tourism Marketing District as described in the attached summary of the Management District Plan attached hereto as Exhibit A. Lodging Establishment :usiness Owner rj -'--"-t~=.?-rf:;;.,::~~ ~7,.--'/ Owner Representative/ WOer Name (printedj Title A complete copy of the Management District Plan will be furnished upon request. complete eepy of the Management District Plan should be made to: Requests fo r a lorena Parker 4024 Radford Avenue Editorial Building 2, Room A Studio City, CA 91604 818-655-5377 ProBJDconsulting@gmail.com

9 PETITION TO THE CITY OF SIMI VALLEY TO FORM THE SIMI VALLEY TOURISM MARKETING DISTRICT We petition you to initiate special assessment proceedings to form a Tourism Marketing District in accordance with the Property and Business Improvement DistriCt Law of 1994, Streets and Highways Code Section 36600 et seq., for the purpose of undertaking and 'nnplementing the Tourism Marketing District as described in the attached sumlllary of the Management District- Plan attached hereto as Exhibit A. BUsiness Owner " I. "'\ r;-.. ~Wil Jk~\ A '. FeeM~l)cjL ~~_ Owner Representative/Owner Name (printed) A coml)lete copy of the Management District Plan will be furnished upon request. complete copy of the Management District Plan should be made to: Requests for a Lorena Parker 4024 Radford Avenue Editorial Building 2, Hoorn A Studio City. CA 91604 818-655-53T/ ProBIDconsu!ting@gmail.com

10 PETITION TO THE CITY OF SIMI VALLEY TO FORM THE SIMI VALLEY TOURISM MARKETING DISTRICT v\le pc:wion you \0 initi;lle specia! d:.sl's5i11l.'n\ proo:cciini{> io form.;; Tourism Marb~ting Ol:,trict in (lccordancc with the Property and Bu~ine)$ hnpfo\icnwnt Distrlct LilW of 1~9IJ! Street> and Highways Code Section 36600 et seq" lor the purpose of undcnakmg and irnplernenting the Tourisrn MJfketlng District ns de')uibcd l!l the attnchcd 5ummi1ry of the rv1;:!h~lg{>nwlit District Ph;}l) ;)U;lched hereto ;:n; fxhlbh A i (C\ \ <,1, J ( A complete copy ()f the fv!an~h!(~i1h::nt D!stnn Pian 1/1111 be furnished upon fl'qucsl!{«quest". for ;] complete copy of the fvldllagenwnt Dbtrict PIon should be nliltj(.' to~ Lorena P{JrKcf MJ24 I\li{Hord Av(>nuc Ldttori<ll Building I, Boom A Studio Clty_ (A 91GO'1 81~:H-;:}:}~~J3n P (ob 1 Dco n"u J t lllg (~!)gni it 1 i_co nl

11 PETITION TO THE cnv OF SIMI VAllEY TO FORM THE SIMI VAllEVTOUIUSM MARKETING DISTRICT We petition you to initiate special assessment proceedings to form a Tourism Marketing District in accordance with the Property and BuSiness Improvement District; law ot 1994, Streets and Highways Code Section 36600 et seq., for the purpose of u"dert.kins and Implementing the TourlsmM.rketing District as. described in thfi! attached summary of the Management District Plan attached hereto as Exhibit A. Lodging Establishment Busingss Owner 1'100016 2566 N. El'I'lnger Rei Simi Valley Ca 93065 Owner/RepresentatIve Signature A complete copy of the Management District Plan. will be furnished upon request. Requests for a complete copy oftne Management District Plan should be made to; loremparker 4024 Radford Avenue fditorial Building 2, Room A Studio City, CA 91604 818,655 5377 ProBIDconsuiting@gmail.com IOIlG 39\1d GL 10 9 l310w \>99T5L 08 IS:rT 1>10Z/8Z/Z8

12 PETITION TO THE CITY OF SIMI VALLEY TO FORM THE SIMI VALLEY TOURISM MARKETING DISTRICT W~ petition YOll to initiate special assessment proceedings to form a Tourism Marketing District in accordance with the Property and Business Improvemen! District Law of 1994, Streets and Highways Code Section 36600 et seq., for the purpose of undertaking and implementing the Tourism Marketing District as described in the attached summary of the Management District Plan attached hereto as Exhibit A. lodging: Establishment Business OWner Owner Representative/Owner Name (printed) Title A com ele copy of the Management Disldc! Plan will be furnished upon request. ilequests for a complete copy oftlle Management District Plan should be made to; lorena Parker 4024 Radford Avenue editorial Building 2, Room A studio City, CA 91604 818 655-5,77 ProBIDconSlllting@gmail.com Date

13 EXHIBIT A MANAGEMENT DISTRICT PLAN SUMMARY location: The proposed Simi Valley Tourism Marketing District (SVTMD) includes all lodging businesses located within the boundaries of the City of Simi Valley. Services: Marketing and sales promotions to increase tourism and to market Simi Valley lodging businesses as tourist, meeting, and event destinations. Budget: The total SVTMD annual budget for each year of its five-year operation is anticipated to be approximately $230,000 Cost: Annual assessment rates are two percent (2%) of gross short term (stays less than 31 days) room rental revenue. Based on the benefit received, assessments will not be collected on stays of more than thirty (30) consecutive days, nor stays pursuant to contracts executed prior to July 1, 2014. Formation: Tourism Marketing District (TMD) formation requires submittal of petitions from lodging businesses representing more than 50% of the total annual assessment followed by a City Council hearing and an opportunity for a written protest. The assessed lodging business owners will receive notice of the public hearing by mail. Ifthere is a majority written protest, the TMD will not be formed. Duration: Collection: The proposed SVTMD will have a five-year life. The SVTMD assessment will be implemented beginning July 1, 2014 through June 30, 2019. Once per year beginning on the anniversary of the formation of the district there is a 30-day period in which owners paying more than 50% of the assessment may protest and terminate the district. The SVTMD assessment will be implemented beginning July 1, 2014 and will continue for five years through June 30, 2019. The City of Simi Valley will be responsible for collecting the assessment on a monthly or quarterly basis (including any delinquencies, penalties and interest) from each lodging business located in its respective jurisdiction. The cities shall take all reasonable efforts to collect the assessments from each lodging business.

14 EXHIBIT A MANAGEMENT DISTRICT PLAN SUMMARY Simi Valley City Limits

2014 2019 15 ATTACHMENT B SIMI VALLEY Prepared for the Simi Valley Chamber of Commerce By Lorena Parker (818) 970 6084 ProBIDConsulting@gmail.com [DRAFT MANAGEMENT DISTRICT PLAN] Prepared pursuant to the Property and Business Improvement District Law of 1994, Streets and Highways Code section 36600 et. seq

16 SIMI VALLEY TOURISM MARKETING DISTRICT MANAGEMENT DISTRICT PLAN TABLE OF CONTENTS TABLE OF CONTENTS... 1 I. OVERVIEW... 1 II. PURPOSE... 3 III. BACKGROUND... 4 IV. BOUNDARY... 6 V. SERVICE PLAN AND BUDGET... 7 Assessment... 7 Delinquencies... 7 Determination of Specific Benefit and Government Service... 8 Time and Manner for Collecting Assessments... 9 Service Plan Budget Summary... 9 Annual Service Plan... 9 Adjustments... 12 Expiration... 12 VI. GOVERNANCE... 13 A. Owners Association... 13 Brown Act and California Public Records Act Compliance... 13 Annual Report... 13

17 APPENDIX 1 PBID LAW... 14 APPENDIX 2 ASSESSED BUSINESSES... 32 Prepared by Lorena Parker 4024 Radford Avenue, Editorial Building Two, Room A Studio City, CA 91604 ProBIDConsulting@gmail.com (818) 970 6084

18 I. OVERVIEW Developed by local lodging businesses, the Simi Valley Tourism Marketing District (SVTMD) is a benefit assessment district proposed to help fund marketing and sales promotion efforts which provide a specific benefit to assessed Simi Valley lodging businesses. This approach has been used successfully in other destination areas throughout the country to drive additional room night sales at assessed businesses via increased tourism. Location: The exterior boundaries of the proposed SVTMD are the boundaries of the City of Simi Valley ( the City ). The proposed SVTMD includes all lodging businesses located within the boundaries of the City. Services: Marketing and sales promotions that provide a specific benefit directly to assessed businesses by improving room night sales. Programs are designed to provide a specific benefit by directly marketing assessed Simi Valley lodging businesses as tourist, meeting and event destinations. Budget: The total SVTMD annual budget for each year of its five-year operation is anticipated to be approximately $230,000. Assessment: The annual assessment rate to be levied on each lodging business within the proposed SVTMD is two percent (2%) of gross short term (stays less than 31 days) room rental revenue. Lodging businesses include all lodging businesses within the boundaries of the SVTMD who are also subject to paying transient occupancy tax to the City of Simi Valley. The objective of the SVTMD marketing programs will not be to attract long-term visitors. Therefore, assessments will not be collected on stays of more than thirty (30) consecutive days, nor stays pursuant to contracts executed prior to July, 2014. Formation: The City of Simi Valley will act as the lead jurisdiction in forming the SVTMD. The Simi Valley City Council ( City Council ) may initiate proceedings to form the SVTMD upon the submission of a written petition signed by business owners (or their authorized representatives) who will pay more than 50% of the total annual assessment. If the City Council proposes to levy an assessment in proposed district, 1 1BI. Overview

19 the City Council must hold a noticed meeting and a subsequent public hearing at which each business that would be subject to the assessment may submit a written protest. The business owners will receive notice of the meeting and public hearing by mail. If written protests are received from the owners or authorized representatives of businesses in the SVTMD that will pay 50% or more of the assessment to be levied, the City Council may not take any further proceedings to levy the proposed assessment against such businesses for a period of one year from the date of the finding of the majority protest. The City Council may form the district within the territorial jurisdiction of another city with the consent of the city council of such other city. Duration: The proposed SVTMD will have a five-year life. The SVTMD assessment will be implemented beginning July 1, 2014 through June 30, 2019. Once per year beginning on the anniversary of the formation of the district there is a 30-day period in which owners paying more than 50% of the assessment may petition the City Council to terminate the SVTMD. Collection: The City will collect the assessment from each lodging business at the same time and in the same manner as they collect transient occupancy taxes. Operation: The Simi Valley Chamber of Commerce ( the Chamber ) will serve as the owners association and be responsible for implementing programs. The Chamber will carefully manage programs to ensure that the specific benefit of room night sales is provided directly and only to assessed businesses. 2 1BI. Overview

20 II. PURPOSE There are several reasons why the Simi Valley lodging businesses desire to form a Tourism Marketing District (TMD): 1. The Need to Increase Occupancy The formation of the SVTMD is a proactive effort to provide services that specially and specifically benefit assessed lodging businesses. The funding will ensure that adequate financing exists for the investment required to increase occupancy. 2. Stable Funding for Tourism Promotion The SVTMD will provide a stable source of funding for consistent tourism promotion efforts. The SVTMD will provide funding for tourism promotion free of the political and economic circumstances that can reduce or eliminate government funding for tourism promotion. 3. The Need to Remain Competitive In recent years, the lodging industry has become more competitive. In order to ensure that Simi Valley will remain a competitive tourism market, the assessed lodging businesses must implement marketing programs designed to attract overnight visitors with the TMD funding. The investment will cover a new marketing and promotional budget needed to reach its market segment. 3 2BII. Purpose

21 III. BACKGROUND Cities throughout California have been creating Tourism Marketing Districts (TMDs) since 1992. The first TMD was formed in West Hollywood, California in 1992. Since then, over eighty California destinations have followed suit. In recent years, other states have begun adopting the California model Washington, Montana, and Texas have adopted TMD laws. Several other states are in the process of adopting their own legislation. And, some cities, like Portland, Oregon, have utilized their charter powers to create TMDs without a state law. Collectively, California s TMDs raise approximately $150 million for local destination marketing. The tourism market is an important industry. It has become increasingly necessary to implement marketing programs to stay competitive. With competitors raising their budgets, and increasing rivalry for visitor dollars, it is important that the Simi Valley lodging businesses continue their investment in stable, lodging-specific marketing programs. TMDs utilize the efficiencies of private sector operation in the market-based promotion of tourism districts. TMDs allow lodging business owners to organize their efforts to increase room night sales. Lodging business owners within the TMD pay an assessment and those funds are used to provide services that increase room night sales. In California, TMDs are formed pursuant to the Property and Improvement District Law of 1994. This law allows for the creation of a special benefit assessment district to raise funds within a specific geographic area. The key difference between TMDs and other special benefit assessment districts is that funds raised are returned to the private non-profit corporation governing the district. 4 3BIII. Background

22 There are many benefits to Tourism Marketing Districts: Funds must be spent on services and improvements that provide a specific and special benefit only to those who pay; Funds cannot be diverted to general government programs; They are customized to fit the needs of each tourism district; They allow for a wide range of services, including those listed above; They are designed, created and governed by those who will pay the assessment; and They provide a stable funding source for tourism promotion. 5 3BIII. Background

23 IV. BOUNDARY The SVTMD will include all lodging businesses, existing and in the future, available for public occupancy within the boundaries of the city limits of Simi Valley. Lodging businesses include all lodging businesses within the boundaries of the SVTMD who are also subject to paying transient occupancy tax to the City of Simi Valley. The boundary currently includes six (6) lodging businesses. Please see the Simi Valley map below. A complete listing of lodging businesses within the proposed SVTMD can be found on Appendix 2 of this Plan. 6 4BIV. Boundary

24 V. SERVICE PLAN AND BUDGET ASSESSMENT The assessment rate is two percent (2%) of gross short term (stays less than 31 days) room rental revenue per night on lodging businesses, which is based on the estimated benefit to the businesses to be assessed. SVTMD program objectives will not be to attract long-term visitors. Therefore, assessments will not be collected on stays of more than thirty (30) consecutive days, nor stays pursuant to contracts executed prior to July 1, 2014. Bonds. State Law allows for the issuance of bonds to finance long-term projects. As part of this TMD, bonds will not be issued. The amount of assessment, if passed on to each transient, shall be 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 identified as TMD assessment on guest documentation. DELINQUENCIES 1) Original delinquencies. Any business who shall fail to remit the assessment within the time required shall pay a penalty of ten (10%) percent of the assessment in addition to the amount of the assessment. 2) Continued delinquencies. Any business who shall fail to remit any delinquent remittance on or before thirty (30) days following the date on which the remittance first became delinquent shall pay a penalty in the amount of ten (10%) percent of the assessment in addition to the amount of the assessment and the ten (10%) percent penalty first imposed. 3) Fraud. For the fraudulent nonpayment of any remittance, a penalty in the amount of twenty-five (25%) percent of the amount of the assessment shall be imposed in addition to the penalties set forth in subsections (1) and (2) of this section. 4) Interest. In addition to the penalties imposed, any business who shall fail to remit any assessment imposed by the provisions of this Plan shall pay interest at the rate of onehalf (½) of one percent per month on the amount of the assessment, exclusive of penalties, from the date on which the remittance first became delinquent. 7 5BV. Service Plan and Budget

25 5) Penalties and interest merged with assessment. Every penalty imposed, and such interest as accrues, pursuant to the provisions of this section shall merge and become a part of the assessment required to be paid by the provisions of this Plan. DETERMINATION OF SPECIFIC BENEFIT AND GOVERNMENT SERVICE State law requires that assessment funds be expended on a specific benefit or service conferred directly to the payors that is not provided to those not charged, and that the assessment does not exceed the reasonable cost to the City of conferring the benefit or service. 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 payor as a consequence of providing the specific benefit to the payor. Further, the assessment may be utilized to provide a specific government service directly to the payors that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service. District services will be implemented carefully to ensure the charge imposed does not exceed the reasonable cost to the city of conferring the specific benefit described herein. Funds will be managed by the Chamber, and reports submitted on an annual basis to the City of Simi Valley. The amount of the assessment is no more than necessary to cover the reasonable costs of the proposed activities, and the manner in which the costs are allocated to each business bears a fair share relationship to the businesses benefits received from the proposed activities. The services discussed in this Management District Plan are designed to provide a direct benefit to assessed businesses by increasing overnight room sales. These promotional services are not tailored to serve the general public, but rather to serve the specific lodging businesses within the District by increasing room night revenue. The specific benefit the district will provide directly to assessed lodging businesses, and will not provide to non-assessed lodging businesses, is room night sales. In order to provide a specific benefit and government service only to payors, the marketing and promotions services provided with the district funds will be designed specifically to drive room night sales to assessed lodging businesses. Only assessed lodging businesses will be featured in marketing materials, receive sales leads generated from district-funded activities, be featured in advertising campaigns, and receive a direct specific benefit from other district-funded services. Non-assessed lodging businesses will not receive these, or any other district-funded services. 8 5BV. Service Plan and Budget

26 TIME AND MANNER FOR COLLECTING ASSESSMENTS The SVTMD assessment will be implemented beginning July 1, 2014 and will continue for five years through June 30, 2019. The City will be responsible for collecting the assessment on a quarterly basis (including any delinquencies, penalties and interest) from each lodging business located in its respective jurisdiction. The City shall take all reasonable efforts to collect the assessments from each lodging business. The City shall forward the assessments to the Chamber, which will have the responsibility of managing TMD programs as provided in this Management District Plan. SERVICE PLAN BUDGET SUMMARY A summary of the annual service plan budget for the SVTMD is provided on the following pages. The total five year improvement and service plan budget is projected at approximately $230,000 annually, or $1,150,000 through 2019. 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. The privileges and services provided with District funds are sales and marketing programs available only to assessed businesses. The Chamber shall form a new standing advisory committee, to be known as the Simi Valley Tourism Alliance (SVTA). The SVTA shall be responsible for approving the TMD marketing budget and programs. The Chamber shall be responsible for administering and implementing the TMD programs. A service plan budget has been developed and approved by the committee to deliver services to all assessed lodging businesses. Please see the budget exhibit on the following page. An annual service plan and budget will be developed and approved by the SVTA within the guidelines of this Plan. The annual service plan shall be filed with the City of Simi Valley as part of the Annual Report required by Streets and Highways Code section 36650. 9 5BV. Service Plan and Budget

27 Simi Valley Tourism Marketing District Budget Category Percent of Budget Dollar Amount Sales, Marketing and Operations 76% $174,800.00 Administration 20% $46,000.00 Contingency/Renewal 3% $6,900.00 City Collection Costs 1% $2,300.00 Total Annual Budget 100% $230,000.00 Sales, Marketing and Operations A sales and marketing program will promote the assessed lodging business in the Simi Valley as tourist, event, and meeting destinations. The sales and marketing program will have a central theme of promoting Simi Valley as a desirable place for lodging. All program elements will be provided directly to and focused entirely on assessed businesses, and may include the following activities: Internet marketing efforts to increase awareness and optimize internet presence for assessed businesses; Print ads in magazines and newspapers targeted at potential visitors and featuring assessed businesses; Television ads targeted at potential visitors and featuring assessed businesses; Radio ads targeted at potential visitors and featuring assessed businesses; 10 5BV. Service Plan and Budget

28 Attendance of trade shows to drive room night sales to assessed businesses; Sales blitzes for assessed businesses; Familiarization tours featuring assessed businesses; Preparation and production of collateral promotional materials such as brochures, flyers and maps featuring and utilized by assessed businesses; Attendance of professional industry conferences and affiliation events to promote and serve assessed businesses; Lead generation activities designed to attract tourists and group events to assessed lodging businesses; TMD District Administrator will plan and operate tourism promotion efforts for assessed lodging businesses; Education of hospitality staff at assessed lodging businesses on service and safety (related to alcohol and food) designed to create a visitor experience that will bring repeat visits; and Education of management at assessed lodging businesses and the owners association on marketing strategies best suited to meet those businesses needs. Administration and Operations The administrative and operations portion of the budget shall be utilized for administrative staffing costs, legal costs related to formation or operation of the district, accounting fees, office costs, and other general administrative costs. City Administration Fee The City of Simi Valley shall be paid a fee equal to no more than 1% of the amount of assessment collected in its respective jurisdiction to cover their costs of collection and administration. Contingency/Renewal A prudent portion of the budget will be set aside in a contingency fund, to be used for unforeseeable costs in carrying out the sales and marketing programs. If at the expiration of the SVTMD there are contingency funds remaining, and business owners wish to renew the SVTMD, the remaining contingency funds may be used for renewal costs. 11 5BV. Service Plan and Budget

29 ADJUSTMENTS The Simi Valley TMD expense plan shall remain consistent with the budget herein. Although actual revenues will fluctuate due to market conditions, the proportional allocations of the budget shall remain the same. The Chamber shall form a new standing advisory committee, to be known as the Simi Valley Tourism Alliance (SVTA). The Simi Valley Tourism Alliance shall have the authority to adjust budget allocations between the categories by no more than fifteen percent (15%) per year. EXPIRATION If there are funds remaining at the end of the SVTMD term and SVTMD businesses choose to renew, these remaining funds shall be transferred to the renewed District. If there are funds remaining at the end of the SVTMD and lodging businesses choose not to renew, any remaining funds will be spent consistent with this Plan or returned to assessed businesses in equal proportions to the assessment paid by each business. 12 5BV. Service Plan and Budget

30 VI. GOVERNANCE A. OWNERS ASSOCIATION The City Council, through adoption of this Management District Plan, has the right, pursuant to Streets and Highways Code 36651, to identify the body that shall implement the proposed program, which shall be the owners association of the SVTMD as defined in Streets and Highways Code 36614.5. The City Council has identified the Simi Valley Chamber of Commerce as the body that will serve as the Owner s Association for the SVTMD. The Chamber shall form a new standing advisory committee, to be known as the Simi Valley Tourism Alliance (SVTA). The SVTA shall be responsible for approving the TMD marketing budget and programs. The Chamber shall be responsible for administering and implementing the TMD programs. The majority of SVTA members must be hotel representatives. The Simi Valley Tourism Alliance shall be comprised of the following members: Five (5) Simi Valley hotels representatives, with a maximum of 1 representative from each hotel. One (1) City of Simi Valley representative, designated by the City Council One (1) Simi Valley Chamber of Commerce representative, designated by the Chamber Board of Directors Two (2) At-large representatives, appointed by the SVTA. Preference shall be given to hotel representatives. BROWN ACT AND CALIFORNIA PUBLIC RECORDS ACT COMPLIANCE The owner s association is subject to government regulations relating to transparency, namely the Ralph M. Brown Act and the California Public Records Act, designed to promote public accountability. The owners association of a TMD is considered a legislative body under the Ralph M. Brown Act (Government Code 54950 et seq.). Thus, meetings of the Chamber board and committees, to the extent they discuss and consider SVTMD business, must be held in compliance with the public notice and other requirements of the Brown Act. The Owner s Association is also subject to the record keeping requirements of the California Public Records Act. ANNUAL REPORT The Chamber board shall present an annual report at the end of each year of operation to the City Council pursuant to Streets and Highways Code 36650 (see Appendix 1). 13 6BVI. Governance

31 APPENDIX 1 PBID LAW 36600. Citation of part Property and Business Improvement District Law of 1994 *** This document is current through the 2012 Supplement *** (All 2011 legislation) This part shall be known and may be cited as the "Property and Business Improvement District Law of 1994." 36601. Legislative findings and declarations The Legislature finds and declares all of the following: (a) Businesses located and operating within the business districts 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 the business districts of its city 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 city to fund business related improvements, maintenance, and activities through the levy of assessments upon the businesses or real property that benefits from those improvements. (d) Assessments levied for the purpose of providing improvements and promoting activities that benefit real property or businesses are not taxes for the general benefit of a city, but are assessments for the improvements and activities which confer special benefits upon the real property or businesses for which the improvements and activities are provided. 14 7BAppendix 1 PBID LAW

32 36602. Purpose of part The purpose of this part is to supplement previously enacted provisions of law that authorize city to levy assessments within a business improvement area. This part does 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. 36603. 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 2800)). 36603.5. Part prevails over conflicting provisions Any provision in this part that conflicts with any other provision of law shall prevail over the other provision of law. 36604. 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. 36605. [Section repealed 2001.] 36606. "Assessment" "Assessment" means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements and promoting activities which will benefit the properties or businesses located within a property and business improvement district. 36607. "Business" "Business" means all types of businesses and includes financial institutions and professions. 15 7BAppendix 1 PBID LAW

33 36608. "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 1 of the Government Code, the public member agencies of which includes only city, counties, or a city and county, or the State of California. 36609. "City council" "City council" means the city council of a city or the board of supervisors of a 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. 36610. 'Improvement" "Improvement" means the acquisition, construction, installation, or maintenance of any tangible property with an estimated useful life of five years or more including, but not limited to, the following: (a) Parking facilities. (b) Benches, booths, kiosks, display cases, pedestrian shelters and signs. (c) Trash receptacles and public restrooms. (d) Lighting and heating facilities. (e) Decorations. (f) Parks. (g) Fountains. (h) Planting areas. (i) Closing, opening, widening, or narrowing of existing streets. (j) Facilities or equipment, or both, to enhance security of persons and property within the area. (k) Ramps, sidewalks, plazas, and pedestrian malls. (l) Rehabilitation or removal of existing structures. 16 7BAppendix 1 PBID LAW

34 36611. "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. 36612. "Property" "Property" means real property situated within a district. 36613. "Activities" "Activities" means, but is not limited to, all of the following: (a) Promotion of public events which benefit businesses or real property in the district. (b) Furnishing of music in any public place within the district. (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. (f) Activities which benefit businesses and real property located in the district. 36614. "Management district plan"; "Plan" "Management district plan" or "plan" means a proposal as defined in Section 36622. 17 7BAppendix 1 PBID LAW