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HomeMy WebLinkAboutI-1 - Uniform Transient Occupancy Tax IncreaseBY THE CITY COUNCIL CITY OF NEWPORT BEACH JUN 9 1986 COUNCIL MENDA NO.. ��/-- -G0UNCIL---AGENDA -ITEM—NO:- CITY OF NEWPORT BEACH OFFICE OF THE CITY MANAGER May 12, 1986 TO: MAYOR AND CITY COUNCIL FROM: City Manager SUBJECT: UNIFORM TRANSIENT OCCUPANCY TAX CITE' OF Smit" h'PORT PMAC�l INCREASE MAY 12 1986 During March, 1986 the City Council received a request from the Newport Beach Conference.and Visitors Bureau to increase the Transient Occupany Tax from 8% to 90, and make the to increase available to the Conference and Visitors Bureau for promotion of the hotel/restaurant industry in Newport Beach. On March 24th the City Council permitted the first reading of a subject ordinance increasing the Transient Oc- cupancy Tax to 9%. It was to receive a second reading on April 14th, but the item was continued to May 12th at the request of the Conference and Visitors Bureau. I believe it was anticipated by the City Council that when the ordinance was considered for second reading, that it would be accompanied by an agreement between the City of Newport Beach and the Conference and Visitors Bureau out- lining the conditions for the use of the additional to tax. This agreement has not been finalized and is not, therefore, ready for presentation to the City Council. It is still my belief that the second reading should not occur until there is a better understanding on the part of the City as to how these funds would be used. Additional developments have occurred since this item was first introduced to the City Council. The first is that the neighboring cities of Costa Mesa and Irvine are currently considering the same item, and it will be a topic of discussion at the next Inter -City Liaison Committee meet- ing on May 22nd. I believe it would be helpful if the City postponed final action on this subject until it is known ,}x, what adjoining cities are proposing. The second development, is the request from the Arts Commission for a portion of the.'.# 1% increase. This item has not been reviewed in great detail, and probably should be reviewed before the second reading occurs. BY THE Mly COUNCIL CITY OF NEWPORT BEACH JUL 2 8 1986 Page -2- For all of the reasons discussed above, it is suggested that the second reading not occur at this time to permit additional review and study of the proposal. ROBERT L. WYNN 6'V THE CiffCOUNCIL CITY OF NEWPORT BEADI APR 14 1986 7/./.� e t(ef(- am- - /--), / M- L AGENDA STAFF REPORT .Agenda lteffl R(6) BY THE CITY i3OUNCiL CITY OF f4pi'y (c � 11 OFFICE OF THE CITY ATTORNEY MAR 24 1986 March 17, 1986 TO: Honorable Mayor and Members of the City Council FROM: Carol A. Korade, Assistant City Attorney RE: Proposed Ordinance Amending Chapter 3.16 Pertaining to Uniform Transient Occupancy Tax The City Council is considering the adoption of an Ordinance amending Chapter 3.16 of the Newport Beach Municipal Code pertaining to uniform transient occupancy tax. Specifically, this amendment increases the transient occupancy tax from eight percent (8%) to nine percent (9%) of the amount charged by the hotel operator and provides that the tax shall be deposited in the general fund and utilized for general revenue purposes. The City Council has the legal authority to enact an amendment increasing the transient occupancy tax. In 1982, the California Supreme Court in San Francisco v. Farrell determined that general taxes do not require a 2/3 vote of the electorate. Any taxes which are placed in the general fund and utilized for general revenue purposes can be levied by the City Council. Since the transient occupancy tax is not levied on property according to its value, the additional constraints on the levy of an ad valorem tax do not apply. The past practice of the City is to place the entire transient occupancy tax into the general fund. The additional sentence requiring that the tax be deposited in the general fund and utilized for general revenue purposes codifies this practice and preserves the integrity of the tax. The City Council can allocate any portion of the general fund, including the money derived from the transient occupancy tax for any general revenue purposes. ";TV COURIML s.ORT UFACH lj�'\ N1AY 12 19d'6 Recommendation: It is recommended that the City Council introduce the Ordinance amending Chapter 3.16 of the Newport Beach Municipal Code pertaining to uniform transient occupancy tax and, if desired, pass to second reading and adoption on April 14, 1986. Carol A. Korade Assistant City Attorney CAK/mlh Agenda Item No. I-1 AGREEMENT (Newport Beach Convention & Visitors Bureau) This Agreement, made and entered into this day of , 1986, by and between the CITY OF NEWPORT BEACH, a municipal corporation and charter city ("City"), and NEWPORT BEACH CONVENTION & VISITORS BUREAU, a non-profit corporation organized and existing under and by virtue of the laws of the State of California ("Bureau") is made with reference to the following facts: A. The City of Newport Beach, pursuant to the provisions of its City Charter and Section 37110 of the Government Code of the State of California has the power to expend monies accruing to the General Fund for the purpose of promoting tourism and related activities; B. The City Council has determined that the Bureau has special knowledge and experience necessary to promote tourism in Newport Beach; C. The City Council has determined that the Bureau's promotional activities are likely to substantially increase transient occupancy tax revenue and sales tax revenue; and D. The City Council has determined that funding of Bureau activities will be a significant benefit to the City of Newport Beach. NOW, THEREFORE, the parties agree as follows: -1- I . Term: This Agreement shall and shall terminate on June 30, 19889 provided in this Agreement. 2. Bureau Services: commence on October 1, 19869 unless sooner terminated as Bureau shall develop, plan, carry out and supervise a conference and tourism development program as outlined in the marketing plan attached as Exhibit "A." Bureau, in implementing this plan, shall, at a minimum, do the following: A. Maintain suitable quarters and employ competent personnel to properly carry out the promotional activities; B. Prepare and distribute, by way of the media or direct mail, brochures, publications and guides that inform prospective tourists and visitors of the recreational and cultural assets of Newport Beach; C. Develop marketing programs that increase business and visitor trade during the off-season (October through May). 3. City Funding: City shall pay the Bureau, from the General Fund, the sum of $255,000.00 for the remaining portion of City's 1985- 86 fiscal year, and $340,000.00 for City's 1986-87 fiscal year 1986-87, or an amount equal to one -ninth (1/9th) of the transient occupancy tax revenue collected by the City during each fiscal year whichever is less. City's obligation to fund the Bureau activities is contingent upon all of the following: -2- A. A transient occupancy tax rate of 9%. In the event the transient occupancy tax rate is less than 9% for any reason, including, but not limited to, a decision on the part of the City Council to establish the transient occupancy tax at a rate below 9% or the passage of any legislation or initiative that would require a roll -back of the tax rate to a level below 9%, the City's obligation to pay funds to Bureau shall cease; B. A determination by the City Manager that sufficient funds are currently available within the General Fund such that payment will not jeopardize the City's ability to provide necessary services; C. With respect to the funding during the City's 1987-88 fiscal year, the City Council has made an appropriation for Bureau funding in the budget for that fiscal year; and D. With respect Bureau has submitted, and City outlining the services to be fiscal 1987-88. to funding for fiscal 1987-88, has approved, a marketing plan performed by the Bureau during 4. Manner of Payment: Funds due Bureau pursuant to this Agreement shall be paid on or before the thirty - fifth (35th) day following the close of each quarter during the fiscal year (quarter closure dates are September 30th, December 31st, March 31st and June 30th). For example, payments for the portion of fiscal year 1986-87 are due on February 5, May 5, and August 5, 1987. Payments shall be made on a pro -rata basis ($85,000.00 per quarter) provided, however, quarterly payments shall not exceed -3- one -ninth (1/9th) of the transient occupancy tax revenue received by the City during the preceding quarter. 5. Bureau Reports: In addition to the duties specified in Section 2 of this Agreement, Bureau shall: A. Provide City with a marketing plan and annual budget on or before April 1, 1987. The budget shall first have been approved by the Board of Directors of Bureau. The marketing plan shall specify the goals and objectives of Bureau during the 1987-88 fiscal year, and the methods Bureau will use to achieve those goals and objectives. The marketing plan shall also evaluate the success of the Bureau in increasing tourism and related activities during the preceding six (6) months. B. On or about January 1, 1988, Bureau shall provide City with a semi-annual report summarizing the progress it has made towards achieving goals and objectives specified in the marketing plan. 6. Expenditure of Funds by Bureau: Bureau shall expend funds provided by City in accordance with the budget submitted to, and approved by, the City Council (see Exhibit "A.") With the prior approval of the City Manager, Bureau may transfer funds, or make expenditures, allocated for one element of the budget to another element so long as the basic goals and objections of the tourist development program are not impaired. 1XIM 7. Records: Bureau shall prepare and maintain, during the term of this Agreement, and for 12 months after its termination, complete and accurate books, records and accounts showing the expenditures of all funds disbursed to it by City pursuant to this Agreement. City shall, during Bureau's regular business hours, have the right to audit and review all records maintained by the Bureau. If, upon audit of the records, it is determined that funds provided by the City have been utilized other than as provided in the budget and as specified in this Agreement, Bureau shall reimburse City for all such funds and the cost of the audit. 7. Licenses and Permits: Bureau shall obtain and maintain any and all licenses and permits necessary to conduct its activities, render the services required by this Agreement and maintain its facilities. 8. Indemnification: Bureau shall defend, indemnify, and hold harmless City, and its officers, employees, agents, and representatives from and against any and all claims, losses, damage, liability, lawsuits, judgments, costs, fees and expenses that may be claimed by any person or entity, or incurred by the City, and which arise out of, or are in any way related, to the activities of Bureau, its agents, employees, subcontractors, or representatives, pursuant to this Agreement, whether or not there is concurrent, passive or active negligence on the part of the City or its officers, agents, or employees; provided, however, Bureau's duties under this paragraph shall not extend to any claims, losses, damage, liability, lawsuits, judgments, costs, fees and -5- 0 expenses arising from the sole negligence or wilful misconduct, of the City, its employees, officers, agents or representatives. 9. Termination: City shall have the right to terminate this Agreement as provided in this paragraph: A. City shall have the right to terminate this Agreement, effective on the date written notice is given to Bureau, in the event of any of the following: 1. Bureau has improperly expended funds provided by the City pursuant to this Agreement; 2. Bureau has failed to perform the services required of it pursuant to this Agreement; 3. Bureau has filed, or has taken or committed any act preparatory to filing, a petition in bankruptcy or for receivership or reorganization under the Bankruptcy Act. 4. Bureau has become insolvent or committed any act of insolvency. B. City shall have the right to terminate this Agreement by giving thirty (30) days' written notice, in the event Bureau fails to perform any duty required of it other than those specified in the preceding sub -section. C. City shall have the right to terminate this Agreement without any cause or legal justification, and at any -6- time, by giving Bureau ninety (90) days' prior written notice of termination. 10. Independent Contractor: The parties agree that Bureau, while engaged in the performance of duties required by this Agreement, is an independent contractor, and not an officer, agent or employee of the City. 11. Assignment: Bureau shall not assign this Agreement, nor the right to receive any monies pursuant to this Agreement, without the prior written consent of the City. 12. Notices: All notices required to be given by this Agreement shall be in writing and personally served or given by mail. Notice by mail shall be deemed to have been given when deposited in the United States mail, certified and postage prepaid, and addressed to the party to be served as follows: To City: CITY OF NEWPORT BEACH Attention: City Manager's Office 3300 Newport Boulevard Newport Beach, CA 92663 To Bureau: NEWPORT BEACH CONVENTION do VISITORS BUREAU Attention: Chip Stuckmeyer Newport Beach, CA 92660 -7- 13. Complete Agreement: This document represents the entire Agreement between the City and Bureau and supersedes all prior negotiations, representations or agreements, either oral or in writing. This Agreement may be amended only by a written instrument signed by the City and the Bureau. Date: Date: Date: NEWPORT BEACH CONVENTION & VISITORS BUREAU By: And: "Bureau" CITY OF NEWPORT BEACH, a municipal corporation. By: "City" Approved as to form this day of -8- By: City Attorney 1986. COUNCR AGENDA -.4- -1' ORDINANCE NO. ORDINANCE OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AMENDING CHAPTER 3.16 OF THE NEWPORT BEACH MUNICIPAL CODE PERTAINING TO UNIFORM TRANSIENT OCCUPANCY TAX. The City Council of the City of Newport Beach does hereby ordain as follows: Section 1: Section 3.16.030 of the Newport Beach Municipal Code is amended to read as follows: 3. 16.030 Tax Imposed. For the privilege of occupancy in any hotel, each transient is subject to and shall pay a tax in the amount of nine percent -(9%) of the rent charged by the operator. The tax shall be deposited in the general fund and utilized for general revenue purposes. The tax constitutes a debt owed by the transient to the City which is extinguished only by payment to the operator or to the City. The transient shall pay the tax to the operator of the hotel at the time the rent is paid. If the rent is paid in installments,'a proportionate share of the tax shall be paid with each installment. The unpaid tax shall be due upon the transient's ceasing to occupy space in the hotel. If, for any reason, the tax due is not paid to the operator of the hotel, the Finance Director may require that such tax shall be paid directly to the. Finance Director. Section 2: All other provisions of Chapter 3.16 shall remain in full force and effect. Section 3: The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within fifteen (15) days after its adoption. The Ordinance shall become effective on October 1, 1986. Section 4: This Ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the day of , and adopted on the day of , by the following vote, to -wit: AYES, COUNCILMEMBERS NOES, COUNCILMEMBERS ABSENT COUNCILMEMBERS Mayor ATTEST: City Clerk copy( AGENDA M0 Thomas Wilck Associates Public Relations Suite 290 2151 Michelson Drive Irvine, California 92715 [714] 553-0333 EXECUTIVE SUMMARY OF NEWPORT BEACH STRATEGIC MARKETING PLAN PREPARED FOR THE NEWPORT BEACH CITY COUNCIL M THE NEWPORT CONFERENCE & VISITORS BUREAU JUNE 2, 1986 EXECUTIVE SUMMARY NEWPORT BEACH CITY COUNCIL SEVEN KEY ELEMENTS 1. Tourism is No. 1 state industry. 2. Newport Beach thrives on visitor economy. 3. Our city faces strong competition. 4. We must attract a quality -seeking guest. 5. Target marketing is a business decision and a wise city investment. 6. Visitors Bureaus are effective city marketing tools. 7. Newport Beach benfits from the Conference and Visitors Bureau. OVERVIEW This special executive summmary has been prepared for the Newport Beach City Council as a digest of the rationale for city participation in a marketing plan to present Newport Beach as a destination for upscale, quality -seeking guests. You are being asked to make a'n investment in the future of our city which is consistent with the actions you have already taken to insure a high quality of life here. This is a business decision. You have made extensive infrastructure investments in this city and continue to spend for operational costs. Target marketing is a business method used to attract upscale individuals to the city through the use of focused advertising and promotions. These are people whose visits help to economically and socially contribute to the well-being of our city. By adopting this marketing plan for Newport Beach you will be protecting the city's current and future revenue base in the face of increasing competition from activist resort/destination cities. (1 ) 1. TOURISM IS NO. 1 STATE INDUSTRY. Visitors are important to the state's economy. California visitors spend more than $31 billion a year, making tourism the number one job and tax -producing industry in the state. In fact, 500,000 people are employed because of the guests who come to California. In order to protect its investment in the face of stiff competition from other areas, California has undertaken a massive marketing effort. The state has invested more than $11 million during the past two years to maintain the state's multi -billion dollar share of the industry. In addition, the state allocated funds to promote the Southern California coastal communities, specifically singling out Newport Beach for special attention. This broad exposure gives us a base with which to further refine the message about Newport Beach to attract the finest quality of visitor. It is from this segment of the visitor population that the city will derive its greatest benefit. 2. NEWPORT BEACH THRIVES ON VISITOR ECONOMY. The upscale visitors to be attracted to Newport Beach will contribute greatly to our economic and social vitality. Economically, visitors to Orange County last year spent more than $2.2 billion, according to the California Office of Tourism. For Newport Beach businesses, small and large, this meant at least $84 million was spent locally. Small clothing stores, gift shops, and other small businesses drew direct benefits, as did restaurants, hotels and florists. This is based on an extrapolation of Laventhol & Horwath's study of visitor spending per day for the Irvine area. In addition, studies indicate that no part of a city's economic life is untouched by the boon of tourism. In fact, money that is spent in the city actually circulates 2 times, according to the California Office of Tourism, a huge multiplier effect that translates our cummulative visitor economic impact to $168 million a year. Tax revenues generated for the city were $3.3 million from the bed tax alone. In addition, the restaurants and lounges of the (2) city generated another $1.5 million in sales tax revenues. These funds went directly to aid our community services like police, public works and other community projects and to maintain our high quality of life in Newport Beach. Any decline in this level of support would obviously mean an equivalent slippage in our services. The City has strong incentive to protect and insure the health of our visitor economy. 3. OUR CITY FACES STRONG COMPETITION. Newport Beach faces stiff competition throughout the marketplace for both the business and pleasure traveler. Though our longer-term objective is to lure visitors to this area in cooperation with surrounding cities, there is increasing competition locally for the business traveler dollars. This probably cannot be avoided, though it can be minimized through cooperation. For the pleasure visitor, Newport Beach's competition is well- heeled and fierce. As a resort/destination city, Newport Beach is in a league with, and in direct competition with, Long Beach, San Diego, Santa Barbara, Palm Springs, and Monterey. Each of these cities has drawn the battle lines to fight for the upscale visitor dollars. Their commitments have come in the form of funding city Conference and Visitors Bureaus with significant investments. Below are the total annual budgets of each city bureau: *San Diego...............$2.7 million *Monterey................$1.1 million *Palm Springs ............ $1.1 million *Long Beach..............$975,000 *Santa Barbara ........... $680,000 With extensive investment in the development of their marina communities, the cities of Carlsbad and Ventura/Oxnard will not be far behind in pursuing the upscale resort visitor. With competition this strong, either a commitment is made or a city loses by default. Newport Beach either fights to hold its own or we begin to decline. This market place will not allow neutrality. (3) 4. WE MUST ATTRACT A QUALITY -SEEKING GUEST. The focus of the Newport Beach Conference and Visitors Bureau will be to target a special type of guest to the city. This guest expects the best and is willing to pay for it. A sample profile of the upscale guest, based on experience in the area, is an upper -middle to upper -management executive or successful consultant, in the 35 -plus age group, with annual income of $75,000 -plus, who dines at the finest restaurants, is a high-volume shopper and demands quality throughout the visit. We expect to attract these travelers for business and pleasure. In addition, the Bureau will play other vital roles in the city. The services provided by the Bureau will lend a sense of the specialness of the City. VIPs and other visitors to Newport Beach will know what it means to visit a first-class city. The Bureau will also act as a central source of information for every day questions and those harder -to -answer queries. Information will be up to date and accurate. 5. TARGET MARKETING IS A BUSINESS DECISION AND A WISE CITY INVESTMENT. Businesses devote a substantial amount of their budgets toward protecting their capital investments and off -setting operating costs. This includes target marketing aimed at maintaining their market shares and communicating with selected consumers in their market place. Newport Beach has natural beauty and, one would think, would need little marketing to attract visitors. But on closer inspection, it becomes clear that target marketing is critical for Newport Beach for two reasons: First, we must focus on a particular type of visitor --one who expects quality and is willing to pay for it. This visitor spends a great deal of money in the city without placing any strain on the city's services or infrastructure. We are looking for people who bring more to the city than they take away. Second, the city has made a substantial capital investment in infrastructure and provides excellent services. These are investments made to maintain the high quality of life in our (4) city. If visitors choose to stay in surrounding communities yet still "drop in" to Newport Beach, the city is carrying the burden of investment with little or no return. Target marketing --reaching those upscale visitors who spend time and money in our city --is a prudent business decision and will be the central function of the Newport Beach Conference and Visitors Bureau. 6. VISITORS BUREAUS ARE EFFECTIVE CITY MARKETING TOOLS. When facing such strong competition from other cities, a city like Newport Beach must use all of the tools at its disposal to market itself. The Conference and Visitors Bureau is one such tool that has been used successfully throughout the country to promote individual cities. The Newport Conference and Visitors Bureau will operate as a strong, independent force. The Bureau will act on established business principles, using the research, planning and execution outlined in the earlier marketing plan. As a demonstration of this broad-based, community -wide support the board has been revised to reflect the diversity of our city: (2) Representatives of community small business (2) Newport Beach citizen representatives appointed by the Bureau Board (1) Representative of the Chamber of Commmerce (1) Represenative of the Newport Beach Restaurant Association (1) Representative of Fashion Island (1) Representative of the airline industry (7) Representatives of the hotel/motel industry The Executive Director of the Bureau will be required to have strong business background, with effective management and marketing skills. Responsible to the Board, the Executive Director will be charged with meeting the Bureau's central marketing objectives in a controlled, cost-effective and timely manner. A sample budget has been included in the Bureau's Marketing Plan. Based on a previous estimate of the one percent increase in the bed tax yeilding about $340,000, this budget presents an example of how these funds will be spent. The fact is that the Executive Director and new Board will be required to formulate and implement a budget that meets these policy guidelines: (5) 1. Not more than 30 percent of the amount budgeted shall be used for administration/operation of the Bureau. The remaining 70 percent of the budget shall be used only for advertising/promotion to meet the Bureau's stated marketing objectives. 2. If the actual dollar amount received by the Bureau increases, the additional amount will be used mainly for advertising/promotional costs and not for administration. 7. NEWPORT BEACH BENEFITS FROM THE CONFERENCE AND VISITORS BUREAU. We ask you to support the Newport Beach Conference and Visitors Bureau's plan to target market our city because it makes basic economic sense. Target marketing provides us with a means of reaching the visitors that we seek and protecting our city's resources with a minimum investment. We hope that you wi 11 agree and take this step to insure the economic and social vitality of Newport Beach. (6)