HomeMy WebLinkAbout08-11-1986 Item #I-10
CITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
August 11, 1986
COUNCIL AGENDA ITEM NO. I-1
BY THE CITE' COUNCIL
CITY OF NEWPORT BERCI
AUG 11 1986
TO: MAYOR AND CITY COUNCIL .Le_
FROM: City Manager
SUBJECT: REQUEST OF CONVENTION AND VISITORS BUREAU
During the City Council meeting of July 28th, the request of
the Conference and Visitors Bureau was discussed. Following discussion,
the Council requested additional information as follows:
1. What kind of return will the City receive for its investment?
Using the 1985-86 fiscal year total T.O.T. revenue of $3,018,000,
a 5% increase in occupancy would return to the City $150,900/yr;
a 10% increase in occupancy would return $301,800/yr; and a 15%
increase in occupancy would return $452,700/yr. If the City
utilizes the projected revenue for the 1986-87 fiscal year of
$3,720,000, a 5% increase in occupancy would return $186,000/yr;
a 10% increase in occupancy would return to the City $372,000/yr;
and a 15% increase in occupancy would return $558,000/yr. The pro-
jected increase in 1986-87 fiscal year is due to the new Four Seasons
Hotel and the additional rooms at the Marriott Hotel.
2. How much fundinq can the City afford?
Based on the 1985-86 T.O.T. revenue of $3,018,000, 1% equals
$377,250. Based on the projected 1986-87 T.O.T. revenue of $3,720,000
1% equals $465,000. While an increase of 1% would produce the above
amounts, the real answer to the question is a value judgment.
3. What is the City trying to accomplish by this allocation?
The City Council should find some overall benefit to the City before
accepting the C & V Bureau's proposal. If the Council believes that
the tourist industry in Newport Beach is important to the community
and enhances the City's image as well as the City's revenue, then a
financial contribution probably could be justified. You will note
Page -2-
in the draft agreement that a finding has been inserted to the
effect that "the Bureau's promotional activities are likely to
substantially increase T.O.T. revenue and sales tax revenue."
If this is true, then the City Council could be legally justified
in providing this assistance. This, however, raises another
question that should be taken into consideration. This question
is listed as No. 4 below.
4. How much will the promotion increase the number of tourists comi
to Newport Beach?
Including the Four Seasons Hotel and the new addition to the Marriott
Hotel, plus all other hotels currently in operation in the City, there
are 2,487 rooms. Using the same percentage increases that were
utilized in question No.l above, a 5% increase in occupancy, assuming
a current 60% occupancy rate, would produce 54,750 new tourists each
year assuming an average of two persons per room (2,487 rooms x 60% x
5% x 365 days x 2 persons = 54,750). A 10% increase in occupancy would
produce 108,770 new tourists each year. (2,487 x 60% x 10% x 365 days
x 2 persons = 108,770). A 15% increase in occupancy would produce
163,520 new tourists each year. (2,487 x 60% x 15% x 365 days x 2
persons = 163,520). The tourist increase would impact the airport and
surface transportation, and could, therefore, be considered a negative
impact against the City. On the other hand, these new tourists generate
the increase in T.O.T. and it is argued by the C & V Bureau that these
new tourists spend money within the City that translates into a sales
tax increase to Newport Beach.
5. Should there be an accountability as to where the money should be spent?
The contract could be easily structured to require an annual audited
accounting to the City. In addition, if the Council desires, a pro-
posed budget could be submitted to the City Council for the Council's
review prior to the commencement of a new fiscal year. At the end of
the fiscal year, the audit report would determine how well the Bureau
complied with their submitted budget. If compliance was not reached,
then the City should have the right to terminate the agreement by
giving Ninety (90) days written notice. I Suggest the 90 days to co-
incide with a quarter of any fiscal year. With very minor modifications
the draft agreement could provide this accountability.
Page -3-
6. Should the City give this a testing period?
The City could easily judge the effectiveness of this proposal
by comparing revenues generated in each fiscal year. As long as
the City has the right to terminate said agreement, the City could
do so if anticipated results are not achieved.
7. Could the City utilize a service charqe rather than a T.O.T. increase?
The City could utilize a service charge and by doing so probably
could circumvent the revenues from being proceeds of taxes. Cur-
rently the City is levying a sewer service charge and by the same
principle is assessing charges for zone changes, planning variances,
etc. Under the same principle, the City could impose a service
charge and have it levied in the same manner as a T.O.T. and could
then give this revenue to the C & V Bureau whose members generate
it in the first place. Incidentally, the City of Irvine is no longer
considering a service charge against hotels within their city.
In spite of the information above, the issue of assisting the
Convention and Visitors Bureau is really a value judgment. Many cities
do it, and some of these cities have been reported by the C & V Bureau.
The cities that assist the C & V Bureau report success and acceptance by
the City Council and the residents from the communities which participate
in the program. On the other hand, many cities do not participate and
some cities who have participated in the past have declined to continue
participation because in their judgment the results did not justify the
cities involvement. In the past, I believe it has been this City's judg-
ment not to participate with the tourist industry. This has been the
first instance, however, in which the local industry has requested to be
taxed with said revenues to be given back to the Bureau for further pro-
motion.
As reported earlier, the neighboring cities of Irvine, Costa Mesa,
Santa Ana, and possibly Laguna Beach, have shown some interest to participate
in a promotional endeavor. This item is on the agenda again for the next
Inter -City Liaison Committee meeting to be held August 21, 1986. Mayors,
Page -4-
Council Members and City Managers will be represented at this meeting
and, hopefully, a definitive position can be taken by each city. Also,
a study group is meeting on August 29th. If it is deemed desirable to
know of other cities' position with respect to the subject, the item
can be continued to September 8th.
Just for information, please find attached some statistical data
on practices and arrangements of other cities in California.
Finally, because of the different possibilities that exist with
respect to this item, such as the Arts Commission's request, rate, the
use of T.O.T. vs. a service charge, etc., it may be that a series of
straw votes could be utilized by the Council to determine the City's
position.
I'DCC��,
ROBERT L. WYNN
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Newport Beach
P.O. Box 1768
Newport Beach,
215 Marguerite Avenue
Corona Del Mar, CA 92625
August 1, 1986
City Council
CA 92658-8915
Dear Members of the City Council:
Reference is made to the plan proposed by the
Conference and Visitors Bureau to increase the transit
occupancy tax as a means of raising funds for a
promotional campaign.
I support a promotional -campaign -to attract tourists.
but oppose any City participation in raising the req-
uired funds.and administering their distribution.
The city's hotels, restaurants,c.bars.and other visitor -
serving activities will be the beneficiaries of such a
campaign and should administer the fund collection and
distribution program through th6ir various associations.
A one percent price increase for products and services
would accomplish the same purpose as a bed tax increase
if the funds so raised were channeled through the
service organizations to the Bureau. By so doing, the
City would be spared the certain increase in adminis-
tration costs inherent to being involved.
The Newport Area Chamber of Commerce would be an ideal
administrator of the fund collection and distribution
program.
Respectfully,
Phil Sansone
cc: CDM Comm Assn
CtT Of
AUG 6 1986'";
RECEIVED f
\% CITY CLERK �j ;'
C
3
CITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
August 11, 1986
TO: MAYOR AND CITY COUNCIL
FROM: City Manager
SUBJECT: REQUEST OF CONVENTION AND VISITORS BUREAU
COUNCIL AGENDA ITEM NO. I-1
BY THE CITY COUNCIL
CITY OF NEWPORT BEACH
AUG 11 1996
During the City Council meeting of July 28th, the request of
the Conference and Visitors Bureau was discussed. Following discussion,
the Council requested additional information as follows:
1. What kind of return will the City receive for its investment?
Using the 1985-86 fiscal year total T.O.T. revenue of $3,018,000,
a 5% increase in occupancy would return to the City $150,900/yr;
a 10% increase in occupancy would return $301,800/yr; and a 15%
increase in occupancy would return $452,700/yr. If the City
utilizes the projected revenue for the 1986-87 fiscal year of
$3,720,000, a 5% increase in occupancy would return $186,000/yr;
a 10% increase in occupancy would return to the City $372,000/yr;
and a 15% increase in occupancy would return $558,000/yr. The pro-
jected increase in 1986-87 fiscal year is due to the new Four Seasons
Hotel and the additional rooms at the Marriott Hotel.
2. How much funding can the City afford?
Based on the 1985-86 T.O.T. revenue of $3,018,000, 1% equals
$377,250. Based on the projected 1986-87 T.O.T. revenue of $3,720,000
1% equals $465,000. While an increase of 1% would produce the above
amounts, the real answer to the question is a value judgment.
3. What is the City trying to accomplish by this allocation?
The City Council should find some overall benefit to the City before
accepting the C & V Bureau's proposal. If the Council believes that
the tourist industry in Newport Beach is important to the community
and enhances the City's image as well as the City's revenue, then a
financial contribution probably could be justified. You will note
r
Page -2-
in the draft agreement that a finding has been inserted to the
effect that "the Bureau's promotional activities are likely to
substantially increase T.O.T. revenue and sales tax revenue."
If this is true, then the City Council could be legally justified
in providing this assistance. This, however, raises another
question that should be taken into consideration. This question
is listed as No. 4 below.
4. How much will the promotion increase the number of tourists coming
to Newport Beach?
Including the Four Seasons Hotel and the new addition to the Marriott
Hotel, plus all other hotels currently in operation in the City, there
are 2,487 rooms. Using the same percentage increases that were
utilized in question No.l above, a 5% increase in occupancy, assuming
a current 60% occupancy rate, would produce 54,750 new tourists each
year assuming an average of two persons per room (2,487 rooms x 60% x
5% x 365 days x 2 persons = 54,750). A 10% increase in occupancy would
produce 108,770 new tourists each year. (2,487 x 60% x 10% x 365 days
x 2 persons = 108,770. A 15% increase in occupancy would produce
163,520 new tourists each year. (2,487 x 60% x 15% x 365 days x 2
persons = 163,520). The tourist increase would impact the airport and
surface transportation, and could, therefore, be considered a negative
impact against the City. On the other hand, these new tourists generate
the increase in T.O.T. and it is argued by the C & V Bureau that these
new tourists spend money within the City that translates into a sales
tax increase to Newport Beach.
5. Should there be an accountability as to where the money should be spent?
The contract could be easily structured to require an annual audited
accounting to the City. In addition, if the Council desires, a pro-
posed budget could be submitted to the City Council for the Council's
review prior to the commencement of a new fiscal year. At the end of
the fiscal year, the audit report would determine how well the Bureau
complied with their submitted budget. If compliance was not reached,
then the City should have the right to terminate the agreement by
giving Ninety (90) days written notice. I Suggest the 90 days to co-
incide with a quarter of any fiscal year. With very minor modifications
the draft agreement could provide this accountability.
C
C
Page -3-
6. Should the City give this a testing period?
The City could easily judge the effectiveness of this proposal
by comparing revenues generated in each fiscal year. As long as
the City has the right to terminate said agreement, the City could
do so if anticipated results are not achieved.
7. Could the City utilize a service charge rather than a T.O.T. increase?
The City could utilize a service charge and by doing so probably
could circumvent the revenues from being proceeds of taxes. Cur-
rently the City is levying a sewer service charge and by the same
principle is assessing charges for zone changes, planning variances,
etc. Under the same principle, the City could impose a service
charge and have it levied in the same manner as a T.O.T. and could
then give this revenue to the C & V Bureau whose members generate
it in the first place. Incidentally, the City of Irvine is no longer
considering a service charge against hotels within their city.
In spite of the information above, the issue of assisting the
Convention and Visitors Bureau is really a value judgment. Many cities
do it, and some of these cities have been reported by the C & V Bureau.
The cities that assist the C & V Bureau report success and acceptance by
the City Council and the residents from the communities which participate
in the program. On the other hand, many cities do not participate and
some cities who have participated in the past have declined to continue
participation because in their judgment the results did not justify the
cities involvement. In the past, I believe it has been this City's judg-
ment not to participate with the tourist industry. This has been the
first instance, however, in which the local industry has requested to be
taxed with said revenues to be given back to the Bureau for further pro-
motion.
As reported earlier, the neighboring cities of Irvine, Costa Mesa,
Santa Ana, and possibly Laguna Beach, have shown some interest to participate
in a promotional endeavor. This item is on the agenda again for the next
Inter -City Liaison Committee meeting to be held August 21, 1986. Mayors,
Page -4-
Council Members and City Managers will be represented at this meeting
and, hopefully, a definitive position can be taken by each city. Also,
a study group is meeting on August 29th. If it is deemed desirable to
know of other cities' position with respect to the subject, the item
can be continued to September 8th.
Just for information, please find attached some statistical data
on practices and arrangements of other cities in California.
Finally, because of the different possibilities that exist with
respect to this item, such as the Arts Commission's request, rate, the
use of T.O.T. vs. a service charge, etc., it may be that a series of
straw votes could be utilized by the Council to determine the City's
position.
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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 CONFERENCE & VISITOR'S 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, and serve the needs of visitors to, 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
and shall continue until
Agreement.
shall commence on March 1, 1987
terminated as provided in this
2. Bureau Services:
Bureau shall develop, plan, carry out and
supervise a program to promote tourism in, and serve the needs of
visitors to, the City of Newport Beach. 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,
direct mail or hand out, brochures, publications and guides that
inform prospective tourists and visitors of the recreational
assets of Newport Beach;
C. Develop marketing programs with an emphasis
on increasing business and visitor trade during the off-peak
season (October through May).
3. City Funding:
City shall pay the
pursuant to the "Service Provision
equal to one ( 1%) percent of those
administrative costs. If this Cc
City's obligation to pay Bureau aj
Service Provision Fee Ordinance i
invalid. Bureau acknowledges the
-2-
Bureau all funds received
Fee Ordinance," less a sum
avenues to defray the City's
tract shall terminate, the
funds shall cease if the
repealed or ruled to be
City Council has the full
discretion to repeal the Service Provision Fee Ordinance and, by
this Agreement, gives up any right to contend that repeal of the
Ordinance is prohibited for any reason, including, but not
limited to, impairment of this Contract.
4. Manner of Payment:
Funds due Bureau pursuant to this Agreement shall
be paid on or before the thirty -fifty (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).
5. Bureau Reports:
In addition to the duties specified in Section 2
of this Agreement, Bureau shall provide the City with a marketing
plan and annual budget on or before April 1st of each year. 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 fiscal year, and the methods
Bureau will use to achieve those goals and objectives. The
report shall also evaluate the success of the Bureau in
increasing tourism and related activities during the preceding
year.
6. Expenditure of Funds by Bureau:
Bureau shall expend funds provided by City in
accordance with a budget submitted to, and approved by, the City
Council. The City Council will not approve any budget that
proposes to spend 30% or more of the funds received from the City
for salaries or administrative expenses. With the prior approval
of the City Manager, Bureau may transfer funds, or make
expenditures, allocated for one element of the budget to another
-3-
element so long as the basic goals and objectives of the tourist
development program are not impaired.
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. Bureau shall submit an audited report sixty (60)
days following the close of a fiscal year listing all expenses of
said Bureau. 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.
8. 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.
9. 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,
-4-
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
expenses arising from the sole negligence or wilful misconduct of
the City, its employees, officers, agents or representatives.
10. Termination:
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 ninety (90) days' written notice.
11. Independent Contractor:
The parties agree that Bureau, and its officers,
employees and representatives, while engaged in the performance
-5-
of duties required by this Agreement, is an independent
contractor, and not an officer, agent or employee of the City.
12. 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.
13. 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 CONFERENCE &
VISITOR'S BUREAU
Attention: Executive Director
4340 Campus Drive
Newport Beach, CA 92660
14. 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
-6-
writing. This Agreement may be amended only by a written
instrument signed by the City and the Bureau.
DATE:
DATE:
DATE:
1986 NEWPORT BEACH CONFERENCE
AND VISITOR'S BUREAU
1986 And:
"Bureau"
1986 CITY OF NEWPORT BEACH, a
municipal corporation
APPROVED AS TO FORM
THIS DAY OF , 1986.
By:
City Attorney
-7-
By: _
"City"