HomeMy WebLinkAbout04 - Amend the Stakeholder Business Structure and Annual Assessment Levied to Forgive Delinquent Penalties for the NRBIDQ SEW Po�T
CITY OF
_ _NEWPORT BEACH
City Council Staff Report
June 28, 2016
Agenda Item No. 4
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Dave Kiff, City Manager - 949-644-3001,
dkiff@newportbeachca.gov
PREPARED BY: Mary Locey, Management Analyst/BID Liaison
PHONE: 949-644-3031
TITLE: Resolution of Intention to Amend the Stakeholder Business
Structure and Annual Assessment Levied and Resolution of
Intention to Forgive Delinquent Assessments and Penalties for the
Newport Beach Restaurant Association Business Improvement
District
ABSTRACT:
The Newport Beach Restaurant Association Business Improvement District (NBRA)
requests an amendment to its membership structure and annual assessments levied
and a forgiveness of delinquent member assessments and penalties on delinquent
assessments.
RECOMMENDATION:
a) Determine that the action is exempt from the California Environmental Quality Act
(CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines
because it will not result in a physical change to the environment, directly or
indirectly;
b) Adopt Resolution No. 2016-81, A Resolution of the City Council of the City of
Newport Beach, California, Declaring its Intention to Amend the Stakeholder
Business Structure and Annual Assessments Levied for the Newport Beach
Restaurant Association Business Improvement District and Fixing the Time and
Place of a Public Meeting for July 12, 2016 and a Public Hearing for August 9, 2016;
and
c) Adopt Resolution No. 2016-82, A Resolution of the City Council of the City of
Newport Beach, California, Declaring its Intention to Forgive Delinquent
Assessments and Penalties for the Newport Beach Restaurant Association Business
Improvement District and Fixing the Time and Place of a Public Hearing for July 12,
2016.
Resolution of Intention to Amend the Stakeholder Business Structure and Annual
Assessment Levied and Resolution of Intention to Forgive Delinquent Assessments and
Penalties for the Newport Beach Restaurant Association Business Improvement District
June 28, 2016
Page 2
FUNDING REQUIREMENTS:
There is no fiscal impact to the City's General Fund related to this item. If the City
Council ultimately approves the proposed changes, the new assessments levied would
increase the NBRA BID's revenues by approximately $54,000 in fiscal year 2016-2017.
If the Council ultimately approves the proposal to forgive all delinquent assessments,
the NBRA BID's balance sheet would be reduced $61,274.63.
DISCUSSION
The Newport Beach Restaurant Association Business Improvement District (NBRA BID)
was formed pursuant to the Parking and Business Improvement Area Law of 1989
(1989 Law), codified in Streets and Highways Code Sections 36500 et seq., for the
purpose of financing activities and programs to benefit businesses located and
operating in the area. The NBRA BID was established in 1995 and the territory
encompasses any food -service business operating within the boundaries of the City of
Newport Beach.
The NBRA BID Board of Directors, which serves in an advisory capacity to the City
Council, developed a three-year Strategic Business Plan (Plan) in FY 2013. The plan
identified several priority initiatives and activities, one of which included an evaluation of
the NBRA BID's member assessment fee structure.
The proposed recommendations have been thoroughly reviewed and discussed by the
NBRA BID Board of Directors and are detailed below. The NBRA BID Board President,
Jim Walker, submitted a letter to the City recommending that the City Council approve
the proposed new structure and forgiveness of delinquent accounts (See Attachment
A).
Another consideration is changing the way the NBRA BID refers to its membership as
members or member businesses. The NBRA BID Board thinks it is more appropriate to
use the term stakeholder or stakeholder businesses going forward.
Proposed Amendment to Stakeholder Structure
In 2014, the NBRA BID Board formed a subcommittee to review the BID's stakeholder
structure, assessment levy process and assessment levels. During this review, the
Board conducted a brief survey to obtain information about each stakeholder
businesses, such as the type of establishment, years of operation, and number of
employees. In addition, the subcommittee met on several occasions to review the
NBRA BID's organization and its assessment levels. The subcommittee drafted a new
assessment structure that it believes better aligns with the benefits stakeholders
receive.
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Resolution of Intention to Amend the Stakeholder Business Structure and Annual
Assessment Levied and Resolution of Intention to Forgive Delinquent Assessments and
Penalties for the Newport Beach Restaurant Association Business Improvement District
June 28, 2016
Page 3
Since 2009, the NBRA BID has assessed its stakeholder businesses based on the
amount of business license tax paid and the number of employees reported to the City
of Newport Beach (City) through the business license process. The assessments are
broken into three categories:
1. For businesses with fewer than 11 employees, the assessment shall be $95.
2. For businesses with greater than 10 employees, and a business license tax less
than $600, the business paid 100 percent of the business license tax plus an
additional $65.
3. For businesses that paid more than $600 for its business license tax, the
business paid 100 percent of the business license tax plus an additional $145.
Based on its current structure, the NBRA BID estimates receiving approximately
$135,000 in assessment revenues (assuming a 10 percent delinquency rate) this fiscal
year. Additional revenue is received from the City ($40,000 committed through fiscal
year 2017-2018, if the BID is renewed) and other sources such as sponsorships and its
partner program.
The main activities funded by the NBRA BID are marketing, advertising and public
relations. A large part of the NBRA BID's annual budget (currently estimated at
$253,500) is for retaining the services of Newport Beach & Company (NB&Co.), which
handles the BID's marketing, administration and bookkeeping services. The remaining
balance, approximately $108,000, goes toward its marketing, advertising and public
relations programs. This is a relatively small program budget for marketing Newport
Beach as a dining destination.
The goal of changing the assessment levy is to increase revenues to have a more
robust advertising campaign for greater reach to the regional market. By creating
different categories and assessment levels, the NBRA BID Board believes the value of
the assessment is aligned with the benefit received by its stakeholders.
At its March 23, 2016 annual meeting, the Board voted to recommend the City Council's
approval of the new NBRA BID stakeholder categories and assessment levies as
follows:
Proposed Stakeholder Category
Assessment Levy
Full Service Restaurant
$600
Fast Casual Restaurant
$500
Grocery or Market
$500
Coffee, Tea, or Specialty Shop
$150
Desserts, Bakery or Treat Shop
$150
Juice Bar or Smoothie Shop
$150
Catering Company
$150
4-3
Resolution of Intention to Amend the Stakeholder Business Structure and Annual
Assessment Levied and Resolution of Intention to Forgive Delinquent Assessments and
Penalties for the Newport Beach Restaurant Association Business Improvement District
June 28, 2016
Page 4
Based on preliminary calculations made by placing current stakeholder businesses into
the proposed categories with the corresponding assessments, the NBRA BID Board
predicts that the annual assessments collected would increase to $189,000 (assuming a
10 percent delinquency rate) per fiscal year if the new structure is approved. This would
provide an additional $54,000 per year in marketing dollars. See Attachment B for a
copy of the NBRA BID's operating budget.
With the implementation of the new structure, the NBRA BID would grow its marketing
program with the expectation of increasing sales for its stakeholders and the sales tax
revenue for the City. In fiscal year 2015, restaurant sales revenue in Newport Beach
was reported at slightly under $700 million, which generated nearly $7 million in the
one -percent local tax collected by the City. This was an increase of 7.1 percent from
fiscal year 2014.
City staff recommends adoption of Resolution No. 2016-81, a Resolution of Intention to
Amend the Stakeholder Business Structure and Annual Assessments Levied for the
Newport Beach Restaurant Association (Attachment C).
NBRA BID Assessment Forgiveness
With the potential implementation of a new assessment structure, coupled with
outsourcing the bookkeeping services to NB&Co. (as approved by the City Council on
June 14, 2016), the Board believes the forgiveness of past due debt will provide a fresh
start. Having a clean slate creates the opportunity to better track accounts that become
past due and has the potential to increase the collection of assessments.
There are currently 462 active businesses in the NBRA BID with 82 carrying delinquent
accounts totaling $61,274.63 ($40,343.26 in assessments and $20,931.37 in penalty
charges). Some of this debt has been on the NBRA BID books for many years and
deemed uncollectible. Several invoice statements reflecting the outstanding balances
have been mailed to the delinquent stakeholders in addition to calling some of the
businesses with higher outstanding balances. The majority of these attempts have
proven to be unsuccessful.
At its March 23, 2016 annual meeting, the NBRA BID Board of Directors voted to
recommend the City Council approve the waiver of stakeholder's delinquent accounts,
up to $5,000 per business. There is only one business with over $5,000 in debt. Staff
spoke with the NBRA BID President about this limit and is recommending waiving all
delinquent balances. Implementing the forgiveness program would remove $61,274.63
of bad, uncollectable debt from the NBRA BID's books.
The NBRA BID Board has discussed the proposed stakeholder amendment and
forgiveness of delinquent balances during several of its public board meetings as well
as providing email and written communications to the stakeholder businesses. Should
the City Council approve of the recommended actions, City staff will correspond with the
Resolution of Intention to Amend the Stakeholder Business Structure and Annual
Assessment Levied and Resolution of Intention to Forgive Delinquent Assessments and
Penalties for the Newport Beach Restaurant Association Business Improvement District
June 28, 2016
Page 5
stakeholders explaining the proposals and process and will include copies of the
resolutions of intention. The City Clerk will also publish the resolutions.
City staff recommends the adoption of Resolution No. 2016-82, a Resolution of Intention
to Forgive Delinquent Assessments and Penalties for the Newport Beach Restaurant
Association (Attachment D).
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A — Letter from NBRA BID Board President
Attachment B — NBRA BID Operating Budget
Attachment C — Resolution of Intention to Amend the NBRA BID Structure and Annual
Assessments Levied
Attachment D — Resolution of Intention to Waive Delinquent Assessments and Penalties
for the NBRA BID
4-5
ATTACHMENT A
V
k�,1="IPORT By�'ri�I-' `�
RESTAURANT :
1a ASSOCIATION
April 19, 2016
Newport Beach City Council
100 Civic Center Drive
Newport Beach, CA 92660
Re: Newport Beach Restaurant Business Improvement District Proposed Amendment
Dear City Council,
For the past three years, the Newport Beach Restaurant 'Business Improvement District (NBRA
BCD) has spent considerable time and resources in developing and implementing a Strategic
Business Plan to ensure that the organization continues to succeed and provides value for its
member/stakeholder businesses, Through this process, the Board of Directors determined that the
current stakeholder classification and fee structure does not accurately levy the size and type of
the stakeholder business.
In 2014, a sub -committee was formed and met throughout the year to review the stakeholder
structure, levy process and assessment levels. In 2015, the sub -committee commissioned a survey
of the NBRA BID stakeholders for feedback about the organization. Survey results were presented
to the Board of Directors, and the sub -committee met with city officials to further discuss a possible
new BID stakeholder and fee structure.
On March 23, 2016 at the NBRA BID Annual meeting, the Board of Directors voted to amend the
basis and method of levying its stakeholder assessments. The NBRA BID board recommends that
the City Council approve the proposed assessment structure detailed in the enclosed attachment.
The proposed new structure will accurately categorize and appropriately levy the NBRA BID
stakeholders using a method that better defines the local culinary community.
In addition, the Board of Directors recommends waiving all past due stakeholder assessments and
penalties up to $5,000 per restaurant, as they have been deemed uncollectabie at this point.
Under the proposed new stakeholder and fee structure, BID income will remain in tact to ensure
that the organization can continue to carry out the marketing and authorized activities as outlined in
the NBRA BID bylaws.
The Board of Directors wishes to thank City Council for its continued support of the NBRA BID and
its stakeholders, and we ask for your approval of our recommendations to ensure that the Newport
Beach dining destination continues to thrive.
Sincerely,
Ji Walker
NBRA BID Board President
Owner, The Bungalow Restaurant
cc: Dave Kiff, City Manager
NBRA BID Board of Directors
Tara Finnigan, Asst. to the City Manager/Public Information Officer
Mary Lacey, Management Analyst
.01
N=WPORT E=ACH
RESTAURANT
ASSOCIATION
EI F{]RN`
CITY OF NEWPORT BEACH
RESTAURANT BUSINESS IMPROVEMENT DISTRICT
Proposed NBRA BID Structure
• Effective Fiscal Year 2016-2017
• BID stakeholders are defined as foodservice businesses (such as restaurants,
markets with dine -in or take-out food service, bars serving food, dessert shops,
coffee shops, juice bars, catering companies, food trucks, etc.) within the Newport
Beach City limits selling prepared food and beverage to the public.
• BID stakeholders are assigned a category with a set annual assessment fee.
• Assessment fee billed annually for existing businesses in July.
• Assessment fee billed and pre -rated when a new business opens.
Annual Assessment Fees
Stakeholder - s i
Full Service Restaurant
$600
Fast Casual Restaurant
$500
Grocery I Market
$500
Coffee I Tea I Specialty Shap
$150
Desserts I Bakery I Treats
$150
Juice Bar I Smoothie Shop
$150
Catering Company
$150
RVA
ATTACHMENT B
Irl YPOR > 1
RESTAURANT
ASSOCIATION
Newport Beach Restaurant Business Improvement District
Operating Budget
July 1, 2016 — June 30, 2017
NBRA BID FY 2016-2017 Budget I Page 1 of 1
Advertising Media
$32,000
Event Marketing & Operational Expenses_
A. $60,000
E -Newsletter I Website Content � Bloggers�
$12,000
�---____._ __
Digital Marketing I SEO _._.. __
___.._...._......__...m $7,500
Collateral
$5,000
Website Maintenance
$5,000
Graphic Design IBrandin_
_.._ _ $2,000
Social Media Promotions
$2,66-6—
2000Public
PublicRelations
$2,000
Annual Meeting
$2,000
Community Event Participation
€ $2,500
Strategic Planning I Miscellaneous Expenses
$8,000
Research
$5,000
Marketin Consultation A enc Fee
$60,000
BID Accountinq_Services
$18,000
BID Administration _--..
, - _ $18,000
Operating Expenses Insurance
$12,000
Dues I Memberships
$500
Total $253,500.00
NOTE: The NBRA BID has an amendment to its stakeholder categories and assessment
levies before the City Council. Should the amendment pass, the NBRA BID would amend
its FY 2017 budget as follows:
NBRA BID FY 2016-2017 Budget I Page 1 of 1
ATTACHMENT C
RESOLUTION NO. 2016-81
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, DECLARING ITS
INTENTION TO AMEND THE STAKEHOLDER BUSINESS
STRUCTURE AND ANNUAL ASSESSMENTS LEVIED
FOR THE NEWPORT BEACH RESTAURANT
ASSOCIATION BUSINESS IMPROVEMENT DISTRICT
AND FIXING THE TIME AND PLACE OF A PUBLIC
MEETING AND A PUBLIC HEARING THEREON
WHEREAS, the Property and Business Improvement Law of 1989, Streets and
Highways Code Sections 36500 et seq. ("1989 Law"), authorizes cities to establish
property and business improvement districts for the purpose of promoting business
activities which benefit the stakeholder businesses;
WHEREAS, on November 13, 1995, the Newport Beach City Council adopted
Ordinance No. 1995-55 establishing the Newport Beach Restaurant Association
Business Improvement District ("NBRA BID") pursuant to the 1989 Law;
WHEREAS, on September 22, 2009, the Newport Beach City Council amended
the NBRA BID's annual benefit assessment levy by adopting Ordinance No. 2009-26;
WHEREAS, in past years, the NBRA BID referred to businesses within the
NBRA BID as "members" or "member businesses", the NBRA BID Advisory Board of
Directors thinks it is appropriate to use the term "stakeholder businesses" going forward
to refer to businesses located within the NBRA BID;
WHEREAS, the 1989 Law allows the City Council to amend the benefit
assessment levied on stakeholder businesses within the NBRA BID; and
WHEREAS, the NBRA BID Advisory Board of Directors has requested that the
City Council amend the stakeholder business structure and assessments levied on its
stakeholder businesses.
NOW THEREFORE, the City Council of the City of Newport Beach hereby
resolves as follows:
Section 1: The City Council declares its intention to amend the stakeholder
structure to include the following businesses within the NBRA BID: any food -service
business within the boundaries of the city of Newport Beach, such as restaurants,
markets with dine -in or take-out food service, bars serving food, dessert shops, coffee
shops, juice bars, catering companies or similar type of food related business.
Resolution No. 2016-81
Page 2 of 3
Section 2: The City Council further declares its intention to amend the NBRA
BID's annual benefit assessments as follows:
A.
Full service restaurant
$600
B.
Fast casual restaurant
$500
C.
Grocery or market
$500
D.
Coffee, tea or specialty shop
$150
E.
Dessert, bakery or treats
$150
F.
Juice bar or smoothie shop
$150
G.
Catering company
$150
Section 3: The time and place for a public meeting on the amendment of the
NBRA BID is set for 7 p.m. or as soon thereafter as the matter may be heard on July 12,
2016, at the Council Chambers located at 100 Civic Center Drive, Newport Beach, CA
92660.
Section 4: The time and place for a public hearing on the amendment of the
NBRA BID is set for 7 p.m. or as soon thereafter as the matter may be heard on
August 9, 2016, at the Council Chambers located at 100 Civic Center Drive, Newport
Beach, CA 92660.
Section 5: The City Clerk is directed to provide notice of the public meeting
and public hearing in accordance with Streets and Highways Code Sections 36523 and
36541.
Section 6: The City Council finds the adoption of this resolution of intention is
not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections
15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect
physical change in the environment) and 15060(c)(3) (the activity is not a project as
defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title
14, Chapter 3, because it has no potential for resulting in physical change to the
environment, directly or indirectly.
Section 7: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall
not affect the validity or constitutionality of the remaining portions of this resolution. The
City Council hereby declares that it would have passed this resolution, and each
section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any
one or more sections, subsections, sentences, clauses or phrases be declared invalid
or unconstitutional.
I
4-10
Resolution No. 2016-81
Page 3 of 3
Section 8: This resolution shall take effect immediately upon its adoption by
the City Council and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 28t" day of June, 2016.
ATTEST:
Leilani I. Brown,
City Clerk
3
Diane B. Dixon,
Mayor
4-11
ATTACHMENT D
RESOLUTION NO. 2016-82
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, DECLARING ITS
INTENTION TO FORGIVE DELINQUENT
ASSESSMENTS AND PENALTIES FOR THE NEWPORT
BEACH RESTAURANT ASSOCIATION BUSINESS
IMPROVEMENT DISTRICT AND FIXING THE TIME AND
PLACE OF A PUBLIC HEARING THEREON
WHEREAS, the Property and Business Improvement Law of 1989, Streets and
Highways Code Sections 36500 et seq. ("1989 Law"), authorizes cities to establish
property and business improvement districts for the purpose of promoting business
activities which benefit the stakeholder businesses;
WHEREAS, on November 13, 1995, the Newport Beach City Council adopted
Ordinance No. 1995-55 establishing the Newport Beach Restaurant Association
Business Improvement District ("NBRA BID") pursuant to the 1989 Law;
WHEREAS, on September 22, 2009, the Newport Beach City Council amended
the NBRA BID's annual benefit assessment levy by adopting Ordinance No. 2009-26;
WHEREAS, the NBRA BID has continued to assess its member businesses and
apply penalty charges per City Council Resolution each fiscal year;
WHEREAS, there are approximately 462 businesses within the NBRA BID, of
which approximately 82 are delinquent in the payment of their assessments and/or
penalties on their delinquencies;
WHEREAS, the total amount of delinquent assessments and penalties is
approximately Sixty One Thousand Two Hundred Seventy Four Dollars and 63/100
($61,274.63) through Fiscal Year 2015/2016;
WHEREAS, the NBRA BID Advisory Board of Directors requests that the City
Council forgive NBRA BID delinquent balances including assessments and penalties
applied to outstanding assessments.
NOW, THEREFORE, the City Council of the City of Newport Beach hereby
resolves as follows:
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Resolution No. 2016-82
Page 2 of 3
Section 1: The City Council hereby declares its intention to implement a
forgiveness program to remove the outstanding balances of NBRA BID member's
accounts ("NBRA BID Forgiveness Program") under the following conditions:
A. The NBRA BID Forgiveness Program shall commence upon the 26 day of
August, 2016.
B. The delinquent assessments and penalties qualifying for the NBRA BID
Forgiveness Program shall be for the Fiscal Years commencing July 1, 1995 and
ending June 30, 2016 only.
C. Assessments and penalties assessed upon a delinquent NBRA BID assessment
pursuant to Ordinance Nos. 1995-55, 2009-26, and related resolutions, shall be
forgiven.
D. The City Finance Director or his/her designee shall administer the NBRA BID
Forgiveness Program.
Section 4: The time and place for a public hearing on the NBRA BID
Forgiveness Program is set for 7 p.m. or as soon thereafter as the matter may be heard
on July 12, 2016, at the Council Chambers located at 100 Civic Center Drive, Newport
Beach, CA 92660.
Section 5: The City Clerk is directed to provide notice of the public hearing in
accordance with Streets and Highways Code Sections 36523 and 36541.
Section 6: The City Council finds the adoption of this resolution of intention is
not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections
15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect
physical change in the environment) and 15060(c)(3) (the activity is not a project as
defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title
14, Chapter 3, because it has no potential for resulting in physical change to the
environment, directly or indirectly.
Section 7: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall
not affect the validity or constitutionality of the remaining portions of this resolution. The
City Council hereby declares that it would have passed this resolution, and each
section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any
one or more sections, subsections, sentences, clauses or phrases be declared invalid
or unconstitutional.
2
4-13
Resolution No. 2016-82
Page 3 of 3
Section 8: This resolution shall take effect immediately upon its adoption by
the City Council and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 28th day of June, 2016.
ATTEST:
Leilani I. Brown,
City Clerk
Diane B. Dixon,
Mayor
3
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