HomeMy WebLinkAbout11 - NBRA BID - Waive Past Due Assessments and PenaltiesTO:
FROM:
CITY OF
NEWPORT BEACH
City Council Staff Report
July 12, 2016
Agenda Item No. 11
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
Dave Kiff, City Manager - 949-644-3001,
dkiff@newportbeachca.gov
PREPARED BY: Mary Locey, Management Analyst/BID Liaison
PHONE: 949-644-3031
TITLE: Introduction of an Ordinance to Waive Past Due Assessments and
Associated Penalties for the Newport Beach Restaurant Association
Business Improvement District
ABSTRACT:
The Newport Beach Restaurant Association Business Improvement District (NBRA BID)
has requested City Council's approval for a one-time waiver of delinquent assessments
and the associated penalties for its stakeholder businesses.
RECOMMENDATION:
a) Hold a public hearing regarding the one-time waiver of delinquent stakeholder
assessments and penalties on delinquent assessments for the Newport Beach
Restaurant Association Business Improvement District;
b) 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; and
c) Introduce Ordinance No. 2016-12, An Ordinance of the City Council of the City of
Newport Beach, California, Waiving Past Due Assessments and Associated
Penalties for the Newport Beach Restaurant Association Business Improvement
District, and pass to second reading on July 26, 2016.
FUNDING REQUIREMENTS:
There is no fiscal impact to the City's General Fund related to this item. If the City
Council ultimately approves of the proposed waiver of all delinquent assessments and
penalties on delinquent assessments, the action would remove $58,200.90 from the
NBRA BID's balance sheet.
Introduction of an Ordinance to Waive Past Due Assessments and Associated Penalties
for the Newport Beach Restaurant Association Business Improvement District
July 12, 2016
Page 2
DISCUSSION:
The Newport Beach Restaurant Association Business Improvement District (NBRA BID)
was formed in 1995 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 territory encompasses any food -service business
operating within the boundaries of the City of Newport Beach.
Establishment of the NBRA BID was at the request of local food -service business
owners for the purpose of marketing Newport Beach as a dining destination. Per the
1989 Law, membership is mandatory for the identified businesses within the BID and
the annual assessments are based on City Council Resolution.
Following the annual NBRA BID renewal, stakeholder businesses are invoiced at the
beginning of the fiscal year. A large majority of the businesses remit their assessment
payments on time, while other businesses' payments are received after the due date
and penalty charges are applied. Several businesses do not pay their assessments and
penalty charges. The NBRA BID's budget reflects an estimated 10 percent reduction of
annual revenue for this reason.
The NBRA BID Board of Directors (Board), 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 assessment fee structure. As a part of the Board's review
of its assessment structure (also being considered by the City Council on July 12, 2016
under a separate staff report), the Board wanted to take action on the uncollected debt
that has been carried on its books for many years.
The current assessment structure is based upon the number of employees reported and
the amount paid for a City business license. The new proposed structure bases the
annual assessment on the business category, which the Board considers a more
equitable system for the stakeholder businesses. With the potential implementation of
the new assessment structure, coupled with outsourcing the bookkeeping services to
Newport Beach & Company (NB&Co.), the Board believes the one-time waiver of past
due debt will provide a fresh start.
Background on BID Delinquencies
The NBRA BID Board has been concerned with the large outstanding balances being
carried year -after -year on its books. The Board has previously discussed sending
delinquent stakeholders to collections. The former BID bookkeeper attempted
collections in 2002 with a small sampling of businesses. The attempted collection was
for approximately $4,500 and slightly less than $1,500 was collected. Of that amount,
the collection agency charged 30 percent of the total amount resulting in a payment to
the collection agency of approximately $1,300. The result was less than $200, which
confirmed that the collection process was unsuccessful.
11-2
Introduction of an Ordinance to Waive Past Due Assessments and Associated Penalties
for the Newport Beach Restaurant Association Business Improvement District
July 12, 2016
Page 3
In 2013, the Corona del Mar BID (CdM BID) Board requested an amnesty program to
encourage its delinquent members pay their outstanding assessments and have their
penalty charges forgiven. At the time, the CdM BID had 75 members owing $94,432
($51,600 in original assessments and $42,832 in penalties). The City Council approved
the amnesty program on October 22, 2013. The NBRA BID discussed implementing a
similar program, but opted to wait to see the outcome of the CdM BID's amnesty
program.
The implementation of the CdM BID amnesty program required the contracted
bookkeeper to manually create custom invoices for the 75 delinquent members. The
City amended its agreement with the bookkeeper to increase the contract by $4,000
(paid by the City) for the additional scope of work. A significant amount of City staff time
was also required to coordinate the program between the bookkeeper, member
businesses and the CdM BID Board. The end result of the program recovered
approximately $5,000 of the $51,600 in outstanding assessments. The amnesty
program was deemed unsuccessful and the NBRA BID decided to not pursue its own
amnesty program.
When City staff assumed responsibility for the BID's bookkeeping in August 2014, the
outstanding balance for the NBRA BID totaled slightly over $100,000. Staff immediately
began analyzing the database to uncover the reasons for the large amount of bad debt.
First, staff removed the accounts of known closed businesses. Next, staff determined
that the invoices mailed by past bookkeepers did not include the outstanding balances
due. The annual invoices only reflected the current fiscal year assessment and incurred
penalty charges. To correct this practice, staff implemented statement billing procedures
which included the full account history of unpaid assessments and penalties. Since the
changes were implemented by the City, there has been some success in receiving
payments to clear accounts. However, some businesses still have not paid their full
balances.
Thus, the NBRA BID Board of Directors voted to recommend the City Council approve a
one-time waiver of stakeholder's delinquent accounts. There are currently 428 active
businesses in the NBRA BID with 71 carrying delinquent accounts totaling $58,200.90
($38,225.76 in assessments and $19,975.14 in penalty charges).
City staff recommends the adoption of Ordinance No. 2016-12, an Ordinance to Waive
Past Due Assessments and Associated Penalties for the Newport Beach Restaurant
Association Business Improvement District (Attachment A).
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
11-3
Introduction of an Ordinance to Waive Past Due Assessments and Associated Penalties
for the Newport Beach Restaurant Association Business Improvement District
July 12, 2016
Page 4
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 — Ordinance to Waive Past Due Assessments and Associated Penalties
for the NBRA BID
11-4
ATTACHMENT A
CRCIINANCB NC. 2016 -
AN ORDINANCE CF THE CATIA CC UN CIU CF THE CITY!
CF NBWRCRT BEACH, CAUIFCRNIA, WAIVING PASIT
DUB ASISESSMENTS AND ASISIC CIATE11 RENALITIES
FOR THE NEWRCRI BEACH RESTAURANT
ASSOCIA111ON BUSINESS IMPRCbIBMENT DISTRICII
WHEREAS, c n N cvemter 13, '1995, 11he City Ccc ncil cf if• e City cf Newport
Bea& ij"C iiy Cc L ncil") adc pted C rc it ar ce N c. 1993-53 establishing the New pc rl Beach
Restac rar 11 A sscciatic n Bc siness Improverrier 1 Districi ("NBRA BID") pc rsuc nt to the
Parking and BusinesEi lmprc�ement Area Law cf 1989, Califcrnia StreellEi anc Highways
Code lection 36500 et seq. Il"1989 Law");
WHEREAS, c n November 24, 2009, the City C cc ncil ac cl:111ed Cndinance No.
2009-2EI, which arrienc ec il• e NBRA BID's annual benefit assessment levy;
WHEREAS, ea& fiscal year since estat lishment cf it e NBRA BID, the City
Cour cil r as renewed the NBRA BI❑ and cc nfirrried the levy cf assessments and
penalties;
WHEREAS, there are apprcximallely 428 businesses within the NBRA BID, of
whicl approxirriately 71 are delinquent in the payment cf their assessments and/cr
penalties on thein delinquencies;
WHEREAS, the tcial arricLnt cf delinquent assessments and associated
penalties is apprc ximaiely Rifty Bigl• 11 Thousanc llwc F unc rec Dc Ile rs anc 90/100
11$918,200.90) thiic ugh Riscal Yee r 2015/20'16;
WH ERBAS, c n June 28, 2016, the C ity Cc uncil adoptec Resc lution N c. 2016-82
declarirg its intenticn lo waive cListanding balarces cf NBRA BID's stakeholden's
acciounts;
WH ERBAS, the City Cc unciil held a public hearing c n ,, my 12, 2016, where the
Ciiy Council sc liciied testirricny fric rri it e public and stakeholders in 11he N BRA BID; and
WH ERBAS, the C ily Cc ur cil deoires to provide a fresh stars fc r 11he NBRA BID's
stakehc lders by offering a one-time waiver of delinquent assessments and associated
penalties.
NOW TH ERSFORE, the City Cc unci) cf 11he City of N ewpc d Beach c rdains as
follows:
Slecticn ' : The City Council hereby waives and forgives all delinquent
assessrrients and asscciatec penalties cf the NBRA BID's sie keholders, that ane
OLisianding and due as of JL ne 30, 2016.
11-5
Ordinance No. 2016 --
Page J of 3
Seictic n 2: B> cepiil as expiiessly modified I- erein, all other provisions, ilerms,
and requirements set forth in C rdinance Nos. Ordinance Nos. 1995-55 and 2009-26
sl- all remain unchanged and shall be in full force and effect.
Section 3: TI- e recitals provided in tr is ordinance are trL a and connect and are
incorporated info tl-e substantive portion of chis ordinance.
Seictic n 4: If any section, subsection, se ntencie, clause or phrase of tl- is
ordinance is for any reason held to be invalid or unconstitutional, such decision shall not
aflecil the validity or constit0ionality of the remaining portions of this ordinancE. TI•e
City Council rEiieby declares tl-at itwould have passed 11his ordinance and eacih secition,
sL bsection, sentencE, cilause ori pl- rase hereof, irrespective of t1-6 fac11 11hat any one or
more secilions, subsections, serillencies, cilauses or phrases ke declared invalid or
L nconstitL11ional.
Seicticn 5: TI -e CHy Council finds the introduciiton and adoption of il•is
ordinancE is not subjEct to 11hE California Environrriental Qualify Act ("CBCA"; PL rsuani
to Secitiori 15060Qci;(12) (lire activity will not result in a direct or reasonably foreseeable
indirEcii prysicial change in 11hE environrrient; and 15060(c)(3) (the acllivity is not a
project as defined in Section 15378) of the CECA Guidelines, California Code of
Regulations, Title 14, Chapter 3, becaL se H has no potential to r aye a significant eflecil
on the environment.
Section 6: TI•e Mayor shall sign and the City Cleiik shall attest ilo the passage
of this ordinance. The Cily C IE rk shall cause the orc iriaricE, ori a sL mmarythereof, to be
piuk lished pc rsuant io City C harler Section 414.
This ordinancie was introduced at a regular meeting of 11hE City Council of the Cily
of Newpiort Beacih held on tre day of , 2016, and adoptec on the day of
2016, by the following vote, to -wit:.
AYES, COUNCIL MEMBERS
N C ES, COUNC ILIV EMBERS
PBSEN71 CCUNCILM91MBERS-
Ax0-
DIANE B. DIXC N
11-6
Ordinance No. 2016 -
Page 3 of 3
ATTEST:
LEILANI I. BROWN= CITY CLERK
APPROVED AS TO FORD:
CITYATTO 'S FFICE
M
(4r) .
AARON C. HARP. CITY ATTORNEY
11-7