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c�<,FORN'P City Council Staff Report
May 26, 2020
Agenda Item No. 12
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Grace K. Leung, City Manager - 949-644-3001,
gleung@newportbeachca.gov
PREPARED BY: Tara Finnigan, Deputy City Manager
tfinnigan@newportbeachca.gov
Melanie Franceschini, Administrative Analyst
mfranceschini@newportbeachca.gov
PHONE: 949-644-3028
TITLE: Ad Hoc Committee on Local Business Advancement
Recommendations
ABSTRACT:
The City Council formed an ad hoc committee to review and determine if two of the City's
Business Improvement Districts and two local merchant associations, and the City's
financial support of these business groups, are aligned with the City Council's priorities.
The ad hoc committee is returning to the Council with short- and longer-term
recommendations.
RECOMMENDATION:
a) Determine this 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
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Review and provide direction on the recommendations of the Ad Hoc Committee on
Local Business Advancement.
FUNDING REQUIREMENTS:
Should the City Council support the recommendation for the City to provide financial
support to the five organizations referenced in this report, the proposed FY 2020-21
budget includes $160,000 in the City Manager's Economic Development Division budget
(Community Funding 01020202-821015) that can be used to fund the expenses.
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Ad Hoc Committee on Local Business Advancement Recommendations
May 26, 2020
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DISCUSSION:
Ad Hoc Formation and Responsibilities
The Ad Hoc Committee on Local Business Advancement (Ad Hoc Committee) is
comprised of Council Members Joy Brenner, Diane Dixon and Jeff Herdman. It was
created by Resolution 2019-53 and amended by Resolutions 2019-71 and 2019-99. The
Committee was tasked with reviewing and determining whether the Newport Beach
Restaurant Association Business Improvement District (NBRA BID), Corona del Mar BID
(CdM BID), Balboa Island Marketing Inc. (BIMI), and Balboa Village Merchant Association
Inc. (BVMA) are aligned with the City Council's priorities. The Ad Hoc Committee was
also responsible for reviewing and determining if the City's funding support of these
entities is aligned with the Council's priorities, and to then make recommendations on
these matters to the entire City Council. The Ad Hoc Committee sunsets upon making its
recommendations to the Council.
Committee Research and Review
The Ad Hoc Committee met separately with board members of the NBRA BID, CdM BID,
BIMI and BVMA as well as representatives of the Newport Beach and Corona del Mar
Chambers of Commerce, and Newport Beach & Company. The Committee also met with
representatives of a new merchant organization that formed in the fall of 2019, the Balboa
Island Merchants Association. The discussions generally centered on the business
groups' organizational goals, budgets and membership, as well as the local business
climate.
In addition to meeting with business leaders, the Ad Hoc Committee reviewed and
discussed the two different statutory schemes under which BIDs can be established: the
Parking and Business Improvement Area Law of 1989 (1989 Law) and the Property and
Business Improvement District Law of 1994 (1994 Law). The Newport Beach Tourism
Improvement District BID was formed under the 1994 Law. The Ad Hoc researched 1994
Law BIDs located in commercial districts in other areas of Southern California.
The NBRA BID and the CdM BID were both formed under the 1989 Law. Several times
in recent years, the City has talked to the BID Boards about the possibility of reorganizing
under the 1994 Law to give them a greater level of autonomy and to reduce the amount
of City oversight required. The BIDs have and continue to raise concerns about that
process and the cost of making such a change (neither City funds nor BID assessment
funds can be used). The NBRA and CdM BIDs desire to continue to operate as 1989 Law
BIDs. Therefore, the Ad Hoc is not recommending that the City require the existing BIDs
to reorganize, but it is recommending any future BIDs formed in Newport Beach should
do so under the 1994 Law.
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Ad Hoc Committee on Local Business Advancement Recommendations
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Prior to the formation of BIMI and BVMA, 1989 Law BIDs represented Balboa Island and
Balboa Village businesses. The BIDs were small, with annual assessment collections
averaging less than $20,000 per year, generally had low member participation, and the
BID Boards often felt burdened by the myriad of City policies and State laws they had to
follow. The BIDs agreed to disestablish in 2013, saving the City staff time, and businesses
in these areas formed the independent merchant associations, BIMI and BVMA. The City
agreed to provide five years of financial support to help the organizations get established.
It is important to note that BIMI changed its name in late 2019 to Balboa Island Merchant
Association Inc. This name is very similar to that of the new business association on
Balboa Island, the Balboa Island Merchants Association. As previously noted, the Ad Hoc
Committee met with representatives of both organizations. Ideally, these groups will work
together on collective or complementary efforts to promote Balboa Island businesses, but
the Ad Hoc Committee is not recommending that the City become directly involved in
forging a common path for them.
City Financial Support
The Ad Hoc Committee also reviewed the City's recent history of financial support to the
NBRA and CdM BIDs as well as BIMI and BVMA. The table below provides a seven-year
history of that funding, exclusive of any special event or other City grants, or Council
discretionary fund donations, these organizations may have received.
Fiscal Year
Corona del Mar
Business
Improvement
District
Newport Beach
Restaurant
Association
Business
Improvement
District
Balboa Village
Merchants
Association Inc.
Balboa Island
Marketing Inc.
FY 2013-14
$40,000
$40,000
$40,000
$40,000
FY 2014-15
$20,000
$20,000
$40,000
$40,000
FY 2015-16
$20,000
$20,000
$40,000
$20,000
FY 2016-17
$40,000
$40,000
$40,000
$40,000
FY 2017-18
$40,000
$40,000
$40,000
$40,000
FY 2018-19
$40,000
$40,000
$40,000
$40,000
FY 2019-20
0
$0
$20,000
$20,000
During the time of the Ad Hoc Committee review, staff conducted a compliance audit of
the funds received by these BIDs and merchant associations as part of the City's annual
audit program. The audit covered three years and found that funds were spent in
conformance to the stated objectives for that time period.
After the Ad Hoc Committee completed its review and was drafting its initial
recommendations, the COVID-19 pandemic led to the statewide, Stay at Home order and
closed all businesses except those providing essential services. In light of the severe
impact this has had on Newport Beach businesses, the Committee reviewed and changed
some its recommendations, and grouped them into short- and longer-term
recommendations for the Council's consideration.
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Ad Hoc Committee on Local Business Advancement Recommendations
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The Ad Hoc Committee believes the BIDs and merchant organizations should be
financially independent and should not automatically receive City funding to support their
administrative and marketing initiatives each fiscal year. However, in light of the COVID-
19 pandemic's impact on Newport Beach businesses, the Ad Hoc is recommending one-
time financial support for the NBRA and CdM BIDs and all three merchant organizations
for FY 2020-21 only. The dollar amounts and distribution are included in the
Recommendations section. The Ad Hoc's recommendations include the requirement that
the City's funding is used specifically for marketing and for helping to facilitate the
reopening and recovery of Balboa Island and Balboa Village merchant association
members and the CdM and NBRA BID members. The BIDs would also be permitted to
use the City's funding to offset any losses in the BID budgets caused by the BID offering
their members some relief by temporarily lowering member assessments next fiscal year.
Recommendations
Short -Term (FY 2020-21)
1. Renew the NBRA and CdM BIDs for FY 2020-21.
2. Provide $40,000 in City funding support to the CdM BID and $40,000 to the NBRA
BID to help the businesses in these districts recover from the financial impact of
the COVID-19 pandemic during FY 2020-21. This funding will be granted to the
BIDs specifically for marketing and improvements that help facilitate the reopening
and recovery of its member businesses. The funding may also be used to offset
the budget impacts of lowering BID member assessments in FY 2020-21. The use
of these funds should be explained in the annual report the BIDs are required to
submit to the Council.
3. Provide City financial support in the amount of $40,000 to the Balboa Village
Merchants Association, $20,000 to Balboa Island Merchant Association Inc.
(formerly known as Balboa Island Marketing Inc.) and $20,000 to the Balboa Island
Merchants Association specifically for marketing and to help their member
businesses reopen and recover from the financial impact of the COVID-19
pandemic during FY 2020-21. The funding would be contingent upon receiving a
report from each organization that outlines the efforts it has undertaken and
completed in the past year, a plan and budget outline for how it would use City
funding, a profit & loss statement for FY 2019-20, and balance sheet of current
assets.
Longer-term
1. When the current economic crisis concludes, the BIDs and merchant associations
should be financially independent from the City of Newport Beach and self-
supporting through member assessments/dues, sponsorships, events and other
methods of generating revenue.
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Ad Hoc Committee on Local Business Advancement Recommendations
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2. Any future BIDs formed in Newport Beach should be created under the 1994
Property and Business Improvement District Law (Cal. Streets & Hwys. Code §§
36600 et seq.) structure, which provides a higher level of self-sufficiency to conduct
their own good governance.
3. BIDs and merchant associations should not receive an annual budget allocation
from the City's General Fund after FY 2020-21. These business groups can and
should continue to apply for special event grants and other grants provided by the
City.
4. The City should continue to support the BIDs, merchant organizations and the
Newport Beach business community at large through citywide marketing
programs, beautification efforts, commercial districts maintenance, small business
education and resources, and capital improvement and transportation / circulation
projects.
5. The Council should reform this Ad Hoc Committee at a future date, after the
economic crisis has subsided, to re-evaluate its recommendations and City
support for local businesses.
If the City Council supports the recommendation to renew the NBRA and CdM BIDs, the
Resolutions of Intention to renew and set the assessments for Fiscal Year 2020-21 and
the BIDs annual reports will be on the Council's June 9 agenda. If the Council supports
the funding recommendations for the BIDs, City staff will work with the BID Boards to
ensure that the annual reports clearly explain how the City's funds will be used toward
COVID-19 related business marketing and recovery efforts. If the Council supports the
recommendation to provide funding to the merchant associations, staff will also work with
those organizations to ensure they submit reports clearly explaining how they will use the
funds in assisting their businesses and that they provide the other documents specified
in Short -Term Recommendation #3.
Funding Sources
Should the Council approve the Ad Hoc's funding recommendations, the proposed
FY 2020-21 budget includes $160,000 in the City Manager's Economic Development
Division budget that can be used to fund these expenses.
Federal stimulus funding may provide more options for supporting these and other
Newport Beach businesses.
• As the Council heard at its May 12 meeting, under the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act), the City will receive an additional Community
Development Block Grant allocation of $219,324 for FY 2020-21. Community
Development staff is investigating if an economic development program can be
developed that will utilize both the CARES Act funds as well as the $250,371
earmarked in the 2020-21 CDBG Action Plan to help and support local small
businesses.
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Ad Hoc Committee on Local Business Advancement Recommendations
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The Orange County Board of Supervisors is considering allocating approximately
$75 million in CARES Act funding for a Business Recovery Grant Program.
Additional CARES Act funding is available through the U.S. Economic
Development Administration (EDA). The City could apply to the EDA for grants to
support a wide variety of assistance, including developing a revolving loan fund to
provide access to capital for businesses or for construction of infrastructure and
other economic development projects.
Staff is awaiting Federal and County guidance on how exactly some of these monies can
be used to support local businesses. The information will be shared with the Council's
recently formed Ad Hoc Committee to Address Commercial Re -Opening and Business
Advancement for its consideration and a possible recommendation to the entire City
Council.
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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).
ATTACHMENTS:
None.
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