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HomeMy WebLinkAbout06-28-1993 Item #22Agenda Item No. 22 CITY OF NEWPORT BEACH OFFICE OF THE CITY MANAGER June 28, 1993 TO: Honorable Mayor and Members of the City Council FROM: Kevin J. Murphy, City Manager //� BY THE CITY COUNCIL z CITY OF NEWPORT P51, :" C JUN _APPROVED SUBJECT: REVISION TO THE CONFERENCE AND VISITORS' BUREAU AGREEMENT At the June 14th City Council meeting, the City Council unanimously approved in concept the modification of the agreement between the City and the Conference and Visitors' Bureau (CVB) which will provide for an increase in the monies paid to the CVB, if the revenue from the City's increase in the tax is achieved as projected. I've attached a copy of the staff report from the June 14th meeting which summarizes the proposed changes which were approved by the City Council, but which now must be embodied in an agreement between the CVB and the City. A second related issue is the fate of the transportation monies that are annually remitted by the CVB from their Visitors' Service Fee revenues. The City Council on a 4-2 vote approved in concept of permitting the CVB to keep the $50,000 for marketing services. The attached agreement prepared by the City Attorney accomplishes this change as well. KJM:kf Attachment Agenda Item No. 3 CITY OF NEWPORT BEACH OFFICE OF THE CITY MANAGER June 14,1993 TO: Honorable Mayor And Member Of The City Council FROM: Kevin J. Murphy, City Manager SUBJECT: TRANSIENT OCCUPANCY TAX/CONFERENCE AND VISITORS BUREAU BACKGROUND: Beginning last fall the City's Budget Committee and City staff began to focus on the 1993-94 Budget anticipating that the State of California would again raid our property tax revenues and the economy would have a minimal improvement. The combination of these two required that the City, for the first time in many years, consider the expansion or increase in existing revenues and the adoption of new fees or taxes. One of the revenues that was discussed for future adjustment was the Transient Occupancy Tax. Following discussions with the Budget Committee, City staff began a long dialogue with the Newport Harbor Chamber of Commerce Budget Task Force on the perils facing the City in the 1993-94 fiscal year. The dialogue, among many other things, included a discussion of the Transient Occupancy Tax and how our City's current rate compared to other surrounding cities and other large cities in the region and around the country. This dialogue was then expanded to include the Newport Beach Conference and Visitors Bureau staff, Board members, and a subcommittee. The dialogue with the Subcommittee of the Conference and Visitors Board has recently included the City's Budget Committee. It is the hope of all the parties that, if the TOT rate for the City must be increased, then there should be some benefit to the members of the Conference and Visitors Bureau who remit this tax to the City through their clientele. The CVB Board and staff are very desirous of expanding their marketing efforts to assist the various hotels in the City generate additional occupancy, which in turn, will benefit the City by producing additional TOT, sales tax, and visitors to the visitor supporting industry which is important to the City's business (and our budget) climate. 2 At the conclusion of the recent discussion between the City's Budget Committee and the CVB Subcommittee, the parties are hopeful that a positive approach has been found that will allow the City to move forward on the increase and assist the CVB in its goal of generating additional revenue for greater marketing efforts. The report that follows will set forth the proposal and seek direction from the City Council so that the proper implementing documents can be returned to the City Council prior to the start of the fiscal year. PROPOSAL: The City's Budget Committee and the CVB Subcommittee (with the full authority of the CVB Board) recommends that the City Council: Increase the Transient Occupancy rate from 8% to 9% (and retain the current 1 % Visitors Service Fee). 2. Revise the City's current agreement with the CVB to provide that: A. If the City collects more than its projected revenue of $5,833,000 (which includes the 1 % increase) then the CVB will receive the first $625,000 of any amount over the $5.833 million strictly for additional marketing services. B. If the City collects more than $6.458 million ($5.833 + $.625 million) then this amount will be split between the City and the CVB on a 50/50 basis. C. The contract will be for three years and the base numbers of $5.833 million and $.625 million will be increased by the Consumer Price Index on an annual basis. D. Payments of any amounts to the CVB will be made on July 30th (following the close of a fiscal year), after it has been determined whether the thresholds have been achieved. In addition to the items above that would need to be incorporated into a new agreement, the parties agreed that in the Ordinance providing for an increase in the TOT rate it would state that existing weekly or monthly rental agreements that specify the lower rate (8%) will be held at the lower rate through October 1st. This is to address the issue raised by the managers of the monthly rental properties at the last City Council meeting. Finally, an issue has been raised by several hotels regarding the payment of the TOT for "persons" (including firms/corporations) occupying or renting rooms on an on-going basis. In the past these "contract" rooms have been exempt from paying the tax. In the original proposal these "contract" rooms would have paid the tax. A compromise has been proposed that provides that these contracts will be exempt, as long as they are continued in place, through July 14, 1998 or five years from the effective date of the ordinance. TRANSPORTATION ISSUE: One issue that has complicated the discussion with the CVB is the issue of the $50,000 that is required in our contract with the CVB to be paid to the City from the current 1 % they receive through the Visitors' Service Fee. As the City Council Members are now aware, the contract provides that the City is to use these monies for the establishment and operation of a "transportation system" in the City. If they are not used for the "transportation system" (presumably a trolley or similar shuttle or bus system) then these monies are to be used for any other transportation purpose. In the last four years these monies have not been earmarked for any specific transportation program, nor have they been segregated and set aside in reserve. Rather, they have been used in the General Fund, indirectly for "transportation" programs which are provided by the Public Works Department. The CVB Board would very much like the City to terminate its requirement of the $50,000 payment from the CVB now, while a member of the Budget Committee would like the City to have until 9/30/93 (date of the next quarterly payment) to determine whether it can put together a legitimate transportation proposal for the City Council to approve or act upon. If no program is approved by that date, then the $50,000 obligation would cease. In any event, this is one item that the City Council must give direction to City staff on to be able to return with documents implementing a revised agreement with the CVB. ANALYSIS: The 1993-94 Budget is nearing adoption and it seems more and more evident from the comments from Sacramento that the State will reduce substantially the property tax revenues to cities and counties. In our Budget of property tax revenues we have forecast the loss of the remaining AB 8 Bailout or $4 million. Recently, the Governor in his May "revision" indicated that he is still proposing that the State take $2.6 billion from cities and counties, with $288 million earmarked for loss by cities. Just how the $288 million might be spread among cities is up in the air at the present time. Other proposals are being floated that would "take" from cities a share of the Motor Vehicle License fee or a share of the sales tax. Until the Legislature adopts the final 93-94 Budget and the Governor signs it, we won't really know where we stand. In the meantime, we need to prepare our own budget and if we're being fiscally prudent, expect the worst and hope for the best. 4 The Ordinance before you tonight will enact an increase of 1% to the TOT rate and in the process create an even closer working relationship with the CVB. The dialogue on the increase of the TOT has brought the City and CVB even closer together and confirmed the realization that the TOT payees and City will prosper together by working jointly on programs that promote the City as a great place to visit. The Budget Committee and City staff believe that the compromise that has been proposed will work for both the City and CVB. The City increases the TOT rate 1%, and if the TOT payees (hotels and rentals) are successful in marketing their businesses, they can produce additional dollars for future expansion of their marketing efforts. RECOMMENDATION: The City Council adopt the increase in the TOT rate by 1% and review and give direction to City staff on the proposed amendment to the CVB contract, including the provisions relating to transportation. After receiving direction from the City Council the staff will return with the implementing documents at the meeting of June 28, 1993. C - Z 63f AGREEMENT THIS AGREEMENT, made and entered into this 3rd day of June , 1992, 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, 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 residents of, and visitors to, the City. NOW, THEREFORE, the parties agree as follows: 1. Term. This Agreement shall commence on the 26th day of May 1992, and shall continue until terminated as provided in Section 10 of this Agreement. 2. Bureau Duties. A. Promotion of Tourism. Bureau shall develop, plan, carry out and supervise a program to promote tourism in, and serve the needs of visitors to, the City. This promotional program shall, at a minimum, include the following: (i) The maintenance of suitable quarters and the employment of competent personnel to properly carry out the promotional activities; The preparation and distribution of, 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 the City; The development of marketing programs with an emphasis on increasing business and visitor trade. B. Visitor Services. Bureau shall contribute Fifty Thousand ($50,000.00) per year to City for the purpose of providing improvements or services that directly benefit visitors paying fees pursuant to the Visitor Service Fee Ordinance. The annual contribution shall be made in two (2) equal installments, with the first installment due on or before September 30, 1992 and on or before that date during each subsequent year, and the second installment due on or before March 30, 1993 and on or before that date during each subsequent year of this Agreement. 3. City Funding. City shall pay the Bureau all funds received pursuant to the "Visitor Service Fee Ordinance," less a sum equal to one (1%) of those revenues to defray the City's administrative costs. The City's obligation to pay Bureau any funds shall cease if the Service Provision Fee Ordinance is repealed or ruled invalid. Bureau acknowledges the City Council has the full discretion to repeal the Visitor Service Fee Ordinance and is under no legal obligation to defend the ordinance against a legal challenge. Bureau gives up any right to seek any form of judicial relief or order based on repeal of the Visitor Service Fee Ordinance or the failure of City to defend the ordinance against a legal challenge. 4. Manner of Payment. Funds due Bureau pursuant to this Agreement shall be paid on a monthly basis and on or before the 20th day of the month subsequent to collection. 2 5. Bureau Reports. A. Bureau shall provide City with a marketing plan and an annual budget on or before April 5th of each year during the term of this Agreement. The Board of Directors of Bureau shall approve the budget before it is submitted to City. The marketing plan shall specify the goals and objectives of the Bureau during the upcoming fiscal year and the programs Bureau will implement to achieve those goals and objectives. B. Bureau shall, on or before the first City Council meeting in October each year during the term of this Agreement, submit to the City the following: (i) A report describing the services and programs offered by Bureau during the preceding fiscal year and an evaluation of the extent to which these services and programs have achieved the Bureau's goals and objectives; and An audit listing all revenues and expenses of the Bureau during the preceding fiscal year. 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. Bureau may transfer funds, or make expenditures, allocated for one element of the budget to another 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 twelve (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. 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. 3 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, pursuant to this Agreement, whether or not there is concurrent, passive or active negligence on the party of the City of its officers, agents or employees. However, Bureau's duties under this Section shall not extent to any claims, losses, damage liability, lawsuits, judgments, costs, fees and expenses arising from the sole negligence, fraud or willful misconduct of the City, its employees, officers, agents or representatives. 10. Termination. A. City Termination. City shall have the right to terminate this Agreement upon thirty (30) days' written notice to Bureau in the event the City Council determines, based upon substantial evidence, that: (i) Bureau has improperly expended funds provided by the City pursuant to this Agreement; or Bureau has failed to perform the services required of it pursuant to this Agreement; or 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; or (iv) Bureau has become insolvent or committed any act of insolvency. B. City/Bureau Termination. Either party shall have the right to terminate this Agreement, without cause, by giving the other party three hundred sixty-five (365) days' written notice of its intention to terminate. C. Automatic Termination. This Agreement shall terminate, without notice to either party, within ninety (90) days 4 after the repeal of, or a final court order invalidating, the Visitor Service Fee Ordinance. 11. Independent Contractor. The parties agree that Bureau, and its officers, employees and representatives, 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. 12. Assignment. Bureau shall not assign this Agreement, or the right to receive any monies pursuant to this Agreement, or the Visitor Service Fee Ordinance, without the prior written consent of the City. Bureau acknowledges that the unique nature of the services to be provided by the Bureau and the nature of the funds disbursed to Bureau by City provide legally adequate justification for any City refusal to consent to an assignment of the rights and/or duties of this Agreement. 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 Attn: City Manager's Office 3300 Newport Boulevard P.O. Box 1768 Newport Beach, CA 92659-1768 TO BUREAU: Newport Beach Conference & Visitor's Bureau Attn: President/CEO 366 San Miguel, Suite 200 Newport Beach, CA 92660 5 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 writing. This Agreement may be amended only by a written instrument signed by the City and the Bureau. Date: Date • ��-%1Z kr\visitorb.agt "CITY" City of Newport Beach, a municipal corporation and Charter City B I MAYOR "BUREAU" Newport Beach Conference & Visitor's Bureau By: 1 0