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HomeMy WebLinkAbout21 - Conference and Visitors Bureau Agreement• CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 21 February 24, 2004 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Glen Everroad, Revenue Manager, 644 -3144 eve rroad(a) city. newport-beach. ca. us SUBJECT: Conference and Visitor's Bureau Agreement ISSUE: Should the City revise the funding provisions and renew the agreement with the Newport Beach Conference and Visitor's Bureau (NBCVB) as per the attached proposed agreement? RECOMMENDATION: Staff recommends the City Council approve the attached proposed 5 year agreement with the NBCVB, which includes annual funding provisions at 16.5% of the total TOTNSF and a maximum annual funding of $1.9 million. DISCUSSION: The City has contracted with the NBCVB to promote tourism for the City since 1987. The last five -year agreement expired on August 31, 2003 and Council extended that agreement to February 29, 2004. Since 1993, the NBCVB agreements have included a rather complicated funding provision that results in the NBCVB receiving 99% of the Visitor Service Fees (VSF) and a small percentage of the Uniform Transient Occupancy Tax (TOT). These agreements resulted in the NBCVB receiving between about 13.5% and 17% of the total VSF and TOT collected by the City each year, up to a predetermined annually adjusted maximum amount (cap). The payment provisions of the agreement makes about two thirds of their funding available in monthly payments and the remaining third paid in a lump sum at the end of the year. Since February of last year, the Economic Advisory Committee, Economic Development Committee, as well as staff, have been working with the . NBCVB on the terms of a new agreement that would provide less complicated calculation, even payment distribution and sufficient funding for the NBCVB to do the work the City contracts with them to do. Uncertainty regarding the impact of the State NBCVB Agreement February 24, 2004 Page 2 budget on the City has delayed resolution of the funding related issues of a new agreement. The NBCVB has related concerns regarding their ability to successfully promote the City at their current funding level due to increased competition in the industry and difficult economic conditions. They also report spending from their reserves in order to maintain current marketing programs. The NBCVB and staff have developed a number of potential funding calculations for the revised contract, including the attached four options submitted by the NBCVB. Their recommended option is for a stepped formula providing a fixed percentage of the total VSF and TOT of 18% in FY 04/05, 19% in FY 05/06 and 20% in FY 06/07. In response to City budget issues and concerns about our ability to fund the NBCVB at the requested levels, last week the NBCVB modified their funding request to 17% of the total VSF and TOT for the first 18 months, 18.5% for the next 18 months and not less than 18.5% for last two years of the contract. The NBCVB also desires removal of the cap in future agreements. Staff has projected what the NBCVB funding would be, based on the NBCVB's proposal related above, for the first three years of a renewed agreement under three different TOT/VSF annual growth scenarios; no growth, 1.3% increase (the average annual for the last 5 years) and 5% increase. A comparison of the staff and NBCVB funding proposals based on the most likely annual growth scenario of 1.3% is as follows: Staff recommends maintaining a cap ($1.9 million) on the annual NBCVB funding, while the NBCVB proposal is to remove the annual funding cap. Based on staff's estimates, in the most optimist scenario of 5% annual growth in TOT and VSF, the cap is not reached even in the NBCVB proposed funding levels of 17% and 18.5 %. However, the addition of a new hotel (e.g. Pelican Hills or Marina Park) during the term of the agreement would potentially result in significantly more TOT, making the cap an issue. The attached proposed agreement with the NBCVB provides that the City may, at its sole discretion, adjust the payment at the end of each fiscal year if the City's revenue assumptions and the Bureau's production and goals no longer make such payments . equitable to the City or the NBCVB. Current Agreement Staff NBCVB Year Actual /Estimate Proposal Increase Proposal Increase 2002 -03 $1,322,736 N/A N/A N/A N/A 2003 -04 $1,320,434 N/A N/A N/A N/A 2004 -05 $1,337,600 $1,419,567 $81,967 $1,462,583 $124,983 2005 -06 $1,354,988 $1,438,021 $83,033 $1,546,962 $191,974 2006 -07 $1,372,603 $1,456,715 $84,112 $1,633,287 $260,684 Staff recommends maintaining a cap ($1.9 million) on the annual NBCVB funding, while the NBCVB proposal is to remove the annual funding cap. Based on staff's estimates, in the most optimist scenario of 5% annual growth in TOT and VSF, the cap is not reached even in the NBCVB proposed funding levels of 17% and 18.5 %. However, the addition of a new hotel (e.g. Pelican Hills or Marina Park) during the term of the agreement would potentially result in significantly more TOT, making the cap an issue. The attached proposed agreement with the NBCVB provides that the City may, at its sole discretion, adjust the payment at the end of each fiscal year if the City's revenue assumptions and the Bureau's production and goals no longer make such payments . equitable to the City or the NBCVB. • • NBCVB Agreement February 24, 2004 Page 3 Funding Availability: The 2003/04 City budget provides for the funding of the current agreement with the NBCVB. Alternatives: (1) Allow the existing agreement to expire without renewal. (2) Renew agreement under the existing terms. (3) Renew agreement under new terms. Prepared by: Glen Everroad, Revenue Manager Attachments: Proposed NBCVB Agreement Proposal from the NBCVB Submitted by: D nnis Danner, Administrative Services Director AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND THE NEWPORT BEACH CONFERENCE & VISITOR'S BUREAU This AGREEMENT, made and entered into this day of 2004, 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 has adopted Chapter 3.28 of Newport Beach Municipal Code which authorizes the collection of a visitor's service fee to offset the cost of providing visitor services and to promote tourism within the City; C. 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, the City of Newport Beach; D. 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 E. 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 I" day of March, 2004 and shall continue through June 30, 2008, unless terminated earlier as provided in Section 10. The City reserves the right, upon sixty (60) days written notice, to renew this Agreement for two additional one (I)- year terms provided that Bureau's performance is deemed acceptable to City, and that the renewal is agreeable to the Bureau. 2. Bureau Duties 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: (a) The maintenance of suitable quarters and the employment of competent personnel to properly carry out its promotional activities; (b) The preparation of brochures, publications, guides and information that inform prospective tourists and visitors of the recreational activities, cultural assets, shopping and dining opportunities, and natural beauty of the City of Newport Beach; (c) The dissemination of the information described in subparagraph 2 (b) by way of the media, direct mail, handout or other means of distribution; and (d) The development and implementation of specific marketing programs designed to increase business and visitor trade in the City of Newport Beach. 3. City Funding (a) City shall pay the Bureau: (1) Payment: City shall pay the Bureau 16.5% of the total combined Transient Occupancy Tax and Visitor Service Fee collected, not to exceed $1.9 million per year, to operate the programs described in Paragraph 2(b). Payment shall be made in monthly installments. (2) Annual Adjustment: The City shall have the right to adjust the Payment at the end of each fiscal year at its sole discretion if the City's revenue assumptions and the Bureau's production and goals no longer make such payments equitable to the City or the Bureau. 4. Manner of Payment Funds due Bureau pursuant to the provisions of 3 (a) (1) shall be paid on a monthly basis, and on or before the 20th day of the month. 5. Bureau Reports (a) Bureau shall provide City with a marketing plan and an annual budget at the second Council Meeting in July each year during the term of this Agreement. The Board of Directors of Bureau shall approve the budget before it is submitted to the City. The marketing plan shall specify the goals and objectives of Bureau during the upcoming fiscal year, as well as the programs Bureau will implement to achieve those goals and objectives. (b) Bureau shall, on or before the second City Council meeting in July 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 (ii) 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 of the Bureau's tourist development program are not impaired. 7. Recordkeenine 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. Bureau shall maintain all accounts, books and records in accordance with generally accepted accounting principles. The City shall have the right, subject to reasonable written notice and no more than one time each calendar year during the term of this Agreement, to conduct an audit of the accounts, books and records of the Bureau. Bureau shall fully cooperate with City in the conduct of the audit. 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 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, to render the services required by this Agreement, and to maintain its office 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 officers, employees, agents, subcontractors, volunteers, or representatives, 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. However, Bureau's duties under this Section shall not extend 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 days (30) 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 0 (ii) Bureau has failed to perform the services required of it pursuant to this Agreement; or (iii) 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 and 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 after the repeal of, or a final court order invalidating, the Visitor Service Fee Ordinance. 12. Independent Contractor The parties agree that Bureau, and its officers, employees, agents, representatives and volunteers, while engaged in performance of duties required by this Agreement, is an independent contractor, and not an officer, agent or employee of the City. Is13. Assignment Bureau shall not assign this Agreement, or the right to receive any monies pursuant to this Agreement, or the Visitor Services 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 nature of the funds disbursed to Bureau by City provide adequate justification for any City refusal to consent to an assignment of the rights and /or duties of this Agreement. 14. 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 given when deposited in the United States mail, certified 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 Blvd. P.O. Box 1736 0 Newport Beach, CA 92659 -1768 To Bureau: 15. Complete Agreement Newport Beach Conference & Visitor's Bureau Attn.: President/CEO 110 Newport Center Drive, Suite 120 Newport Beach, CA 92660 This document represents the entire Agreement between the City and Bureau and supercedes all prior negotiations, representations or agreements, either oral or in writing. This Agreement may be amended only by a written instrument signed by City and Bureau and approved as to form by the City Attorney. In Witness whereof, the Parties are deemed to have executed this Agreement effective on the day and year first written above. CONFERENCE & VISITORS BUREAU: By Marta Hayden President /CEO Approved as to form: City Attorney CITY OF NEWPORT BEACH: Tod W. Ridgeway Mayor Attest: City Clerk 0