Hold the Public Meeting to receive testimony on the proposed renewal of the Carmel Hospitality Improvement District and the levying of assessments

Hold the Public Meeting to receive testimony on the proposed renewal of the Carmel Hospitality Improvement District and the levying of assessments.

California Property and Business Improvement Law of 1994 (“1994 Law”), California Streets and Highways Code §36600 et seq. authorizes cities to establish business improvement districts for the purposes of promoting tourism. The Carmel Hospitality Improvement District (CHID) is an assessment district formed under the 1994 Law that currently assesses a rate of 1% of gross short-term room rental revenue on all lodging businesses located within the City's boundary to fund marketing and other programs to increase overnight room sales.  The CHID has a 5-year term that expires on February 28, 2021.

If a district will expire due to term limits, State law allows for a new Management District Plan (“Plan”) to be created and for a district to be renewed.  Accordingly, Visit Carmel has prepared a new Plan that proposes:

1. A renewal term of 10 years effective 3/1/2021 through 2/28/2031.

2. An assessment rate set to 2% of gross short term room rental revenue, with the ability to raise the assessment rate by no more than .05% in any year up to a maximum of 3%.

3. An anticipated annual budget of $800,000 or $8 million over the 10 year term.

4. An initial budget of $560,000 (70%) for marketing, public relations and sales; $144,000 (18%) for administration, $88,000 (11%) for contingency/reserve and $8,000 (1%) for collections for a total budget of $800,000.

5. A revised definition of lodging businesses to exclude vacation rentals, time-share facilities and recreational vehicle parks from the assessment.

Section III.E on page 6 of the Plan has been revised based upon Council direction received during the October 6, 2020 Council meeting, and is attached to this staff report.  Page 6 includes a table that compares the CHID with other destination marketing organizations or tourism improvement districts. The column referencing the annual revenue generated by assessments has been updated.  No other changes have been made to the Plan.

In order for a district to be renewed, a sequence of actions must occur as outlined within California Streets and Highways Code §36600 et seq.  Upon receiving a written petition signed by the property or business owners who will pay more than 50% of the total amount of assessments proposed to be levied, Council adopted a resolution of intention to renew the CHID on October 6, 2020. As required by Government Code section 54954.6(c), the resolution of intention set a date for the public meeting on November 3, 2020 at 4:30 p.m., and the public hearing on December 8, 2020 at 4:30 p.m., and directed the city clerk to provide written notice.

The purpose of this agenda item is for Council to conduct that public meeting and receive testimony regarding the renewal of the CHID and the levying of assessments, as required by Government Code section 54954.6 and the adopted resolution of intention.  On December 8, 2020, Council will hold a public hearing to consider adopting a resolution to renew the CHID and levy the associated assessments.

In addition to the 10% transient occupancy tax collected by lodging establishments on behalf of the City, guests staying overnight within a lodging business within Carmel-by-the- Sea are assessed 1% of the gross room rental rate for the CHID and either $1 or $2 per night for the Monterey County Tourism Improvement District. Under the proposed renewal of the CHID, the assessment rate would increase to 2%, with the ability to raise the assessment rate by no more than .05% in any year up to a maximum of 3%.

The CHID assessment is collected by the City and remitted to Visit Carmel for marketing and other programs outlined within the Plan.  The City will receive 1% for collections, which based upon the anticipated annual budget of $800,000, would be $8,000.  However, in order to ensure that the City is able to recoup its costs over the 10 year term, the City will receive a minimum of $6,500 per year, which may be adjusted annually as needed.

Council adopted Resolution 2020-068 declaring its intention to renew the Carmel Hospitality District on October 6, 2020.