The purpose of this agenda item is for Council to consider adopting a resolution of intention, an action that will initiate the process to establish a restaurant improvement district within the City’s boundary. The proposed restaurant improvement district is a benefit assessment district that will assess full service and fine dining restaurants located within the City’s boundary in order to fund marketing and sales promotion efforts intended to increase food and beverage sales by the assessed businesses.
Conceptually, a restaurant improvement district (RID) is a special assessment district that allows restaurant business owners to organize their collective efforts to increase restaurant sales. The restaurant business owners within the RID fund the RID, and those funds are used to provide services that the businesses desire and that benefit the restaurant businesses within the RID.
This approach has been used successfully in other destination areas throughout the State to increase sales at assessed restaurant businesses. It utilizes the efficiencies of private sector operation in the market-based promotion of restaurants. Other benefits associated with a RID include: (1) funds generated provide a stable funding source for restaurant promotion; (2) funds generated are able to be used for a wide range of services; including marketing of the destination, promotion activities and sales lead generation; (3) the programs and services are designed, created and governed by those who will pay the assessment; (4) programs are able to be customized to fit the needs of each destination and (5) funds generated through the assessment cannot be diverted for other government programs.
Restaurant improvement districts are formed pursuant to State law, the Property and Business Improvement District Law of 1994, and require a sequence of events to occur in order to be established. In accordance with California Streets and Highway Code Section 36621, “upon the submission of a written petition, signed by the property or business owners in the proposed district who will pay more than fifty percent (50%) of the assessments proposed to be levied, the city council may initiate proceedings to form a district by the adoption of a resolution expressing its intention to form a district.” The City received petitions by restaurant owners representing 78% of the CRID assessment proposed to be levied, thereby allowing Council to initiate proceedings to form the CRID.
State law also requires the drafting of a Management District Plan (Attachment 1), which includes the proposed boundary of the CRID, a service plan and budget and a proposed means of governance. Highlights of the Plan include:
- The CRID will include all full service and fine dining restaurant businesses, existing, and in the future, within the City boundaries of Carmel-by-the-Sea.
- Sales and marketing services will be provided to increase restaurant food and drink sales of the assessed businesses within the CRID.
- The annual assessment rate shall be one quarter of one percent (.25%) of gross food and drink sales revenue.
- The CRID will have a five (5) year duration, beginning January 1, 2019 through December 31, 2023. Once per year, beginning on the anniversary of the CRID formation, there is a thirty (30) day period in which business owners paying fifty percent (50%) or more of the assessment may protest and begin proceedings to terminate the CRID.
- The annual budget for the initial year of the five year operation is anticipated to be $200,000.
- The City will be responsible for collecting the assessment on a quarterly basis from each restaurant business located within the CRID boundaries. The City shall be paid a fee equal to two percent (2%) of the amount of assessment collected to offset its cost of collection and administration.
- The City shall forward the assessments to Visit Carmel, which will serve a the Owners’ Association as required by State law, and have the responsibility of managing CRID programs as provided in the Management District Plan.
- The Visit Carmel Board will form a CRID Management Committee tasked with managing funds and implementing programs in accordance with the Management District Plan.
If Council adopts the resolution of intention to form the CRID, the City will then mail written notices to the owners of all businesses proposed to be within the CRID. Once the notice is mailed, a mandatory forty-five (45) day period in which business owners may protest the CRID formation begins. As required by State law, Council will hold a public hearing during its scheduled September 11, 2018 Council meeting (referenced as the public meeting in the attached resolution) to receive public testimony on the establishment of the CRID and the levying of assessments. Subsequently, Council will then hold a public hearing during its October 2, 2018 Council meeting to consider the adoption of a resolution to form the CRID and to levy assessments.
During the public hearing scheduled for October 2, 2018, if written protests are received from the owners of businesses in the proposed CRID that will pay fifty percent (50%) or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than fifty percent (50%), no further proceedings to levy the proposed assessment against such businesses shall be taken for a period of one (1) year from the date of the finding of a majority protest by the City Council. However, if there is no protest by the majority, then, at the conclusion of the public hearing to establish the CRID, the City Council may adopt a resolution of formation to establish the CRID and to levy assessments. The effective date for the CRID, if established, is January 1, 2019.