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HomeMy WebLinkAboutED BID Annual Levy Assessment 2014( Agenda Item No: 3. g i Meeting Date: October 6, 2014 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Economic Development Prepared by: Tom Adams, ED Specialist City Manager Approval;l ifwk6. SUBJECT: Resolution of the San Rafael City Council Declaring Council's Intention to Levy an Annual Assessment for the Downtown San Rafael Business Improvement District and to Amend Municipal Code Chapter 10.09 RECOMMENDATION: Adopt Resolution. BACKGROUND: Section 36500 of the California Streets and Highways Code allows for the creation of a business improvement district within a municipality whereby businesses within the district self -assess themselves an annual fee in order to pay for improvements and activities which benefit the overall business district. The intent of the state law is to provide a funding mechanism for business districts to promote economic vitality and provide additional services beyond those offered by local government. Businesses within the San Rafael downtown initially set up a business district in 1979 — this original district included approximately 125 businesses along Fourth Street between Lincoln and E Street. In 2013, the City Council voted to disband the original downtown district and replace it with a larger district of approximately 700 businesses along Fourth Street — the expanded district includes the West End and some side streets, as well as non -ground floor tenants, and other tenants not included in in original BID (see Exhibit A for BID Map). The assessments for the new BID were mailed in December 2013 and the new BID organization began operations in 2014. The new BID has been very active in numerous programs to improve the downtown business climate. In its first year, the BID has focused on the following areas: building the BID organization and working with its membership, increasing the effectiveness of marketing and events, promoting economic development, and working with the City to address various issues related to parking, safety, cleanliness, and social issues (see Exhibit B for BID Annual Report). At the 2013 City Council meetings to establish the new assessment district, a wide variety of comments were received from the public. In particular, several speakers questioned the fairness of the assessment formula for the smaller businesses with the highest assessment fees. The primary issue raised was whether these businesses have the financial capacity to absorb the FOR CITY CLERK ONLY File No.. .2.2 Council Meeting: Disposition. R.Silf.07eeW �3g1 b SAN RAFAEL CITY COUNCIL AGENDA REPORT 1 Page: 2 assessment fees. As part of the creation of the new BID, City Council requested that the BID review the overall fairness of the assessment fee structure and provide recommendations for the 2015 year assessments. In addition, over the past year, there have been some questions and complaints from BID members about the clarity of the assessment classifications and the equity of the assessment fee structure. In response to City Council's request for a `fairness review', the BID set up an assessment committee to review the current assessment fee structure and make recommendations to the BID Board on ways to make the fees more equitable for all members. The assessment committee reviewed a variety of ways to change the assessment formulas (it should also be noted that since the BID assessment fee is collected with the business license fee there are administrative constraints on how to structure the assessments based upon the information available to the City's Finance department through the annual business license renewal program). There was not consensus among the assessment committee for a preferred assessment formula. While several members felt that an entirely new assessment fee structure was warranted, others felt that instituting a completely new fee structure would require extensive outreach and consensus building and that the fundamental structure of the current assessment structure is sound and similar to many other business districts throughout the state. While there were some differences of opinion on the overall fee structure, the committee members all agreed that the BID should proceed with changes to the assessment formula to lessen the impact on some of the smallest businesses. At the September 5, 2014 monthly Board meeting, the BID Board reviewed and discussed the recommendations of the assessment committee and potential changes to the assessment fees for the upcoming 2015 calendar year. In general, the BID felt that changes were needed to respond to concerns raised during the 2013 public hearings and to address some of the overall `fairness' issues raised by the BID membership (see Exhibit C for current 2014 assessment formula and proposed 2015 assessment formula). The BID Board unanimously approved the following recommended changes: Summary of the Recommended BID Assessment Fee Structure Changes: Assessment Category # Businesses (a ox.) Proposed Action Total Impact Personal Service Sole Practitioners 50 Reduce fee b $25 $1,250 Financial Institutions /Banks 16 Increase fee b $200 $3,200 Retail, Restaurant, Personal Services - less than $100000 gross receipts(Premium) 40 Reduce fee by $50 ($2,000) Retail, Restaurant, Personal Services - less than $100,000 gross receipts Standard 40 Reduce fee by $25 ($1,000) Total BID Businesses with Fee Changes 146 Total Net Impact ($1,050) As shown in the table above, a total of approximately 130 businesses will receive a reduction in the assessment fee while 16 businesses (banks) will have their assessments increased. The recommended changes to the BID assessment fee structure will result in an approximate reduction in BID revenues of $1,050. Explanations for each of the proposed changes follow along with some additional recommended changes to cleanup category definitions: SAN RAFAEL CITY COUNCIL AGENDA REPORT 1 Page: 3 1. Reduce the assessment fee for `Personal Service Sole Practitioner' (mainly stylists in salons) by $25. The assessment fee for these individuals would be reduced from $75 to $50 for the premium area and $50 to $25 for the standard area. Change #1 Rationale: The BID believes that since stylists typically rent their chair and may not be onsite full time, they deserve a smaller fee. In addition, the salons pay their own annual assessment fee in addition to those paid by the sole practitioners so there is an equity issue for each salon location as well. 2. Reduce the assessment fee for those businesses in the `Retail, Restaurant, Personal Services on the Ground Floor' category with gross receipts of less than $100,000 (currently paying $80 or less in business license fee) by $50 for businesses in the premium area. The assessment fee for these businesses would be reduced from $225 to $175. Change #2 Rationale: The BID believes that those smallest businesses in the highest fee categories deserve a reduction in their annual fee. 3. Reduce the assessment fee for those businesses in the `Retail, Restaurant, Personal Services on the Ground Floor' category with gross receipts of less than $100,000 (currently paying $$0 or less in business license fee) by $25 for businesses in the standard area. The assessment fee for these businesses would be reduced from $175 to $150. Change #3_ Rationale: The BID believes that those smallest businesses in the highest fee categories deserve a reduction in their annual fee. 4. Increase the assessment fee for `Financial Institutions' (i.e. banks) by $200 for both the standard and premium areas, such that the fee for the premium area will increase from $225 to $425 and the fee for the standard area will increase from $175 to $375. Change #4 Rationale: The BID believes that banks benefit the most from a stronger downtown business district as stronger businesses within the district will translate to more revenues for the banks. In addition, the higher fee for banks is consistent with the practices of other nearby BID's such as Novato and Petaluma which both charge a $500 flat rate for banks. 5. Make some cleanup changes to various definitions and other language within the BID ordinance to clarify the assessment fee classifications and make adjustments to better reflect the intention of the assessment. The primary clean changes are: a single person with multiple business licenses at the same address will be charged only one assessment fee, retail business on the second floor (with primarily internet sales) will be treated as an office tenant, and several of the definitions such as 'Financial Institutions' will be further defined to more clearly indicate the businesses covered. Change #5 Rationale: The BID believes that the assessment fee should reflect the approximate value of the business district to business based primarily on the geographic location of the business — those businesses located on the second floor or with multiple business licenses should pay according to the classification of the business and the location of the business per the spirit and intent of the assessment fee structure. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Pane: 4 6. At the request of the Finance Department, the BID will no longer charge pro rata fees for new businesses or issue refunds for businesses that leave the BID before the end of the year. Change #6 Rationale: The Finance Department spends significant time and expense working with businesses to help them understand and comply with the business license fee requirements, as well as the BID assessment fee. Over the past year of the new BID, one particular area of confusion among businesses, and Finance Department administrative difficulty, pertains to the calculation and processing of BID pro -rata fees and refunds. Eliminating these elements from the BID assessment fee structure will simplify the process for businesses as they join or leave the BID and it will greatly reduce the administrative overhead associated with collecting the BID assessments. These changes will not have a significant impact on the net revenues generated for the BID organization. Proposed 2014 Annual Renewal Process Per state law, in order to renew the annual assessment, the City Council must first adopt a `Resolution of Intention to Levy an Annual Assessment' and set a public hearing for a future date. Since the BID proposes to increase the assessment for some of its members, state law requires an additional third public meeting to receive public testimony on the proposed changes to the assessment formula. Thus, the annual renewal process for the BID assessment will take place at three city council meeting as follows: Meeting #1- October 6.2014: Resolution of Intention to Levy an Annual Assessment. This meeting is mainly intended to notify the public of the process. The only action required is to accept the BID annual report and adopt the resolution of intention to levy an annual assessment. These actions do not commit the City Council to any ultimate decision other than initiating the annual renewal process. Meeting #2 - November 3.2014: Public Meeting on Annual Assessment This meeting is intended to receive input from the public on the proposed annual assessment. No action required. Meeting #3 - December 1.2014: Public Hearing on Annual Assessment This meeting is intended to receive additional input from the public on the annual assessment for the BID and to confirm the levy of an assessment for the upcoming year. Public Notification Process The BID will take the initiative to notify its members of the annual renewal through its member communications such as the BID e -newsletter, notifications on the BID website, and through agenda items at the monthly BID Board meeting. In addition, state law requires a certain level of public notification of the annual assessment. Per state law, the City will publish the Resolution of Intention to Levy an Annual Assessment in the newspaper prior to the public meeting and public hearing. Lastly, per state law, notice of the public hearing and a complete copy of the resolution of intention will be mailed to each business which will have an increased fee (`Financial Institution'/banks). SAN RAFAEL CITY COUNCIL AGENDA REPORT 1 Page: 5 FISCAL IMPACT: Adoption of the resolution does not have a direct impact on the City other than some ongoing staff time related to assessment billing and processing and administration of the annual renewal. To the extent that the BID activities enhance the business climate within the district, this will generate increased sales tax revenue for the City. OPTIONS: 1) Adopt the Resolution. 2) Direct Staff to Modify the Resolution 3) Refuse to Adopt the Resolution. ACTION REQUIRED: Adopt Resolution. ATTACHMENTS: Exhibit A: BID Map Exhibit B: 2014 BID Annual Report and Cover Letter, 2014 Board of Directors, and Proposed 2015 BID Budget Exhibit C: BID Assessment Formula (Current and Proposed) RESOLUTION NO. 13816 RESOLUTION OF THE SAN RAFAEL CITY COUNCIL DECLARING COUNCIL'S INTENTION TO LEVY AN ANNUAL ASSESSMENT FOR THE DOWNTOWN SAN RAFAEL BUSINESS IIVVIPROVEMENT DISTRICT AND AMEND SAN RAFAEL MUNICIPAL CODE CHAPTER 10.09 WHEREAS, the California Streets and Highways Code Section 36500 et seq. authorizes cities to establish parking and business improvement areas for the purpose of promoting economic revitalization and physical maintenance of business districts in order to create jobs, attract new businesses and prevent erosion of business districts; and WHEREAS, the Downtown San Rafael Business Improvement District was established in 2013 to amend the existing Parking and Business Improvements Area instituted in 1979 in the commercial area on and around the Fourth Street corridor in San Rafael. WHEREAS, pursuant to San Rafael Municipal Code Chapter 10.09 and the California Streets and Highways Code Section 36533, the Board of Directors of the Business Improvement District shall prepare an annual report for each calendar year in which assessments are to be levied which the City Council shall review. NOW THEREFORE BE IT RESOLVED by the City Council of the City of San Rafael as follows: Section 1. The City Council intends to levy an annual benefit assessment on businesses in the BID, except where funds are otherwise available, to pay for selected improvements and activities of the BID. Section 2. The City Council does, at the request of the existing San Rafael Business Improvement District, and pursuant to the California Streets and Highways Code Section 36500 et. seq., declare its intention to amend San Rafael Municipal Code Chapter 10.09 "Downtown San Rafael Business Improvement District" (the "BID"); revising the `Definitions' section (10.09.020) and revising the `Calculation of Assessment' section (10.09.050); including all businesses except residential uses and home occupations in the District. Section 3. The boundaries of the entire area to be included in the BID, and the boundaries of each separate benefit zone within the BID, are set forth in the map and boundary description, Exhibit A, attached hereto and incorporated herein by reference. A map of the BID is on file with the City Clerk. Section 4. The types of improvements and activities proposed to be funded by the levy of assessments on businesses in the BID are in Exhibit B attached hereto and incorporated herein by reference. Section 5. The method and the basis for levying the benefit assessment on businesses within the BID are set forth in Exhibit C attached hereto and incorporated herein by reference. Section 6. All funds of the BID shall be expended on improvements and activities within the BID. Section 7. New businesses shall not be exempt from payment of the fee. Section 8. A public meeting for the purpose of allowing public testimony on the proposal to amend the BID shall be held before the City Council on November 3, 2014, at 7 p.m. in the Council Chambers, 1400 Fifth Avenue, San Rafael, California. At the public meeting the testimony of all interested persons, for or against the amendment of the BID or of any of the matters included in the amendment, will be heard. Section 9. A public hearing to amend the BID shall be held before the City Council on the December 1, 2014, at 7 p.m. in the Council Chambers, 1400 Fifth Avenue, San Rafael, California. At the public hearing the testimony of all interested persons, for or against the amendment of the BID or of any of the matters included in the amendment, will be heard and all protest collected. Section 10. A protest against the assessment of the BID, or any aspect of the assessment may be made orally or in writing. To be counted as a part of a majority protest against the assessment of the BID, a protest must be in writing and from a business in the BID. A written protest may be withdrawn from record at any time before the conclusion of the public hearing. Each written protest shall contain a written description of the business in which the person signing the protest is interested, sufficient to identify the business, and its address. If the person signing the protest is not shown on the official records of the City of San Rafael as the owner of the business, then the protest shall contain or be accompanied by written evidence that the person is the owner of the business. Any written protest as to the regularity or sufficiency of the proceedings shall be in writing and clearly state the irregularity or defect to which objection is made. Section 11. If at the conclusion of the public hearing there are of record written protests by business owners within the BID that will pay fifty percent (50%) or more of the total assessments of the entire BID, no further proceedings to amend the BID shall occur. New proceedings to amend the BID shall not be undertaken again for a period of at least one year from the date of the finding of the majority written protest by the City Council. If the majority written protest is against a specific activity, inclusion of a specific area or type of business, or a specific assessment amount, adjustments may be made to the amendment proposal. Section 12. Further information regarding the Downtown San Rafael Business Improvement District may be obtained from the Office of Economic Development at 1313 Fifth Avenue, San Rafael, CA 94901. Section 13. The City Clerk is directed to give notice of said public hearing by publishing the notice once a week for three weeks in a newspaper of general circulation in the City of San Rafael, at least seven days before the hearing; and by mailing a complete copy of this Resolution of Intention to those interested parties who have filed a written request with the local agency for mailed notice of public meetings or hearings on new or increased general taxes. I, ESTHER C. BEMNE, Clerk of the City of San Rafael, hereby certify that the foregoing Resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of the City of San Rafael, held on Monday, the 6th day of October, 2014, by the following vote, to wit: AYES: Councilmembers: NOES: Councilmembers: ABSENT: Councilmembers: Bushey, Colin, Connolly, McCullough & Mayor Phillips None None . �tzm-e ESTHER C. BEIRNE, City Clerk