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Report regarding the adoption of a resolution granting consent to the City of Burlingame to form the San Francisco Peninsula Tourism Marketing District and include the City of South San Francisco within the district. (Ernesto Lucero, Economic Development Manager)
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RECOMMENDATION
Recommendation
Staff recommends that City Council adopt a resolution granting consent to the City of Burlingame to form the San Francisco Peninsula Tourism Marketing District and include the City of South San Francisco within the district.
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BACKGROUND
In 2001, the San Mateo County Tourism Business Improvement District (SMC Tourism BID) was formed pursuant to the Parking and Business Improvement Area Law of 1989 (89 Law). The San Mateo County/Silicon Valley Convention and Visitors Bureau, which has been rebranded as San Francisco Peninsula (SFP), and lodging businesses within San Mateo County seek to modernize the SMC Tourism BID by forming a new District, the San Francisco Peninsula Tourism Marketing District (SF Peninsula TMD), pursuant to the Property and Business Improvement District Law of 1994 (94 Law). If established, the new SF Peninsula TMD will replace the existing SMC Tourism BID.
The SF Peninsula TMD is a benefit assessment district proposed to create a revenue source to help fund marketing and sales promotion efforts for San Francisco Peninsula area lodging businesses. This approach has been used successfully in other destination areas throughout the state to improve tourism and drive additional room nights to assessed lodging businesses. The proposed SF Peninsula TMD includes all lodging businesses located within the boundaries of the cities of Belmont, Brisbane, Burlingame, East Palo Alto, Foster City, Half Moon Bay, Menlo Park, Millbrae, Pacifica, Redwood City, San Bruno, San Carlos, San Mateo, South San Francisco, and the unincorporated area of San Mateo County.
SFP and lodging business owners decided to pursue formation of the SF Peninsula TMD to create a revenue source devoted to marketing the San Francisco Peninsula area as a tourist, meeting and event destination. If established, the SF Peninsula TMD would generate approximately $10,895,479 on an annual basis for promotion of travel and tourism specific to the San Francisco Peninsula area.
Outreach with lodging business owners began in July 2022 and concluded in May 2023. SFP and its consultant, Civitas, worked with the lodging industry to obtain sufficient petition support as well as develop a Marketing District Plan, which took into account how the lodging industry in San Mateo County would focus on marketing efforts.
DISCUSSION
Tourism Marketing Districts
Tourism Marketing Districts (TMDs) utilize the efficiencies of private sector operation in the market-based promotion of tourism. These special assessment districts allow lodging business owners to organize their efforts to increase tourism. Lodging business owners within the TMD fund the TMD, and those funds are used to provide services that are desired by and benefit the lodging businesses within the TMD.
TMD benefits:
• Funds cannot be diverted for other government programs;
• They are customized to fit the needs of each destination;
• They allow for a wide range of services; including: destination marketing, tourism promotion, and sales lead generation;
• They are designed, created and governed by those who will pay the assessment; and
• They provide a stable funding source for tourism promotion.
In California, TMDs are primarily formed pursuant to the 94 Law, which allows for the creation of a special benefit assessment districts to raise funds within a specific geographic area. The key difference between TMDs and other special benefit assessment districts is that funds raised are returned to the private non-profit corporation governing the TMD.
Management District Plan
The Management District Plan includes the proposed boundary of the SF Peninsula TMD, a service plan and budget and a proposed means of governance. The SF Peninsula TMD will include all lodging businesses located within the boundaries of the cities of Belmont, Brisbane, Burlingame, East Palo Alto, Foster City, Half Moon Bay, Menlo Park, Millbrae, Pacifica, Redwood City, San Bruno, San Carlos, San Mateo, South San Francisco, and the unincorporated area of San Mateo County.
The annual assessment rate is one- and one-half percent (1.5%) of gross short-term sleeping room rental revenue for lodging businesses with 5,000 square feet or more of dedicated meeting space, and 0.75% for all other lodging businesses within the SF Peninsula TMD’s boundaries. Based on the benefit received, assessments will not be collected on stays of more than thirty (30) consecutive days; stays provided to airline cockpit and/or cabin crews pursuant to an agreement between a hotel and an airline, which is in furtherance of or to facilitate such crews’ performance of their jobs for the airline, including layovers between flights; employees of the state or federal government if room charges are paid directly by their employing agency and copies of official travel orders are submitted as applicable; and any properly credentialed officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty.
The proposed SF Peninsula TMD will have a five-year life, beginning October 1, 2023, or as soon as possible thereafter, and ending five years from its start date. The assessment will be implemented beginning October 1, 2023, or as soon as possible thereafter. Once per year beginning on the anniversary of SF Peninsula TMD formation there is a 30-day period in which business owners paying 50% or more of the assessment may protest and begin proceedings to terminate the SF Peninsula TMD.
The City of Burlingame shall be responsible for collecting the assessments on a monthly basis (including any delinquencies, penalties and interest) from each lodging business located in the boundaries of the SF Peninsula TMD. The City of Burlingame shall take all reasonable efforts to collect the assessments from each lodging business. The City of Burlingame shall be paid a fee equal to one percent (1%) of the amount of assessment collected or a flat fee of $60,000, whichever is greater each year to cover its costs of collection and administration.
SF Peninsula TMD Formation Process
Below is a description of the formation process and timeline:
May 2023
• Resolution of Intention Hearing and Resolution Requesting Consent. Upon submission of a written petition, signed by a majority of the total assessment proposed to be levied (65 lodging businesses signed on representing 58.12% of the total assessment), the Burlingame City Council initiated proceedings on May 15, 2023 by adopting a resolution expressing its intention to establish a district. Along with the Resolution of Intention, the City of Burlingame also requested consent from all jurisdictions proposed to be included in the SF Peninsula TMD. Consent must be received from the jurisdictions prior to the final public hearing (described below) to be included in the established SF Peninsula TMD.
• Mailed Notices. By May 21, 2023, the City of Burlingame was required to mail written notices to the owners of all lodging businesses proposed to be within the SF Peninsula TMD. Mailing the notice started the mandatory 45-day period in which owners may protest formation of the SF Peninsula TMD.
June 2023
• Public Meeting. On June 20, 2023, the Burlingame City Council most hold a public meeting to allow public testimony on the formation of the SF Peninsula TMD and levy of assessments. No Burlingame City Council action is required at that meeting.
July 2023
• Final Public Hearing. The final public hearing is scheduled for July 5, 2023. If written protests are received from the owners of lodging businesses in the proposed SF Peninsula TMD who will pay more than 50% of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than 50% by the final public hearing, no further proceedings to levy the proposed assessment against such lodging businesses shall be taken for a period of one year. If written protests are not received in the amount described above, the Burlingame City Council must hold a public hearing. Following the public hearing, they may consider a resolution to form the SF Peninsula TMD formation. If approved, the SF Peninsula TMD will be formally formed.
FISCAL IMPACT
There is no direct fiscal impact to the City General Fund by adopting the resolution. It is assumed that a newly formed SF Peninsula TMD would assist in increasing Transient Occupancy Tax revenue received within South San Francisco as marketing efforts increase per the Management District Plan.
RELATIONSHIP TO THE STRATEGIC PLAN
This report meets the City’s strategic planning goal #5, Economic Vitality.
CONCLUSION
The recommended action, adoption of the proposed resolution granting consent to the City of Burlingame to form the SF Peninsula TMD and include the City of South San Francisco within the district, will enable the City of Burlingame and SFP to move forward with the district formation process. Upon successful formation, the SF Peninsula TMD will be governed by SFP and by the Management District Plan, and will be facilitated by the Burlingame City Council.
Attachment:
1. PowerPoint presentation