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HomeMy WebLinkAboutD-2 Staff Report - Business Improvement District Informational UpdateBusiness Improvement District Informational Update August 16, 2021 Page 1 SCHEDULED ITEM D-2 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: NICO DE ANDA-SCAIA, DEPUTY CITY MANAGER DATE: AUGUST 16, 2021 SUBJECT: BUSINESS IMPROVEMENT DISTRICT INFORMATIONAL UPDATE BACKGROUND: At their regular meeting of July 19th, 2021 the Azusa City Council requested staff to return at a future meeting with a preliminary informational report regarding Business Improvement Districts. Toward this end, staff conducted preliminary research on what assessment district models are currently in place in select neighboring cities (Attachment 1). The following report provides a brief introductory overview of the various structures and benefits of Business Improvement Districts (BIDs) for Council’s future discussion and consideration. RECOMMENDATION: Staff recommends that the City Council take the following action: 1)Receive & file Staff’s informational report regarding Business Improvement Districts. ANALYSIS: Cities have various tools at their disposal for encouraging investment and economic vitality within their boundaries. These may include incentivizing creative partnerships with and between private entities within a given industry or geographic area. One such approach is the establishment of an assessment or benefit district. APPROVED CITY COUNCIL 8/16/2021 Business Improvement District Informational Update August 16, 2021 Page 2 Under this model, an industry or defined area may levy an annual assessment upon itself in order to spend collective funds on goals for mutually-beneficial purposes. Assessment districts are often considered an effective finance tool available to organizations of businesses and/or property owners working to improve a given geographic area through projects and activities that attract consumers and new businesses, encourage development, and improve property values. There are generally two types of assessment districts which can be created under the state’s “Parking and Business Improvement Area Law of 1989” or the “Property and Business Improvement District Law of 1994.” The first is a “property-based” improvement district (PBID), wherein property owners are assessed as part of their annual property tax bill. The second type is a “business licensed-based” improvement district (BID), which is funded by an assessment which businesses pay as part of an annual business license tax or separate bill. As indicated above, funds generated from both types of districts may be used for a variety of purposes. Property-based improvement districts typically focus on increasing ambiance and safety within the district through built environment enhancements (e.g. street lighting, decorative paving, benches, and other public facilities), security patrol, and maintenance services such as landscaping and graffiti removal programs. Conversely, business-based improvement districts are generally aimed at increasing traffic to businesses through marketing, special events, and decorations. The assessment amount charged to each property or business owner varies, as there is no set formula for determining the individual amount applied other than the overall goal to raise sufficient funds to meet a desired annual budget for the district. The annual fee amount generally depends on how much the property or business owners are willing to assess themselves, and how much they value the benefits from the programs provided by the district. One key difference between the two types of districts is the statutorily required procedures for formation. Because property-based improvement districts are an assessment to real property, Proposition 218 requires that the assessment be approved by a 2/3 majority of property owners, pursuant to a vote. Business-based improvement districts are not subject to approval by a vote, but may be adopted in the absence of a “majority protest”. Although state law does not require a vote of affected businesses, individual business owners can file a protest over the formation of a BID. If businesses compromising more than 50% of the total assessment file a protest, a BID cannot be established. Generally, once a district has been approved, becoming part of it is not optional. For additional information on the distinctions between PBIDs and BIDs, refer to (Attachment 2). Once established, a district is managed by an advisory board consisting of property or business representatives in the district. Under a BID, the Board is appointed by the City Council and is Business Improvement District Informational Update August 16, 2021 Page 3 responsible for an annual budget and oversight of activities and improvements undertaken by the district. In some cases, the governing body may be a non-profit corporation chosen and organized by the district stakeholders. All funds raised through a BID can only be spent on those services permitted under state law and within the designated area of the BID boundaries itself. Funds must be segregated and held within its own fund for accounting purposes, and there are annual reporting requirements on current and planned operations. Business-based improvement districts may also be established by specific business-type, such as restaurant-based improvement districts (RBIDs) or industry, such as tourism-based improvement districts (TIDs). TIDs are frequently used by hotels to fund tourism marketing and promotion efforts, and can provide destination marketing in ways distinctly unique from municipal governments, chambers of commerce, or individual businesses. TIDs are public-private partnerships which benefit both destination cities and businesses located in those cities. Next Steps This report is intended to provide City Council with a general introduction to the various structures and benefits of BIDs. Should the City elect to move forward with the process of establishing a property or business-based improvement district, it is common practice for cities to engage a consultancy firm to facilitate implementation. A typical process for establishing a district may include a Phase 1: Project Initiation, Data Gathering, Stakeholder Outreach and Informational Meetings, and Phase 2: Management District Plan Development; Plan Review and Consensus; Petition Preparation and Collection; City Council Hearings and Ballot. Depending on various community factors, this entire process may take upwards of one year or more to establish. In July of this year, City Council received a presentation on the outcome of a feasibility study for the formation of a Tax Increment Financing (TIF) District, and directed staff to proceed with retaining a consultant to assist the City in the possible formation of said financing district. Considering the City’s ongoing efforts, staff at this time is recommending the City Council receive and file this informational report and consider further steps toward the pursuit of an improvement district model in mid-late 2022, or following final direction from Council regarding a TIF District. FISCAL IMPACT: No fiscal implications to the City at this time. If and when Council directs further action, costs would be incurred for professional consultant services associated with conducting necessary preliminary studies, stakeholder engagement, district plan development, and implementation. Business Improvement District Informational Update August 16, 2021 Page 4 Prepared by: Reviewed and Approved: Nico De Anda-Scaia Sergio Gonzalez Deputy City Manager City Manager Attachments: 1) Local Business Improvement District Survey 2) California BIDs vs. PBIDs Comparison Summary City of Azusa - Regional Business Improvement District Survey City Structure Location of District Date Established Method of Levying Assessment City of Covina BAED Downtown 12/1/2020 $125 per Business Per Year (Area Enhancement) City of Glendora BID Downtown 4/14/2009 *1)Primary Business $200/Yr - PB is the principal business at a particular location Downtown 4/14/2009 *2)Primary Business is subject to additional assessment including: 2ai.) Retail and Food Services - $200/Yr 2aii.) All other Buinesses - $100/Yr 2bi) Tier 1 - First floor entrance or store front $200/Yr 2bii) Tier 2 - Any business not included in Tier 1 - $100/yr City of Monrovia BID Old Town Prior to 1983 * A)$.50 for each $1,000 of Gross Sale. Auto Repair & Gas Station-Gross taxable sale/1,000 X .50 * B)$1 for each $1,000 of gross sale. Business in Foothill Park Plaza-Gross taxable sale/1,000 X 1 * C)$1.50 for each $1,000 of gross sales. All other retail-Gross taxable sale/1,000 X 1.50 * D)Non-Sales taxable business $100 per year on Myrtle and $50 per yr in other location * E) Banks, financial institutions, utility companies - $200 per yr City of West Covina BID (Auto Dealers) Auto Plaza 6/1/1993 City of Duarte None N/A N/A N/A City of Irwindale None N/A N/A N/A $20,943 Per Car Dealership per year (7 dealerships and 10 year term). Funds are used for financing construction, operation, and maintenance of an electronic readerboard sign. Attachment 1 PARTNERSHIPS • PROGRESS • PROSPERITY 1102 Corporate Way, Suite 140 • Sacramento, CA 95831 • 800-999-7781 • www.civitasadvisors.com There are two types of assessment districts which can be created under: the “Property and Business Improvement District Law of 1994.” To help determine which is appropriate for you, following is a comparison of the major differences between the two laws. California BIDs versus PBIDs SUBJECT Typical Services Assessment Basis Benefit Collection Formation Process Supporting Documents Average Time to Form Business Improvement District Increased traffic to businesses through marketing, special events, and decorations •Type of business •Annual revenue •Occupancy / Capacity •Number of employees Proposition 26 Specific benefit or government service not provided to those not charged Collected with renewal/issuance of business licenses or by sending invoices  •Resolution of Intention •Public Meeting / Protest •Resolution of Formation Optional — Benefit study, analyzing the programs and whether they provide specific benefits to assessed businesses at a reasonable cost 6-10 months Property and Business Improvement District Increased beauty and safety within the district through Clean & Safe, security patrol, and graffiti removal programs •Lot size •Built square footage •Frontage linear footage •Use code/zoning Proposition 218 Special benefit versus general benefit, assessments can only be used to pay for special benefit services Collected with property taxes, easy and streamlined process to collect and enforce •Resolution of Intention •Ballots •Resolution of Formation Mandatory — Engineer’s Report, quantifying the amount of general benefit and the proportionality between each assessed parcel and the services 12 months