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HomeMy WebLinkAboutStaff Report 215-05DISCUSSION Pursuant to BID law, the Advisory Board must annually submit to the Council a report that . proposes a budget for the upcoming fiscal year for the BID. The report must: 1) propose any boundary changes in the BID 2) list the improvements and activities to be provided in the fiscal year 3) estimate the cost to provide the improvements and activities; 4) set forth the method and basis for levy of assessments; 5) identify surplus or deficit revenues carried over from the prior fiscal year; and 6) identify amounts of contributions from sources other than assessments. The Council must then: 1) review the report and preliminarily approve it as proposed or as changed by the Council; 2) adopt a resolution of intention to levy the assessments for the upcoming fiscal year; and 3) set a date and time for the public hearing on the levy of assessments in the BID. Absent a majority protest at the public hearing, at the conclusion of the public hearing the Council may adopt a resolution confirming the report for Fiscal Year 2005-06 as filed or as modified by the Council. The adoption of the resolution constitutes the levying of the BID assessments for fiscal year 2005-06. The Advisory Board has prepared a report (Attachment 1), for the Council's consideration, which includes the budget for the Palo Alto Downtown BID for fiscal year 2005-06. As required by BID law, the report has been filed with the City Clerk and contains a list of the improvements, activities, and associated costs proposed in the BID in fiscal year 2005-06. The Advisory Board has recommended no change in the BID boundaries or the method and basis for levying assessments. The activities and improvements are an extension of those initiated in the last year. The estimated amount of carryover funds to be used to carry out activities is $53,500. A map of the Palo Alto Downtown BID is attached as Attachment 2. The proposed assessments in the BID for fiscal year 2005-06 are the same as the assessments in fiscal year 2004-05. The budget report for fiscal year 2005-2006 was reviewed and approved by the Palo Alto Downtown Business and Professional Association at its board meeting on April 13, 2005. RESOURCE IMPACTS Adoption ofthe proposed BID budget does not directly impact City revenue. BID assessments are restricted for use exclusively by the BID. It is anticipated that a healthy BID will encourage growth of the retail community and consequently result in additional sales tax revenue for the City. The Attorney's Office will continue to provide legal oversight to the BID during the annual reauthorization process. Administrative Services staff provides assistance in the collection of BID assessments. Estimates indicate that the cost of collection by the City will continue at the current level of$16,000. Any amount over the $5,000 allocated in the BID budget will paid out of the City Manager's contingency fund up to that level. City Manager staff will continue to provide oversight to the BID and will prepare the annual reauthorization. CMR:215:05 Page 2 of3 Introduction This report from the Advisory Board of the Palo Alto Downtown Business & Professional Association (PAD) was prepared for City Council to review for the annual reauthori.zation of the Downtown Palo Alto Business Improvement District (BID) pursuant to Section 36533 of the Parking and Business Improvement Law of 1989 (Section 36500 and following of the California Streets and Highways code) (the "Law"). This report is for the proposed fiscal year for the BID commencing July 1, 2005 and ending June 30, 2006. ("Fiscal year 2005-06"). As required by the Law, this report contains the following information: I. Any proposed changes in BID boundaries and benefit zones within the BID; II. The improvements and activities to be provided for Fiscal Year 2005- 06' , III. An estimate of the cost of providing the improvements and the activities for that fiscal year; IV. The method and basis of levying the assessment in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2005-06. V. The amount of any surplus or deficit revenues to be carried over from a previous fiscal year. VI. The amount of any contributions to be made from sources other than assessments levied pursuant to the law. Submitted by Stephanie Wansek, Chair, on behalf of the Advisory Board of the Palo Alto Downtown Business & Professional Association (PAD). The Board approved this Report April 13, 2005 at a publicly noticed meeting of the Advisory Board. Received on file in the Office of the City Clerk of the City of Palo Alto on April 15, 2005. ' .2 Section II Improvements and Activities Completed in 2004-05 Marketing and Events Programs -Designed and produced a PAD website, aimed at providing information to the PAD members Designed, distributed and tallied a survey to all the PAD members and published findings. -Produced and mailed a bi-annual newsletter for all PAD members Partnered with the PA Weekly and Palo Alto Medical Foundation to create a coupon book aimed at bringing PAMF clients and employees downtown Events -The Dine Downtown programwas produced in August '04 and January '05 and was considered a great success by the restaurants and diners Produced the well-attended Holiday Stroll in early December '04 Downtown Streets This committee was formed in January 05 to respond to issues identified in the survey. The two key issues are unhoused concerns and dirty streets and sidewalks. Downtown Streets Team - A program was designed to partner with members of the unhoused community to carry out tasks to enhance the beauty and safety of downtown. An initial plan was laid out and then turned over to an agency to implement and manage " -Ateam was formed consisting of PADmembers, representatives from local social services," representativestrom the unhoused community, and Palo Alto City officials Environmental This working group was formed in March '05 - A task force was assembled to review the 1993 Downtown Urban Design Plan Key areas were identified and plans got underway to address upgrading the alleyways, . increase plantings, and install Downtown Directories Parking Representatives from PAD attended the Chamber's parking committee to learn of programs , ' underway and advocate for the PAD members Executive Committee -Set-up a non-profit corporation to administer the BID -Created a budget for 2004-05 -Created a Board Development team to collect information for the Board Information binders Nominating Recruited new members to the Board to ensure all business sectors were represented Developed the Annual Elections notification and voting process Finance -Set up accounting systems for pAD bookkeeping -Oversaw year-end tax filing and audit 4 Section II Expected Improvements and Activities for 2005-06 Marketing and Events Programs -Completely redesign the web site aimed for consumer use. It will include current activities, a comprehensive business directory, maps for parking arid directions, and other links. -The newsletter for all PAD members will be sent out quarterly - A cross-marketing program will be set up among downtown businesses. Programs include gift baskets to new residents, weekend getaway packages, and "A Day Downtown" package Produce a coupon book for all the downtown businesses, with a wide distribution throughout all businesses and residents. This will become an income-generating program Events In August, Dine Downtown will produce its third program PAD will provide music, performers, and artists to liven up the ArtWalks PAD will produce a Fashion Show / Makeover event that will involve many downtown merchants, restaurants, and services. The proceeds will go to the Downtown Streets Team . PAD will produce the Holiday Stroll, similar to last year's event PAD will produce and co-market events to accommodate the influx of visitors for these Stanford events: Graduation in June, Back to School in Sept. and Parents Weekend in Feb. Downtown Streets Downtown Streets Team· -The program will be fully operational and will expand this year Environmental Downtown Walking Maps will be bloWn up and displayed as a directory for visitors. Planters will be installed on the side streets and maintained by the Downtown Streets Team. Decorative enhancements will be used during various holidays Parking Education and outreach programs will be put in place to inform business owners and managers of the parking options for staff -Ads and other outreach programs will be used to educate public of the ample free parking Executive Committee -. Continue to refine PAD structure and organizational development -Continue to update and refine information for Board Information binders Nominating -Continue to recruit effective, active members to the Board Manage the Annual Election notification and voting process Finance Plan and implement delinquent member collections ReView and advise on annual budget -Will explore ways to bring in more income for PAD 5 Section III: Budget for 2005-06 The total funds available for activities for this fiscal year are estimated to be $349,307. The budget for providing the activities is set forth as follows: BID 2005/06 Budget INCOME Assessments $ 122,307 Non-Assessments $ 173,500 Carry over FY 2004/05 $ 53,500 TOTAL INCOME $ 349,307 EXPENSES Operating Expenses Expenses Income Staff Salaries Executive Director Salary $ 50,000 Support Staff Salary $ 18,000 Payroll taxes $ 10,000 Office Supplies & Expenses $ 2,000 Bookkeeping $ 800 InterneUWebsite Maintenance $ 1,500 Travel & Auto $ 500 Telephone $ 1,000 ,Rent $ * Audit $ 2,500 Legal $ 1,500 Collections / City BID management $ 5,000' Expense of Oeliquent Collections $ 1,500 Utilities $ * Insuran'ce -Liability $ 2,000 -Workman's Comp $ 1,000 Contingencies $ 1,000 Total Operating Expenses $ 98,300 $ Marketing and Events Programs $ 19,000 $ 12,500 Events $ 73,000 $ 103,500 Downtown Streets Downtown Streets Team $ 94,000 $ 47,500** Environmental $ 35,000 $ 10,000** Parking (for marketing) 2,500 Nominating (elections expenses) $ 2 .. 000 Executive Committee (Board materials expenses) $ . 2,500 Total Expenses/Income $ 326,300 $ 173,500 *in-kind donation . ** grant and fundraising revue 6 Section IV: Method and Basis of Levying the Assessment Cost Benefit Analysis I Bid Assessments The method arid basis of levying the assessment is provided sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2005-06 and is not changed from the FY 2004-05 assessment. There have been no changes made to the Cost-Benefit Analysis or to the BID Assessments since they were approved by City Council on February 2,2004. The method of calculation used to determine the cost and benefit to each business located in the BID is described below. The BID assessments are based on three criteria: the type of business, the location of the business and the size of the business. It has been conSistently demonstrated that the typical BID program places a higher priority on activities such as commercial marketing. As a result, the retail and restaurant establishments in the BID are assessed more than service and professional businesses in the district. While service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more than professional businesses such as medical, dental, architectural, consultant and legal offices with their minimal advertising. and promotion needs. For these reasons, various business types are assessed according to the benefit that they ... receive from the BID, as follows: . . .... " . );> Retail and Restaurant );> Service );>. Professional 100% of base amount 75% of base amount 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. . The location of a business also determines the degree of benefit that accrues to that business. Centrally located businesses tend to benefit more, as do businesses located on the ground floor. For this reason, A and B benefit zones have been identified for the BID. In Palo Alto, Zone A benefit businesses are assessed 100% of the base benefit assessment while Zone B businesses are assessed 75%. A third criterion is used in the BID to determine benefit. This criterion, the size of the business, takes into consideration the number of full time employees employed by the business. Please refer to Attachment 1 for a more complete understanding of the application· of these three variables to establish BID benefit. Attachment 2 is the BID assessment for each business located within the BID boundaries. Applying the criteria identified in Attachment 1, a summary of the assessment that applies to each business by size, type and location is outlined. In addition to the Cost-Benefit AnalYSiS, the assessments include the following criteria: );> An exemption for "single person professional businesses" that have 25% or fewer full time equivalent (FTE), including the business owner. This covers employees who 7 Section V: Revenue Surplus or Deficit It is estimated that $ 53,500 will be carried over from the 04-05 budget. This is based on the revenue balance on 4/13/05 as $88,000. Expected expenses for the rest of FY 04-05 are as follows: Current revenue balance $88,000 Expected expenses for remaining FY Staff Salaries $10,500 Downtown Streets Team program $6,000 Marketing + Events programs $7,500 Elections and Annual Report $2,500 Office + operating expenses $1,000 Outside Audit $3,000 Collections paid to The City $5,000 Total expected expenses $34,500 Expected carry-over $53,500 Section VI: Non-assessment Income It is estimated that $ 181,500 will be raised in fundraising and sponsor support for FY .2005-06.'· Projected Income for FY 05-06 Marketing and Events . Programs -Web site redevelopment -Coupon Book -Co-marketing programs Events -Dine Downtown -Summer Programs -Annual Fundraiser -Holiday Stroll -Stanford Events Downtown Streets Downtown Streets Team -Program grants -Voucher donations -Tools, supplies donations Environmental -Enhance planting donations -Enhance Alleys donations Total Expected Income $ 10,000. $ 2,500 $ 5,000 $ 3,500 $ 90,000 $ 2,500 $ 2,500 $ 10,000 $ 30,000 $ 7,500 $ 5,000 $ 5,000 $ 173,500 9 , .. ";, Secti'on VII: PAD Board of Directors by Business Type Retailers and Restaurants Faith Bell, Bell's Books Alex Resnik, Spago Palo Alto Cornelia Pendleton, University Art Center Israel Zehavi, Diamonds of Palo Alto Georgie Gleim, Gleim Jewelers Hotel and Lodging Barbara Gross, Garden Court Hotel Stephanie Wansek, Cardinal Hotel Professional Sunny Dykwel, Alain Pinel Jim Maliksi, J. Maliksi + Associates Hedy McAdams, J.D., Mediator Victoria Lukanovich, F1 IT Consulting Jerry Moorman, C.P.A., Moorman and Company Beth Rosenthal, Ph.D., Psychologist Service Marc Dickow, Jungle Digital Imaging Stacey Yates, Skin Spirit 10 A General Statement Regarding Cost-Benefit Analysis For BID Businesses Using The Traditional Three Criteria Formula Criteria 1) Type of Busineoss: ATTACHMENT 1 Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Type Of Business: In a review of 200 California Business Improvement Districts, it is consistently demonstrated that the typical BID Program places a higher priority on Commercial Marketing Programs than on Civic Beautification and Commercial Recruitment Programs. With that trend in mind, retail and restaurant businesses, with their emphasis on, and need for, commercial marketing, are traditionally assessed more than less marketing-sensitive service-oriented or professional.:oriented businesses. However, while service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more, (from commercial marketing programs), than professional businesses such as medical, dental and legal offices with their minimal advertising and promotion needs. Therefore, set forth below, is an example of how various business types might be considered regarding ° the computation of the annual benefit assessment. • Retail and Restaurant: • Service: • Professional: 100% of base amount 75% of base amount 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. Lodging businesses are assessed based on the total number of rooms because it is a more equitable manner of determining size. Many lodging businesses have many part time employees, but revenues are based on the room occupancies of the hotel, not the goods sold or serviced provided by employees. Criteria 2) Location of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Location of Business: It has also been consistently demonstrated that the more centrally located businesses tend to benefit from BID activities and services to a greater degree than businesses located toward the periphery of the proposed BID boundaries. Events and activities tend to originate in the central core of the downtown area and spread benefit to the outer areas with diminishing energy and impact, much like the ripple effect of a stone tossed into a body of calm water. Furthermore, ground floor businesses tend to benefit to a greater degree than businesses located in upper floors. Therefore, in some cases, a new BID's annual benefit assessment formula also takes these street level criteria into account. As mentioned above, special events, fairs, festivals and other activities tend to take place within, or along, the Main Street core rather than in the areas at the periphery of the downtown core. Additionally, BID-sponsored seasonal decorations, public art projects, street banners and street furniture tend to be located within the immediate core area. Therefore, businesses located within the most central area of the proposed BID are considered to be within "Zone A" which should be. considered the primary benefit zone. There is typically a "secondary zone" or "Zone B" within most proposed BID areas. This area receives less benefit than Zone A and should be assessed accordingly. 11 An example of how different zones might be treated regarding the computation of the annual benefit assessment is as follows. ' . • Zone A: 1 00% of base benefit assessment • Zone B: 75% of base benefit assessment In the case of Downtown Palo Alto, it is recommended that all Zone A upper floor businesses, as well as any other businesses located at the periphery of the proposed BID, be considered as Zone B . businesses. Please refer to the map in Attachment I. Criteria 3) Size of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Size of Business: In approximately 50% of newly established BIDs, a third assessment criterion is used. This criterion involves the size of each individual business that is based upon the businesses' total number of full- time employees. Full-time employees are those working a total of 2,000 hours per year. Part-time employees are grouped into full-time job positions, Le., two half-time employees total one full-time. Fractions are rounded down to the nearest whole number with no less than one person as a minimum for business. An example of how various business sizes might be treated regarding the computation of the annual benefit assessment is as follows: • Small: 50% of base assessment • . Medium: 75% of base assessment • Large: 100% of base assessment * Full-time employees (HE) Retail/Restaurants under 6 FTE* 6-under 11 FTE* 11+ FTE* Service Businesses under 4 FTE* 4 to under 7 FTE * 7+ FTE* Additionally, an exemption was established for "single person professional businesses" that have 25% or less full time equivalent (FTE), including the business owner. This covers employees who work less 10 hours a week (based on a 40 hour work week) Since "single person businesses" that have 26% FTE to 1 FTE in the professional business category of the BID benefit the very least from the assessment, their assessments have been tiered by size based (according to benefit) on the new "single person business" criteria. . ATTACHMENT 1, page ~ 12 Restaurants (100%) Service Businesses (75%) Professional Businesses .. (50%) Lodging Businesses (100%) Financial Institutions Downtown Palo Alto Business Improvement District Annual BID Assessments ZONE A .ZONE B (75%) Retailers and $225.00 (Under 6 FTE employees) (50%) $340.00 (6 to under 11 FTE employees) (75%) $450.00 (11+ FTE employees) (190%) $170.00 (Under 4 FTE employees) (50%) $260.00 (4 to under 7 FTE employees) (75%) $340.00 (7+ FTE employees) (100%) ATTACHMENT 2 $170.00 $260.00 $340.00 $130.00 $200.00 $260.00 EXEMPT (25% or fewer FTE employees, including the business owner) $ 60.00 (26% FTE to 1 FTE employees) (25%) $ 50.00 $110.00 (2 to 4 FTE employees) (50%) $ 90.00 $170.00 (5 to 9 FTE employees) (75%) $130.00 $225.00 (10+ FTE employees) (100%) $170.00 $225.00 (up to 20 rooms) (50%) $340.00 (21 to 40 rooms) (75%) $450.00 (41+ rooms) (100%) $500.00 $170.00 $260.00 $340.00 $500.00 Note 1: For retail, restaurant, service, and professional businesses, size will be determined by number of employe~s either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A will be assessed the same as . similar street-level businesses located within Zone B. Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. 13 NOT YET APPROVED SECTION 6. The City Council hereby declares its intention, in addition to. any assessments, fees, charges or taxes imposed by the City, to levy and collect an assessment against businesses within the District for fiscal year 2005-2006 (July 1, 2005 to June '30, 2006). Such assessment is not proposed to increase from the assessment levied and collected for fiscal year 2005-2006. The method and basis of levying the assessment is set forth in Exhibit "B" attached hereto, and incorporated herein by reference. SECTION 7. The types of improvements to be funded by the levy of an assessment against businesses within the District are the acquisition, construction, installation or maintenance of any tangible property with an estimated useful life of five years or more. The types of activities to be funded by the levy of an assessment against businesses wi thin the District are the promotion of public events which benefit businesses in the area and which take place on or in public places within the District; the furnishing of music in any public place in the District; and activities which benefit businesses located and operating in the District. SECTION 8. New businesses . established in' the District after the beginning of any fiscal year shall be exempt from'the levy of the assessment for that fiscal year. In addition, non- profit organizations, newspapers and professional "single-person businesses, II defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 9. The City Council hereby fixes the time and place for a public hearing on the proposed levy of an assessment against businesses within the District for fiscal year 2005-2006 as follows: TIME: DATE: PLACE: 7:00 p.m. Monday, May 16, 2005 City Council Chambers 250 Hamilton Avenue Palo Alto, California 94301 At the public hearing, the testimony of all interested persons regarding the levy of an assessment against businesses within the District for fiscal year 2005-2006 shall be heard. A protest may be made orally or in writing by any interested person. 050426 8m 0100356 2 NOT YET APPROVED SECTION 11. The City Clerk is hereby authorized and directed to provide notice of the public hearing in accordance with law. SECTION 12. The Council finds that this is not a project under the Calif<?rnia Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: Gity Clerk APPROVED AS TO FORM: Sr. Assistant City Attorney 050426 sm 0100356 4 Mayor APPROVED: City Manager Director of Administrative Services Retailers and Restaurants (100%) Service Businesses (75%) Professional Businesses (50%) Lodging Businesses (100%) Financial Institutions Downtown Palo Alto Business Improvement District Annual BID Assessments ZONE A ZONEB (75%) $225.00 (Under 6 FTE employees) (50%) $170.00 $340.00 (6 to under 11 FTE employees) (75%) $260.00 $450.00 (11 + FTE employees) (100%) $340.00 $170.00 (Under 4 FTE employees) (50%) $130.00 $260.00 (4 to under 7 FTE employees) (75%) $200.00 $340.00 (7+ FTE employees) (100%) $260.00 EXEMPT (25% or fewer FTE employees, including the business owner) $ 60.00 (26% FTE to 1 FTE employees) (25%) $ 50.00 $110.00 (2 to 4 FTE employees) (50%) $ 90.00 $170.00 (5 to 9 FTE employees) (75%) $130.00 $225.00 (10+ FTE employees) (100%) $170.00 $225.00 (up to 20 rooms) (50%) $340.00 (21 to 40 rooms) (75%) $450.00 (41+ rooms) (100%) $500.00 $170.00 $260.00 $340.00 $500.00 Note 1: For retail, restaurant, service, and professional businesses, size will be determined by number of employees either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A will be assessed the same as similar street-level businesses located within Zone B. Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. EXHIBIT "B"