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HomeMy WebLinkAbout2004-05-10 City Council (10)City of Palo Alto City Manager’s Report TO: FROM: DATE: SUBJECT: 1HONORABLE CITY COUNCIL 1 CITY MANAGER DEPARTMENT: CITY MANAGER MAY 10, 2004 2MR: 258:04 ADOPTION OF RESOLUTION PRELIMINARILY APPROVING BID ADVISORY BOARD’S 2004-2005 BUDGET REPORT ADOPTION OF RESOLUTION OF INTENTION TO LEVY 2004- 2005 ASSESSMENTS IN THE PALO ALTO DOWNTOWN BUSINESS IMPROVEMENT DISTRICT AND SETTING OF A DATE AND TIME FOR THE PUBLIC HEARING ON THE LEVY OF ASSESSMENTS APPROVAL TO WAIVE THE 10%LATE CHARGE FEE FOR 2003-04 ANNUAL BID ASSESSMENT RECOMMENDATION Staff recommends that the City Council: ¯Adopt a resolution preliminarily approving the report as filed by the Palo Alto Downtown Business Improvement District Advisory Board for the 2004-2005 fiscal year ¯Adopt a resolution of intention to levy the annual assessment for 2004-05 and ¯Set June 7, 2004 at 7:00 p.m. as the date and time for the public hearing on the levy of the proposed assessments ¯Approve the waiver of the 10% late fee for businesses paying the 2003-04 BID assessment BACKGROUND The Palo Alto Downtown Business Improvement District (BID) was established by the City Council in 2004 pursuant to the California Parking and Business Improvement Area Law to promote the economic revitalization and physical maintenance of the Palo Alto Downtown business district. The Council appointed the Palo Alto Downtown Business CMR:216:04 Page 1 of 4 and Professional Association as the Advisory Board (Advisory Board) for the BID, to advise the Council on the method and basis for levy of assessments in the BID and the expenditure of revenues derived from the assessments. DISCUSSION Pursuant to BID law, the Advisory Board must annually submit to the Council on an annual basis 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 (none are proposed); 2) list the improvements and activities to be provided in the fiscal year. Activities will be an extension of the activities and improvements initiated in the last year. 3) estimate the cost to provide the improvements and activities; 4) set forth the method and basis for levy of assessments (no changes are proposed); 5) identify surplus or deficit revenues carried over from the prior fiscal year. It is anticipated that approximately $42,500 will be carried over into the 2004-05 fiscal year, due to the partial year of operation in 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 approving the report for Fiscal Year 2004-05 as filed or as modified by the Council. The adoption of the resolution constitutes the levying of the BID assessments for fiscal year 2004-05. The Advisory Board has prepared a report attached as Attachment 1, for the Council’s consideration that includes the budget for the Palo Alto Downtown BID for fiscal year 2004-05. 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 2004-05. The Advisory Board has recommended no change in the BID boundaries or the lnethod and basis for levying assessments. A map of the Palo Alto Downtown BID is attached as Attachment 2. The proposed assessments in the BID for fiscal year 2004-05 are the same as the assessments in fiscal year 2003-04, although because the BID was in operation for only six months, the assessments sent to businesses were only 50% of the annual BID assessment for FY 2003-04. The budget for fiscal year 2004-2005 was reviewed and approved by the Palo Alto Downtown Business and Professional Association at its board meeting on May 5, 2004. CMR:216:04 Page 2 of 4 Because of the partial year of the 2003-04 assessment and lateness of the actual billing, (invoices were sent March 19, due by April 19) staff recommends that the BID assessments do not include an additional amount for late fees not paid within 30 days. In this start up year, corrections to the database also impacted the timeline for the collection of payments from Downtown businesses. RESOURCE IMPACTS Adoption of the proposed BID budget will not directly impact City revenue. BID assessments are restricted for use exclusively by the BID and must be reported to the City Council annually. It is anticipated that a BID will encourage growth of the retail community; potentially resulting in additional sales tax revenue for the City. The City Attorney’s Office will continue to provide legal oversight to the BID during the annual reauthorization process without reimbursement. Administrative Services staff will provide assistance in the receipt and processing of BID assessments. Cost estimates for these processes will continue at the current level of $16,000, of which, the BID will pay $5,000 and $11,000 paid from the City Manager’s contingency fund. The City Manager’s office will continue to provide oversight to the BID and will prepare the annual reauthorization. ENVIRONMENTAL REVIEW This action by the City Council is not considered a project under the California Environmental Quality Act. ATTACHMENTS Attachment 1 : Attachment 2: Report of the Advisory Board with Regard to the Reauthorization of the Downtown Palo Alto Business Improvement District for Fiscal Year 2004-2005 Downtown Palo Alto Business Improvement District Map Attachment 3:Resolution of.the City Council of the City of Palo Alto Approving the Report of the Advisory Board for Fiscal Year 2004-05 In Connection with the Palo Alto Downtown Business Improvement District Attachment 4:Resolution of City Council of the City of Palo Alto Declaring its Intention to Levy an Assessment Against Businesses Within the CMR:216:04 Page 3 of 4 Downtown Palo Alto Business Improvement District for FY 2004- 05 and Setting a Time and Place for Hearing Objections Thereto PREPARED BY: S~SAN ARPAN, Economic Development and Redeveloprpent ~ CiTY EM~--HARRIS ON ,’-... Assistant City Manager CMR:216:04 Page 4 of 4 Attachment Report of the Advisory Board With Regard to the Reauthorization of the Downtown Palo Alto Business ]:mprovement District For Fiscal Year 2004-2005 As approved by the Advisory Board on lVlay 5, 2004 Submitted by Stephanie Wansek Chair, Palo Alto Downtown Business Professional Association May 5, 2004 Introduction This report from the Advisory Board of the Palo Alto Downtown Business &, Professional Association (PADBPA) was prepared for City Council to review for the annual reauthorization 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, 2004 and ending June 30, 2005. ("Fiscal year 2004-05"). As required by the Law, this report contains the following information: Any proposed changes in BID boundaries and benefit zones within the BID; The improvements and activities to be provided for Fiscal Year 2004-05; An estimate of the cost of providing the improvements and the activities for that fiscal year; 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 2004-05. The amount of any surplus or deficit revenues to be carried over from a previous fiscal year. 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 (PADBPA). The Board approved this Report may 5, 2004 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 May 6, 2004. Section 1: Any proposed changes in B]:D boundaries and benefit zones within the B]:D. There have been no changes in the B]:D boundaries and benefit zones within the B]:D. A map of the B]:D Boundaries and benefit zones is available in Attachment I of this report. Section 2: The improvements and activities to be provided for Fiscal Year 2004-05. The activities listed in Attachment 2 of this Report are proposed to be provided annually. Section 3: An estimate of the cost of providing the improvements and activities for Fiscal Year 2004-05. The total funds available for activities for this fiscal year are estimated to be: $157,000. The budget for providing the activities is set forth in Attachment 2 of this Report. Section 4: 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 2004-05 and is not changed from theFY 2003-04 assessment. There have been no changes made to the Cost-Benefit Analysis or to the BTD Assessments since they were approved by City Council on January :[2, 2004. Attachment 3 describes the method of calculation used to determine the cost and benefit to each business located in the B]:D. The B]:D assessments are based on three criteria: the type of business, the location of the business and the size of the business. ]:t has been consistently demonstrated that the typical B]:D Program places a higher priority on activities such as commercial 2 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 3 for a more complete understanding of the application of these three variables to establish BID benefit. Attachment 4 is the BID assessment for each business located within the BID boundaries. Applying the criteria identified in 3 Attachment 3, a summary of the assessment thatapplies to each business by size, type and location is outlined. ]:n 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 work less than10 hours a week (based on a 40 hour work week (A full FTE equals approximately 2000 hours annually) > An assessment specifically for "single person businesses" that have 26% FTE to 1 FTE in the professional business category of the B]:D (A full FTE equals approximately 2000 hours annually) The tiering of other professional businesses by size based (according to benefit) on the new "single person business" criteria This outline provides information by which a business can determine its annual assessment based on objective criteria. Except where otherwise defined, all terms shall have the meanings identified below: Definitions of Business Types in the Downtown Business Zmprovement District (BZD) Retailers and Restaurants: Businesses that buy or resell goods such as clothing stores, shoe stores, office supplies as well as businesses that sell prepared food and drink. Service Businesses: Businesses that sell services such as beauty or barber shops, repair shops, most automotive businesses, dry cleaners, art and dance studios, printing firms, film processing companies, travel agencies, entertainment businesses such as theatres, etc. Hotel and Lodqinq: These include businesses that have as their main business the lodging of customers. This is restricted to 4 residential businesses that provide lodging services to customers for less than :30 days. Professional Businesses: Businesses that require advanced and/or specialized licenses or academic degrees such as architects, engineers, attorneys, chiropractors, dentists, doctors, accountants, optometrists, realtors, insurance brokers, venture capital firms, consultants, advertising and marketing professionals, mortgage brokers and similar professions. Financial Institutions: Includes banking, savings and loan institutions and credit unions. Additional clarification on business definitions will be defined according to Section 18.04.030 (Definitions) of the Palo Alto Municipal Code. The Advisory Board recommends that the following businesses be exempt from the BID assessment: New businesses established in the BID area following the annual assessment for the year in which they locate in the BID area Non-profit organizations Newspapers "Single person professional businesses" that have 25% or less full time equivalent (FTE), including the business owner The Assessment calculated shall be paid to the City no later than 30 days after receipt of the invoice with the amount of the annual assessment sent by the City. Asecond notice will be mailed as a reminder to businesses that have not remitted payment by that date. Payments received after 30 days of receipt of the invoice will be subject to a 10% late fee. Section 5’ The amount of any surplus or deficit revenues to be carried over from a previous fiscal year. We anticipate that the City of Palo Alto will approve a contract with the Palo Alto Downtown Business & Professional Association (PADBPA) prior to June 7, 2004 to provide administration and activities in the B]:D, in accordance with the approved Downtown Palo Alto B]:D Budget for fiscal year 2003-2004. We anticipate this will happen in mid-Nay 2004. Any funds not used by June 30, 2004 will be carried over into the contingency line of Budget for Fiscal Year 2004-2005. Section 6: The amount of any contributions to be made from sources other than assessments levied pursuant to the law. Assessment proceeds are estimated to be approximately $ 122,000 for Fiscal Year 2004-05. Assessment proceeds will be spent only on activities authorized in the annual reauthorization of the Downtown Palo Alto Business ]:mprovement District by the City Council of the City of Palo Alto. ]:n this first year of operations, there could be additional funds generated through B]:D sponsored events and/or fundraising. B]:D Activities / Accomplishments for FY 2003-2004 The Advisory Board has completed the Bylaws of PADBPA, created a non-profit organization of the 501C6 category. We will have hired a staff person, set up an office, purchased furniture and office equipment. We have began the branding process for PADBPA and created a logo design, banner design and a website for the organization. PADBPA will also be involved in a downtown PA event, which will involve closing off Ramona St. for a Brazilian night in conjunction with PA Art Center’s week long event. B]:D Activities anticipated for FY 2004-05 (See Attachment 2) Proposed activities for FY 2004-05 fall under three categories. 6 1) Operations costs which include staff salary, printing costs, website maintenance, mailings, phone and the required audit and collection costs. 2) Marketing and Promotion which include producing a Business Directory, a B]:D newsletter, the development of directional signs, and events planning and execution. 3) Beautification and improving downtown cleanliness. This includes enhanced tree lighting and seasonal planting. For FY 2004-05 Attachments: Attachment 1: BID Boundaries Attachment 2: Budget of Recommended FY 2004-05 BID Activities Attachment 3: BID Cost Benefit Analysis Attachment 4: BID Assessment Schedule Attachment 5: BID Advisory Board Members by Business Type 7 ATTACHblENT i 2 The City of Palo Alto Downtown Palo Alto Business Improvement District This map is a product of the City of Palo Alto GIS ATTACHMENT 2 CARDINAL HOTEL BUDGET/OPERATING EXPENSES 2004 5/5/200411:41 AM INCOME Assessments $122,0001 77.71% non-assessment income $5,000 t 3.18% carry over FY 2003-04 $30,000 t 19.11% TOTAL INCOME $157,0001 100% EXPENSES Operatinq Expenses Staff Salaries $55,0001 35.03% Incentive Pay $5,0001 3.18% Admin. Supplies & Expense $1,000 0.64% Mailing $2,500:~1.59% Printing Supplies $5,000 3.18% website $1,000 0.64% Travel & Auto $500i 0.32% Telephone $1,000i 0.64% Audit $3,000[0.64% Collections $5,000 i 3.18% Utilities 0.00% Insurance Liability $1,000 0.64% Payi-oll Tax 0.00°/ Contingencies 0.64% Marketinq and Promotions ~ Business Directory ~ Development of Directional Signs ~Signature event planning ~ Design / advertising ~ Banners / Hardware (1 time) ~Newsletter ~ BID information Beautification $1,000 $52,000 $10,000 33.12% 6.37% ~ Enhanced tree lighting ~seasonal planting Total Operating Expense $143,000 91.08% TOTAL OPERATING INCOME $14,000 8.92% ATTACHMENT 3 A General Statement Regarding Cost-Benefit Analysis For BID Businesses Using The Traditional Three Criteria Formula Criteria 1) Type of Business: 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 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. An example of how different zones might be treated regarding the computation of the annual benefit assessment is as follows. ¯Zone A:100% 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, i.e., 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: ¯Medium: 50% of base assessment 75% of base assessment ¯ Large: 100% of base assessment * Full-time employees (FTE) 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 I&ss 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 4 Downtown Palo Alto Business Improvement District Annual BID Assessments Retailers and Restaurants (100%) ZONE A ZONE B (75%) $225.00 (Under 6 FTE employees) (50%) $340.00 (6 to under 11 FTE employees) (75%) $450.00 (11+ FTE employees) (100%) $170.00 $26O.00 $340.00 Service Businesses (75%) $170.00 (Under 4 FTE employees) (50%) $260.00 (4 to under 7 FTE employees) (75%) $340.00 (7+ FTE employees) (lOO%) $130.00 $200.00 $26O.00 Professional Businesses (50%) 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) (lOO%)$170.00 Lodging Businesses (100%) $225.00 (up to 20 rooms) [5o%) $340.00 (21 to 40 rooms) (75%) $450.00 (41+ rooms) (lOO%) $170.00 $260.00 $340.00 Financ~l Insdtudons $500.00 $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 fiat 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. Attachment 5 Downtown BID Advisory Board Hembers by Type of Business Retailers and Restaurants Georgie Gleim, Gleim the Jeweler Cornelia Pendleton, University Art Faith Bell, Bell’s Books Israel Zehavi, Diamonds of Palo Alto John Aylward, Car@ Niebaum Coppola Alex Resnik, Spago Hotel and Lodqinq Stephanie Wansek, Cardinal Hotel Barbara Gross, Garden Court Hotel Professional Sunny Dykwel, Alain Pinel Realtors Warren Thoits, Thoits Brothers Insurance Jim Maliksi, Jim Maliksi Architects Beth Rosenthal, Psychologist Victoria Lukanovich, F1 IT Consulting Service Business IVlarc Dickow, Jungle Copy Chamber of Commerce Sandra Lonnquist, PA Chamber of Commerce AITACHMENT 2 i This map is a product of the Ci~ of Pslo Alto GIS ATTACHMENT 3 NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO APPROVING THE REPORT OF THE ADVISORY BOARD FOR FISCAL YEAR 2004-05 IN CO~qECTION WITH THE PALO ALTO DOWNTOWN BUSINESS IMPROVEMENT DISTRICT THE CITY COUNCIL OF THE CITY OF PALO ALTO DOES HEREBY FIND, DECLARE, AND ORDER AS FOLLOWS: SECTION i. The Parking and Business Improvement Area Law of 1989, California Streets and Highways Code Sections 36500 et seq., (the "Law"), authorizes the City Counci! to levy an assessment against businesses within a parking and business improvement area which is in addition to any assessments, fees, charges, or taxes imposed in the City. SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819 establishing the Downtown Palo Alto Business Improvement District (the "District") in the City of Palo Alto. SECTION 3. The Law requires the City Council to appoint an advisory board which shall make recommendations to the City Council on the expenditure of revenues derived from the levy of assessments, on the classification of businesses, as applicable, and on the method and basis of levying the assessments. SECTION 4. By previous resolution, the City Council appointed the Board of Directors of the Palo Alto Downtown Business & Professiona! Association, a California nonprofit mutua! benefit corporation, to serve as the Advisory Board for the District (the "Advisory Board") and directed the Advisory Board to prepare a report in connection with the proposed levy of an assessment against businesses in the District for fisca! year 2004-2005. SECTION 5. In accordance with Section 36533 of the Law, the Advisory Board has prepared and filed with the City Clerk, and the City Clerk has presented to the City Council, a report entitled "Downtown Palo Alto Business Improvement District, 2004-05 Annual Report" (the "Report"). SECTION 6. The City Council has examined and reviewed the Report, and such report is hereby preliminarily approved as filed. 040430 sm 00100237 1 NOT YET APPROVED SECTION 7. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: St. Assistant City Attorney City Hanager Director of Administrative Services 040430 sm 00100237 2 ATTACHMENT 4 NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO DECLARING ITS INTENTION TO LEVY AN ASSESSMENT AGAINST BUSINESSES WITHIN THE DOWNTOWN PALO ALTO BUSINESS IMPROVEMENT DISTRICT FOR FISCAL YEAR 2004-2005 AND SETTING A TIME AND PLACE FOR HEARING OBJECTIONS THERETO THE CITY COUNCIL OF THE CITY OF PALO ALTO DOES HEREBY FIND, DECLARE, AND ORDER AS FOLLOWS: SECTION i. The Parking and Business Improvement Area Law of 1989 (the "Law"), California Streets and Highways Code Sections 36500 et seq., authorizes the City Council to levy an assessment against businesses within a parking and business improvement area which is in addition to any assessments, fees, charges, or taxes imposed in the City. SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819 establishing the Downtown Palo Alto Business Improvement District (the "District") in the City of Palo Alto. SECTION 3. By previous resolution, the City Council appointed the Board of Directors of the Palo Alto Downtown Business & Professiona! Association, a California nonprofit mutual benefit corporation, to serve as the Advisory Board for the District (the "Advisory Board") and directed the Advisory Board to prepare a report for fiscal year 2004-2005 in connection with the proposed levy of an assessment against businesses within the District. SECTION 4. In accordance with Streets and Highways Code Section 36533, the Advisory Board prepared and filed with the City Clerk a report entitled "Downtown Palo Alto Business Improvement District, Annual Report 2004-2005" (the "Report"), and, by previous resolution,the City Council preliminarily approved such report as filed. SECTION 5. The boundaries of the District are within the City limits of the City of Palo Alto (the "City") and encompass the greater downtown area of the City, generally extending from E! Camino Real to the East, Webster Street to the West, Lytton Avenue to the North and Addison Avenue to the South (east of Emerson Street, the boundaries extend only to Forest Avenue to the South). Reference is hereby made to the map of the District attached hereto as Exhibit "A" and incorporated 040430 sm 0100239 1 NOT YET APPROVED herein by reference for a complete description of the boundaries of the District. 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 2004-2005 (July i, 2004 to June 30, 2005). Such assessment is not proposed to increase from the assessment levied and collected for fiscal year 2003-2004. 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 within 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," 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 2004-2005 as follows: TIME: DATE: PLACE: 7:00 p.m. Monday, June 7, 2004 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 2004-2005 shall be heard. A 040430 sm 0100239 2 NOT YET APPROVED protest may be made orally or in writing by any interested person. Any protest pertaining to the regularity or sufficiency of the proceedings must be in writing and shall clearly set forth the irregularity or defect to which the objection is made. Every written protest must be filed with the City Clerk at or before the time fixed for the public hearing. The City Council may waive any irregularity in the form or content of any written protest and at the public hearing may correct minor defects in the proceedings. A written protest .may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest must contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the City as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business. A written protest which does not comply with the requirements set forth in this paragraph wil! not be counted in determining a majority protest (as defined below). If, at the conclusion of the public hearing, written protests are received from the owners of businesses in the District which will pay 50 percent or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than that 50 percent (i.e., there is a majority protest), no further proceedings to levy the proposed assessment, as contained in this resolution of intention, shall be taken for a period of one year from the date of the finding of a majority protest by the City Council. If the majority protest is only against the furnishing of a specified type or types of improvement or activity within the District, those types of improvements or activities shall be eliminated. SECTION i0. For a full and detailed description of the improvements and activities to be provided for fiscal year 2004- 2005, the boundaries of the District and the proposed assessments to be levied against the businesses within the District for fiscal year 2004-2005, reference is hereby made to 040430 sm 0100239 3 NOT YET APPROVED the Report of the Advisory Board. The Report is on file with the City Clerk and open to public inspection. SECTION ii. 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 California Environmental Quality Act and, therefore, no environmenta! impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: St. Assistant City Attorney City Manager Director of Administrative Services 040430 sm 0100239 4 EXHIBIT "A" The CiIy of Palo Alto Downtown Palo Alto Business Improvement District This map is a product of the City of Palo Alto GIS EXHIBIT "B" A General Statement Regarding Cost-Benefit Analysis For BID Businesses Using The Traditional Three Criteria Formula Criteria 1) Type of Business: 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 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. An example of how different zones might be treated regarding the computation of the annual benefit assessment is as follows. ¯Zone A:100% 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. Criter!a 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 intofull-time job positions, i.e., 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: ¯Medium: 50% of base assessment 75% of base assessment ¯ Large: 100% of base assessment * Full-time employees (FTE) 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.