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HomeMy WebLinkAbout2017.10.03 Economic Development Special Meeting Agenda Packet This AGENDA is posted in accordance with Government Code Section 54954.2(a). If requested, pursuant to Government Code Section 54953.2, this agenda shall be made available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12132), and the federal rules and regulations adopted in implementation thereof. To make a request for disability-related modification or accommodation, please contact the City Clerk’s Office (925) 833-6650 at least 72 hours in advance of the meeting. ECONOMIC DEVELOPMENT COMMITTEE SPECIAL MEETING AGENDA Tuesday, October 3, 2017 – 5:00 PM City of Dublin Civic Center 100 Civic Plaza, Dublin Administrative Services Conference Room 1. Call to Order 2. Public Comment 3. Minutes of the Standing Economic Development Committee Special Meeting of May 16, 2017 The Committee will consider the approval of the minutes of the Economic Development Committee Special meeting of May 16, 2017. 4. Dublin Transit Center Discussion Staff will provide an update on the BART Garage alternatives as well as discuss the Surplus Property sites and related Development Agreement. 5. Review of Hotel Incentive Program Staff will provide an outline of the hotel incentive program designed to encourage the development of new hotels, as well as promote reinvestment in existing hotels. 6. Request for Future Agenda Items The Committee and/or Staff can make requests for future agenda items as an Informational Item only. 7. Adjournment SUMMARY MINUTES OF THE ECONOMIC DEVELOPMENT COMMITTEE SPECIAL MEETING – May 16, 2017 A special meeting of the Economic Development Committee was held on May 16, 2017, in the City Manager’s Conference Room of the Dublin Civic Center. The meeting was called to order at 12:30 PM by Mayor Haubert. 1. Call to Order PRESENT: Mayor Haubert and Councilmember Gupta ABSENT: None 2. Public Comment No comments were made by any member of the public. 3. Minutes of the Standing Economic Development Committee Special Meeting of January 24, 2017 ACTION: By Consensus, the Committee approved the minutes of the special meeting of January 24, 2017. 4. Request for Participation in Small Business Assistance Program Staff presented an updated request from Stanforth Holding Co, LLC, owner of the Grafton Station retail center, to participate in the City’s incentive program. The application seeks $75,000 to fund a new trash enclosure. In 2015, the applicant requested $75,000 for a new trash enclosure; at that time, the Committee agreed to award $25,000, but the applicant decided not to pursue the project or accept the award. ACTION: After consideration, the Committee recommended that Stanforth Holding Co, LLC, receive assistance through the Business Assistance Program, in the amount of $37,500. 5. City Business Incentive Program – Overview and Status Report Staff presented an overview of the existing business incentive programs, which include City- Only Programs (Commercial Façade Improvement Grant Program, Sales Tax Reimbursement Program, Sewer Capacity Assistance Program, Fee Deferral Program, and Small Business Assistance Program) and City-Supported Programs (Statewide Community Infrastructure Program (SCIP), EB 5 Investor Program, and PACE Financing for Energy Upgrades). A list of current program participants was provided along with status updates, as well as program balances where applicable. ACTION: The Committee received the presentation. 6. Key Projects Update Staff provided an overview of recent regional economic publications and presentations, including: the 2017 Mirador View, a report describing the Tri-Valley’s regional economy, and the East Bay Economic Outlook, a report which highlights the current and sustaining strength of the East Bay economy. Staff also summarized a presentation of the Economic Outlook by renowned economist Dr. Christopher Thornberg on May 11. Staff gave a verbal update on recent development activities: re-tenanting is actively underway for previously vacated retail, office and industrial space, including 6400 Sierra Court, Creekside Business Park on Gleason Drive (new tenants include Gigatronics and Zeltique), the former SAP building, Mimi’s Restaurant, Elephant Bar, and OSH; re-development planning is underway for several key sites, such as the Coco’s property on Amador Plaza Road; and new development continues at various locations throughout the City, including Lucky’s Supermarket at Fallon Gateway, Zeiss at Site 15A, Aloft Hotel, and Inc 82 Brewing on San Ramon Road. Staff also summarized several prospective development meetings regarding opportunity sites throughout the City, including the commercial property adjacent to the Kaiser medical campus, and the BART-owned property on Golden Gate Drive. Staff then discussed the ongoing facilitation of meetings between property owners for the retail center adjacent to Dublin Place, and summarized the regional “Tri-Valley Commerce Con: Cyber-Savvy Event” small business development event held in Dublin on May 3. ACTION: The Committee suggested Staff discuss opportunities to improve the façade of key connecting properties within the retail center adjacent to Dublin Place. 7. Update on Regional Organizations Staff provided a verbal report on recent and upcoming activities associated with regional economic development groups. ACTION: The Committee received the presentation. 8. Review Standing Agenda Items & Meeting Day and Time of the Economic Development Committee The Committee determined that the best meeting day would be on the first Tuesday of every other month, with the meeting time of 12:30 to remain the same. ACTION: Per the Committee’s feedback, future Economic Development Committee meetings will take place on the first Tuesday of every other month at 12:30 PM, beginning August 1, 2017. 9. Request for Future Agenda Items None. ACTION: None. 10. Adjournment There being no further business to come before the Committee, the meeting was adjourned at 1:15 PM. Minutes prepared by Erin Steffen, Management Analyst II. ___________________________________ Mayor ATTEST: ________________________________ Economic Development Director/ Public Information Officer ECONOMIC DEVELOPMENT MEMORANDUM     DATE: October 3, 2017  TO: Economic Development Committee Members  FROM: Hazel Wetherford, Assistant to the City Manager  CC: SUBJECT: Christopher L. Foss, City Manager  Linda Smith, Assistant City Manager    HOTEL INCENTIVE PROGRAM PROPOSAL TO SHARE TRANSIENT OCCUPANCY TAX  (TOT) REVENUES TO ENCOURAGE NEW HOTEL DEVELOPMENT AND HOTEL  REDEVELOPMENT    BACKGROUND:  On August 8, 2016, the Economic Development Committee provided direction to Staff on the possible  development of a Hotel Incentive program, with the goal of attracting new hotel development and  existing hotel redevelopment (Attachment 1). After reviewing the different types of hotel incentive  packages, Staff has developed a proposal that incentivizes development by sharing transient occupancy  tax (TOT) revenues with applicants.    The proposed Hotel Incentive program (Attachment 2) incorporates the comments provided by the  Committee at the August 2016 meeting, including:     Emphasis on High Quality   Proven Financial Need   Minimum Size Requirements  RECOMMENDATION:  Staff recommends that the Committee provide feedback on the proposed Hotel Incentive program and  recommend the program for consideration before the City Council.    If given direction to proceed, Staff will work closely with legal counsel to develop the binding agreement  and any corresponding documents, and to confirm that all proposed program elements are compliant  with current legal standard.  ECONOMIC DEVELOPMENT MEMORANDUM DATE: August 5, 2016 TO: Economic Development Committee Members CC: City Councilmembers FROM: Lori Taylor, Economic Development Director SUBJECT: CONSIDERATION OF SHARING TRANSIENT OCCUPANCY TAX (TOT) REVENUES TO ENCOURAGE NEW HOTEL DEVELOPMENT AND HOTEL REDEVELOPMENT PURPOSE: The purpose of this report is to engage the Economic Development Committee in a discussion of a potential Hotel Incentive program. BACKGROUND: Hotels can be an important economic development catalyst in a city. In addition to attracting visitors and providing a needed community amenity, they can be a significant source of revenues due to property tax, sales tax, and Transient Occupancy Taxes. The Transient Occupancy Tax (TOT) is collected on hotel bills for stays of less than 30 days. The City of Dublin’s TOT rate is 8%, and it is applied to all hotel rooms. The City generated $1.374 million in FY 2015-16 in Transient Occupancy Tax revenues. The City has averaged approximately $1.14 million in TOT revenues over the past 5 years. Currently, the City of Dublin has four (4) public hotels operating within its jurisdiction. There is also a lodging facility for military personnel located at Camp Parks which has very limited operations. In addition, the City recently approved a 127-room Aloft Hotel at Grafton Plaza, which will be the newest hotel in the region. Dublin’s hotels are as follows: Hotel Rooms Built Average TOT for past two years Extended Stay America 236 Feb. 2000 $141,000 Holiday Inn 122 June 1997 $482,000 Hyatt Place 128 June 1999 $475,000 La Quinta Inn & Suites 91 Jan. 1999 $234,000 Aloft Hotel 127 Begin late 2016 ECONOMIC DEVELOPMENT MEMORANDUM By comparison, the other Tri-Valley cities generate the following: City Hotel Rooms Hotel Tax Revenue FY15-16 TOT per Room average Danville 62 $126,000 $2032 Dublin 577 $1,374,000 $2381 Livermore 1,312 $2,500,000 $1905 Pleasanton 1,807 $4,500,000 $2490 San Ramon 1,028 $2,884,000 $2805 OPPORTUNITY/ISSUE: The City of Dublin has been approached over the last year by several hotel developers who have expressed interest in building additional hotel rooms in Dublin. There has been interest in eastern Dublin as well as the West Dublin BART Station area. The City has been desirous of adding new hotels for the past several years (as evidenced by the 150 hotel rooms described in the Downtown Dublin Specific Plan). While the interest level remains high in Dublin, the cost of development (land costs, construction costs and development fees) has made hotel development financially difficult for developers to achieve their desired Return on Investment (ROI). Due to the significant construction costs factors involved in hotel development (which are consistent throughout the State), several California communities have developed financial assistance programs to aid in the development of hotels. These programs go by the names of “Hotel Assistance”, “Hotel Incentive” or TOT Rebate and involve a “rebate” of hotel taxes generated to help stimulate development. Staff has found programs around the State including: City TOT Rebate Duration Rebate Cap Palm Springs 50-75% 10-20 years $50 million La Quinta Up to 95% - years 1-10 Up to 75% - years 11-15 (only rebated when an 11% return is not achieved) 15 years Anaheim 80% 15 years $40 million Santa Barbara County 70% 15 years Los Angeles Up to 50% 25 years Escondido 55% 10 years $1.5 million Sacramento 50% 14 years $10 million Rancho Palos Verdes 80% 34 months $8.2 million ECONOMIC DEVELOPMENT MEMORANDUM City TOT Rebate Duration Rebate Cap Cathedral City 50% for increment from existing 75% for new 10 years Berkeley 50% 8 years $13.125 million Long Beach (under study) 50% These programs vary in the criteria involved in participation, as well as the required performance standards required. Many of the programs are targeted for specific sites, or for specific types of hotels (higher end with amenities such as full-service restaurants, conference space, or specific rating qualifications). Other cities include conditions for community benefits developed through the entitlement process (such as union labor for construction and operations, and public accessibility for restaurants and other amenities). There are considerations to any type of incentive program. Advantages: • Such programs can attract investment and assist in the development of revenues and promote tourism, as well as support business travelers. • Hotels are a significant generator of revenues and employment. New incentives can spur opportunities that otherwise wouldn’t be possible to build. Considerations: • Participation in such a program triggers requirements for the hotel developer (such as prevailing wages) that can be a deterrent in participating. • Reduces potential revenues to the city and requires staff oversight and reporting requirements. If the Committee were interested in directing the development of a program, Staff would propose the following be included (as a starting point) as criteria for eligibility to participate in the program: Quality and Size Standards: 1. Hotel must be of a quality that it meets a four (first class)/three star (comfort new hotel) or four (first class)/three diamond (comfort new hotel) hotel rating or higher under the rating criteria established by the American Automobile Association (AAA), JD Power and Associates, or comparable hotel rating entity which includes hotel operations on a 24-hour per day, 7 days a week basis with housekeeping services, food and beverage services, room services, banquet and meeting services, with at least 10,000 s.f. of meeting/banquet space, concierge and bell services, and parking services. 2. Hotel must have 125 or more rooms. ECONOMIC DEVELOPMENT MEMORANDUM Transparency & Financial Need 3. Hotel developer required to provide pro forma to show ROI – independently reviewed by City consultant – only provide assistance if ROI is less than 8% Program Participation Limits 4. Rebate no more than 70% for a 4-star hotel and no more than 50% for a 3-star hotel. 5. Rebate no longer than 20 years for a 4-star hotel and no more than 15 years for a 3-star hotel. 6. Limit the rebate to cost of Development Impact Fees and DSRSD fees. 7. Applicant must enter into an Operating Covenant Agreement 8. Renovated Hotels – 50% of the increment above existing TOT levels – rebate for up to 10 years and no more than $2 million. Renovated hotel must measurable and demonstrably improve the quality of the hotel through either increased capacity or ability to charge higher room rates, and enhancements to the hotel’s ratings by AAA, JD Power, etc. Staff recommends that the Committee should provide direction to prepare a Hotel Incentive Program for consideration by the City Council. The addition of new hotel rooms to the City would provide additional tax benefits (transient occupancy as well as property taxes) and new jobs to the community. It also provides Staff with another incentive program to assist new businesses looking to move to Dublin. Future Hotel-Related Policy Considerations Monitored by Staff: TOT Rate Levels As discussed, hotels are important economic drivers in a community. Realizing the potential of increasing local government revenues, many cities throughout the state have increased the percentage amount of TOT collected for lodging. These efforts are placed on the ballot and have a strong success rate. In 2015, five of five initiatives were passed which increased rates to either 10% (Azusa, Ceres, Trinity County) or 12% (Hermosa Beach and Cerritos). This may be a future revenue stream for the City to explore. Sharing Economy Impacts Firms that allow residents or property owners to connect with consumers, such as AirBnB and VRBO (Vacation Rental By Owner) are creating policy issues for community. Many cities (Monterey, Pacific Grove, Tiburon and Danville) have decided to ban such businesses from operating within their communities due to the impacts to neighbors. Enforcement of the ban may prove difficult. Other cities have adopted ordinances to ensure the collection of TOT from such operations. As these operations expand, staff will continue to track best practices and local impacts to determine if local policies would be helpful. Hotel Incentive Program Proposal     PURPOSE:  To establish a financial incentive program which encourages the development of high‐quality hotels in  the City of Dublin.    ELIGIBILTY:  1. Hotel must be of a quality that it meets a four (first class)/three star (comfort new hotel) or four  (first class)/three diamond (comfort new hotel) hotel rating or higher under the rating criteria  established by the American Automobile Association (AAA), JD Power and Associates, or  comparable hotel rating entity which includes hotel operations on a 24‐hour per day, 7 days a  week basis with housekeeping services, food and beverage services, high‐quality finishes, room  services, banquet and meeting services, including at least 10,000 square feet of  meeting/banquet space, concierge and bell services, and parking services.  2. Hotel must provide independent, third‐party, certification acceptable to the City of the level of  the quality of the new hotel as a four (first class)/three‐star (comfort new hotel) or four (first  class)/three diamond (comfort new hotel) hotel as defined above.  3. Hotel must have 125 or more rooms.  4. Existing hotels seeking funds for redevelopment must measurably and demonstrably improve  the quality of the hotel through either increased capacity or ability to charge higher room rates,  and/or enhancements to the hotel’s ratings by AAA, JD Power, etc.  FINANCIAL NEED:  As part of the application, a feasibility analysis shall be completed by the applicant to demonstrate a  funding gap between operating performance and project development or improvement cost. The  analysis will be independently reviewed by a City consultant, and must prove that, but for this program,  the development or improvement would not occur.    LIMITS:  1. The rebate will be no more than 70% for a 4‐star hotel and no more than 50% for a 3‐star hotel.  Renovated hotels are eligible to receive a rebate of 50% of the increment above existing TOT  levels for up to 10 years.  2. The term of the rebate shall be no longer than 20 years for a 4‐star hotel, and no longer than 15  years for a 3‐star hotel. Any change in star rating below 3 stars for the applicant throughout the  lifetime of the agreement will result in termination of the agreement. A reduction from a 4‐star  hotel rating to a 3‐star hotel rating will result in a reduction of the term of the rebate, consistent  with that of a 3‐star hotel.  3. The amount of the rebate shall be no greater than the funding gap.  4. The Applicant must enter into a binding agreement with the City.  Hotel Incentive Program Proposal     DOCUMENTATION:  Applications must include the following:  1. An application form  2. Third party certification of the development’s rating status  3. A feasibility analysis  4. An executed binding agreement  Determination of the applicant’s TOT revenues will be based on revenues received, as documented by  the City’s Finance Department.     APPLICATION PROCESS:  Program applicants will follow all procedures required by AB 562 (see attached), including prevailing  wage, public hearings and reporting requirements.    Upon receipt of a complete application for the City’s Hotel Incentive Program, the application will be  presented to the Committee for review and recommendation. Applications approved by the Economic  Development Committee will be presented to City Council for final approval.