SR - ORD-16-18 - ESTABLISHMENT OF UNIFORM TRANSIENT OCCUPANCY TAX SHARING PROGRAM . .
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_ Decem er 11, 201:8:
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TO: : Honorable Mayor and Members of the City Council
FROM: Rick Otto, City:Manager
. .
.. '
.: REVIEW: City-Manage, inance ���
1. SUBJECT
: .
Ordinance No: 16-18 —:Introduction and first reading of an Ordinance of the City Council .
of the City of Orange:.= :. � '
2. SUMMARY
An Ordinance of the City Council of the:Gity of Orange, adding Chapter 5.17 to Title 5 of
the Orange Municipal Code r.elating to ttie establishment of a uniform transient occupancy
tax sharing program.
3. RECOMMENDED ACTION .
_
Approve Ordinance No. 1.6-18:for first reading.
4. . FISCAL IMPACT
The proposed performance-based economic developmenf assistance program will allow
for negotiated agreements. t:hat will be budgeted through the_ City's annuaF budget
process. .
5. STRATEGIC PLAN GOALS
Goal 2: Be a fiscally healthy community.
d. Effectively manage and develop:City assets. : . _
6. DISCUSSION AND BACKGROUND �
Economic development covers a.wide. spectrum of activities that foster and maintain a ,
healthy local economy, including business retention, encouraging expansion and growth
of new businesses, attracting start-up businesses, and encouraging job retention and job
creation. Enhancing and ma'intaining :the City's economic base through increased tax
dollars to the City's general fund are.also essential economic development efforts to
sustain delivery of services to.residents and businesses.
ITEM� •`I' � 12/11/2018
The proposed Ordinance No. 16-18 would establish a Uniform Transient Occupancy Tax .
Sharing Program to assist in the City's economic development efforts through the
development of new hotels and expansion of existing hotels in the city. �This program
� would create additional and expanded sources of uniform transient occupancy tax
revenue forthe general fund. Underthe proposed program, new.and existing hotels would
need to generate at least $1 million in annual uniform transient occupancy tax in the city,
and,new hotels would have to create at least fifty full-time jobs to be eligible.
E�Iigible hotel developments would be able to negotiate a Participation Agreement with
staff :that �would allow for shar.ing of a portion of uniform transient occupancy tax to �
incentivize.the development. The terms:of each agreement would be based on the details
of the proposed development and the prevailing mark�t. conditions. Each ,agreement
� would.require economic analysis in the form of.a tax sharing report to be prepared and
made�.�available to the public. Any Participation.Agreement would be subject to approval �
by the�City CounciL : �
It is recorrimended that the City Council adopt Ordinanee No: 16-18 establishing a uniform
transient occupancy tax sharing program.
7. �ATTACHMENT �
• �. Ordinance No. 16-18
ITEM 2 12/11/2018
ORDINANCE NO. 16-18
� AN�ORDINANCE OF THE CITY COUNCIL OF THE
� . CITY OF ORANGE, ADDING CHAPTER 5.17 TO
� TITLE 5 OF THE ORANGE MUNICIPAL CODE
� . . RELATING TO� THE ESTABLISHMENT OF A .
� UNIFORM TRANSIENT OCCUPANCY TAX
� SHARING PROGRAM. � � � �
� WHEREAS, the general welfare and material well-being of the residents of the City :
� of Orange (the "City") depend in large measure upon the facilities, goods, and services that �
� � businesses make available to the public and the City's residents, which, in turn, generate tax
revenues to the City to help pay for necessary services to:�support�such businesses; and
� � WHEREAS, the opening, operation, expansion of new.and existing hotels within the
: City will attract both local and regional travelers and will likely generate�increased�uniform
transient occupancy tax revenues to the City; and �
WHEREAS, the City wishes to induce anci �encourage the opening, operation, �
eXpansion of new and existing hotels, thereby assisting the City in achieving its goals related
to the development of said businesses and creating :new� sources of uniform transient
occupancy tax revenue for the City's general fund which�supports the public services that the
City provides to its residents and to said businesses; and
� WHEREAS, the City desires to incentivize hotel development in the City by sharing
� a portion of the increased uniform transient occupancy ta�c revenues generated by new and
. expanding hotels; and � . �
, � WHEREAS, the City Council desires to incentivize�the opening of.new hotels and
expansion.of existing hotels by adding a Chapter to Title 5 of.the City's Municipal Code that
provides for partial rebates of incremental uniform transient.occupancy tax to qualifying new
and existing hotels.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ORANGE
DOES ORDAIN AS FOLLOWS:
Section I. . � ADD CHAPTER 5.17 - U1vIFORM TRANSIENT OCCUPANCY TAX �
SHARING PROGRAM �� �
, Chapter 5.17 is added to Title 5 of the City of Orange Municipal Code to read as
follows: �
Chapter 5.17 � .
' UNIFORM TRANSIENT OCCUPANCY TAX SHARING PROGRAM
Sections:� �
5,17.010 .:: Purpose � � �
5.17,020 � De�nitions
5.17.03.Q ��. Participation Requirements �. �.
.: 5,17.040 � Uniform Transient Occupancy Tax Sharirig I'rogram
5.17.050. . General Fund Revenues � .
5.17.060 , .. Termination of Tax Sharing � � �. . _
5.17.070 Administrative Rules and Regulations �
5.17.010..� �Pur.pose. � ,
.The. purpose of this ,Chapter is to provide an ecorioinic� development incentive
� program for the opening, operation, and expansion of hotels which: i) enhance the quality of
hotels available to the public and the City's residents; ii) provide .desirable and a�tractive
experiences for the City's residents and visitors; iii) promote job creation opportunities in the
� City; iy) encourage property upgrades and enhancements in.the City; �and v) increase the
Unifor�n Transient Occupancy Tax revenue to the City. In the �implementation of this
program, the City Council finds: . �
. . .
(a) The general welfare and material well-being of the residents of the City depend in
substantial measure upon the growth and expansion of hotels in the City. �
(b) The opening, operation,�and expansion of the inventory of hotels in the City will: i)
enhance��the qualify of hotels available to the public and the�City',s�residents; ii)�provide
� desirabie and attractive experiences for the City's residents and .visitors; iii) promote job
creation opportunities in the City; iv) encourage property.upgrades and enhancements in the
City; and v) increase the Gity's iJniform Transient Occupancy Tax revenue.
• (c) It is in.the best interest of the City to induce and encourage.the opening, operation,
and expansion of hotels that might not otherwise exist.or might nof be as successful, thereby
creating new sources of revenues for the City's general fund which supports the public
.services.the City provides its residents and visitors.
(d) The authority granted and the purposes to be accomplished by this Chapter are proper .
local governmental and public purposes for which public funds can be expendecl and that the
opening, operatiori, and expansion of the inventory of hotels are of paramount importance to
the City, its residents, and businesses.
5.17.020 Definitions.
For the purposes of this Chapter, the following definitions shall apply:
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"Approved Hotel" means any Existing Hotel or New Hotel, as defined in this .
Chapter, located�within the City which has submitted an applicatiori for participation in the
Program and been approved by the City to participate in the Program through a Participation
Agreement. � �..
"Hotel" means any"Existing Hotel" or "New Hotel" as defined in tliis Cliapter.
, "Developer".riieans any person or entity in the business of developirig real property
for the purpose of operating a hotel thereon, and with whom the City Council.may, in its sole
discretion, enter into a Participation Agreement. . �� .
"Ex%sting Hotel.'.'. means a hotel in the hotel business which is subject to the Uniform
Transient .Occupancy Tax, which was operating with a valid business. license anywhere
within the City.not l.ess,than five (5) years prior to the filing of an application by.the Existing
Hotel for as:sistance under this Chapter. �
"New Hotel". means a hotel in the business of, or which proposes to be in a business,
which will be subject to the Uniform Transient Occupancy Tax, w�hich desires to open within
the City, and .is not operating within the City as of the date of the applicat�on by the New
Hotel for assistance under this Chapter, and has not operated within the City within one (1)
year of the date of the.application. �
"Owner or Operator" means the person or entity which owns and.operates the k�otel
, and has legal authority to enter into a Participation Agreement on behalf of tk�e hotel with the
City.
"Participation Agreement" or"Agreement" means an agreement between the City and
an Approved�.Hotel which provides for the rebate from the City to the Hotel.Owner of a
portion of the Hotel's Uniform Transient Occupancy Tax Increment, at a rate�and for a time
period as. determined by the City. Said Agreements may include �such provisions, .
restrictions, ,conditions or other provisions as the parties then agree are necessary to give
effect to the intent and spirit of this Chapter. � .
"Uniform Transient Occupancy T�" means that tax imposed pursuant to OMC
� . Chapter 5.16; accrued on account of occupancy in a hotel that would be payable to the City
by tlie liotel operator.� , . � - � �
"Uniform Transient Occupancy Tax Base" means the historical production. of
Uniform Transierit Occupancy Tax by an Existing Hotel as .calculated in the Uniform
Transient Occupancy Tax Sharing Report. The Uniform Transient Occupancy Tax Base
shall be calculated in a manner as to take into account the then-current. economic state
� relative to the historical performance of the hotel. In addition, it shall use a method
determined by the preparer of the Tax Sharing Report, for averaging production over an
appropriate period adjusted for inflation, or other similar adjustment index, it being the intent
that an Approved Hotel should receive a t� sharing arrangement which does not reward the
hotel for improvement in uniform transient occupancy tax arising from general economic
conditions as opposed to the improvements made by the Owner.
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"Uniform Transient Occupancy Tax IncremenY' means, on an annual .basis, the
difference between the Uniform Transient Occupancy Tax Base and the amount of Uniform
Transient Occupancy Tax.actually generated by a hotel and received by the City after a hotel
begins participating in the Program. .It is determined by reference to actual receipts by .the
City of Uniform Transient Occupancy Tax from the Operator. With respect to New H�tels,
all iJniform Transient Occupancy. Tax received shall be deemed to be Unifarm Transient
Occupancy Tax Increment unless adjustment(s) and/or additional condition(s) � are
incorporated into the Participation Agreement and approved by City. Under no.circumstance
shall the City be liable for any reimburseme�t of Uniform Transient Occupancy Tax
Increment not actually received and permanently retained by the City. ' . . � �
"Uniform Transient Occupancy Tax Quarter" means a three month quarterly period
as designated by the City. . � �.
"Uniform Transient Occupancy Tax Sharing" means the disbursement amount from �
the City to the Owner o��an Approved Hotel of a portion of that hotel's Uniform Trarisient
Occupancy Ta1c Increment, as determined each year for which the Agreement 'is valid.. �.The
payment of the Approved Hotel's portion of the Uniform Transient Occupancy �'�ax �
Increment shall be paid to the Approved Hotel within a reasonable time after the coriclusion
of each Uniform Trans'ient Occupancy Tax Quarter, consistent with the City's�ability to �
verify its actual Uniform Transient Occupancy Tax,receipts relative to the Approved Hotel.
"Uniform Transient Occupancy Tax Sharing Program" or "Program"- means the
Uniform Transient Occupancy Tax Program established by this Chapter. A Hotel's
participation°in the Program extends as long as the time period provided for in a Participation
Agreement. � � � �
� "Tax Sharing Report" means the report which shall be completed for�any applicant
hotel which shall analyze the projected econorriic factors relating to the expansion of an
Existing Hotel, or construction of a New Hotel, and the projected iinpact of such expansion
or construction on the hotel's generation of occupancies which are subject. to Uniform
� Transient Occupancy Tax and which generate general fund revenues to the City;.which shall
be considered by the City Council in making its decision as to a particular hotel, and which
the City Council may use, along with other evidence presented, in its sole discretion, to
determine whether the subject hotel is approyed to participate in the Program, and if so, the
appropriate Uniform Transient Occupancy Tax Sharing rate and time period for .the
Participation Agreement. The Tax Sharing Report shall be prepared by, staff or by a qualified
ecoriomic consultant employed by the City. The cost of preparing the Tax Sharing Report,
whether prepared by staff or an outside consultant shall be paid by the Owner of the hotel
applying for participation in the Program, unless the City, in its sole discretion, waives this
requirement as part of the terms of the Participation Agreement.
5.17.030 Participation Requirements.
(a) Eligible Existing Hotels include those hotels with an operating history of not less than
(5) five years or more in the City of Orange. Participation requirements include
implementation of a minimum of four(4) criteria listed below:
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(1) Be a Developer and/or Owner of any Existing Hotel;
(2) Plan and implement renovation to the existing hotel property including, but
not limited to rehabilitation work such as upgrading and expanding permanent
building improvements, parking, landscaping, tenant improvements, signs and
equipment that are permanently attached to the building;
(3) Plan and implement expansion to improve and/or expand the business
operations;
(4) Plan and implement consolidation of operations to a location in the City;
(5) Retention and/or creation of employment opportunities in the City; and
(6) Generate a minimum of$1 million in annual uniform transient occupancy tax
reported in the City.
(b) Eligible New Hotel shall include those Developer(s) and/or Owner(s) who desire(s) to
open a hotel within the City, and is(are) not operating said hotel within the City as of the date
of the application by the New Hotel for assistance under this Chapter, and has not operated
such a hotel within the City within one (1) year of the date of the application. Participation
requirements shall include all of the following:
(1) Identify a suitable location in the City;
(2) Plan and implement development of a New Hotel in the City; and,
(3) Create employment opportunities of not less than fifty (50) full-time jobs in
the City; and,
(4) Generate a minimum of$1 million in annual uniform transient occupancy tax
reported in the City.
(c) Both Eligible New and Existing Hotels are required to complete all the following:
(1) Submit to the City Manager a completed application for participation in the
Uniform Transient Occupancy Tax Sharing Program on the City's official
Uniform Transient Occupancy Tax Sharing Program application form; and
(2) Receive approval for participation in the Program from the City; and
(3) If approved by the City, enter into a Participation Agreement in the form
approved by the City.
(d) It is recognized that some hotels will be located in premises which are not owned by
the Owner of the Hotel and are rented or leased from a third party. In such circumstances,
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the City and the Hotel shall seek the permission of the owner of the property to record the
Operating Covenants against the subject property, applicable only to the Hotel. The City
Council, at its sole discretion, may approve such terms or conditions as it deems appropriate
in order to obtain the property owner's consent, or may, in its sole discretion, waive the
requirement of recording the Operating Covenants. If the property owner and the Owner are
under common control, recording the Operating Covenants shall be a requirement of
approval of the Participation Agreement.
5.17.040 Uniform Transient Occupancy Tax Sharing Program.
(a) the City Council is authorized to enter into Participation Agreements with Hotels in
accordance with this section.
(b) In order to determine the appropriate rate of Uniform Transient Occupancy Tax
Sharing for each hotel that has submitted an application pursuant to Section 5.17.030, the
City Manager or his designee shall cause to be prepared a Tax Sharing Report, which shall
analyze factors including the following. The City Manager or his designee, in his sole
discretion, may consider additional factors, or require additional studies or reports, as
deemed appropriate, which may include, but not be limited to:
(1) For Existing Hotels, the existing level of Uniform Transient Occupancy Tax
generated by the Existing Hotel, and the projected Uniform Transient
Occupancy Tax to be generated after a planned expansion project; and
(2) For New Hotels, the projected Uniform Transient Occupancy Tax to be
generated by the New Hotel; and
(3) The amount of expected Uniform Transient Occupancy Tax Increment; and
(4) For New and Existing Hotels, the type, quality, and price point of the New or
Existing Hotel; and ,
(5) For New and Existing Hotels, the total projected cost to construct the New
Hotel or expand the Existing Hotel; and
(6) The impact and benefits of the proposed expansion or construction of the New
or Existing Hotel on the residents and other businesses in the City and the
surrounding region; and
(7) The necessity for public assistance.
(c) After considering the Tax Sharing Report and such other factors, studies or reports as
it, in its sole discretion, deems appropriate, the City shall determine the rate of Uniform
Transient Occupancy Tax Sharing to be provided to a hotel that will be necessary or
appropriate to achieve the goals and intent of this chapter. The rate may vary over time as
determined by the City Council in its sole discretion.
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(d) After considering all of the material outlined in Section 5.17.040(c), the City shall
determine, in its sole discretion, the time period over which Uniform Transient Occupancy
Tax 5haring will be necessary or appropriate to achieve the goals and intent of this chapter.
The time period may be subject to possible reduction or termination as the City Council may
determine in its sole discretion.
(e) The City Council shall hold a public meeting on all contemplated Participation
Agreements. Notice of the time and place of the meeting shall be published pursuant to laws
of the State of California. At this meeting, the City Council shall consider all evidence
before it, including the information contained in the Ta}c Sharing Report.
(� The City shall make all Tax Sharing Reports available for public inspection and
copying, at a cost not to exceed the cost of duplication, no later than the time of publication
of the first notice of the public meeting mandated by this section.
(g) As part of the public meeting on a contemplated Participation Agreement, the City
. Council may approve the Participation Agreement with the Owner or Developer. A
Participation Agreement may provide for the City to rebate to a New or Existing Hotel an
appropriate rate of Uniform Transient Occupancy Tax Increment for an appropriate time
period, as necessary to achieve the goals and intent of this chapter, as determined by the City
Council in its sole discretion.
5.17.050 General Fund Revenues.
All Uniform Transient Occupancy Tax revenues or Uniform Transient Occupancy
Tax Increment remitted to the City by the Operator; which were collected by a hotel, are
general fund revenues of the City and shall be deposited in the City's general fund.
5.17.060 Termination of Tax Sharing.
The City may terminate the Participation Agreement on ten (10) days notice, or a
longer time period so specified in the Participation Agreement if the Hotel violates any of the
provisions in the Participation Agreement, this Ordinance, or local, State or Federal law,
provided that such violation or violations continue to exist at the end of said ten (10) day
period, the time period provided for in the Participation Agreement, or as determined by a
court of competent jurisdiction.. The City shall give notice to the Owner as required by the
terms of the Participation Agreement.
5.17.070 Administrative Rules and Regulations.
Consistent with the intent and goals of this chapter, the City Manager may adopt
administrative rules and regulations for implementation and furtherance of the requirements
of this chapter.
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Section II. SEVERABILITY
The City Council declares that, should any provision, section, paragraph, sentence or
word of this Ordinance be rendered or declared invalid by any final court action in a court of
competent jurisdiction or by reason of any preemptive legislation, the remaining provisions,
sections, paragraphs, sentences or words of this Ordinance as hereby adopted shall remain in
full force and effect.
Section III. REPEAL OF CONFLICTING PROVISIONS
All the provisions of the Orange Municipal Code previously adopted that are in
conflict with the provisions of this Ordinance are hereby repealed.
Sectiori IV. EFFECTIVE DATE
This Ordinance shall take effect thirty (30) days after its second reading by the City '
Council.
Section V. PO5TING
A summary of this ordinance shall be published and a certi�ed copy of the full text of
this ordinance shall be posted in the Office of the City Clerk at least 5 days prior to the City
Council meeting at which this ordinance is adopted. A summary of this ordinance shall also
be published once within 15 days after the ordinances passage in a newspaper of general
circulation, published, and circulated in the City of Orange. The City Clerk shall post in the
Office of the City Clerk a certified copy of the full text of such adopted ordinance along with
the names of those City Councilmembers voting for and against the ordinance in accordance
of Government Code Section 36933. This ordinance shall take effect 30 days from and after
the date of its final passage.
ADOPTED this day of , 2019.
Mark A. Murphy, Mayor, City of Orange
ATTEST:
Pamela Coleman, City Clerk, City of Orange
8
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) _
CITY OF ORANGE )
I, Pamela Coleman, Clerk of the City of Orange, California, do hereby certify that the
foregoing Ordinance was introduced at the regular meeting of the City Council held on the
day of , 2019, and thereafter at the regular meeting of said City
Council duly held on the day of , 2019, was duly passed and adopted
by the following vote, to wit:
AYES: COUNCILMEMBERS:
NOES: COUNCII.MEMBERS:
ABSENT: COUNCILMEMBERS:
ABSTAIN: COUNCILMEMBERS:
Pamela Coleman, Clerk, City of Orange
9
CITY COUNCIL MINUTES DECEMBER 11, 2018
9. LEGAL AFFAIRS (Continued)
9.2 Eichler Historic District Designation and adoption of the Orange Eichler Design
Standards. Ordinance No. 14-18 (Second Reading).
An Ordinance of the City Council of the City of Orange approving a Zone Change to create
a historic district overlay zone for three Eichler Tracts and amending Orange Municipal
Code Section 17.17.060 to include the adoption of the Orange Eichler Design Standards.
MOTION —Nichols
SECOND —Alvarez
AYES —Alvarez, Murphy,Nichols, Monaco
Moved that Ordinance No. 14-18 be read by title only and same was approved and adopted
by the preceding vote.
9.3 Repealing and Replacing Chapter 10.42 of the Orange Municipal Code pertaining to
off street parking lots. Ordinance No. 15-18 (First Reading).
An Ordinance of the City Council of the City of Orange Repealing and Replacing Chapter
10.42 of the Orange Municipal Code pertaining to parking in off-street parking lots.
MOTION —Alvarez
SECOND —Nichols
AYES —Alvarez, Murphy,Nichols, Monaco
Moved to approve Ordinance No. 15-18 for First Reading and same was set for Second
Reading by the preceding vote. '
9.4 Adding Chapter 5.17 to Title 5 of the Orange Municipal Code pertaining to Uniform
Transient Occupancy Tax Sharing Program. Ordinance 16-18 (First Reading).
An Ordinance of the City Council of the City of Orange, adding Chapter 5.17 to Title 5 of
the Orange Municipal Code relating to the Establishment of a Uniform Transient
Occupancy Taac Sharing Program.
MOTION —Monaco
SECOND —Nichols
AYES —Alvarez, Murphy,Nichols,Monaco
Moved to approve Ordinance No. 16-18 for First Reading and same was set for Second
Reading by the preceding vote.
9.5 Adopting the 2019 Regulations of the Orange County Taxi Administration Program.
Ordinance 17-18 (First Reading).
An Ordinance of the City Council of the City of Orange amending Title 5 of the Orange
Municipal Code repealing and replacing Chapter 5.79 adopting the 2019 regulations of the ,
Orange County Taxi Administration Program.
MOTION —Alvarez
SECOND —Nichols
AYES —Alvarez, Murphy,Nichols, Monaco
Moved to approve Ordinance No. 17-18 for First Reading and same was set for Second
Reading by the preceding vote.
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