ORD 16-18 Establishing Uniform TOT Sharing ProgramORDINANCE 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
Orarige (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 and 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 tax 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 — UNIFORM 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'S.17
UNIFORM TRANSIENT OCCUPANCY TAX SHARING PROGRAM
Sections:
5.17.010 Purpose
5.17.020 Definitions
5.17.030 Participation Requirements
5.17.040 Uniform Transient Occupancy Tax Sharing Program
5.17.050 General Fund Revenues
5.17.060 Termination of Tax Sharing
5.17.070 Administrative Rules and Regulations
5.17.010 Purpose.
The purpose of this Chapter is to provide an economic 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 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 Uniform
Transient Occupancy Tax revenue to the City. In the implementation of this program, the City
Council fmds:
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 quality of hotels available to the public and the City's residents; ii)provide desirable
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 City's Uniform Transient Occupancy Tax revenue. .
c) It is in the best interest of the City to induce and enc,ourage the opening, operation, and
expansion of hotels that might not otherwise exist or might not 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 expended and that the
opening, operation, 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:
Ordinance No. 16-18 2
Approved Hotel" means.any Existing Hotel or New Hotel, as defined in this Chapter,
located within the City which has submitted an application 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 this Chapter.
Developer" means any person or entity in the business of developing 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.
Existing 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 less than five (5) years prior to the filing of an application by the Existing Hotel for
assistance 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 Taa, which desires to open within the
City, and is not operating within the City as of the date of the application 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 hotel and
has legal authority to enter into a Participation Agreement on behalf of the 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 Tax" 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 the hotel
operator.
Uniform Transient Occupancy Tax Base" means the historical production of Uniform
Transient Occupancy Tax by an Existing Hotel as calculated in the Uniform Transient
Occupancy Tax Sharing Report. The Uniform Transient Occupancy T 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 tax 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.
Ordinance No. 16-18 3
Uniform Transient Occupancy Tax Increment" 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 Hotels, all Uniform
Transient Occupancy Tax received shall be deemed to be Uniform 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 reimbursement of Unifortn Transient Occupancy T 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 of an Approved Hotel of a portion of that hotel's Uniform Transient
Occupancy Tax Increment, as determined each year for which the Agreement is valid. The
payment of the Approved Hotel's portion of the Uniform Transient Occupancy Tax Increment
shall be paid to the Approved Hotel within a reasonable time after the conclusion of each
Uniform Transient 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 economic factors relating to the expansion of an Existing
Hotel, or construction of a New Hotel, and the projected impact 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 approved 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 prepaxed by staff or by a qualified economic 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:
Ordinance No. 16-18 4
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, the City
Ordinance No. 16-18 5
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 r,ecording
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.
Ordinance No. 16-18 6
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
Sharing 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 Tax 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.
Ordinance No. 16-18 7
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.
Section IV. EFFECTIVE DATE
This Ordinance shall take effect thirty (30) days after its second reading by the City
Council.
Section V. POSTING
A summary of this ordinance shall be published and a certified 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 8th day of January 2019.
f
Mar A. Murphy, Mayor, Ci f range
i
ATTEST:
Pamela Coleman, City Clerk, City of Orange
Ordinance No. 16-18 8
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF ORANGE
I, PAMELA COLEMAN, City 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 l lth day of December 2018, and thereafter at the regular meeting of said City Council duly
held on the 8th day of January 2019, was duly passed and adopted by the following vote,to wit:
AYES:COUNCILMEMBERS: Alvarez, Murphy, Nichols, Monaco
NOES:COUNCILMEMBERS: None
ABSENT: COLTNCILMEMBERS: None
ABSTAIN: COUNCILMEMBERS: None
Pamela Co leman, City Clerk, City of Orange
Ordinance No. 16-18 9