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HomeMy WebLinkAboutItem 4.08 - 1998 Amendment to the Hotel Incentive Program Page 1 of 3 STAFF REPORT CITY COUNCIL DATE: May 15, 2018 TO: Honorable Mayor and City Councilmembers FROM: Christopher L. Foss, City Manager SUBJECT: Amendment to the Hotel (Transient Occupancy Tax) Incentive Program Prepared by: Suzanne Iarla, Management Analyst II EXECUTIVE SUMMARY: The City Council will consider amending the Hotel (Transient Occupancy Tax) Incentive Program to aid in attracting investment and assisting in the development of hotels in the City. STAFF RECOMMENDATION: Adopt the Resolution Approving the Amendment to the Hotel (Transient Occupancy Tax) Incentive Program. FINANCIAL IMPACT: None. DESCRIPTION: On November 7, 2017, the City Council approved the Hotel (Transient Occupancy Tax) Incentive Program to aid in attracting investment and assisting in the development of hotels in the City. Since that time, Staff has spoken with a number of interested hotel developers. Through these conversations, Staff has recognized a few development scenarios that meet the intent of the new program but would benefit from flexibility regarding the meeting space requirements for large, high quality hotel developments. Following is a summary of the adopted Program's eligibility and reimbursement limits: Program Eligibility: 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 Page 2 of 3 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, includin g 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 cl ass) / 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. Program Limits: 1. The Transient Occupancy Tax (TOT) 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 TOT 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 TOT rebate, consistent with that of a 3 -star hotel. 3. The amount of the TOT rebate shall be no greater than the funding gap. 4. The Applicant must enter into a binding agreement with the City. Staff recommends the following changes to the Program: 1. Edit Program Eligibility #1 to clarify that the hotel must operate continuously and also must offer certain services, however, services such as food and beverage, do not need to be available on a 24 -hour per day, 7 days a week basis. 2. Add Program Eligibility #5 which would allow high quality hotels who meet the intent of the program, but may not meet the 10,000 square feet of meeting/banquet space requirements, to be evaluated on a case -by-case basis by the City Manager or his/her designee to negotiate the terms of a draft agreement. At the April 3, 2018 Economic Development Committee special meeting, Staff presented the proposed changes to the Program for the Committee’s consideration. The Committee received the presentation and supported the amendments to the Program. Page 3 of 3 NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Resolution - Amending the Hotel (TOT) Incentive Program 2. Exhibit A to Resolution - Hotel (TOT) Incentive Program RESOLUTION NO. XX-18 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN ********* APPROVING AN AMENDENT TO THE HOTEL (TRANSIENT OCCUPANCY TAX) INCENTIVE PROGRAM WHEREAS, the City Council has made economic development a high priority and has asked Staff to evaluate possible incentives to renovate or update commercial areas in Dublin; and WHEREAS, the City Council desires to encourage the development of new high-quality hotels, as well as promote reinvestment in existing hotels in the City of Dublin, and WHEREAS, on November 7, 2017, the City Council of the City of Dublin approved Resolution 139-17 which established a Hotel (Transient Occupancy Tax) Incentive Program, and WHEREAS, amending the Program may allow the City greater flexibility to negotiate with a hotel developer. NOW THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby approve amendments to the Hotel (Transient Occupancy Tax) Incentive Program attached hereto as Exhibit A to this Resolution. BE IT FURTHER RESOLVED that the City Manager or designee is authorized to execute the Program and any associated agreement and to undertake such further actions as may be necessary and desirable to carry out the intent of this resolution. PASSED, APPROVED AND ADOPTED this 15th day of May, 2018, by the following vote: AYES: NOES: ABSENT: ABSTAIN: _______________________________ Mayor ATTEST: ______________________________ City Clerk Hotel (Transient Occupancy Tax) Incentive Program Approved by Resolution No. ___-18 on 5/15/18 PURPOSE: To offer a financial incentive program which encourages the development of new hotels, as well as promote reinvestment in existing hotels in the City of Dublin. ELIGIBILTY: 1. Hotel must be of a high 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; Hotel must offer 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. 5. On a case‐by‐case basis, the City Manager or his/her designee may negotiate with the applicant regarding the meeting space requirement and additional improvements that are deemed to be consistent with the intent of the program. 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 Transient Occupancy Tax (TOT) rebate will be no more than 70% for a 4-star hotel and no more than 50% for a 3-star hotel. Existing hotels that are renovated are eligible to receive a TOT rebate of no more than 50% of the increment above existing TOT levels for no longer than 10 years. 2. The term of the TOT 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 Exhibit A to Resolution Hotel (Transient Occupancy Tax) Incentive Program Approved by Resolution No. ___-18 on 5/15/18 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 TOT rebate, consistent with that of a 3-star hotel. 3. The amount of the TOT rebate shall be no greater than the funding gap. 4. The Applicant must enter into a binding agreement with the City. DOCUMENTATION: Requests to participate in the program must include the following: 1. A letter of request; 2. Third party certification of the development’s rating status; 3. A feasibility analysis; and 4. An executed binding agreement. Determination of the applicant’s TOT revenues will be based on revenues received, as documented by the City’s Administrative Services (Finance) Department. APPLICATION PROCESS: Program applicants will follow all procedures required by Assembly Bill 562 (2013), including prevailing wage, public hearings and reporting requirements. Upon receipt of a complete request to participate in the City’s Hotel Incentive Program, the request packet will be presented to the Economic Development Committee for review and recommendation. Requests approved by the Economic Development Committee will then be presented to City Council for final approval.