SR 12-12-2017 3C
City Council Report
City Council Meeting: December 12, 2017
Agenda Item: 3.C
1 of 4
To: Mayor and City Council
From: Andy Agle, Director, Housing and Economic Development, Economic
Development Division
Subject: Santa Monica Tourism Marketing District Annual Report
Recommended Action
Staff recommends that the City Council receive and approve the Santa Monica Tourism
Marketing District’s Annual Report for 2017-18.
Executive Summary
Since its inception in 2013, the assessment revenues from the Santa Monica Tourism
Marketing District (SMTMD) have been invested in expanding Santa Monica’s
international brand recognition and broadening target markets in order to enhance local
benefits from tourism while reducing external impacts. The attached Annual Report
summarizes the SMTMD’s programs and activities for Fiscal Year 2017-18, including
the SMTMD budget, hotel report, and marketing plan. Staff recommends that Council
receive and approve the Annual Report, in compliance with State law governing tourism
marketing districts.
Background
In California, Tourism Marketing Districts are formed pursuant to the Property and
Business Improvement District Law of 1994. The law allows for the creation of special
benefit assessment districts for businesses to assess themselves in order to raise funds
within a specific geographic area to achieve a number of objectives including stabilizing
funding for tourism promotion, increasing a city’s transient occupancy tax revenues, and
remaining competitive by growing market share of visitors.
The Santa Monica Tourism Marketing District (SMTMD) was initiated by Santa Monica
hotels and Santa Monica Travel and Tourism (SMTT). Council adopted the SMTMD in
2 of 4
2012 and approved the renewal of the SMTMD in 2016. The current SMTMD has a
five-year term that began on January 1, 2013 and ends on December 31, 2017. The
renewal of the SMTMD provides an extension of nine-and-one-half years with a term
beginning January 1, 2018 and ending June 30, 2027 as outlined in the SMTMD Plan
2018-2027 (Attachment A). The Annual Report for FY 2017-18 represents the first
report for the renewal term of SMTMD (Attachment B).
The goals of the SMTMD are to develop Santa Monica as a brand, promote Santa
Monica as a tourism destination, and increase lodging stays through marketing and
promotional efforts. Key achievements that were a direct result of the SMTMD
assessment funding are detailed in the Annual Report. Most notably, the SMTMD funds
were invested in enhancing business development programs to broaden international
target markets of the United Kingdom, Australia, Brazil, France, and Germany, as well
as markets in North America. The additional investment in public relations media has
shown an increase in international visitors who are more likely to stay longer, spend
more money locally, and use active forms of transportation once they arrive.
Discussion
Streets and Highways Code Section 36650 specifies that the Annual Report must
provide the following information:
The improvements, maintenance, and activities to be provided for that fiscal year.
An estimate of the cost of providing the improvements, maintenance, and
activities for that fiscal year.
The estimated amount of any surplus or deficit in revenues to be carried over
from a previous fiscal year.
The estimated amount of any contributions to be made from sources other than
assessments levied pursuant to this part.
3 of 4
The method and basis of levying the assessment in sufficient detail to allow each
real property or business owner, as appropriate, to estimate the amount of the
assessment to be levied against his or her property or business for that fiscal
year.
Any proposed changes to the boundaries of the tourism marketing district or to
any benefit zones or classification within the district.
The operating budget for the SMTMD fluctuates with market conditions such as the
number of room night sales and is adjusted annually to reflect expenditure plans. The
following overview summarizes the expenditures funded with SMTMD assessments and
the information required in Section 36650:
SMTMD Reporting Years FY 2017-18
Revenues
Estimated TMD Assessments $4,596,540
Total Revenues* $4,596,540
Expenditures
Cost of Programs $3,156,206
Travel Industry Sales $1,532,509
Marketing $1,381,780
Visitor Services $63,917
Client Services/MICE $178,000
General and Administrative Services $389,221
Salaries and Benefits $821,286
Contingency Fund $229,827
Total Expenses $4,596,540
Estimated Carry-over from Previous Fiscal Year $120,050
Estimated In-Kind Contributions $125,000
* This does not include $2,701,170 funding that the City provides SMTT annually.
The FY 2017-18 Annual Report was presented and approved by the TMD Committee
on November 2, 2017 and by the Board of Santa Monica Travel and Tourism on
November 8, 2017, in accordance with the adopted SMTMD Management District Plan.
4 of 4
As stipulated by State Law, Council may approve the report as filed by the SMTMD or
may modify any particular section contained in the annual report and approve it as
modified. However, Council may not alter nor approve a change in the basis and
method of levying assessments that would impair an authorized or executed contract to
be paid from the revenues derived from the levy of assessments. Because the
proposed changes in the assessment formulas in the Annual Report were previously
approved in the formal renewal of the SMTMD, staff recommends approval of the
attached Annual Report as prepared by the SMTMD.
Financial Impacts and Budget Actions
The Santa Monica Tourism Marketing District is self-supporting and there is no budget
or fiscal impact resulting from the approval of the SMTMD’s Annual Report for
FY 2017-18.
Prepared By: Nia Tang, Senior Development Analyst
Approved
Forwarded to Council
Attachments:
A. Attachment A. SMTMD Plan 2018-27
B. Attachment B. SMTMD FY 2017-18 Annual Report
2018-2027
September 29, 2016 Prepared pursuant to the Property and Business Improvement District Law of
1994, Streets and Highways Code section 36600 et seq.
SANTA MONICA TOURISM
MARKETING DISTRICT
MANAGEMENT DISTRICT PLAN
CONTENTS
I. OVERVIEW ........................................................................................................................................ 2
II. ACCOMPLISHMENTS ..................................................................................................................... 4
III. BACKGROUND ................................................................................................................................ 6
IV. BOUNDARY ....................................................................................................................................... 7
V. BUDGET AND SERVICES ............................................................................................................. 8
A. Annual Service Plan ............................................................................................................ 8
B. Annual Budget .................................................................................................................... 9
C. California Constitutional Compliance .............................................................................. 10
D. Assessment ........................................................................................................................ 13
E. Penalties and Interest ........................................................................................................ 13
F. Time and Manner for Collecting Assessments ................................................................. 14
VI. GOVERNANCE ............................................................................................................................... 15
A. Owners’ Association ......................................................................................................... 15
B. Brown Act and California Public Records Act Compliance ............................................ 15
C. Annual Report ................................................................................................................... 15
D. Milestone Report ............................................................................................................... 15
APPENDIX 1 – LAW .................................................................................................................................... 17
APPENDIX 2 – ASSESSED BUSINESSES ............................................................................................. 28
APPENDIX 3 – BENEFIT STUDY .......................................................................................................... 29
APPENDIX 4 – TIER BENEFITS ............................................................................................................. 30
Prepared by
Civitas
(800)999-7781
www.civitasadvisors.com
SMTMD Management District Plan 2
September 29, 2016
I. OVERVIEW
Developed by Santa Monica Travel & Tourism (SMTT), the Santa Monica Tourism Marketing District
(SMTMD) is an assessment district proposed to provide specific benefits to payors, by funding
marketing and sales promotion efforts for assessed businesses. The SMTMD was formed in 2012 for
a five (5) year term; lodging businesses now wish to renew it for an additional nine and one-half (9.5)
years.
Location: The renewed SMTMD includes all lodging businesses located within the boundaries
of the City of Santa Monica with an average daily rate of $100 or more, as shown on
the map in section IV.
Services: The SMTMD is designed to provide specific benefits directly to payors by increasing
room night sales. Marketing and sales promotions will increase overnight tourism and
market payors as tourist, meeting and event destinations, thereby increasing room
night sales.
Budget: The total SMTMD annual budget for each full year of operation is anticipated to be
approximately $4,130,000. The initial “year” of operation will be a partial year
consisting of six months, for which the anticipated budget is $2,065,000. This budget
is expected to fluctuate as room sales and the assessment rate do, as detailed in Section
V.
Cost: The assessment is a fixed amount per occupied room per night. The assessment is
based on the businesses’ average daily rate, based on the previous year’s performance.
Average daily rate figures shall be updated annually. Based on the benefit received,
assessments will not be collected on: stays of more than thirty (30) consecutive days;
and stays paid by any Federal, State of California, or City of Santa Monica, official or
employee when on official business provided that an exempt certificate is executed at
the time of registration. Lodging businesses with an average daily rate less than $100
will not be included in the district or assessed. Assessment rates are:
Tier Average Daily
Rate
Assessment Per Occupied Room
Per Night
1 $300 and above $5.25
2 $200 - $299.99 $4.25
3 $100 - $199.99 $1.50
Assessment rates may be subject to an annual increase of no more than twenty-five
cents ($0.25) per year for Tier 1 and Tier 2 lodging businesses and no more than ten
cents ($0.10) per year for Tier 3 lodging businesses. The table below demonstrates the
maximum with the assumption that the rates will be increased by the maximum
amounts for each category in each year of the SMTMD’s nine and one-half (9.5) year
term, as it is a required disclosure, it is not the anticipated course of action. The
maximum assessment rate for each category is:
SMTMD Management District Plan 3
September 29, 2016
Year $100 - $199.99 $200 - $299.99 $300 and Above
2018* $1.50 $4.25 $5.25
2018-19 $1.60 $4.50 $5.50
2019-20 $1.70 $4.75 $5.75
2020-21 $1.80 $5.00 $6.00
2021-22 $1.90 $5.25 $6.25
2022-23 $2.00 $5.50 $6.50
2023-24 $2.10 $5.75 $6.75
2024-25 $2.20 $6.00 $7.00
2025-26 $2.30 $6.25 $7.25
2026-27 $2.40 $6.50 $7.50
*The initial “year” is January 1, 2018 through June 30, 2018
Collection: The City will be responsible for collecting the assessment on a monthly basis (including
any delinquencies, penalties and interest) from each lodging business located in the
boundaries of the SMTMD. The City shall take all reasonable efforts to collect the
assessments from each lodging business.
Duration: The renewed SMTMD will have a nine and one-half (9.5) year life, beginning January
1, 2018 through June 30, 2027. Once per year, beginning on the anniversary of district
renewal, there is a 30-day period in which owners paying more than fifty percent (50%)
of the assessment may protest and initiate a City Council hearing on district
disestablishment.
Management: Santa Monica Travel & Tourism will continue to serve as the SMTMD’s Owners’
Association. The Owners’ Association is charged with managing funds and
implementing programs in accordance with this Plan, and must provide annual reports
to the City Council.
SMTMD Management District Plan 4
September 29, 2016
II. ACCOMPLISHMENTS
The SMTMD is being renewed for the following reasons:
1. The SMTMD has funded excellent marketing programs and strategies
In the first five (5) year term of the SMTMD, the District has funded:
x Creation of 5-year strategic plan for the destination with input provided by the TMD Hotel
Committee;
x Focus Groups conducted in seven (7) domestic and international target markets to assess
perceptions of the destination brand;
x Integrated advertising campaigns targeted to domestic target markets to drive travel during
Santa Monica’s soft season (paid search, behavioral retargeting, display, paid social,
eNewsletter sponsorships).
x Entirely redesigned SantaMonica.com, including new white labeled booking site to drive
bookings directly to assessed lodging businesses’ websites. New website recognized with
industry design awards for structure, concept and functionality;
x Redesigned logo, brand style guide, destination photography and video; and
x New and improved Official Visitor Guide and Map with award-winning publishing partner.
2. The SMTMD has funded enhanced business development programs for key
international target markets
x United Kingdom, Australia and Brazil:
o Full time representation in all three markets;
o Enhanced public relations support;
o B2B and B2C integrated campaigns with performance metrics and sales analysis;
o Brand enhancing partnerships with travel trade clientele (Visit California and Brand
USA);
o Sales and media missions including key hotel partners for targeted markets;
o Tradeshow participation; and
o Ongoing trade relationship development and trainings.
x France and Germany:
o Part-time representation;
o B2B campaigns with sales and social media performance metrics;
o Tradeshow participation; and
o Ongoing trade relationship development and trainings.
3. The SMTMD has funded initiatives to increase the meetings and incentives market
Santa Monica Travel and Tourism has executed over twenty meetings and incentive (MICE) programs
with the objective of increasing qualified meetings and incentives business to the destination.
x Sales missions were conducted in New York, Toronto, Washington DC, Chicago,
Minneapolis, San Francisco, Orange County and San Diego;
x SMTT exhibited at IMEX America, IncentiveWorks, and Incentive Travel Exchange,
conducting over 500 meetings with key buyers;
x SMTT hosted nearly thirty (30) meeting planners to the destination to experience first hand
what their clients would be booking; and
SMTMD Management District Plan 5
September 29, 2016
x SMTT engaged a third party consultant to conduct focus groups with these meeting planners
to better understand future meetings and incentives business opportunity for the destination.
SMTMD Management District Plan 6
September 29, 2016
III. BACKGROUND
TMDs are an evolution of the traditional Business Improvement District. The first TMD was formed
in West Hollywood, California in 1989. Since then, ninety-five (95) California destinations have
followed suit. In recent years, other states have begun adopting the California model – Montana,
South Dakota, Washington, Colorado, Texas and Louisiana have adopted TMD laws. Several other
states are in the process of adopting their own legislation. The cities of Wichita, Kansas and Newark,
New Jersey used an existing business improvement district law to form a TBID. And, some cities,
like Portland, Oregon and Memphis, Tennessee have utilized their home rule powers to create TMDs
without a state law.
California’s TMDs collectively raise
over $200 million for local
destination marketing. With
competitors raising their budgets,
and increasing rivalry for visitor
dollars, it is important that Santa
Monica lodging businesses
continue to invest in stable,
lodging-specific marketing
programs.
TMDs utilize the efficiencies of
private sector operation in the
market-based promotion of
tourism districts. TMDs allow
lodging business owners to
organize their efforts to increase room night sales. Lodging business owners within the TMD pay an
assessment and those funds are used to provide services that increase room night sales.
In California, TMDs are formed pursuant to the Property and Business Improvement District Law of
1994. This law allows for the creation of a benefit assessment district to raise funds within a specific
geographic area. The key difference between TMDs and other benefit assessment districts is that funds raised are
returned to the private non-profit corporation governing the district.
There are many benefits to TMDs:
x Funds must be spent on services and improvements that provide a specific benefit only to those
who pay;
x Funds cannot be diverted to general government programs;
x They are customized to fit the needs of payors in each destination;
x They allow for a wide range of services;
x They are designed, created and governed by those who will pay the assessment; and
x They provide a stable, long-term funding source for tourism promotion.
1 2 4 6 9 12
19 24 28 31
37
45
60 63
72
80
88
95
0
10
20
30
40
50
60
70
80
90
100
1
9
8
9
1
9
9
5
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
Number of Districts Operating Per Year
SMTMD Management District Plan 7
September 29, 2016
IV. BOUNDARY
The SMTMD will include all lodging businesses, existing and in the future, available for public
occupancy within the boundaries of the City of Santa Monica with an average daily rate of $100 or
more. Lodging businesses whose average daily rate increases to $100 will be assessed upon
determination of the increase; likewise, lodging businesses whose average daily rate decreases to below
$100 will not be assessed upon determination of the decrease. Average daily rate figures shall be
updated annually.
Lodging business means: Any public or private hotel, inn, hostelry, tourist home or house motel,
rooming house or other lodging place within the City of Santa Monica offering lodging, wherein the
owner and operator thereof, for compensation, furnishes lodging to any transient.
The boundary, as shown in the map below, currently includes thirty-two (32) lodging businesses. A
complete listing of lodging businesses within the renewed SMTMD can be found in Appendix 2.
SMTMD Management District Plan 8
September 29, 2016
V. BUDGET AND SERVICES
A. Annual Service Plan
Assessment funds will be spent to provide specific benefits conferred or privileges granted directly to
the payors that are not provided to those not charged, and which do not exceed the reasonable cost
to the City of conferring the benefits or granting the privileges. The privileges and services provided
with the SMTMD funds are sales and marketing programs available only to assessed businesses. The
assessment rate for each Tier will be commensurate with privileges and services provided to assessed
businesses in each Tier as detailed in Appendix 4.
A service plan budget has been developed to deliver services that benefit the assessed businesses. A
detailed annual budget will be developed and approved by the SMTT TMD Committee and the SMTT
Board. The table below illustrates the initial annual budget allocations for the first partial fiscal year.
The total SMTMD annual budget for each full year of operation is anticipated to be approximately
$4,130,000. The initial “year” of operating will be a partial year consisting of six months, for which
the anticipated budget is $2,065,000.
Although actual revenues will fluctuate due to market conditions and assessment rate increases, the
proportional allocations of the budget shall remain the same. However, the City and the SMTT board
shall have the authority to adjust budget allocations between the categories by no more than fifteen
percent (15%) of the total budget per year. A description of the proposed improvements and activities
for the initial year of operation is below. The same activities are proposed for subsequent years. In
the event of a legal challenge against the SMTMD, any and all assessment funds may be used for the
costs of defending the SMTMD.
Each budget category includes all costs related to providing that service, in accordance with Generally
Accepted Accounting Procedures (GAAP). For example, the sales and marketing budget includes the
cost of staff time dedicated to overseeing and implementing the sales and marketing program. Staff
time dedicated purely to administrative tasks is allocated to the administrative portion of the budget.
The costs of an individual staff member may be allocated to multiple budget categories, as appropriate
Sales & Marketing,
$1,755,250 , 85%
Administration,
$206,500 , 10%
Contingency/Reserve, $103,250 , 5%
FY 2018 Budget (January -June) -$2,065,000
SMTMD Management District Plan 9
September 29, 2016
in accordance with GAAP. The staffing levels necessary to provide the services below will be
determined by SMTT on an as-needed basis. Staff costs will be allocated based on work performed.
Sales and Marketing
A sales and marketing program will promote assessed businesses as tourist, meeting, and event
destinations. The sales and marketing program will have a central theme of promoting Santa Monica
as a desirable place for overnight visits. The program will have the goal of increasing overnight
visitation and room night sales at assessed businesses, and may include the following activities:
x Internet marketing efforts to increase awareness and optimize internet presence to drive
overnight visitation and room sales to assessed businesses;
x Print ads in magazines and newspapers, television ads, and radio ads targeted at potential
visitors to drive overnight visitation and room sales to assessed businesses;
x Attendance of trade shows to promote assessed businesses;
x Sales blitzes for assessed businesses;
x Familiarization tours of assessed businesses;
x Research and analytics to promote assessed businesses;
x Translation services designed to drive overnight visitation and room sales to assessed
businesses;
x Staff to implement and support expanded marketing and promotion efforts to promote
assessed businesses;
x External public relations firms to promote assessed businesses;
x Preparation and production of collateral promotional materials such as brochures, flyers and
maps featuring assessed businesses;
x Attendance of professional industry conferences and affiliation events to promote assessed
businesses;
x Lead generation activities designed to attract tourists and group events to assessed businesses;
x Director of Sales and General Manager meetings to plan and coordinate tourism promotion
efforts for assessed businesses; and
x Development and maintenance of a website designed to promote assessed businesses.
Administration and Operations
The administration and operations portion of the budget shall be utilized for administrative staffing
costs, office costs, and other general administrative costs such as insurance, legal, and accounting fees.
Contingency/Reserve
The budget includes a contingency line item to account for uncollected assessments, if any. If there
are contingency funds collected, they may be held in a reserve fund or utilized for other program,
administration or renewal costs at the discretion of the Owners’ Association. Policies relating to
contributions to the reserve fund, the target amount of the reserve fund, and expenditure of monies
from the reserve fund shall be set by the SMTT TMD Committee and the SMTT Board of Directors.
The reserve fund may be used for the costs of renewing the District.
B. Annual Budget
The total nine and one-half (9.5) year improvement and service plan budget is projected at
approximately $4,130,000 annually, or $57,530,913 through 2027 if the maximum assessment rate
increases are adopted. Fiscal year 2018 covers the six month period from January to June 2018,
resulting in a lower budget for the first six months of district operation. This budget is expected to
fluctuate as room sales change and if the assessment rate is increased. The initial assessment rate is:
SMTMD Management District Plan 10
September 29, 2016
Tier Average Daily Rate Assessment Per Occupied Room Per Night
1 $300 and above $5.25
2 $200 - $299.99 $4.25
3 $100 - $199.99 $1.50
The SMTT may increase the assessment rate by a maximum of $0.25 per year for Tier 1 and Tier 2
lodging businesses and no more than ten cent ($0.10) per year for Tier 3 lodging businesses. The
assessment rate might not increase starting in fiscal year 2018-19, the increases may be implemented
in later years at the discretion of the Owners’ Association. The table below demonstrates the
maximum with the assumption that the rates will be increased by the maximum amounts for each
category in each year of the SMTMD’s nine and one-half (9.5) year term, as it is a required disclosure,
it is not the anticipated course of action. Additionally, a three percent (3%) annual increase in the
total budget is shown, to account for estimated increased room night sales as a result of SMTMD
efforts. This three percent (3%) annual increase is a conservative estimate based on the effects of
similarly sized TMD budgets. If the maximum annual assessment increases are adopted by the SMTT
Board, the estimated annual budget will increase as shown in the table below.
Estimated Annual Budget If Maximum Assessment Rates Are Adopted
2018-2027
FY Sales &
Marketing Administration Contingency/Reserve Total
2018* $1,755,250 $206,500 $103,250 $2,065,000
2018-19 $3,813,041 $448,593 $224,297 $4,485,931
2019-20 $4,130,576 $485,950 $242,975 $4,859,501
2020-21 $4,463,730 $525,145 $262,572 $5,251,447
2021-22 $4,813,157 $566,254 $283,127 $5,662,537
2022-23 $5,179,531 $609,357 $304,678 $6,093,566
2023-24 $5,563,556 $654,536 $327,268 $6,545,360
2024-25 $5,965,962 $701,878 $350,939 $7,018,778
2025-26 $6,387,504 $751,471 $375,736 $7,514,710
2026-27 $6,828,969 $803,408 $401,704 $8,034,082
Total $48,901,276 $5,753,091 $2,876,546 $57,530,913
*Fiscal year 2018 only covers a 6 month period (January – June). The estimate for the first year of operation of the
district is $4,130,000 which translates to approximately $344,166.67 per month. The subsequent years in the table
above use the $4,130,000 figure as a base number for all calculations.
C. California Constitutional Compliance
The SMTMD assessment is not a property-based assessment subject to the requirements of
Proposition 218. The Court has found, “Proposition 218 limited the term ‘assessments’ to levies on
real property.”1 Rather, the SMTMD assessment is a business-based assessment, and is subject to
Proposition 26. Pursuant to Proposition 26 all levies are a tax unless they fit one of seven exceptions.
Two of these exceptions apply to the SMTMD, a “specific benefit” and a “specific government
service.” Both require that the costs of benefits or services do not exceed the reasonable costs to the
City of conferring the benefits or providing the services.
1 Jarvis v. the City of San Diego 72 Cal App. 4th 230
SMTMD Management District Plan 11
September 29, 2016
1. Specific Benefit
Proposition 26 requires that assessment funds be expended on, “a specific benefit conferred or
privilege granted directly to the payor that is not provided to those not charged, and which does not
exceed the reasonable costs to the local government of conferring the benefit or granting the
privilege.”2 The services in this Plan are designed to provide targeted benefits directly to assessed
lodging businesses, and are intended only to provide benefits and services directly to those businesses
paying the assessment. These services are tailored not to serve the general public, businesses in
general, or parcels of land, but rather to serve the specific lodging businesses within the District. The
activities described in this Plan are specifically targeted to increase room night sales for assessed
lodging businesses within the boundaries of the District, and are narrowly tailored. SMTMD funds
will be used exclusively to provide the specific benefit of increased room night sales directly to the
assessees. Assessment funds shall not be used to feature non-assessed lodging businesses in SMTMD
programs, or to directly generate sales for non-assessed businesses. The activities paid for from
assessment revenues are business services constituting and providing specific benefits to the assessed
businesses.
The assessment imposed by this District is for a specific benefit conferred directly to the payors that
is not provided to those not charged. The specific benefit conferred directly to the payors is an
increase in room night sales. The specific benefit of an increase in room night sales for assessed
lodging businesses will be provided only to lodging businesses paying the district assessment, with
marketing and sales programs promoting lodging businesses paying the district assessment. The
marketing and sales programs will be designed to increase room night sales at each assessed lodging
businesses. Because they are necessary to provide the marketing and sales programs that specifically
benefit the assessed lodging businesses, the administration and contingency services also provide the
specific benefit of increased room night sales to the assessed lodging businesses.
Although the District, in providing specific benefits to payors, may produce incidental benefits to
non-paying businesses, the incidental benefit does not preclude the services from being considered a
specific benefit. The legislature has found that, “A specific benefit is not excluded from classification
as a ‘specific benefit’ merely because an indirect benefit to a nonpayor occurs incidentally and without
cost to the payor as a consequence of providing the specific benefit to the payor.”3
2. Specific Government Service
The assessment may also be utilized to provide, “a specific government service or product provided
directly to the payor that is not provided to those not charged, and which does not exceed the
reasonable costs to the local government of providing the service or product.”4 The legislature has
recognized that marketing and promotions services like those to be provided by the SMTMD are
government services within the meaning of Proposition 265. Destination marketing services are
frequently funded and provided by local governments. In the case of the SMTMD, the district is
formed and services are overseen by the Santa Monica City Council. Further, the legislature has
determined that “a specific government service is not excluded from classification as a ‘specific
government service’ merely because an indirect benefit to a nonpayor occurs incidentally and without
cost to the payor as a consequence of providing the specific government service to the payor.”6
2 Cal. Const. art XIII C § 1(e)(1)
3 Government Code § 53758(a)
4 Cal. Const. art XIII C § 1(e)(2)
5 Government Code § 53758(b)
6 Government Code § 53758(b)
SMTMD Management District Plan 12
September 29, 2016
3. Reasonable Cost
District services will be implemented carefully to ensure they do not exceed the reasonable cost of
such services. The full amount assessed will be used to provide the services described herein. Funds
will be managed by SMTT, and reports submitted on an annual basis to the City. Only assessed
lodging businesses will be featured in marketing materials, receive sales leads generated from district-
funded activities, be featured in advertising campaigns, and benefit from other district-funded services.
Non-assessed lodging businesses will not receive these, nor any other, district-funded services and
benefits.
The District-funded programs are all targeted directly at and feature only assessed businesses. It is,
however, possible that there will be a spill over benefit to non-assessed businesses. If non-assessed
lodging businesses receive incremental room nights, that portion of the promotion or program
generating those room nights shall be paid with non-District funds. SMTMD funds shall only be
spent to benefit the assessed businesses, and shall not be spent on that portion of any program which
directly generates incidental room nights for non-assessed businesses.
4. Benefit to NonPayors
The specific benefits provided by the SMTMD will only be directly provided to the assessed
businesses; they will not be directly provided to non-assessed businesses. Possible indirect benefit
does not preclude the SMTMD services from being considered a specific benefit. The legislature has
directly indicated, in the context of tourism marketing districts, that services are not precluded from
classification as a specific benefit merely because an indirect benefit to a nonpayor occurs as a
consequence of providing the service and without cost to the payor.7
Although the legislature does not require the cost of any incidental benefit to non-payors be separated
from the assessment, out of an abundance of caution a study was conducted on benefit generated by
the SMTMD programs. The study is attached as Appendix 3. The study found that 6.6% of marketing
programs generate incidental room night sales at non-assessed lodging businesses. Although it is not
required, the portion of programs that generate this benefit will be paid for with non-assessment
funds. Assessment funds will only fund that portion of the programs (93.4%) which represents a
specific benefit to the assessed businesses. For example, if a program costs $100,000 total, the
SMTMD will fund $93,400 and the remaining $6,600 will be sourced from non-assessment funds.
The amount of the assessment is no more than necessary to cover the reasonable costs of the proposed
activities, and the manner in which the costs are allocated to a business owner bear a fair share or
reasonable relationship to the businesses’ benefits received from the proposed activities. The benefit
study in Appendix 3 found that the benefits provided by the SMTMD do not exceed the reasonable
cost.
The programs provided with District funding receive additional non-assessment funding in the form
of grants, corporate sponsorships, event income, transient occupancy tax, and other funds. These
funding sources shall be equal to or exceed the amount of benefit conferred to non-payors annually
by the District’s services. These non-assessment funds will be used to pay for the benefit to non-
payors provided by the proposed services, ensuring that assessments will only be used to provide
benefits to assessed businesses.
7 AB 483 Ting (2014)
SMTMD Management District Plan 13
September 29, 2016
D. Assessment
The assessment is a fixed amount per occupied room per night. The assessment is based on the
businesses’ average daily rate, based on the previous year’s performance. Average daily rate figures
shall be updated annually. Based on the benefit received, assessments will not be collected on: stays
of more than thirty (30) consecutive days; and stays paid by any Federal, State of California, or City of
Santa Monica, official or employee when on official business provided that an exempt certificate is
executed at the time of registration. Lodging businesses with an average daily rate less than $100 will
not be included in the district or assessed. Assessment rates are:
Tier Average Daily Rate Assessment Per Occupied Room Per Night
1 $300 and above $5.25
2 $200 - $299.99 $4.25
3 $100 -$199.99 $1.50
Assessment rates may be subject to an annual increase of no more than twenty-five cents ($0.25) per
year for Tier 1 and Tier 2 lodging businesses and no more than ten cent ($0.10) per year for Tier 3
lodging businesses. The table below demonstrates the maximum with the assumption that the rates
will be increased by the maximum amount for each category in each year of the SMTMD’s nine and
one-half (9.5) year term, as it is a required disclosure, it is not the anticipated course of action. The
maximum assessment rate for each category is:
FY $100 - $199.99 $200 - $299.99 $300 and Above
2018* $1.50 $4.25 $5.25
2018-19 $1.60 $4.50 $5.50
2019-20 $1.70 $4.75 $5.75
2020-21 $1.80 $5.00 $6.00
2021-22 $1.90 $5.25 $6.25
2022-23 $2.00 $5.50 $6.50
2023-24 $2.10 $5.75 $6.75
2024-25 $2.20 $6.00 $7.00
2025-26 $2.30 $6.25 $7.25
2026-27 $2.40 $6.50 $7.50
*Fiscal year 2018 only covers a 6 month period (January – June).
The assessment is levied upon and a direct obligation of the assessed lodging business. However, the
assessed lodging business may, at its discretion, pass the assessment on to transients. The amount of
assessment, if passed on to each transient, shall be disclosed in advance and separately stated from the
amount of rent charged and any other applicable taxes, and each transient shall receive a receipt for
payment from the business. The assessment shall be disclosed as the “TMD Assessment.” The
assessment is imposed solely upon, and is the sole obligation of the assessed lodging business even if
it is passed on to transients. The assessment shall not be considered revenue for any purposes,
including calculation of transient occupancy taxes.
Bonds shall not be issued.
E. Penalties and Interest
If any business shall fail or refuse to remit to the City the assessment due on or before the last day of
the month in which the assessment becomes due, there shall be added to the assessment a penalty of
ten percent (10%) of the amount of the assessment. If the assessment remains delinquent and
SMTMD Management District Plan 14
September 29, 2016
unpaid thereafter for a period of thirty (30) days, there shall be an additional penalty of ten percent
(10%).
F. Time and Manner for Collecting Assessments
The SMTMD assessment will be implemented beginning January 1, 2018 and will continue for nine
and one-half (9.5) years through June 30, 2027. The City will be responsible for collecting the
assessment on a monthly basis (including any delinquencies, penalties and interest) from each lodging
with an average daily rate of $100 or more. The City shall take all reasonable efforts to collect the
assessments from each lodging business. The City shall forward the assessments collected to the
Owners’ Association.
SMTMD Management District Plan 15
September 29, 2016
VI. GOVERNANCE
A. Owners’ Association
The City Council, through adoption of this Management District Plan, has the right, pursuant to
Streets and Highways Code §36651, to identify the body that shall implement the proposed program,
which shall be the Owners’ Association of the SMTMD as defined in Streets and Highways Code
§366612. The City Council has determined that Santa Monica Travel & Tourism will serve as the
Owners’ Association for the SMTMD.
The SMTT standing advisory committee, known as the “TMD Hotel Committee” shall continue to
be responsible for making recommendations to the SMTT Board regarding SMTMD funds and
programs. The TMD Hotel Committee shall have between four (4) and nine (9) members, of which
at least four (4) will be representatives of assessed lodging businesses.
Annually, SMTT shall hold a joint SMTT board and TMD Hotel Committee meeting which will be
open to the public. The purpose of the annual meeting will be mutual approval of the budget and
programs for SMTMD funds for the upcoming fiscal year.
B. Brown Act and California Public Records Act Compliance
An Owners’ Association is a private entity and may not be considered a public entity for any purpose,
nor may its board members or staff be considered to be public officials for any purpose. The Owners’
Association is, however, subject to government regulations relating to transparency, namely the Ralph
M. Brown Act and the California Public Records Act. These regulations are designed to promote
public accountability. The Owners’ Association acts as a legislative body under the Ralph M. Brown
Act (Government Code §54950 et seq.). Thus, meetings of the SMTT board and certain committees
must be held in compliance with the public notice and other requirements of the Brown Act. The
Owners’ Association is also subject to the record keeping and disclosure requirements of the California
Public Records Act. Accordingly, the Owners’ Association shall publicly report any action taken and
the vote or abstention on that action of each member present for the action.
C. Annual Report
SMTT shall present an annual report at the end of each year of operation to the City Council pursuant
to Streets and Highways Code §36650 (see Appendix 1). The annual report shall include:
x Any proposed changes in the boundaries of the improvement district or in any benefit zones
or classification of businesses within the district.
x The improvements and activities to be provided for that fiscal year.
x An estimate of the cost of providing the improvements and the activities for that fiscal year.
x 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
that fiscal year.
x The estimated amount of any surplus or deficit revenues to be carried over from a previous
fiscal year.
x The estimated amount of any contributions to be made from sources other than assessments
levied pursuant to this part.
D. Milestone Report
SMTT shall prepare a five-year Milestone Report, which will be due in May 2022 prior to the City’s
approval of the annual report for Fiscal Year 2022-2023. The Milestone Report shall be submitted to
SMTMD Management District Plan 16
September 29, 2016
the City and all assessed businesses. It shall include all information required in the annual report, as
well as historical program and performance data, including key performance indicators for lodging
businesses such as average daily rate, revenue per available room, and occupancy rates. The Milestone
Report may serve as the annual report for Fiscal Year 2022-2023. If lodging businesses are not
satisfied with the results of the Milestone Report, they may petition the City to disestablish the District
pursuant to Streets and Highways Code section 36650.
SMTMD Management District Plan 17
September 29, 2016
APPENDIX 1 – LAW
STREETS AND HIGHWAYS CODE
Division 18. Parking
Part 7. Property and Business Improvement District Law of 1994
Cal Sts & Hy Code Div. 18, Pt. 7 Note (2015)
*** This document is current through the 2015 Supplement ***
(All 2014 legislation)
36600. Citation of part
This part shall be known and may be cited as the “Property and Business Improvement District Law of 1994.”
36601. Legislative findings and declarations
The Legislature finds and declares all of the following:
(a) Businesses located and operating within business districts in some of this state’s communities are economically
disadvantaged, are underutilized, and are unable to attract customers due to inadequate facilities, services, and
activities in the business districts.
(b) It is in the public interest to promote the economic revitalization and physical maintenance of business districts
in order to create jobs, attract new businesses, and prevent the erosion of the business districts.
(c) It is of particular local benefit to allow business districts to fund business related improvements, maintenance,
and activities through the levy of assessments upon the businesses or real property that receive benefits from those
improvements.
(d) Assessments levied for the purpose of conferring special benefit upon the real property or businesses in a
business district are not taxes for the general benefit of a city, even if property or persons not assessed receive
incidental or collateral effects that benefit them.
(e) Property and business improvement districts formed throughout this state have conferred special benefits upon
properties and businesses within their districts and have made those properties and businesses more useful by
providing the following benefits:
(1) Crime reduction. A study by the Rand Corporation has confirmed a 12-percent reduction in the
incidence of robbery and an 8-percent reduction in the total incidence of violent crimes within the 30 districts
studied.
(2) Job creation.
(3) Business attraction.
(4) Business retention.
(5) Economic growth.
(6) New investments.
(f) With the dissolution of redevelopment agencies throughout the state, property and business improvement districts
have become even more important tools with which communities can combat blight, promote economic
opportunities, and create a clean and safe environment.
(g) Since the enactment of this act, the people of California have adopted Proposition 218, which added Article XIII
D to the Constitution in order to place certain requirements and restrictions on the formation of, and activities,
expenditures, and assessments by property-based districts. Article XIII D of the Constitution provides that property-
based districts may only levy assessments for special benefits.
(h) The act amending this section is intended to provide the Legislature’s guidance with regard to this act, its
interaction with the provisions of Article XIII D of the Constitution, and the determination of special benefits in
property-based districts.
(1) The lack of legislative guidance has resulted in uncertainty and inconsistent application of this act,
which discourages the use of assessments to fund needed improvements, maintenance, and activities in property-
based districts, contributing to blight and other underutilization of property.
(2) Activities undertaken for the purpose of conferring special benefits upon property to be assessed
inherently produce incidental or collateral effects that benefit property or persons not assessed. Therefore, for special
SMTMD Management District Plan 18
September 29, 2016
benefits to exist as a separate and distinct category from general benefits, the incidental or collateral effects of those
special benefits are inherently part of those special benefits. The mere fact that special benefits produce incidental or
collateral effects that benefit property or persons not assessed does not convert any portion of those special benefits
or their incidental or collateral effects into general benefits.
(3) It is of the utmost importance that property-based districts created under this act have clarity regarding
restrictions on assessments they may levy and the proper determination of special benefits. Legislative clarity with
regard to this act will provide districts with clear instructions and courts with legislative intent regarding restrictions
on property-based assessments, and the manner in which special benefits should be determined.
36602. Purpose of part
The purpose of this part is to supplement previously enacted provisions of law that authorize cities to levy
assessments within property and business improvement districts, to ensure that those assessments conform to all
constitutional requirements and are determined and assessed in accordance with the guidance set forth in this act.
This part does not affect or limit any other provisions of law authorizing or providing for the furnishing of
improvements or activities or the raising of revenue for these purposes.
36603. Preemption of authority or charter city to adopt ordinances levying assessments
Nothing in this part is intended to preempt the authority of a charter city to adopt ordinances providing for a
different method of levying assessments for similar or additional purposes from those set forth in this part. A
property and business improvement district created pursuant to this part is expressly exempt from the provisions of
the Special Assessment Investigation, Limitation and Majority Protest Act of 1931 (Division 4 (commencing with
Section 2800)).
36603.5. Part prevails over conflicting provisions
Any provision of this part that conflicts with any other provision of law shall prevail over the other provision of law,
as to districts created under this part.
36604. Severability
This part is intended to be construed liberally and, if any provision is held invalid, the remaining provisions shall
remain in full force and effect. Assessments levied under this part are not special taxes.
36606. “Activities”
“Activities” means, but is not limited to, all of the following that benefit businesses or real property in the district:
(a) Promotion of public events.
(b) Furnishing of music in any public place.
(c) Promotion of tourism within the district.
(d) Marketing and economic development, including retail retention and recruitment.
(e) Providing security, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services
supplemental to those normally provided by the municipality.
(f) Other services provided for the purpose of conferring special benefit upon assessed businesses and real property
located in the district.
36606.5. “Assessment”
“Assessment” means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements and
providing activities that will provide certain benefits to properties or businesses located within a property and
business improvement district.
36607. “Business”
SMTMD Management District Plan 19
September 29, 2016
“Business” means all types of businesses and includes financial institutions and professions.
36608. “City”
“City” means a city, county, city and county, or an agency or entity created pursuant to Article 1 (commencing with
Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code, the public member agencies of which
includes only cities, counties, or a city and county, or the State of California.
36609. “City council”
“City council” means the city council of a city or the board of supervisors of a county, or the agency, commission,
or board created pursuant to a joint powers agreement and which is a city within the meaning of this part.
36609.4. “Clerk”
“Clerk” means the clerk of the legislative body.
36609.5. “General benefit”
“General benefit” means, for purposes of a property-based district, any benefit that is not a “special benefit” as
defined in Section 36615.5.
36610. “Improvement”
“Improvement” means the acquisition, construction, installation, or maintenance of any tangible property with an
estimated useful life of five years or more including, but not limited to, the following:
(a) Parking facilities.
(b) Benches, booths, kiosks, display cases, pedestrian shelters and signs.
(c) Trash receptacles and public restrooms.
(d) Lighting and heating facilities.
(e) Decorations.
(f) Parks.
(g) Fountains.
(h) Planting areas.
(i) Closing, opening, widening, or narrowing of existing streets.
(j) Facilities or equipment, or both, to enhance security of persons and property within the area.
(k) Ramps, sidewalks, plazas, and pedestrian malls.
(l) Rehabilitation or removal of existing structures.
36611. “Management district plan”; “Plan”
“Management district plan” or “plan” means a proposal as defined in Section 36622.
36612. “Owners’ Association”
“Owners’ association” means a private nonprofit entity that is under contract with a city to administer or implement
improvements, maintenance, and activities specified in the management district plan. An owners’ association may
be an existing nonprofit entity or a newly formed nonprofit entity. An owners’ association is a private entity and
may not be considered a public entity for any purpose, nor may its board members or staff be considered to be
public officials for any purpose. Notwithstanding this section, an owners’ association shall comply with the Ralph
M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government
Code), at all times when matters within the subject matter of the district are heard, discussed, or deliberated, and
with the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the
Government Code), for all records relating to activities of the district.
SMTMD Management District Plan 20
September 29, 2016
36614. “Property”
“Property” means real property situated within a district.
36614.5. “Property and business improvement district”; “District”
“Property and business improvement district,” or “district,” means a property and business improvement district
established pursuant to this part.
36614.6. “Property-based assessment”
“Property-based assessment” means any assessment made pursuant to this part upon real property.
36614.7. “Property-based district”
“Property-based district” means any district in which a city levies a property-based assessment.
36615. “Property owner”; “Business owner”; “Owner”
“Property owner” means any person shown as the owner of land on the last equalized assessment roll or otherwise
known to be the owner of land by the city council. “Business owner” means any person recognized by the city as the
owner of the business. “Owner” means either a business owner or a property owner. The city council has no
obligation to obtain other information as to the ownership of land or businesses, and its determination of ownership
shall be final and conclusive for the purposes of this part. Wherever this part requires the signature of the property
owner, the signature of the authorized agent of the property owner shall be sufficient. Wherever this part requires the
signature of the business owner, the signature of the authorized agent of the business owner shall be sufficient.
36615.5. “Special benefit”
“Special benefit” means, for purposes of a property-based district, a particular and distinct benefit over and above
general benefits conferred on real property located in a district or to the public at large. Special benefit includes
incidental or collateral effects that arise from the improvements, maintenance, or activities of property-based
districts even if those incidental or collateral effects benefit property or persons not assessed. Special benefit
excludes general enhancement of property value.
36616. “Tenant”
“Tenant” means an occupant pursuant to a lease of commercial space or a dwelling unit, other than an owner.
36617. Alternative method of financing certain improvements and activities; Effect on other provisions
This part provides an alternative method of financing certain improvements and activities. The provisions of this
part shall not affect or limit any other provisions of law authorizing or providing for the furnishing of improvements
or activities or the raising of revenue for these purposes. Every improvement area established pursuant to the
Parking and Business Improvement Area Law of 1989 (Part 6 (commencing with Section 36500) of this division) is
valid and effective and is unaffected by this part.
36620. Establishment of property and business improvement district
A property and business improvement district may be established as provided in this chapter.
36620.5. Requirement of consent of city council
SMTMD Management District Plan 21
September 29, 2016
A county may not form a district within the territorial jurisdiction of a city without the consent of the city council of
that city. A city may not form a district within the unincorporated territory of a county without the consent of the
board of supervisors of that county. A city may not form a district within the territorial jurisdiction of another city
without the consent of the city council of the other city.
36621. Initiation of proceedings; Petition of property or business owners in proposed district
(a) Upon the submission of a written petition, signed by the property or business owners in the proposed district who
will pay more than 50 percent of the assessments proposed to be levied, the city council may initiate proceedings to
form a district by the adoption of a resolution expressing its intention to form a district. The amount of assessment
attributable to property or a business owned by the same property or business owner that is in excess of 40 percent
of the amount of all assessments proposed to be levied, shall not be included in determining whether the petition is
signed by property or business owners who will pay more than 50 percent of the total amount of assessments
proposed to be levied.
(b) The petition of property or business owners required under subdivision (a) shall include a summary of the
management district plan. That summary shall include all of the following:
(1) A map showing the boundaries of the district.
(2) Information specifying where the complete management district plan can be obtained.
(3) Information specifying that the complete management district plan shall be furnished upon request.
(c) The resolution of intention described in subdivision (a) shall contain all of the following:
(1) A brief description of the proposed improvements, maintenance, and activities, the amount of the
proposed assessment, a statement as to whether the assessment will be levied on property or businesses within the
district, a statement as to whether bonds will be issued, and a description of the exterior boundaries of the proposed
district, which may be made by reference to any plan or map that is on file with the clerk. The descriptions and
statements do not need to be detailed and shall be sufficient if they enable an owner to generally identify the nature
and extent of the improvements, maintenance, and activities, and the location and extent of the proposed district.
(2) A time and place for a public hearing on the establishment of the property and business improvement
district and the levy of assessments, which shall be consistent with the requirements of Section 36623.
36622. Contents of management district plan
The management district plan shall include, but is not limited to, all of the following:
(a) If the assessment will be levied on property, a map of the district in sufficient detail to locate each parcel of
property and, if businesses are to be assessed, each business within the district. If the assessment will be levied on
businesses, a map that identifies the district boundaries in sufficient detail to allow a business owner to reasonably
determine whether a business is located within the district boundaries. If the assessment will be levied on property
and businesses, a map of the district in sufficient detail to locate each parcel of property and to allow a business
owner to reasonably determine whether a business is located within the district boundaries.
(b) The name of the proposed district.
(c) A description of the boundaries of the district, including the boundaries of benefit zones, proposed for
establishment or extension in a manner sufficient to identify the affected property and businesses included, which
may be made by reference to any plan or map that is on file with the clerk. The boundaries of a proposed property
assessment district shall not overlap with the boundaries of another existing property assessment district created
pursuant to this part. This part does not prohibit the boundaries of a district created pursuant to this part to overlap
with other assessment districts established pursuant to other provisions of law, including, but not limited to, the
Parking and Business Improvement Area Law of 1989 (Part 6 (commencing with Section 36500)). This part does
not prohibit the boundaries of a business assessment district created pursuant to this part to overlap with another
business assessment district created pursuant to this part. This part does not prohibit the boundaries of a business
assessment district created pursuant to this part to overlap with a property assessment district created pursuant to this
part.
(d) The improvements, maintenance, and activities proposed for each year of operation of the district and the
maximum cost thereof. If the improvements, maintenance, and activities proposed for each year of operation are the
same, a description of the first year’s proposed improvements, maintenance, and activities and a statement that the
same improvements, maintenance, and activities are proposed for subsequent years shall satisfy the requirements of
this subdivision.
(e) The total annual amount proposed to be expended for improvements, maintenance, or activities, and debt service
in each year of operation of the district. If the assessment is levied on businesses, this amount may be estimated
SMTMD Management District Plan 22
September 29, 2016
based upon the assessment rate. If the total annual amount proposed to be expended in each year of operation of the
district is not significantly different, the amount proposed to be expended in the initial year and a statement that a
similar amount applies to subsequent years shall satisfy the requirements of this subdivision.
(f) The proposed source or sources of financing, including the proposed method and basis of levying the assessment
in sufficient detail to allow each property or business owner to calculate the amount of the assessment to be levied
against his or her property or business. The plan also shall state whether bonds will be issued to finance
improvements.
(g) The time and manner of collecting the assessments.
(h) The specific number of years in which assessments will be levied. In a new district, the maximum number of
years shall be five. Upon renewal, a district shall have a term not to exceed 10 years. Notwithstanding these
limitations, a district created pursuant to this part to finance capital improvements with bonds may levy assessments
until the maximum maturity of the bonds. The management district plan may set forth specific increases in
assessments for each year of operation of the district.
(i) The proposed time for implementation and completion of the management district plan.
(j) Any proposed rules and regulations to be applicable to the district.
(k) (1) A list of the properties or businesses to be assessed, including the assessor’s parcel numbers for
properties to be assessed, and a statement of the method or methods by which the expenses of a district will be
imposed upon benefited real property or businesses, in proportion to the benefit received by the property or business,
to defray the cost thereof.
(2) In a property-based district, the proportionate special benefit derived by each identified parcel shall be
determined exclusively in relationship to the entirety of the capital cost of a public improvement, the maintenance
and operation expenses of a public improvement, or the cost of the activities. An assessment shall not be imposed on
any parcel that exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special
benefits are assessable, and a property-based district shall separate the general benefits, if any, from the special
benefits conferred on a parcel. Parcels within a property-based district that are owned or used by any city, public
agency, the State of California, or the United States shall not be exempt from assessment unless the governmental
entity can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special
benefit. The value of any incidental, secondary, or collateral effects that arise from the improvements, maintenance,
or activities of a property-based district and that benefit property or persons not assessed shall not be deducted from
the entirety of the cost of any special benefit or affect the proportionate special benefit derived by each identified
parcel.
(l) In a property-based district, the total amount of all special benefits to be conferred upon the properties located
within the property-based district.
(m) In a property-based district, the total amount of general benefits, if any.
(n) In a property-based district, a detailed engineer’s report prepared by a registered professional engineer certified
by the State of California supporting all assessments contemplated by the management district plan.
(o) Any other item or matter required to be incorporated therein by the city council.
36623. Procedure to levy assessment
(a) If a city council proposes to levy a new or increased property assessment, the notice and protest and hearing
procedure shall comply with Section 53753 of the Government Code.
(b) If a city council proposes to levy a new or increased business assessment, the notice and protest and hearing
procedure shall comply with Section 54954.6 of the Government Code, except that notice shall be mailed to the
owners of the businesses proposed to be assessed. A protest may be made orally or in writing by any interested
person. Every written protest shall be filed with the 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. A written protest may be withdrawn
in writing at any time before the conclusion of the public hearing. Each written protest shall 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 or the
authorized representative. A written protest that does not comply with this section shall not be counted in
determining a majority protest. If written protests are received from the owners or authorized representatives of
businesses in the proposed district that 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 50 percent, no further proceedings to levy the
proposed assessment against such businesses, as contained in the 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.
SMTMD Management District Plan 23
September 29, 2016
(c) If a city council proposes to conduct a single proceeding to levy both a new or increased property assessment and
a new or increased business assessment, the notice and protest and hearing procedure for the property assessment
shall comply with subdivision (a), and the notice and protest and hearing procedure for the business assessment shall
comply with subdivision (b). If a majority protest is received from either the property or business owners, that
respective portion of the assessment shall not be levied. The remaining portion of the assessment may be levied
unless the improvement or other special benefit was proposed to be funded by assessing both property and business
owners.
36624. Changes to proposed assessments
At the conclusion of the public hearing to establish the district, the city council may adopt, revise, change, reduce, or
modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with
the revenues from the assessments. Proposed assessments may only be revised by reducing any or all of them. At the
public hearing, the city council may only make changes in, to, or from the boundaries of the proposed property and
business improvement district that will exclude territory that will not benefit from the proposed improvements,
maintenance, and activities. Any modifications, revisions, reductions, or changes to the proposed assessment district
shall be reflected in the notice and map recorded pursuant to Section 36627.
36625. Resolution of formation
(a) If the city council, following the public hearing, decides to establish a proposed property and business
improvement district, the city council shall adopt a resolution of formation that shall include, but is not limited to, all
of the following:
(1) A brief description of the proposed improvements, maintenance, and activities, the amount of the
proposed assessment, a statement as to whether the assessment will be levied on property, businesses, or both within
the district, a statement on whether bonds will be issued, and a description of the exterior boundaries of the proposed
district, which may be made by reference to any plan or map that is on file with the clerk. The descriptions and
statements need not be detailed and shall be sufficient if they enable an owner to generally identify the nature and
extent of the improvements, maintenance, and activities and the location and extent of the proposed district.
(2) The number, date of adoption, and title of the resolution of intention.
(3) The time and place where the public hearing was held concerning the establishment of the district.
(4) A determination regarding any protests received. The city shall not establish the district or levy
assessments if a majority protest was received.
(5) A statement that the properties, businesses, or properties and businesses in the district established by the
resolution shall be subject to any amendments to this part.
(6) A statement that the improvements, maintenance, and activities to be conferred on businesses and
properties in the district will be funded by the levy of the assessments. The revenue from the levy of assessments
within a district shall not be used to provide improvements, maintenance, or activities outside the district or for any
purpose other than the purposes specified in the resolution of intention, as modified by the city council at the hearing
concerning establishment of the district.
(7) A finding that the property or businesses within the area of the property and business improvement
district will be benefited by the improvements, maintenance, and activities funded by the proposed assessments, and,
for a property-based district, that property within the district will receive a special benefit.
(8) In a property-based district, the total amount of all special benefits to be conferred on the properties
within the property-based district.
(b) The adoption of the resolution of formation and, if required, recordation of the notice and map pursuant to
Section 36627 shall constitute the levy of an assessment in each of the fiscal years referred to in the management
district plan.
36626. Resolution establishing district
If the city council, following the public hearing, desires to establish the proposed property and business
improvement district, and the city council has not made changes pursuant to Section 36624, or has made changes
that do not substantially change the proposed assessment, the city council shall adopt a resolution establishing the
district. The resolution shall contain all of the information specified in Section 36625.
36627. Notice and assessment diagram
SMTMD Management District Plan 24
September 29, 2016
Following adoption of the resolution establishing district assessments on properties pursuant to Section 36625 or
Section 36626, the clerk of the city shall record a notice and an assessment diagram pursuant to Section 3114. No
other provision of Division 4.5 (commencing with Section 3100) applies to an assessment district created pursuant
to this part.
36628. Establishment of separate benefit zones within district; Categories of businesses
The city council may establish one or more separate benefit zones within the district based upon the degree of
benefit derived from the improvements or activities to be provided within the benefit zone and may impose a
different assessment within each benefit zone. If the assessment is to be levied on businesses, the city council may
also define categories of businesses based upon the degree of benefit that each will derive from the improvements or
activities to be provided within the district and may impose a different assessment or rate of assessment on each
category of business, or on each category of business within each zone.
36628.5. Assessments on businesses or property owners
The city council may levy assessments on businesses or on property owners, or a combination of the two, pursuant
to this part. The city council shall structure the assessments in whatever manner it determines corresponds with the
distribution of benefits from the proposed improvements, maintenance, and activities, provided that any property-
based assessment conforms with the requirements set forth in paragraph (2) of subdivision (k) of Section 36622.
36629. Provisions and procedures applicable to benefit zones and business categories
All provisions of this part applicable to the establishment, modification, or disestablishment of a property and
business improvement district apply to the establishment, modification, or disestablishment of benefit zones or
categories of business. The city council shall, to establish, modify, or disestablish a benefit zone or category of
business, follow the procedure to establish, modify, or disestablish a property and business improvement district.
36630. Expiration of district; Creation of new district
If a property and business improvement district expires due to the time limit set pursuant to subdivision (h) of
Section 36622, a new management district plan may be created and the district may be renewed pursuant to this part.
36631. Time and manner of collection of assessment; Delinquent payments
The collection of the assessments levied pursuant to this part shall be made at the time and in the manner set forth by
the city council in the resolution levying the assessment. Assessments levied on real property may be collected at the
same time and in the same manner as for the ad valorem property tax, and may provide for the same lien priority and
penalties for delinquent payment. All delinquent payments for assessments levied pursuant to this part may be
charged interest and penalties.
36632. Assessments to be based on estimated benefit; Classification of real property and businesses;
Exclusion of residential and agricultural property
(a) The assessments levied on real property pursuant to this part shall be levied on the basis of the estimated benefit
to the real property within the property and business improvement district. The city council may classify properties
for purposes of determining the benefit to property of the improvements and activities provided pursuant to this part.
(b) Assessments levied on businesses pursuant to this part shall be levied on the basis of the estimated benefit to the
businesses within the property and business improvement district. The city council may classify businesses for
purposes of determining the benefit to the businesses of the improvements and activities provided pursuant to this
part.
(c) Properties zoned solely for residential use, or that are zoned for agricultural use, are conclusively presumed not
to benefit from the improvements and service funded through these assessments, and shall not be subject to any
assessment pursuant to this part.
SMTMD Management District Plan 25
September 29, 2016
36633. Time for contesting validity of assessment
The validity of an assessment levied under this part shall not be contested in any action or proceeding unless the
action or proceeding is commenced within 30 days after the resolution levying the assessment is adopted pursuant to
Section 36626. Any appeal from a final judgment in an action or proceeding shall be perfected within 30 days after
the entry of judgment.
36634. Service contracts authorized to establish levels of city services
The city council may execute baseline service contracts that would establish levels of city services that would
continue after a property and business improvement district has been formed.
36635. Request to modify management district plan
The owners’ association may, at any time, request that the city council modify the management district plan. Any
modification of the management district plan shall be made pursuant to this chapter.
36636. Modification of plan by resolution after public hearing; Adoption of resolution of intention;
Modification of improvements and activities by adoption of resolution after public hearing
(a) Upon the written request of the owners’ association, the city council may modify the management district plan
after conducting one public hearing on the proposed modifications. The city council may modify the improvements
and activities to be funded with the revenue derived from the levy of the assessments by adopting a resolution
determining to make the modifications after holding a public hearing on the proposed modifications. If the
modification includes the levy of a new or increased assessment, the city council shall comply with Section 36623.
Notice of all other public hearings pursuant to this section shall comply with both of the following:
(1) The resolution of intention shall be published in a newspaper of general circulation in the city once at
least seven days before the public hearing.
(2) A complete copy of the resolution of intention shall be mailed by first class mail, at least 10 days before
the public hearing, to each business owner or property owner affected by the proposed modification.
(b) The city council shall adopt a resolution of intention which states the proposed modification prior to the public
hearing required by this section. The public hearing shall be held not more than 90 days after the adoption of the
resolution of intention.
36637. Reflection of modification in notices recorded and maps
Any subsequent modification of the resolution shall be reflected in subsequent notices and maps recorded pursuant
to Division 4.5 (commencing with Section 3100), in a manner consistent with the provisions of Section 36627.
36640. Bonds authorized; Procedure; Restriction on reduction or termination of assessments
(a) The city council may, by resolution, determine and declare that bonds shall be issued to finance the estimated
cost of some or all of the proposed improvements described in the resolution of formation adopted pursuant to
Section 36625, if the resolution of formation adopted pursuant to that section provides for the issuance of bonds,
under the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500)) or in conjunction with
Marks-Roos Local Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of Chapter 5 of Division 7
of Title 1 of the Government Code). Either act, as the case may be, shall govern the proceedings relating to the
issuance of bonds, although proceedings under the Bond Act of 1915 may be modified by the city council as
necessary to accommodate assessments levied upon business pursuant to this part.
(b) The resolution adopted pursuant to subdivision (a) shall generally describe the proposed improvements specified
in the resolution of formation adopted pursuant to Section 36625, set forth the estimated cost of those improvements,
specify the number of annual installments and the fiscal years during which they are to be collected. The amount of
debt service to retire the bonds shall not exceed the amount of revenue estimated to be raised from assessments over
30 years.
SMTMD Management District Plan 26
September 29, 2016
(c) Notwithstanding any other provision of this part, assessments levied to pay the principal and interest on any bond
issued pursuant to this section shall not be reduced or terminated if doing so would interfere with the timely
retirement of the debt.
36650. Report by owners’ association; Approval or modification by city council
(a) The owners’ association shall cause to be prepared a report for each fiscal year, except the first year, for which
assessments are to be levied and collected to pay the costs of the improvements, maintenance, and activities
described in the report. The owners’ association’s first report shall be due after the first year of operation of the
district. The report may propose changes, including, but not limited to, the boundaries of the property and business
improvement district or any benefit zones within the district, the basis and method of levying the assessments, and
any changes in the classification of property, including any categories of business, if a classification is used.
(b) The report shall be filed with the clerk and shall refer to the property and business improvement district by name,
specify the fiscal year to which the report applies, and, with respect to that fiscal year, shall contain all of the
following information:
(1) Any proposed changes in the boundaries of the property and business improvement district or in any
benefit zones or classification of property or businesses within the district.
(2) The improvements, maintenance, and activities to be provided for that fiscal year.
(3) An estimate of the cost of providing the improvements, maintenance, and activities for that fiscal year.
(4) The method and basis of levying the assessment in sufficient detail to allow each real property or
business owner, as appropriate, to estimate the amount of the assessment to be levied against his or her property or
business for that fiscal year.
(5) The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year.
(6) The estimated amount of any contributions to be made from sources other than assessments levied
pursuant to this part.
(c) The city council may approve the report as filed by the owners’ association or may modify any particular
contained in the report and approve it as modified. Any modification shall be made pursuant to Sections 36635 and
36636.
The city council shall not approve a change in the basis and method of levying assessments that would impair an
authorized or executed contract to be paid from the revenues derived from the levy of assessments, including any
commitment to pay principal and interest on any bonds issued on behalf of the district.
36651. Designation of owners’ association to provide improvements and activitites
The management district plan may, but is not required to, state that an owners’ association will provide the
improvements, maintenance, and activities described in the management district plan. If the management district
plan designates an owners’ association, the city shall contract with the designated nonprofit corporation to provide
services.
36660. Renewal of district; Transfer or refund of remaining revenues; District term limit
(a) Any district previously established whose term has expired, or will expire, may be renewed by following the
procedures for establishment as provided in this chapter.
(b) Upon renewal, any remaining revenues derived from the levy of assessments, or any revenues derived from the
sale of assets acquired with the revenues, shall be transferred to the renewed district. If the renewed district includes
additional parcels or businesses not included in the prior district, the remaining revenues shall be spent to benefit
only the parcels or businesses in the prior district. If the renewed district does not include parcels or businesses
included in the prior district, the remaining revenues attributable to these parcels shall be refunded to the owners of
these parcels or businesses.
(c) Upon renewal, a district shall have a term not to exceed 10 years, or, if the district is authorized to issue bonds,
until the maximum maturity of those bonds. There is no requirement that the boundaries, assessments,
improvements, or activities of a renewed district be the same as the original or prior district.
36670. Circumstances permitting disestablishment of district; Procedure
SMTMD Management District Plan 27
September 29, 2016
(a) Any district established or extended pursuant to the provisions of this part, where there is no indebtedness,
outstanding and unpaid, incurred to accomplish any of the purposes of the district, may be disestablished by
resolution by the city council in either of the following circumstances:
(1) If the city council finds there has been misappropriation of funds, malfeasance, or a violation of law in
connection with the management of the district, it shall notice a hearing on disestablishment.
(2) During the operation of the district, there shall be a 30-day period each year in which assessees may
request disestablishment of the district. The first such period shall begin one year after the date of establishment of
the district and shall continue for 30 days. The next such 30-day period shall begin two years after the date of the
establishment of the district. Each successive year of operation of the district shall have such a 30-day period. Upon
the written petition of the owners or authorized representatives of real property or the owners or authorized
representatives of businesses in the area who pay 50 percent or more of the assessments levied, the city council shall
pass a resolution of intention to disestablish the district. The city council shall notice a hearing on disestablishment.
(b) The city council shall adopt a resolution of intention to disestablish the district prior to the public hearing
required by this section. The resolution shall state the reason for the disestablishment, shall state the time and place
of the public hearing, and shall contain a proposal to dispose of any assets acquired with the revenues of the
assessments levied within the property and business improvement district. The notice of the hearing on
disestablishment required by this section shall be given by mail to the property owner of each parcel or to the owner
of each business subject to assessment in the district, as appropriate. The city shall conduct the public hearing not
less than 30 days after mailing the notice to the property or business owners. The public hearing shall be held not
more than 60 days after the adoption of the resolution of intention.
36671. Refund of remaining revenues upon disestablishment or expiration without renewal of district;
Calculation of refund; Use of outstanding revenue collected after disestab-lishment of district
(a) Upon the disestablishment or expiration without renewal of a district, any remaining revenues, after all
outstanding debts are paid, derived from the levy of assessments, or derived from the sale of assets acquired with the
revenues, or from bond reserve or construction funds, shall be refunded to the owners of the property or businesses
then located and operating within the district in which assessments were levied by applying the same method and
basis that was used to calculate the assessments levied in the fiscal year in which the district is disestablished or
expires. All outstanding assessment revenue collected after disestablishment shall be spent on improvements and
activities specified in the management district plan.
(b) If the disestablishment occurs before an assessment is levied for the fiscal year, the method and basis that was
used to calculate the assessments levied in the immediate prior fiscal year shall be used to calculate the amount of
any refund.
SMTMD Management District Plan 28
September 29, 2016
APPENDIX 2 – ASSESSED BUSINESSES
BUSINESS NAME BUSINESS MAILING ADDRESS
Bayside Hotel 2001 Ocean Avenue, Santa Monica, CA 90405
Best Western Plus Gateway Hotel
Santa Monica
1920 Santa Monica Boulevard, Santa Monica, CA
90404
Cal Mar Hotel Suites 220 California Avenue, Santa Monica, CA 90403
Comfort Inn Santa Monica-West Los
Angeles
2815 Santa Monica Boulevard, Santa Monica, CA
90404
Days Inn Santa Monica/Los Angeles 3007 Santa Monica Boulevard, Santa Monica, CA
90404
DoubleTree Suites by Hilton Hotel
Santa Monica
1707 Fourth Street, Santa Monica, CA 90401
Fairmont Miramar Hotel & Bungalows 101 Wilshire Boulevard, Santa Monica, CA 90401
Hotel Carmel 201 Broadway, Santa Monica, CA 90401
Hotel Cassa Del Mar 1910 Ocean Way, Santa Monica, CA 90405
Hotel Shangri-La at the Ocean 1301 Ocean Avenue, Santa Monica, CA 90401
Huntley Santa Monica Beach 1111 Second Street, Santa Monica, CA 90403
JW Marriott Santa Monica Le Merigot 1740 Ocean Avenue, Santa Monica, CA 90401
Le Meridien Delfina Santa Monica 530 Pico Boulevard, Santa Monica, CA 90405
Loews Santa Monica Beach Hotel 1700 Ocean Avenue, Santa Monica, CA 90401
Ocean Lodge Hotel Corporation 1667 Ocean Avenue, Santa Monica, CA 90401
Ocean Park Inn 2452 Lincoln Boulevard, Santa Monica, CA 90405
Ocean View Hotel 1447 Ocean Avenue, Santa Monica, CA 90401
Oceana Beach Club Hotel 11766 Wilshire Boulevard, Los Angeles, CA 90025
Palihouse Santa Monica 1001 Third Street, Santa Monica, CA 90403
Rest Haven Motel 815 Grant Street, Santa Monica, CA 90405
Santa Monica Motel 2102 Lincoln Boulevard, Santa Monica, CA 90405
Santa Monica Pico Travelodge 3102 Pico Boulevard, Santa Monica, CA 90405
Sea Shore Motel 2637 Main Street, Santa Monica, CA 90405
Seaview Hotel 1760 Ocean Avenue, Santa Monica, CA 90401
Shore Hotel 1515 Ocean Avenue, Santa Monica, CA 90401
Shutters on the Beach Hotel One Pico Boulevard, Santa Monica, CA 90405
The Ambrose Hotel 1255 20th Street, Santa Monica, CA 90404
The Cottage Santa Monica 2219 Ocean Avenue, Santa Monica, CA 90405
The Georgian Hotel 1415 Ocean Avenue, Santa Monica, CA 90401
The Hotel California 1670 Ocean Avenue, Santa Monica, CA 90401
Viceroy Santa Monica 1819 Ocean Avenue, Santa Monica, CA 90401
Wyndham Santa Monica – At The Pier 120 Colorado Avenue, Santa Monica, CA 90401
SMTMD Management District Plan 29
September 29, 2016
APPENDIX 3 – BENEFIT STUDY