Fate of the TBID still unknown

Fate of the TBID still unknown
Operators of Del Mar’s six hotels are seeking renewal of a 1 percent fee that is used to market their facilities and bring people to the city. Council members are reluctant to make the commitment unless the hoteliers can prove the money is increasing occupancy. Photo by Bianca Kaplanek

DEL MAR — With the Tourism Business Improvement District set to expire in about a month, council members failed to reach a consensus and extended the approval process by two weeks, allowing more time to decide under what circumstances, if any, it should be renewed.

At the July 20 meeting, the first of two required public hearings to renew the district, they directed staff to work with hoteliers and the Del Mar Village Association to craft plans that could potentially be amenable to all the stakeholders.

The TBID, as it is known, allows hotel operators to charge guests an additional 1 percent fee that is collected with the transient occupancy tax and must be used for marketing to attract more visitors to lodging facilities in Del Mar.

It was authorized in 2010 for five years and will automatically expire Sept. 30 unless council approves an extension.

Earlier this month district members, who are representatives from the city’s six hotels, sought the maximum 10-year extension and introduced a plan in which the Del Mar Village Association would take over management duties.

At that meeting council members made it clear they didn’t support re-establishing the district for 10 years but said they would consider renewing it for up to five.

Based on the early history of the district they said they were reluctant to make a long-term commitment.

All parties involved agree the TBID got off to a rocky start. It took about three years to find the right marketing company and longer than expected to launch the Dream Del Mar website.

But within the past year or so the district has been showing some signs of success.

“The TBID has hit its stride and it’s working well,” property and business owner KC Vafiadis said. “In fact, I have to tell you that the hotels working together has inspired many of our retail businesses to start working together, and I have seen so many of our businesses start doing cross-promoting.”

Hotel occupancy and TOT funds have increased, but only slightly, leaving council members skeptical that the TBID is the best use of funds.

Richard Earnest, former mayor and current DMVA president, urged council not to give up too soon.

“We’re anticipating spending or investing a considerable amount of money over the next five years to improve what’s going on, the heads in the beds in the hotels,” which he said is beneficial to all other merchants in town.

When the hotels are full, “it does make a difference,” he said, “but we have to be able to measure what we are getting for those dollars.”

Earnest acknowledged the first few years “didn’t work out” as anticipated.

“I don’t think any of us disagree with that,” he said. “The first two or three years didn’t really measure what kind of results we can get from this. We believe that the last two years, however, have shown that we really can and are … making a difference.

“If you’re not sure that it’s not working and we seem to be doing well as a city, this is not the right time to be canceling it, because if you do and you’re wrong, you can’t recover from it. It just takes too long to do that,” Earnest said.

“We’re very much behind spending this money to support and promote the downtown,” Councilman Dwight Worden said. “Don’t have a problem with that. The question is, is the TBID the best vehicle for doing that because the option is to take the same amount of money and channel it in a different way.

“And the arguments in favor of doing it a different way are that the TBID statute, unfortunately from my perspective, says you have to spend the money targeted at the six hotels who are being assessed,” he added. “Some incidental spillover benefit to other businesses is OK, but you really can’t go out with a program to spend TBID money to generally promote the downtown.”

The TBID is anticipating revenue of about $205,000 annually. Earnest said members agreed to accept a five-year extension but anything shorter would be cost prohibitive since it takes about $35,000 to complete the renewal process.

Vafiadis said renewing the district for only two years would be like asking the president to seek re-election every other year.

“The important stuff gets put on the back burner,” she said. “Everybody loses.”

Council members have the option to cancel the TBID but only if there is malfeasance, City Attorney Leslie Devaney said.

They could, however, dissolve it under other circumstances if the hoteliers agree to those terms.

Mayor Al Corti said he could not support the TBID in its current form because there is not a good metric to measure its success or the return on investment.

“I am a little tired of spending our money as well as their money on trying to figure out how to do that,” he said.

Corti said he preferred a recommendation from the finance committee that calls for reducing the TBID assessment to a half percent to cover the cost of maintaining the Dream Del Mar website and increasing the TOT by a half percent so the money can be used to promote the entire city and not just the hotels.

Worden said he supports a two-year renewal but with “reopeners” that allow the city to cancel the district if it does not meet milestones or show proof of success.

Councilmen Don Mosier and Terry Sinnott said they would support a five-year renewal with similar requirements.

“I think it is very doable for our hotels (to) verify in a more specific way how the web page and the other marketing efforts contribute to their occupancy,” Sinnott said. “It just hasn’t been done yet. I’m reluctant to pull a plug on something … we haven’t proved one way or the other.”

“I think it’s better to stick with what’s working pretty well at the moment and watch it carefully,” Mosier said.

Between now and the next meeting on Sept. 8, when council was expected to vote on the renewal, staff will discuss with TBID and DMVA members a plan that allows the city to terminate the agreement early if performance goals are not met.

They will also look into using an alternate method to channel the necessary funds to the TBID to maintain its efforts, but without the restrictions.

Council is now expected to make its final decision Sept. 21.

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