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City of Missoula, Montana Item to be Referred to City Council Committee Committee: Administration and Finance Committee Item: Resolution of intention to create a Tourism Business Improvement District Date: August 14, 2009 Prepared by: Marty Rehbein, City Clerk Initiated by: same Action Required: Adopt a resolution of intention and schedule a public hearing. Recommended Motion: I move the City Council adopt a resolution of the Missoula City Council declaring it to be their intention to create a tourism business improvement district consisting of non- contiguous lands with the city of Missoula for the purpose of aiding tourism, promotion and marketing within the district and setting a public hearing on October 5, 2009 Time line: Referral to committee: August 24, 2009 Committee discussion: August 26th , September 2nd or September 9th Public hearing (if necessary): October 5, 2009 Deadline: N/A Background and Alternatives Explored: Background In 2007, the Montana legislature enacted amendments to the Business Improvement District law to permit cities to establish Tourism Business Improvement Districts. The cities of Billings, Bozeman, Great Falls, Bozeman and Helena have created TBID's, and Kalispell is in the initial stages of developing a TBID. Funds raised by a TBID can be spent to generally promote tourism and market the community for the benefit of the ratepayers. The ratepayers in a TBID are hotel and motel owners. The petitioners and city staff will be on hand to answer other questions Council members may have. Process for consideration Missoula hoteliers have presented a petition to my office requesting the City Council create a Tourism Business Improvement District in our community. The petition is signed by property owners or their authorized representatives representing over 60% of the area of the properties proposed to be assessed in the district. Under Montana state law, when a city is presented with such a petition, the City Council must commence the process to create the district. Following is the process outlined in the statutes: ---PAGE BREAK--- 1. City Clerk receives a petition to create a Tourism Business Improvement District and determines if it is signed by the owners (or their representative) of more than 60% of the area of the district. 2. If the petition meets this threshold, the City Council adopts a resolution of intention to establish the district and schedules a public hearing on the creation of the district. 3. The City Clerk publishes notice in the newspaper and mails notice to property owners at the last address where tax bills were sent. In Missoula, we will send this notice via certified mail. 4. The city observes a 15 day protest period. Property owners in the district may protest its creation by submitting a written protest within the 15 day protest period. 5. If the City receives protests from over 50% of the owners in the district, or if the City receives protest from property owners who represent over 50% of the total property tax valuation of the district, the district cannot be created. There is a statutory provision that requires if protest is received from owner who represent over 50% of the proposed assessments in the district, a district may not be created. At this time, however, there is no public information available to determine the projected assessment for each property owner. There is a recent court case out of Kalispell where the court determined that the city couldn't perform this analysis because the data was not available. 6. If there is not a sufficient protest, the City Council can create the district. How big is the district? The district encompasses the current and future city limits. Who would be subject to the assessment? Hotels will pay the assessment. A "hotel" is defined as any building containing six or more individual sleeping rooms or suites, providing overnight lodging facilities for periods of less than 30 days to the general public for compensation. The term "hotel" includes a facility represented to the public as a hotel, motel, resort, condominium inn, dude ranch, guest ranch, hostel, public lodging house, bed and breakfast facility, or other similar structure or portion thereof, which meet this criteria and are located within the district This definition is taken from state law regulating the statewide bed tax. Room rentals that are not subject to the Montana state bed tax are also exempt from the TBID assessment. How much are the proposed assessments? The assessments are proposed to be 75 cents per occupied room night. How will property owners be notified that this district has been requested? Is there a right of protest? The City Clerk office will send a certified mail notice to each of the property owners listed in Exhibit B. The notice will describe the general purpose of the district, when and where the public hearing will be conducted, and how they can protest the creation of the district. The notice will also include a copy of the resolution of intention and the proposed boundaries of the district. ---PAGE BREAK--- There is a right of protest provided in statute. Following are the statutory provisions (7-12- 1114 MCA) relating to protest:: ( 3) No further action shall be taken upon the proposed district or proposed expansion of an existing district for 1 year if a written protest against passage of the proposed ordinance is filed by: owners of property within the proposed district or area of a proposed expansion having a taxable valuation, when aggregated, representing not less than 50% of the total taxable valuation of property within the district or within the area of a proposed expansion; not less than 50% of the owners of property within the district or area of a proposed expansion; or owners of property within the proposed district or area of a proposed expansion having projected assessments, when aggregated, representing not less than 50% of the total projected assessments for property within the district or within the area of a proposed expansion. A note about protest provision The city has no way of knowing what the projected assessments for each individual property will be for this district. In a recent court case involving the establishment of a business improvement district in Kalispell, the court held that this provision in the protest law didn't apply because the city didn't have access to any information establishing what the assessments would be for each property in the district. How would assessments be reported and collected? When a hotel rents a room, they will collect the 75 cent per night assessment. When the hotel reports the revenue it collects for the state bed tax, it will prepare a similar report showing the number of occupied room nights. These reports will be submitted to the city or its agent. In many towns, the TBID board of trustees hires an accountant to collect and tabulate the reports. Each year, the city council will levy a tax on each of the properties in the district equal to the TBID fees collected and reported during the year. The tax will be collected through property tax bills in November and May each year. How would the district be governed? State law provides for the governance of the TBID. The Mayor appoints a 5-7 member board of trustees with the advice and consent of the City Council. The petitioners have recommended the board of trustees have seven members, and this recommendation is reflected in the resolution of intention. The trustees must be property owners (or their legally authorized representatives) in the district. The Mayor designates the first chairperson. State law provides that the director of Missoula's local non-profit convention and visitors bureau is the executive director to the TBID board. Each year, the trustees prepare an annual budget and work plan for the City Council's review and approval. The city conducts a public hearing on the work plan and budget before finalizing it. The budget and work plan must contain a provision to provide liability insurance coverage insuring the district, the board, and the city against legal liability for personal injury and property damage in an amount determined sufficient for that purpose by the city council. If the district is created, the resolution establishing the district will contain a provision that establishes the board of trustees. The Mayor will also appoint a non-voting ad hoc liaison ---PAGE BREAK--- to the board from the city to facilitate communication between the district trustees and the city. How long would the district last? The district is proposed for 10 years. If property owners in the district want to continue the district, they must follow the state law's procedures for creating the district (petition, resolution of intention, notice, public hearing, protest, resolution creating the district.) Financial Implications: The Missoula CVB estimates the district will raise approximately $492,750 annually given a 60% occupancy rate. This would be in addition to the $150,000 in current bed tax funds the Missoula CVB receives from the state of Montana. Attachments: Resolution of intention Exhibit A (map of current city limits (boundary of the district) Exhibit B (current listing of hotels within the boundary of the district where notices will be sent) Sample form of petition submitted