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HomeMy WebLinkAboutFS 2014-03-18 Item 2A - Interlocal Agreement - Formation of Tourism Promotion AreaTO: City of Tukwila Jim Haggerton, Mayor INFORMATIONAL U��U���������U� uu�n-*�vnnu�m�mo n*�`u����� n�n��u�ux�'�o��o�����u�u Mayor Haggerton Finance and Safety FROM: Derek Speck, Economic Development Administrator BY: Brandon Miles, Economic Development Planner DATE: March 5, 2014 SUBJECT: Tourism Promotion Are Update Review of Primary Deal Terms for Inter-local Agreement ISSUE Authorizing the Mayor to sign an Inter local Agreement (ILA) with the Cities of SeaTac and Des Moines for the creation of Tourism Promotion Area (TPA). BACKGROUND On April 1, 2013, the City Council adopted a motion in support of forming a TPA with the City of SeaTac (and any other cities). A TPA is geographic region in which a legislative authority (such as a county or city) charges a per room night fee on the furnishing of lodging by either a hotel or motel. The fee may be up to S2 per room night and may be charged to lodging businesses with forty or more lodging units. The fee is collected by the Washington State Department of Revenue and then transmitted to the legislative authority, or the legislative authority's designee. State law requires that TPA5 in King County comprise at least two loca governments (two cities or a city and the county). Therefore, Tukwila and SeaTac would need to execute an interlocal agreement designating a legislative authority with the ability to form the TPA. Over the last ten months, staf members from the Cities of Tukwila, SeaTac, and Des Moines have been working on a draft ILA. In mid-February the parties concluded negotiations and reached a tentative agreement that would be taken to the respective City Councils for review and possible action. The following outlines the primary terms of the draft ILA. Primary Terms of the Draft ILA 1. Transferal of Legislative Authority. The City will transfer its legislative authority to the SeaTac City Council for purposes of forming a TPA. The SeaTac City Council will have oversight of the TPA and the use of the funds. The Tukwila City Council's involvement in the formation of TPA will end once the ILA is executed. 2. Public Development Authority (PDA). SeaTac is responsible for forming a PDA. The SeaTac City Council, operating as the legislative authority for the TPA, will enter into a contract with the PDA to administer the day to day use of the TPA funds. The funds must be used for tourism promotion. The City of Tukwila will have no responsibility in the administration or oversight of the PDA. INFORMATIONAL MEMO Page 2 3. Lodinq Tax. The draft ILA specifies that the City intends to provide lodging tax funds to the PDA on an annual basis. The following is a breakdown of the intended lodging tax commitment: Annual Commitment of Lodging Tax to the Public Development Authority Notes Year Amount 2014 $712'000 Tukwila's 2014 lodging tax budget for Seattle Southside includes: $483.000 for basic operations and m jor initiatives; - �1O25OOfVr�v�rh��d� ' ' $1O,0OO for capital; and $110'50Ufor the conversation study and the Westfield Southcenter Visitor Information Center totaling $712.000. Note: The actual commitment of lodging tax to the FDA will be prorated based upon the formation date of the PDA. 2015 $403'000 Following 2014 the commitment of lodging tax to the PDA is reduced. In 2018 the amount provided to the FDA is approximately 50% of the 2014 budget for basic operations. 2016 $337.500 2017 $270.000 2018 and beyond $202'500 While the ILA specifies that the City intends to provide some lodging tax to the FDA, the ILA does not create a contractual obligation for the City to do so. The PDA, like any organization desiring to use lodging tax funds, will have to make an annual application to the City's Lodging Tax Advisory Committee (LTAC) for use of lodging tax funds. The LTAC will consider the application and make a formal recommendation to the City Council on the application. The City Council retains full control of the annual allotment of lodging tax funds, subject to the limitations under State Law. During the ILA negotiation process the City heard from several hoteliers who expressed concern that SSVS might cease operations while the PDAja becoming operational. Both the Cities of SeaTac and Tukwila are committed to operating SSVS until the PDA is able to assume full operations. The City of Tukwila, as the administrator of SGVG, has incurred liabilities and expenses associated with the operation of SSVS. These costs indude, but are not limited to; |abor, rent, and utilities. Until the POA is able to assume full operations, the City will also likely have future costs associated with the operation of SSVS. Under the terms of the ILA, the City of Tukwila is permitted to reduce the annual contributions to the PDA in order to pay for expenses incurred for the operation of SSVS. 4. Duration and Termination of the Agreement. The ILA's initial term is twenty (20) years from the effective date of the agreement. During the twenty (20) year period a city may withdraw from the agreement once the agreement has been in effect for at least four years. A city withdrawing from the ILA must provide at least one year's notice. Z:\Tourism Promotion Area\Council Review of ILA\Finance and Safety Memo, V2doc 2 INFORMATIONAL MEMO Page 3 5. Records of the FDA. The ILA provides that any city can i the records of the FDA. O. Transfer of SSVS Assets. The ILA specifies that the City of Tukwila will transfer existing assets and intellectual property to the FDA at no costs. 7. Hold Harmless and Legal Liability. The ILA creates little to no liability for the City of Tukwila with regards to administration of the TPA and the TPA funds. The City of SeaTac will be fully responsible for the operation of the TPA and will be responsible for the creation and operation of the FDA. DISCUSSION City staff believes that a tourism promotion area is a very good opportunity for the City of Tukwila and the Seattle Southside area. It is important to recognize that a number of the City's hoteliers are asking the City to impose the charge. Staff believes that hotelier support is a strong indication that the TPA would increase tourist activity and benefit the City and its businesses. Based upon the hotelier request, staff believes the additional benefits from the TPA would more than offset any competitive disadvantage due to the additional room night fee. During the n ns with the two other cities, City staf also discussed the p TPA formation with Tukwila lodging businesses. An open house for Tukwila hoteliers was held on August 20, 2013. Staff also had additional meetings with hoteliers who were unable to attend the open house. Staf has notified Tukwila hoteliers of the Council schedule for consideration of the ILA. The SeaTac City Council was briefed on the ILA on March 11, 2014 and was i of moving the ILA forward for approval. SeaTac will likely approve the ILA on March 25th. Staff from the City of Des Moines indicated that the [)es Moines City Council would review the ILA in April. All three cities must sign the ILA for it to become effective. FINANCIAL IMPACT Under the terms of the proposed ILA, the City will, in the future, commit a portion of its lodging tax to the PDA. The City Council will approve the annual commitment of lodging tax funds. If the TPA is successful in attracting additional room nights to the City then the City will likely see increase collections in lodging and sales tax revenue. RECOMMENDATION Staff recommends that the Mayor be authorized to enter into the ILA with the Cities of SeaTac � and Des Moines. Staff requests the Committee forward this item to the March 24th of the Whole meeting for discussion and be placed on the April 7th consent agenda. ATTACHMENTS • Draft Inter local Agreement with the Cities of SeaTac and Des Moines. • Memo to Finance and Safety, dated July 11, 2013 (without original attachments). • Memo to Finance and Safety, dated February 27, 2013 (without original attachments). • Minutes from the July 16. 2013 Finance and Safety Meeting. zATourism Promotion xma1councilReview ofvmFinance and Safety Memo, V2.doc 4 INTERLOCAL AGREEMENT FOR THE JOINT ESTABLISHMENT OF A TOURISM PROMOTION AREA THIS INTERLOCAL AGREEMENT FOR THE JOINT ESTABLISHMENT OF A TOURISM PROMOTION AREA (this "Agreement ") dated this day of 2013, is made and entered into by and among the CITY OF SEATAC ( "SeaTac "), the CITY OF TUKWILA ( "Tukwila "), and the CITY OF DES MOINES ( "Des Moines "), each being a municipal corporation organized under the laws and statues of the State of Washington, for the purpose of establishing a joint tourism promotion area pursuant to chapter 35.101 of the Revised Code of Washington ( "RCW "). RECITALS: WHEREAS, Tukwila currently administers Seattle Southside Visitors Services ( "SSVS "), a tourism promotion program funded by lodging taxes imposed and collected within Tukwila, SeaTac, and Des Moines, and remitted to SSVS in exchange for tourism promotion services; and WHEREAS, the tourism industry is a vital and substantial component of the region's economy and tourism promotion increases the number of visitors to the region which in turn increases regional sales supporting the local economy; and WHEREAS, the Legislature of the State of Washington has recognized the importance of tourism promotion in the State of Washington and in 2003 passed Engrossed Substitute Senate Bill No. 6026, codified as chapter 35.101 RCW (the "TPA Act "), authorizing counties with a population greater than forty thousand but less than one million, and any city or town within such a county, to establish a tourism promotion area for the purpose of imposing special assessments on the furnishing of lodging to be expended exclusively on tourism promotion; and WHEREAS, in 2009 the Legislature amended the TPA Act to allow two or more cities located in a county with a population of one million or more acting jointly under chapter 39.34 RCW (the "Interlocal Cooperation Act ") to form a tourism promotion area for such purpose; and WHEREAS, other Washington counties and cities, including Pierce County, the Tri- Cities, Spokane County, and Clark County, have established tourism promotion areas and have dedicated such funds for tourism promotion; and WHEREAS, the operators of lodging businesses located in southwest King County are preparing to initiate the formation of a tourism promotion area pursuant to the TPA Act within the jurisdictional boundaries of Tukwila, SeaTac and Des Moines (the "Seattle Southside TPA "); and 5 WHEREAS, depending on the rates of the assessments, the proposed Seattle Southside TPA is projected to provide approximately $2.5 million of additional revenue for tourism promotion each year; and WHEREAS, the additional revenue stream is expected to help the tourism promotion program currently administered by SSVS remain competitive with other destination marketing organizations in the State of Washington, bring more visitors to the area, bolster hotel occupancy, protect current jobs, create new jobs, increase business at restaurants and retail stores, and increase patronage at arts, cultural and sporting venues in an ever increasingly competitive marketplace; and WHEREAS, assessments received from the proposed Seattle Southside TPA will be remitted to a public development authority chartered by SeaTac pursuant to chapter 35.21 RCW; and WHEREAS, if formed, the Seattle Southside TPA is expected to provide needed resources to increase tourism, which will increase hotel occupancy among participating hotels within the defined area; and WHEREAS, the promotion of the region to increase tourism will also provide economic benefit to retail, restaurant, entertainment and cultural industries that are closely connected to the hotel industry and critical to the health of the local economy; and WHEREAS, SeaTac, Tukwila, and Des Moines (referred to herein as the "Parties ") currently fund certain basic operations and media expenses of SSVS with lodging tax revenues and desire to have that work continue. As set forth herein, the Parties intend to commit certain lodging tax revenues to fund regional tourism marketing by contracting with the public development authority, or successor entity, for such services; and WHEREAS, it is paramount that SeaTac and Tukwila continue to operate SSVS in its current form until such time that the public development authority can assume all duties and obligations of SSVS; and WHEREAS, to form a tourism promotion area an initiation petition satisfying the terms of the TPA Act must first be presented to the legislative authority having jurisdiction of the area in which the proposed tourism promotion area is to be located and a public hearing must be held after providing proper notice; and WHEREAS, the Parties now desire to enter into this Agreement for the purpose of appointing a legislative authority to receive the initiation petition and otherwise carry out the terms of the TPA Act in order to help facilitate the formation and operation of the Seattle Southside TPA; NOW THEREFORE, it is hereby agreed and covenanted among the undersigned as follows: 2 6 Section 1. Definitions. In addition to the terms defined in the Recitals above, the following terms shall have the meanings set forth below: "Agreement" means this Interlocal Agreement for the Joint Establishment of a Tourism Promotion Area by and among SeaTac, Tukwila and Des Moines, entered into pursuant to the TPA Act and the Interlocal Cooperation Act, as it may be amended from time to time. "Annual Budget" means the budget approved pursuant to Section 7 of this Agreement. "Des Moines" means the City of Des Moines, a municipal corporation organized under the laws and statutes of the State. "Interlocal Cooperation Act" means chapter 39.34 RCW as the same may be amended from time to time. "Legislative Authority" means the legislative authority of the Seattle Southside TPA appointed pursuant to Section 2 of this Agreement, as the same shall be duly and regularly constituted from time to time. "Lodging Business" means a business located within the Seattle Southside TPA that furnishes lodging taxable by the State under chapter 82.08 RCW that has 40 or more lodging units. Lodging facilities with fewer than 40 rooms are not considered "Lodging Businesses" for the purpose of this Agreement and are exempt from any fees imposed under chapter 35.101 RCW. "Operating Agreement" means the agreement(s) for the operation and management of the Seattle Southside TPA. "Operator" or "Operator of a Lodging Business" means an operator of a Lodging Business, whether in the capacity of owner, general manager, lessee, sublessee, mortgagee in possession, license or any other similar capacity. "Petition" means the initiation petition delivered to the Legislative Authority pursuant to the TPA Act. "SeaTac" means the City of SeaTac, a municipal corporation organized under the laws and statutes of the State. "SeaTac City Council" means the City Council of SeaTac as the general legislative authority of SeaTac, as the same shall be duly and regularly constituted from time to time. "Seattle Southside Tourism Promotion Area" means the geographic area identified in the Petition. "Seattle Southside TPA" means the Seattle Southside Tourism Promotion Area. 3 7 "Special Assessment" means the levy (charge) imposed by the Legislative Authority on the Operators of Lodging Businesses within the Seattle Southside TPA and subsequently passed on to the guests of the Lodging Business, under the authority of the TPA Act, for the purpose of providing funding of tourism promotion in the boundaries of the Seattle Southside TPA. "SSRTA" or "Seattle Southside Regional Tourism Authority" means the public development authority chartered by SeaTac pursuant to chapter 35.21 RCW. "SSRTA Board of Directors" means the Board of Directors of SSRTA, as the general legislative authority of SSRTA, as the same shall be duly and regularly constituted from time to time. "SSVS" means Seattle Southside Visitors Services, a tourism promotion program currently administered by Tukwila. "State" means the State of Washington. "Tourism Promotion" means domestic and international tourism promotion, advertising, sales and marketing activities intended to encourage tourism in the Seattle Southside TPA in order to increase area hotel occupancies. "Promotion, advertising, sales and marketing activities" include, but are not limited to, strategic planning, market research, creative development, media placement, sales activities, hosting tourism industry events relating to promotion and marketing, and administrative and management support for such services, and creating and maintaining a standing limited reserve, as such reserve may be specified in the Annual Budget, to fund any such activities. "Transient Basis" means the rental of a room or rooms for dwelling, lodging, or sleeping purposes by the Operator of a Lodging Business for a period of 30 consecutive calendar days or less, counting a portion of a day as a full calendar day. "Tukwila" means the City of Tukwila, a municipal corporation organized under the laws and statutes of the State. "Zone" or "Zones" means the distinct geographic subarea or subareas within the Seattle Southside TPA as established by resolution of the Legislative Authority. Section 2. Purpose of this Agreement; Appointment of Legislative Authority. (a) Purpose of this Agreement. The purpose of this Agreement is (1) to promote tourism in the boundaries of the Seattle Southside TPA by appointing a legislative authority for the purpose of accepting an initiation Petition for the formation of the Seattle Southside TPA pursuant to the TPA Act in the jurisdictional boundaries of SeaTac, Tukwila and Des Moines, which when and if created, will permit collection of Special Assessments from Lodging Businesses to fund Tourism Promotion, and (2) to memorialize the agreement among the Parties hereto relating to the Seattle Southside TPA. 4 8 The Petition must describe the boundaries of the proposed tourism promotion area, the proposed uses and projects to which the proposed revenue from the charges shall be used and the total estimated costs, the estimated rate for the charge with a proposed breakdown by class of Lodging Businesses (if such classification is to be used), and the signatures of the persons who Operate Lodging Business in the proposed area who would pay sixty percent or more of the proposed charges. (b) Appointment of Legislative Authority. The SeaTac City Council is hereby appointed as the Legislative Authority of the Seattle Southside TPA for purposes of this Agreement and the TPA Act. References to the "Legislative Authority" herein shall mean the SeaTac City Council serving in its capacity as the Legislative Authority of the Seattle Southside TPA. (c) Understanding of the Parties. It is hereby understood and agreed by the Parties that the SeaTac City Council, serving in its capacity as the Legislative Authority, shall, after receiving the Petition, proceed with adopting a resolution of intent to establish the "Seattle Southside Tourism Promotion Area" designated to include the jurisdictional boundaries of SeaTac, Tukwila and Des Moines, and hold a public hearing after providing proper notice under the terms of the TPA Act. It is understood and agreed to by the Parties hereto that the purpose of forming the Seattle Southside TPA is to provide an additional source of revenue to be used exclusively to fund Tourism Promotion within the boundaries of the Seattle Southside TPA which will benefit the tourism industry and the Operators of Lodging Businesses located in the boundaries of the Seattle Southside TPA and the Parties hereto. (d) Termination of Proceedings. Notwithstanding anything herein to the contrary, if the Seattle Southside TPA is not formed by March 31, 2015, this Agreement shall terminate and shall no longer be in force and effect. Section 3. Legislative Authority; Meetings; Powers. (a) Officers of the Legislative Authority. The Chair of the SeaTac Lodging Tax Advisory Committee, or his or her designee, shall serve as Chair of the Legislative Authority. On matters decided by the Legislative Authority, the signature of the Chair alone is sufficient to bind the Legislative Authority. (b) Meetings of the Legislative Authority. Regular meetings of the Legislative Authority shall be held at the times and locations set forth in a meeting schedule approved by the Legislative Body. There shall be at least one meeting of the Legislative Authority each year, and not less than fifteen days' notice shall be given to all members of the Legislative Authority and the Parties hereto prior to any such meeting. Other meetings (including special meetings) may be held upon request of the Chair or any other members. All meetings shall be open to the public to the extent required by chapter 42.30 RCW. Each member of the Legislative Authority shall have an equal vote and voice in all decisions of the Legislative Authority. Unless otherwise provided, the City of SeaTac City Council Administrative Procedures and Robert's Revised 5 9 Rules of Order (newly revised) shall govern all procedural matters relating to the business of the Legislative Authority. (c) Powers of the Legislative Authority. The Parties hereto acknowledge and agree that the SeaTac City Council is being appointed solely to serve as the "legislative authority" for purposes of the TPA Act. The day to day operations of the Seattle Southside TPA, including but not limited to the management and expenditure of Special Assessments, shall be managed by SSRTA as manager and operator of the Seattle Southside TPA. The SeaTac City Council, when acting in its capacity as Legislative Authority, shall have the authority to: 1. Receive the Petition, adopt a resolution of intent to form the Seattle Southside TPA, hold a public hearing as required by the TPA Act, and otherwise carry out the terms of the TPA Act; 2. Form the Seattle Southside TPA, establish rates of Special Assessments and levy Special Assessments pursuant to the terms of this Agreement, the Petition, and the TPA Act; 3. Adopt an Annual Budget; 4. Conduct regular and special meetings as may be designated by the Legislative Authority; 5. Enter into agreements with third parties as necessary to fully implement the purposes of this Agreement; 6. Enter into Operating Agreements with SSRTA for the operation of the Seattle Southside TPA, the management and expenditure of Special Assessments and other revenues, and other services as determined to be necessary from time to time; 7. Enter into agreements with and receive funds from any federal, state or local agencies and to distribute such funds to SSRTA; 8. Receive and account for all funds allocated to the Seattle Southside TPA; and 9. Engage in any and all other acts necessary to further the goals of this Agreement. Section 4. Levy of Assessments on Lodging Businesses within the Seattle Southside TPA. (a) The Legislative Authority will levy Special Assessments on the Operators of Lodging Businesses within the Seattle Southside TPA in accordance with the Zones and levels of Special Assessments as set forth in the Petition and resolution of the Legislative Authority. The Parties acknowledge that, unless otherwise provided for in the Petition, Special Assessments shall not be imposed on rooms (1) where the occupant has stayed 30 or more days and are not otherwise on a Transient Basis, (2) that are provided by an Operator of a Lodging Business to 6 10 guests without charge for promotional purposes, (3) available exclusively to members or guests of members of a private member -owned clubs or its reciprocal clubs, or (4) contracted with airline crews. (b) The Legislative Authority shall contract with the State Department of Revenue for the administration and collection of the Special Assessments pursuant to RCW 35.101.090. Special Assessments shall be deposited into the local tourism promotion account created in the custody of the State Treasurer under RCW 35.101.100. It is understood and agreed that in accordance with RCW 35.101.100, the State Treasurer has the authority to distribute the revenue from the tourism promotion account allocable to the Seattle Southside TPA to the Legislative Authority, or directly to the SSRTA, on a monthly basis. SeaTac shall act as fiscal agent to the Seattle Southside TPA and shall be responsible for receiving Special Assessments from the State Treasurer and holding such funds in a segregated account(s) until remitted to SSRTA pursuant to Section 7 of this Agreement. (c) Any change in the Special Assessment rates for any Zone as set in the resolution of the Legislative Authority shall be made only by amendment of the resolution by the Legislative Authority and only upon written request by the persons who Operate Lodging Business in the proposed area who would pay sixty percent or more of the proposed charges and with the approval and consent of the SSRTA Board of Directors. No increase in the Special Assessment rates for any Zone or the boundaries of any Zone shall be made by the Legislative Authority except after receipt of the written request of persons who Operating Lodging Businesses as identified in the preceding sentence and upon the affirmative approval of the SSRTA Board of Directors. (d) It is understood and agreed by the Parties hereto that the Special Assessments imposed in the Seattle Southside TPA are not a tax on the "sale of lodging" for the purposes of chapter 82.14 RCW and are not applicable to temporary medical housing exempt under chapter 82.08 RCW. (e) It is understood and agreed by the Parties that the Special Assessments imposed under this Agreement are in addition to the special assessments that may be levied under chapter 35.87A RCW. Section 5. Use of Special Assessment Revenue. All of the revenues from Special Assessments collected by the State Department of Revenue from Lodging Businesses within the Seattle Southside TPA shall be remitted by the Legislative Authority to SSRTA and shall be used exclusively for Tourism Promotion as defined herein, and for no other purpose, in accordance with the Annual Budget. The revenue derived from the Special Assessments shall be used only for the following purposes: (a) The general promotion of tourism within the Seattle Southside TPA as specified in the business plan of the SSRTA; (b) The marketing of convention and trade shows that benefit local tourism and the Lodging Businesses in the Seattle Southside TPA; 7 11 (c) The marketing of the Seattle Southside TPA region to the travel industry in order to benefit local tourism and the lodging businesses in the Seattle Southside TPA; (d) The marketing of the Seattle Southside TPA region to recruit sporting events in order to promote local tourism and to benefit the Lodging Businesses and tourism industry within the Seattle Southside TPA; and (e) Direct administration, operation, formation, and start-up costs associated with the Seattle Southside TPA and the ongoing management and maintenance of the Seattle Southside TPA program, including but not limited to staff costs, public notice advertising, legal costs, accounting and auditing (including audits of the Parties and the SSRTA as they relate to this Agreement), as approved by the SSRTA Board of Directors, provided no funds will be used for costs not directly related to operation of the Seattle Southside TPA, this Agreement, or the SSRTA. Section 6. Lodging Taxes. The Parties intend to commit lodging tax revenues to fund regional tourism marketing by contracting with the SSRTA, or successor entity. The Parties intend the minimum annual funding levels to be set according to the following table: Annual Commitment of Lodging Tax to the SSRTA* Year SeaTac Tukwila Des Moines 2014 $835,000 $712,000 100% of monthly lodging tax receipts 2015 $460,000 $405,000 100% of monthly lodging tax receipts 2016 $383,333 $337,500 100% of monthly lodging tax receipts 2017 $306,666 $270,000 100% of monthly lodging tax receipts 2018 and beyond $230,000 $202,500 100% of monthly lodging tax receipts * The exact amount of funding for 2014 will be pro -rated based upon the actual date of establishment of the SSRTA. Notwithstanding the foregoing, the Parties acknowledge and agree that the final allocation, uses, and level of lodging tax revenue is subject to the provisions of chapter 67.28 RCW. Recognizing that RCW 67.28.1816 requires that the annual expenditures of the respective City's lodging tax be approved by the respective city council (based on a recommendation from its respective lodging tax advisory committee) this Agreement provides no guarantee that future city councils will approve future funding. The Parties further recognize that Tukwila has financial obligations in place to operate SSVS. Tukwila may, at its sole discretion and absolute authority, reduce the annual payment to the SSRTA in order to meet obligations and liabilities associated with the operation of SSVS, including, but not limited to, labor, lease costs, payment of utilities, and other contracts executed in support of SSVS by Tukwila. 8 12 Section 7. Management of Seattle Southside TPA; Annual Budget; Reporting Requirements. (a) The Legislative Authority shall contract with the SSRTA pursuant to one or more Operating Agreements for the management and operation of the Seattle Southside TPA. (b) The Parties hereto acknowledge and agree that SeaTac is chartering the SSRTA for the purpose of serving as a separate legal entity formed to advise and make recommendations to the Legislative Authority on all matters related to the Seattle Southside TPA and to carry out its purposes as set forth in its formation documents. The Parties agree to execute agreements with the SSRTA for tourism promotion services and for the transfer of assets, equipment, and intellectual property (including the SSVS "brand ") used by SSVS to accomplish the purposes of the SSRTA, as determined to be necessary by the SSRTA to accomplish its purposes. The Parties hereto agree to use best efforts to assist in the transition of such services, assets, equipment, and property at no cost to the SSRTA. (c) SSRTA shall be responsible for administering the activities and programs of the Seattle Southside TPA and preparing an Annual Budget for the Seattle Southside TPA. (d) The Legislative Authority shall approve an Annual Budget for the use of Special Assessments and shall provide a copy of the Annual Budget to the Parties hereto. The Annual Budget shall consist of: 1. A list of the Lodging Businesses subject to Special Assessments and an estimate of the revenue to be received from all such Lodging Businesses; and 2. A statement of the proposed budget for all Seattle Southside TPA activities and programs to be funded from Special Assessments during the ensuing fiscal year. (e) SSRTA, as manager of the Seattle Southside TPA, shall agree to comply with all applicable provisions of state and federal law, including but not limited to, the TPA Act, and with all applicable county or city resolutions and ordinances, and with all regulations lawfully imposed by the State Auditor or other state agencies, and the applicable provisions of this Agreement. (0 All Special Assessments received by SeaTac, as fiscal agent for the Seattle Southside TPA, from the State Department of Revenue and any interest thereon shall be deposited by SeaTac in a special account and thereafter transferred to SSRTA within thirty days following receipt. Provided, however, no Special Assessment shall be transferred in any fiscal year until after the adoption of that year's fiscal Annual Budget. (g) Legislative Authority shall submit a statement of actual revenues and expenditures to the SSRTA Board of Directors and the Parties hereto. 9 13 (h) The Parties acknowledge and agree that revenue derived from the Special Assessments is intended to enhance, supplement, and extend existing tourism marketing efforts of the Parties. Section 8. Initial Duration; Withdrawal and Termination. (a) Initial Term. The initial duration of this Agreement shall be for a period of twenty years from its effective date. (b) Withdrawal from Agreement; Termination by the Parties. Any Party to this Agreement may withdraw its participation in this Agreement and in the Seattle Southside TPA by providing written notice and serving that notice to the Legislative Authority as provided herein. No Party is permitted to withdraw until this Agreement has been in force at least four years from the effective date. Once this Agreement has been in force for four years, any Party may withdraw by providing at least one year notice of its intent to withdraw. The Party giving notice of intent to withdraw may revoke its notice by giving written notice of revocation to the Legislative Authority. Within 90 days after receiving proper notice as provided in this section, the Legislative Authority shall adopt a resolution of intention (i) identifying the Party that has given notice of withdrawal, (ii) stating that Seattle Southside TPA may be modified or terminated, as applicable, (iii) describing the change or changes proposed, or indicate that it is the intention to revise the boundaries or disestablish the Seattle Southside TPA, and (iv) providing the time and place of a public hearing to be held by the Legislative Authority on the proposed action; provided, the public hearing shall be at least 15 days prior to consideration of the proposed action. The Legislative Authority may, by ordinance, revise the boundaries or disestablish the Seattle Southside TPA after conducting a hearing to receive public comment regarding the boundary revision or disestablishment of the Seattle Southside TPA. Unless the written notice of withdrawal has been revoked by the withdrawing Party and accepted by the Legislative Authority, the revision or disestablishment shall become effective on the date specified by the Legislative Authority. (c) For the sake of clarity, it is the intention of the Parties hereto that this Section 8 provides for a method of withdrawal and/or termination of this Agreement that is initiated solely by a Party to this Agreement. This Section 8 is intended to be in addition to the method of modification and/or disestablishment of the Seattle Southside TPA as provided in Section 9 below. Section 9. Modification or Disestablishment of the Seattle Southside TPA. (a) The Legislative Authority may modify the provisions of the resolution or ordinance establishing the Seattle Southside TPA, revise the boundaries of the Seattle Southside TPA, or provide for the disestablishment of the Seattle Southside TPA, after adopting a resolution of intention to such effect. Such resolution of intention shall describe the change or changes proposed, or indicate that it is the intention to revise the boundaries or disestablish the Seattle Southside TPA, and shall state the time and place of a public hearing to be held by the 10 14 Legislative Authority to consider the proposed action; provided, the public hearing shall be at least 15 days prior to consideration of the proposed action. (b) Additionally, upon receipt of a petition indicating a desire to revise the boundaries or disestablish the Seattle Southside TPA, with the signatures of the persons who Operate Lodging Businesses in the Seattle Southside TPA who pay 50% or more of the total Special Assessments, the Legislative Authority shall adopt a resolution of intention to revise the boundaries or disestablish the Seattle Southside TPA, and shall state the time and place of a public hearing to be held by the Legislative Authority to consider the proposed action; provided, the public hearing shall be at least 15 days prior to consideration of the proposed action. (c) After conducting the public hearing to take public comment on the proposed action as required under Section 9(a) or (b), the Legislative Authority may, by ordinance, revise the boundaries or disestablish the Seattle Southside TPA. Notwithstanding the foregoing, if at a hearing held pursuant to Section 9(a) or (b) a petition objecting to the boundary revision or disestablishment is presented, with the signatures of the persons who Operate Lodging Businesses in the Seattle Southside TPA who pay 50% or more of the total Special Assessments, the Seattle Southside TPA shall not be altered or disestablished. If such petition objecting to the boundary revision or disestablishment is not presented at the hearing, the Legislative Authority shall proceed to revise the boundaries or disestablish the Seattle Southside TPA. (d) Notwithstanding anything to the contrary in this Agreement, in no case shall the Parties hereto be obligated to satisfy the outstanding obligations of the Seattle Southside TPA or the SSRTA from such Party's moneys, funds, or other sources of revenue unless it otherwise agrees to in writing. Section 10. Miscellaneous Provisions. (a) Waiver. No officer, employee, or agent of SeaTac, Tukwila or Des Moines has the power, right, or authority to waive any of the conditions or provisions of this Agreement. No waiver of any breach of this Agreement by SeaTac, Tukwila or Des Moines shall be held to be a waiver of any other or subsequent breach. Failure of SeaTac, Tukwila or Des Moines to enforce any of the provisions of this Agreement or to require performance of any of the provisions herein, shall in no way be construed to be a waiver of such conditions, nor in any way effect the validity of this Agreement or any part hereof, or the right of SeaTac, Tukwila or Des Moines to hereafter enforce each and every such provision. (b) Records. All records prepared, owned, used or retained by SSRTA in conjunction with operating or administering the activities and programs of the Seattle Southside TPA as provided for under the terms of this Agreement shall be made available by the SSRTA upon request to SeaTac, Tukwila or Des Moines. (c) Property and Equipment. The SSRTA shall be the owner of all property and equipment purchased in furtherance of this Agreement from Special Assessment revenue. Provided, however, in the event of the termination of the Operating Agreement with the SSRTA, the SSRTA shall agree to make the property and/or equipment available to the successor 11 15 manager for its use in conjunction with providing similar services. Provided further, in the event of disestablishment of the Seattle Southside TPA, all property and equipment purchased by the SSRTA from Special Assessment revenue shall be retained by SeaTac and used for any lawful purpose. (d) Integration. This Agreement contains all of the terms and conditions agreed upon by SeaTac, Tukwila or Des Moines concerning the establishment of the Seattle Southside TPA and the collection of Special Assessments from Operators of Lodging Businesses. No other understandings, oral or otherwise, regarding the subject matter of this Agreement shall be deemed to exist or to bind any of the Parties hereto. The Parties have read and understand all of this Agreement, and now state that no representation, promise, or agreement not expressed in this Agreement has been made to induce the officials of SeaTac, Tukwila or Des Moines to execute this Agreement. (e) Severability. In the event any provision of this Agreement shall be declared by a Court of competent jurisdiction to be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not, in any way, be effected or impaired thereby. (0 Hold Harmless; No Liability. SeaTac shall indemnify and hold harmless Tukwila and Des Moines and their agents, employees, and /or officers, from any and all costs, claims, judgments, or awards of damages arising out of the acts or omissions of SeaTac, its officers, employees or agents and shall process and defend at its own expense any and all claims, demands, suits, at law or equity, actions, penalties, losses, damages, or costs, of whatsoever kind or nature, brought against Tukwila or Des Moines arising out of, in connection with, or incident to this Agreement and/or SeaTac's performance or failure to perform any aspect of this Agreement. Tukwila shall indemnify and hold harmless SeaTac and Des Moines and their agents, employees, and/or officers, from any and all costs, claims, judgments, or awards of damages arising out of the acts or omissions of Tukwila, its officers, employees or agents and shall process and defend at its own expense any and all claims, demands, suits, at law or equity, actions, penalties, losses, damages, or costs, of whatsoever kind or nature, brought against SeaTac or Des Moines arising out of, in connection with, or incident to this Agreement and/or Tukwila's performance or failure to perform any. aspect of this Agreement. Des Moines shall indemnify and hold harmless Tukwila and SeaTac and their agents, employees, and/or officers, from any and all costs, claims, judgments, or awards of damages arising out of the acts or omissions of Des Moines, its officers, employees or agents and shall process and defend at its own expense any and all claims, demands, suits, at law or equity, actions, penalties, losses, damages, or costs, of whatsoever kind or nature, brought against Tukwila or SeaTac arising out of, in connection with, or incident to this Agreement and/or Des Moines' performance or failure to perform any aspect of this Agreement. The SSRTA shall be an independent legal entity exclusively responsible for its own debts, obligations and liabilities. All liabilities incurred by the SSRTA shall be satisfied exclusively from the assets and credit of the SSRTA. No creditor or other person shall have any 12 16 recourse to the assets, credit, or services of the Parties hereto on account of any debts, obligations, liabilities, acts, or omissions of the SSRTA, unless otherwise agreed in writing by such Party. (g) Filing of Agreement. This Agreement shall become effective immediately after it is duly adopted and executed by the City Council of SeaTac, the City Council of Tukwila, and the City Council of Des Moines and shall be filed and/or posted as required in the Interlocal Cooperation Act. (h) Notice. Any formal notice or communication to be given among the Parties to this Agreement shall be deemed properly given, if delivered either in physical or electronic means, or if mailed postage prepaid and addressed to: City of SeaTac 4800 S. 188th Street SeaTac, WA 98188 Phone: 206.973.4800 Attn: City Manager City of Tukwila 6200 Southcenter Blvd. Tukwila, WA 98188 Phone: 206.433.1800 Attn: City Mayor City of Des Moines 21630 11th Ave. S., Suite A Des Moines, WA 98198 Phone: 206.878.4595 Attn: City Manager (i) Amendment. This Agreement may be amended by the mutual consent of the Parties hereto. No additions to or alterations of the terms of this Agreement shall be valid unless made in writing, formally approved and executed by duly authorized agents of all Parties. (j) Operation of SSRTA. Each Party hereto further authorizes SeaTac to operate the SSRTA within the corporate limits of such city to accomplish the purposes of and pursuant to the terms of this Agreement. (k) Counterparts. This Agreement may be executed in any number of counterparts, each of whom shall be an original, but those counterparts will constitute one and the same instrument. 13 17 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first written above. [signature blocks to be added] 14 18 City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety FROM: Derek Speck, Economic Development Administrator BY: Brandon Miles, Senior Planner DATE: July 11, 2013 SUBJECT: Tourism Promotion Area Update Review of Primary Deal Terms for Inter -local Agreement ISSUE Staff would like to update the Finance and Safety Committee on the primary deal terms of the draft inter -local agreement (ILA) between the Cities of Tukwila, SeaTac and Des Moines to form a tourism promotion area (TPA). BACKGROUND On April 1, 2013, the City Council adopted a motion in support of forming a TPA with the City of SeaTac (and any other cities). The February 27, 2013 memo to the Finance and Safety Committee included the following description of a TPA: "A TPA is geographic region in which a legislative authority (such as a county or city) charges a per room night fee on the furnishing of lodging by either a hotel or motel. The fee may be up to $2 per room night and may be charged to lodging businesses with forty or more lodging units. The fee is collected by the Washington State Department of Revenue and then transmitted to the legislative authority, or the legislative authority's designee. Staff estimates that if the Cities of SeaTac and Tukwila form a TPA that charges $2 per room for hotels and motels with over 60 rooms, it could generate up to $2.5 million per year for tourism promotion." State law requires that TPAs in King County comprise at least two local governments (two cities or a city and the county). Therefore, Tukwila and SeaTac would need to execute an inter -local agreement designating a legislative authority with the ability to form the TPA. Over the last three months, staff members from the Cities of Tukwila, SeaTac, and Des Moines have been working on a draft ILA. The City of SeaTac made the draft ILA public on July 8, 2013. The Administration supports nearly all of the terms in the draft ILA, with the exception of the termination and duration language. Following are the primary terms: Primary Terms of the Draft ILA 1. Transferal of Legislative Authority. The city will transfer its legislative authority to the SeaTac City Council for purposes of forming a TPA. The SeaTac City Council will have oversight of the TPA and the use of the funds. The Tukwila City Council's involvement in the formation of TPA will end once the ILA is executed. 2. Public Development Authority (PDA). SeaTac is responsible for forming a PDA. The SeaTac City Council, operating as the legislative authority for the TPA, will enter into a contract with the PDA to administer the day to day use of the TPA funds. The fund must be used for tourism promotion. 19 INFORMATIONAL MEMO Page 2 3. Lodging Tax. The ILA specifies that the City will provide some (no specific amount identified) lodging tax to the PDA. The lodging tax provided to the TPA will be determined by recommendation of the LTAC and approval by the Council. Contracts for service will then be entered into between the PDA and the City. 4. Duration and Termination of the Agreement. The agreement is drafted for an initial period of ten years, with automatic renewal periods of five year increments. A city must provide at least one year notice before the end of a term in order to withdraw from the ILA. Furthermore, after providing notice to withdraw, a city would still have to participate in the TPA until "proper provisions has been made for the disposition of all the TPA's assets, debts, obligations, and liabilities." Thus, a city could have to remain with the TPA if any obligations extend past the period in which notice was given. If an alternative source of revenue is identified, the PDA may allow for the dissolution of the TPA. In no case shall any of the cities be responsible for paying for any debts, obligations or liabilities from their own individual funds. Administration has expressed concern to the other cities regarding the length of the agreement. The ten year length is highly unusual for an ILA of this type. For example, the City's ILA with King County for animal control services is a two year agreement. Likewise, the initial agreement for Valley Communications provided for an initial term of five years, with two year renewal increments. The language regarding disposition of all of the TPA's debts could extend the length even further. Another concern that administration has with the proposed termination language is that it potentially gives the PDA, an entity that is not a party to the ILA, control over a city withdrawing from the TPA. 5. Records of the PDA. The ILA provides that any city can inspect the records of the PDA. DISCUSSION Staff would like to update the Committee on the terms of the draft ILA and receive the Committee's input. We would then hold a public open house in order to solicit additional input from stakeholders and continue to work with the Cities of SeaTac and Des Moines to finalize an ILA that works for all three cities and return to Finance and Safety on August 20'". FINANCIAL IMPACT Under the terms of the proposed ILA, the City will, in the future, commit a portion of its lodging tax to the PDA. RECOMMENDATION Information Only. Staff would appreciate feedback on the primary terms of the ILA, with specific emphasis on the termination and duration language. ATTACHMENTS A. Memo to Finance and Safety dated February 27, 2013 (without original attachments). B. Draft ILA dated June 27, 2013. W.12013 Info Memos.Coundf TPAFS.doc 20 City of Tukwila TO: Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM Mayor Haggerton Finance and Safety FROM: Derek Speck, Economic Development Administrator BY: Brandon Miles, Senior Planner DATE: February 27, 2013 SUBJECT: Tourism Promotion Area ISSUE Staff is seeking direction from the City Council as to whether the City of Tukwila should engage with stakeholders to form a Tourism Promotion Area. BACKGROUND/DISCUSSION The Cities of Tukwila and SeaTac have been requested by hoteliers to form a Tourism Promotion Area (TPA). The TPA would charge up to $2 per room night. According to the Revised Code of Washington (RCW) 35.101.010, the funds must be used for tourism promotion which means activities and expenditures designed to increase tourism and convention business, including but not limited to advertising, publicizing, or otherwise distributing information for the purpose of attracting and welcoming tourists, and operating tourism and destination marketing organizations ". A TPA is a geographic region in which a legislative authority (such as a county or city) charges a per room night fee on the furnishing of lodging by either a hotel or motel. The fee may be up to $2 per room night and may be charged to lodging businesses with four or more lodging units. The fee is collected by the Washington State Department of Revenue and then transmitted to the legislative authority, or the legislative authority's designee. Staff estimates that if the Cities of SeaTac and Tukwila form a TPA that charges $2 per room night for hotels and motels with over 60 rooms, it could generate up to $2.5 million per year for tourism promotion. Attached is a chart summarizing the other TPAs in Washington State. There are currently no TPAs in King County. Lodging Tax As a separate but related issue, the cities of Tukwila and SeaTac each separately currently implement a 1% tax on lodging. As required by State law, each city also has a lodging tax committee that serves as an advisory committee to each city council and provides recommendations on the expenditures of the lodging tax funds. Through inter -local agreements, the cities of Tukwila, SeaTac, Kent, and Des Moines contribute approximately $1.2 million per year toward the Seattle Southside Visitors Services, which is a tourism program that promotes the region and is administered by the City of Tukwila. Formation of a TPA would not affect the collection of the 1% lodging tax. The lodging tax advisory committees are required by 21 INFORMATIONAL MEMO Page 2 State law and would remain in effect. Staff recommends that if a TPA is formed for the SeaTac and Tukwila region, that the responsibility for marketing the region to tourists be transferred to the new tourism organization. The cities could transfer the Seattle Southside brand, website, and other assets to the tourism organization. The cities could continue to use lodging tax for regional tourism promotion by contracting with that organization. TPA Formation Process The following outlines the basic process to form a TPA between the cities of Tukwila and SeaTac. Other cities could also be included. Of course, prior to starting these steps, staff would engage with SeaTac, Seattle Southside staff, our hoteliers, and other cities to come up with a consensus approach. 1. Cities designate the legislative authority". The participating city councils would need to designate one of the cities as the legislative authority or form a combined legislative authority. This step would be enacted through an inter -local agreement. 2. Hoteliers submit petition to the legislative authority. 3. Legislative authority adopts a °resolution of intention to establish a tourism promotion area ". 4. Legislative authority holds a public hearing. 5. The legislative authority adopts an ordinance establishing the TPA and the lodging charge. 6. The legislative authority contracts with the Washington State Department of Revenue to collect the lodging charge on behalf of the TPA. 7. Washington State Department of Revenue starts collecting the TPA lodging charge. 8. The legislative authority contracts with a tourism organization to carry out the tourism promotion work. 9. The legislative authority should meet at least once a year to approve a basic budget, approve changes to the contract with the tourism organization, and review annual tourism promotion outcomes. Legislative Authority Under State law a legislative authority" (e.g. city or county council) must adopt an ordinance in order to establish a TPA. The law also requires that in any county with a population of one million or more, the legislative authority shall be composed of two or more jurisdictions acting jointly as the legislative authority under an inter -local agreement (RCW 35.101.010). Thus, in order for the City of Tukwila to form a TPA it must partner with one or more jurisdictions, such as with the City of SeaTac, City of Renton or with King County. Staff from the City of SeaTac has expressed interest in forming a TPA with Tukwila and other cities. It should be noted that a city can transfer, through an Inter -local Agreement (ILA), its legislative 22 INFORMATIONAL_ MEMO Page 3 authority to another governmental entity. Therefore, the legislative authority for a Tukwila - SeaTac TPA could take the following forms: 1. SeaTac could transfer its legislative authority to Tukwila; 2. Tukwila could transfer its legislative authority to SeaTac; or 3. SeaTac and Tukwila could form a combined legislative authority that would have some councilmembers from both cities. In this case, one of the cities would coordinate the proceedings of the combined legislative authority. Most of the TPAs involve two or more jurisdictions so they have dealt with this question -- even though these TPAs have been formed in counties that have a population of less than one million and are not required by State law to partner with an another jurisdiction. Options 1 and 2 have occurred with the TPAs in Snohomish, Pierce, Clark, and Spokane Counties. In those four TPAs, the partnering cities have transferred their legislative authority status to the largest governmental entities, the respective county councils. None of the TPAs have used option 3 to create a combined legislative authority. However, it should be noted that none of the TPAs are located in a county with over one million residents and so are not required by law to partner with other jurisdictions to form a legislative authority. There has been some discussion and consideration about transferring the legislative authority to a third party such as a Public Development Authority (PDA). While a third party can be used to actually implement the program and oversee the daily use of the funds, the legislative authority must remain with an elected body. The legislative authority must be able to adopt resolutions and ordinances. If a PDA had a board that was entirely composed of councilmembers then the cities could designate it as the legislative authority for the TPA. All of the TPAs have legislative authorities that are either city or county councils. State law specifies that the legislative authority "has sole discretion as to how the revenue derived from the charge is to be used to promote tourism (RCW 35.101.130).° However, it does not specify the level of involvement needed by the legislative authority in overseeing the TPA. The legislative authority may appoint existing advisory boards or create new advisory boards to make recommendations for the use of the funds. The legislative authority may also contract with tourism destination marketing organizations or similar organizations to promote tourism. Based upon the research into the other TPAs, most of the legislative authorities approve an annual budget for the TPA and the contract with a local tourism organization such as a convention and visitors bureau. Typically, the legislative authorities do not get involved in the day to day operations of the TPA. The one exception is Snohomish County. The Snohomish County Council approves all expenditures of the TPA funds, after request for funds have been reviewed by a commission of hoteliers. Petition and Geographical Area In order to form a TPA, State law requires that a petition be presented to the legislative authority. To be valid, the petition must include a number of items including: 23 INFORMATIONAL MEMO Page 4 1. A description of the boundaries of the proposed TPA. Given that Tukwila may partner with the City of SeaTac on the TPA, the description of the boundary would be the combined area of both cities; 2. The proposed uses and projects to which the proposed revenue from the charge shall be put and total estimated costs; 3. The estimated rate for the charge with a proposed breakdown by classification of lodging business. For example, the TPA could be set up to only apply to hotels with over a certain number of rooms. If the threshold is set to 60 or more rooms, Tukwila has fifteen hotels and motels in that classification which comprise a total of 2,035 rooms; SeaTac has 28 hotels and motels in that classification which comprise a total of 5,227 rooms. The combined total between the two cities is 7,262 rooms; and 4. The signatures of the persons who operate lodging businesses in the proposed area who would pay sixty percent or more of the proposed charges (°ratepaye=rs "). It is important to point out that the 60 percent requirement is for the entire TPA area, which would be the combined area of the cities of Tukwila and SeaTac. If the TPA is limited to hotel and motels with 60 or more rooms, there would be a total of 7,262 rooms within the TPA area, thus hoteliers comprising 4,357 of the rooms would be able to meet the 60 percent threshold. It is important to note that SeaTac hotels/motels would have approximately 71% of the rooms in the TPA, while Tukwila would make up 29 %; thus SeaTac hoteliers could submit a valid petition, even if ALL of Tukwila's hotel ratepayers objected to the formation of the TPA. Before a legislative authority can adopt an ordinance to implement a TPA, State law requires the legislative authority to hold a public hearing. If a protest is made by the lodging businesses in the area which would pay a majority of the proposed charges then the formation proceedings must terminate (RCW 35.101.070). Tourism Organization Once the legislative authority has formed the TPA it can determine the organizational structure to implement the tourism promotion work. There are basically four types of organizations that could work: 1. Business. The legislative authority could contract with a for - profit business (or even an individual as a sole proprietor), such as a marketing firm, to be carry out the tourism promotion work. This appears to be the framework with Union Gap's TPA. 2. City Department. The legislative authority could contract with the City of Tukwila or SeaTac to implement the tourism promotion. This arrangement would be similar to the relationship that Tukwila and SeaTac have with the Seattle Southside. SeaTac and Tukwila have an inter -local agreement in which the cities pool lodging tax funds for tourism promotion under the brand of Seattle Southside. The Seattle Southside staff members are City of Tukwila employees and the City of Tukwila administers the inter - local agreement. A benefit of this arrangement is that it may be faster to implement since we have an existing framework. It also provides stability and openness. There are some significant drawbacks because government agencies are more risk averse since they have to take into account citizen expectations and follow numerous laws and regulations. Cities also have wide variety of functions and policies that serve all departments which can make it challenging to provide the flexibility that may be 24 INFORMATIONAL MEMO Page 5 appropriate for tourism promotion. These aspects can result in higher administrative costs, limited flexibility, and longer time to get results. Snohomish County's operates its TPA program as a grant program. Anyone can propose programs or events to the TPA Commission for funding. The funding requests are reviewed by the Commission and then forwarded to the County Council for final action. The County TPA funds a Tourism Bureau that provides marketing and does not Itself directly engage in any marketing or tourism functions. A benefit of this framework is that staff costs to the WA are relatively low. The TPA is managed by one county staff member. A drawback is the time it takes to get final approval of funding requests given that the requests must be approved by the County Council. 3. 501(c)(6) Organization. All, except two, TPA legislative authorities In Washington State contract with a 501(c)(6) organizations, such as Convention and Visitor Bureaus, to implement the tourism work. Many of these 501(c)(6) organizations existed before the TPAs were formed. There appears to be no existing 501(c)(6) in the Tukwila/SeaTac area that could immediately implement the tourism promotion work. Thus, the organization would need to be created. One major benefit of a 501(c)(6) is that it can operate outside of many of the limitations and citizen expectations that are placed on local governments. Given that the entity would be using public funds it would need to comply with some requirements regarding the use of public funds. The board of directors of the 501(c)(6) would be independent from the legislative authority. The only relationship between the legislative authority and the 501(c)(6) would be a contract. The 501(c)(6) would also be free to solicit business from other governmental entities that need tourism and marking services. 4. Public Development Authority (PDA). In a memo dated March 29, 2012, representatives of eight hotels in Tukwila requested that the TPA be managed and implemented through a Public Development Authority as a way to provide autonomy and oversight, presumably by the TPA ratepayers hotels /motels. A PDA is a public agency created by a local government or combination of governments. Although currently no TPA legislative authorities have contracted with PDAs, a PDA can carry out tourism promotion work. For example, Pike Place Market is a PDA that undertakes significant tourism promotion. The creating legislative authority can choose to have oversight of the PDA; however, the PDA is a separate legal entity. The PDA can enter into its own contracts, sue and be sued, and generally operate independently from the parent organization. While the day to day operations of the PDA are separate from the local government that created it, ultimate oversight of the PDA would rest with the local government. A good example of this is the PDA for the Pike Place Market. While the Pike Place Market PDA operates outside of the management structure of the City of Seattle, the Seattle City Council appoints all of the members of the PDA Board'. Furthermore, the Seattle City Council can terminate all of the Board members and the budget of the Pike Place Market Charter of the Pike Place PDA at p. 13. 25 INFORMATIONAL MEMO Page 6 PDA must be approved by the Seattle City Council2. While a PDA would have some autonomy from the cities of Tukwila and SeaTac, it would not have as much autonomy as a 501(c)(6), which would be fully independent from the legislative authority; with the only relationship being a contractual relationship. One potential benefit of the PDA is that it would provide an avenue for more oversight by the legislative authority and the cities that are part of the legislative authority. When a local government (city or county) creates a PDA, it typically has control of the Charter and bylaws of the PDA. For example, the Charter of the Pike Place Market PDA was approved by the Seattle City Council and any modifications require approval of the Seattle Mayor. Through the Charter, the government agency that creates the PDA can specify the membership of the PDA board and certain operational functions if it desires. Another potential benefit of a PDA is that, as a public agency its employees would be public employees and as such, it could choose to offer State Retirement and other benefits to the current Seattle Southside (City of Tukwila) employees. One potential drawback of using a PDA as the tourism organization is the fact that the PDA would have to comply with all of the same laws that a City has to comply with. Most notably, PDAs are subject to the Open Meetings Act, Public Records Act, archiving requirements, and gifting of public funds. A 501(c)(6) would face some of these same restrictions, but only when it used TPA funds. The restriction would not be in place for separate funds generated by the 501(c)(6). A PDA's full operations would be subject to the same requirements placed on the City. For example, all internal emails would be subject to disclosure under the Public Records Act, even if the emails have nothing to do with the TPA; this would not be the case for a 501(c)(6). Like the 501(c)(6), the PDA could solicit business from other governmental entities that need tourism and marking services; however, this would need to be permitted in the Charter that created the PDA. A benefit of a PDA is that donations to the PDA can be tax deductible. Termination of the TPA Should the need arise, the legislative authority may disestablish the tourism promotion area following a public hearing (RCW 35.101.140). When the cities create the inter -local agreement to designate the legislative authority or establish a combined legislative authority, the ILA could include a termination clause. Feedback from Stakeholders Following is an overview of the feedback that we have received regarding formation of the TPA. Seattle Southside Visitors Services: SSVS staff is very excited about a TPA and sees this as a good opportunity to generate up to $2.5 million in additional tourism promotion revenue each year and hope that the Cities of SeaTac and Tukwila would form a PDA to manage and implement the Seattle Southside tourism program drawing upon both the tourism promotion area revenue and lodging tax revenue. New and expanded tourism promotion activities are expected to include more advertising, sales and marketing (strategic planning, market research, 2 Id. 26 INFORMATIONAL MEMO Page 7 creative development, media placement, sales activities, hosting tourism industry events). New regional sales and marketing efforts could focus on small to mid -size meetings and events, multi- property meetings and events, Canadian market development, niche markets including urban, adventure, cultural, sports, incentive, and geo- tourism; group tour product development, FAM tours for targeted customers, public relations programs including press /travel writer tours and coverage, and sporting event marketing enhancement. Tukwila Lodging Tax Advisory Committee: Over the last year, the City of Tukwila's Lodging Tax Advisory Committee has received informational updates on the possibility of a TPA. City staff has not brought the item to a vote in order to complete additional research and receive City Council feedback on the various options. In general, the discussion at LTAC has been very supportive of forming a TPA. Tukwila Hoteliers: Managers representing eight Tukwila hotels submitted a letter dated March 29, 2012 to the Tukwila City Council requesting the City form a TPA (attached). City staff has not yet performed outreach to hoteliers not represented on the letter. Chamber of Commerce: The Southwest King County Chamber of Commerce provided letters dated March 29, 2012 and November 30, 2012 to the City of Tukwila expressing support for the creation of a TPA (attached). City of SeaTac: On 10/11/11 The SeaTac City Council Administration and Finance Committee received an informational briefing and written materials on the formation of a TPA and potential organizational structures (attached). After multiple conceptual discussions over several months the City's HoteVMotel Tax Advisory Committee (HMAC) received a detailed briefing on the TPA and PDA concepts, including the distribution of written materials that served as the basis for the discussion. At the 6/12/12 City Council Study Session staff presented an Agenda Bill (attached) that authorized the City Manager to execute an agreement for legal services from Pacifica Law Group. The purpose of the agreement was to begin the preparation of the required documentation for the formation of the TPA. This agreement was approved by Council action on 6/26/12 and formally executed on 6/28/12. No actual drafting of documents has been approved pending the decision of the City of Tukwila whether to move forward with the formation of the TPA. After analysis of potential organizational structures and discussions with both the HMAC and the TPA Ratepayers Committee, staff recommended the PDA as the best option for the organizational structure to oversee the operation of the TPA. On 9/25/12 the Ratepayers Committee provided the SeaTac City Manager a letter that indicated strong support for both the TPA and the PDA and urged that the development of legal documentation move forward expeditiously. In each HMAC meeting that followed, the committee either made formal motions or asked that the City move forward with preparation of the legal documents pending Tukwila's decision, to retain the momentum that had been established. The City has yet to instruct the Pacifica Law Group to begin work on the legal documents due to the lack of clarity on the City of Tukwila's position on the TPA/PDA initiative. City of Des Moines: The Des Moines City Council heard this item at their meeting of May 17, 2012 and directed their staff to work with the Cities of SeaTac and Tukwila in the creation of the Seattle Southslde Tourism Development Authority (minutes attached). Conclusion 27 INFORMATIONAL MEMO Page 8 City staff believes that a tourism promotion area is a very good opportunity for the City of Tukwila and Southwest King County. It is important to recognize that a number of the City's hoteliers are asking the City to impose the charge. Staff believes that hotelier support is a strong indication that the TPA would increase tourist activity and benefit the City and its businesses. Based upon the hotelier request, staff believes the additional benefits from the TPA would more than offset any competitive disadvantage due to the additional room night fee. If Council would like to consider forming a TPA, staff would engage the City of SeaTac, Seattle Southside staff, hoteliers, and other cities to see if we can reach a consensus approach. It is important to find a consensus because under State law the hotels need to submit a valid petition and at least two cities need to act jointly or else the TPA cannot be formed. Staff would return to Council when we have a consensus proposal outlining: the legislative authority roles and responsibilities; the draft language for the petition, resolution, and ordinance; and the tourism organization roles and responsibilities. At this time, staff seeks feedback on: 1. Is the Council interested in forming a TPA? 2. How much influence should the City of Tukwila have over the expenditures and operations of the tourism promotion area? 3. How involved would the Council like to be in the legislative authority or tourism organization? FINANCIAL IMPACT At this point, it appears there would be no financial impact to the city other than staff time during the formation process. If a TPA is formed it will generate additional funds for tourism promotion which should result in additional lodging and sales tax revenue to the City. RECOMMENDATION The Committee Is being asked to consider this item and move it forward to the March 25, 2012 Committee of the Whole meeting and the April 1 Regular meeting. ATTACHMENTS • Chart of tourism promotion areas in Washington State • Chart of possible organizational relationships for a tourism promotion area • Chart comparing tourism organization forms • List of Tukwila hotels • List of SeaTac hotels • Minutes from City of SeaTac Administration and Finance Committee dated October 11, 2011 • Letter from Tukwila hoteliers dated March 29, 2012 • Letter from the Chamber of Commerce dated May 14, 2012 • Minutes from the Des Moines City Council meeting of May 17, 2012 • Minutes from the City of Tukwila's Finance and Safety Committee dated June 5, 2012 • City of SeaTac Agenda Bill #3433 from SeaTac study session on June 12, 2012 • City of SeaTac Ratepayers Committee letter dated September 25, 2012 • Letter from the Chamber of Commerce dated November 30, 2012 28 FINANCE AND Meeting Minutes July 16, 2013 — 5: PRESENT Councilmembers: Staff: Guests: SAFETY COMMITTEE 30 p.m.; Conference Room #3 City of Tukwila Finance and Safety Committee Dennis Robertson, Chair; Verna Seal and De'Sean Quinn David Cline, Derek Speck, Brandon Miles, Mike Villa, Peggy McCarthy, Gail Labanara and Laurel Humphrey Chuck Parrish, resident; Jeff Robinson, City of SeaTac; Kristina Thorne and Ashley Comar, Seattle Southside; Deanna Gregory, Pacifica Law Group; Mike Schabbing, Marriott CALL TO ORDER: Committee Chair Robertson called the meeting to order at 5:30 p.m. I. PRESENTATIONS No presentations. II. BUSINESS AGENDA A. Tourism Promotion Area Update Staff provided an update on the status and primary deal terms of the draft inter -local agreement (ILA) between the Cities of Tukwila, SeaTac and Des Moines to form a tourism promotion area (TPA), pursuant to the Council's April 1, 2013 vote in favor of starting negotiations. The primary terms of the draft ILA are summarized as follows: 1) Tukwila will transfer its legislative authority to the SeaTac City Council. 2) SeaTac is responsible for the formation of a Public Development Authority (PDA). 3) Tukwila will provide a portion of its lodging tax revenue to the PDA. 4) The agreement is drafted for an initial ten -year term, with five -year renewal periods. A city must give a minimum of one year notice to withdraw from the ILA, and would still have to participate pending any outstanding obligations. 5) Any city can inspect the records of the PDA. City Administration has expressed concern about the proposed 10 -year duration of the ILA, noting that it is unusually lengthy for such an agreement. In addition, the terms of the draft ILA potentially gives the PDA, an entity not party to the ILA, control over the ability of a city to withdraw from the TPA. Staff requested feedback from committee members on these specific points. Committee members, staff, and guests discussed the terms of the draft ILA. Mike Shabbing, representing the TPA ratepayers steering committee, commented that the 10 -year term of the agreement is very important due to the long -term vision for tourism promotion. He stated that he does not want the TPA fund to supplant the existing lodging tax fund, and that the terms of the draft ILA are not currently satisfactory to hoteliers. Councilmember Quinn asked staff to clarify their position on the lodging tax issue, and staff confirmed that the draft ILA reflects it. Once the PDA is formed, the Council will be given an opportunity to approve contracts, and the City does not want to bind future City Councils to a decision regarding lodging tax funding. Committing lodging tax through the ILA could affect Tukwila's relationship with the Teamsters since the Seattle Southside positions are funded by lodging tax and represented by the Teamsters. In addition, lodging tax is a separate funding source under different state requirements and this agreement is not intended to circumvent the Lodging Tax Advisory Committee. 29 Finance & Safety Committee Minutes July 16, 2013 — Page 2 Committee members each stated general support for the draft terms surrounding the transfer of legislative authority, the PDA establishment, and the availability of records. However, they all commented in favor of reducing the agreement duration from 10 years to 2 years, citing standard duration on other ILAs, as well as noting that this is a new process for the City. They would like to see the PDA established and successful before committing either longer terms or lodging tax dollars. Staff confirmed that the next steps will be to hold a public open house, continue ILA negotiations, and return to Finance & Safety Committee on August 20, 2013 with a final draft. INFORMATION ONLY. B. Police Department 2013 2 °d Quarter Report As information only, Chief Villa shared a presentation that updated the Committee on items of significance that occurred in the Police Department during the second quarter. The information included highlights, crime statistics and crime reduction strategies. Committee Chair Robertson asked that future quarterly reports include a table of staffing numbers, dating back to the current Chief's first year. INFORMATION ONLY. C. Format for Financial Planning Model Attachment A Committee Chair Robertson began with an overview of the purpose of Attachment A, summarized as a six -year view of revenues and expenditures that serves as a tool to show Councilmembers the effectiveness of their policy decisions. Staff presented a line -by -line summary of the table of proposed changes included in the memo, pertaining to Attachment A Lines 1, 5, 7, 12, 14, and 20. Committee members approved each proposed change. Committee members requested the inclusion of a definition key that would always accompany Attachment A, as it is often reviewed by Councilmembers as a standalone item. Staff agreed to draft a proposed key for future Committee review. III. MISCELLANEOUS Committee Chair Robertson reminded staff that at the Finance and Safety meeting on May 21, 2013, the Committee requested that a draft proposal to clarify 1MC Section 7.20.020 — Dogs at Large, be brought back in September. He also stated that the August 6, 2013 Committee meeting will be cancelled. Meeting adjourned at 7:36 p.m. Next meeting: Tuesday, July 20, 2013 — 5:30 p.m. — Conference Room #3 Committee Chair Approval Minutes by Li-I, Reviewed by DS 30