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CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report

August 7, 2018
PUBLIC HEARING

TO: Honorable Mayor and City Council Members

SUBMITTED BY: Marc Wiener, AICP, Community Planning and Building Director

APPROVED BY: Chip Rerig, City Administrator

RESOLUTION NO. 2018-079, ADOPTING AN INCENTIVE PROGRAM WAIVING ALL


SUBJECT: PLANNING AND BUILDING FEES FOR HOTEL IMPROVEMENT PROJECTS FOR
FISCAL YEAR 2018-19.

RECOMMENDATION:
Adopt Resolution No. 2018-079, approving an incentive program fee waiver for the remainder of Fiscal Year
2018-19.

BACKGROUND/SUMMARY:
Estimated Fiscal Year (FY) 18-19 revenue is $22,744,500. Of this revenue, 28% percent will come from
transient occupancy tax. The majority of hotels in the City are over 50 years old and could benefit from
upgrades and repairs. Mayor Dallas has suggested that staff explore options to incentivize hotel upgrades.
Improved accommodations will improve visitor experience and will also enable hotel owners to increase nightly
rental rates, which will in turn generate additional tax revenue for the City in the long term.

Staff recommends that the City waive all planning and building fees for FY 18-19, for any project associated with
improving an existing hotel. Table 1 identifies planning and building fees associated with a project in quarter-
million dollar intervals. Permitting fees often range from 2-5% of the total project valuation, with a decreasing
percentage as the project value increases.

Table 1. Planning and Building Permitting Fees


Permit Planning Building Plan Building Total Permitting
Valuation Fees* Check Permit Fees
$250,000 $2,063 $2,321 $3,571 $7,955
$500,000 $2,063 $4,094 $6,299 $12,456
$1,000,000 $2,063 $7,640 11,754 $21,457
* Average value of the four types of Commercial Design Review applications.

While the cost savings is relatively minor in relation to the total project valuation, the proposed fee waiver may
still encourage hotel owners to invest in site improvements. Near the end of FY 18-19, staff will report to the City
Council on the effectiveness and cost of the incentive program, at which time the Council may consider
extending the program.
ALTERNATIVES: Staff recommends that the fee waiver only apply to projects associated with hotel
improvements. As an alternative, the City Council may also consider waiving planning and building fees for retail
storefront improvements. In addition to transient occupancy tax, sales tax from retail shops, restaurants, and the
like constitutes 24% (including 13% from Measure D) of the City’s revenue.
FISCAL IMPACT:
The total value for work done on hotel properties in the FY 17-18 was $1,254,075; with permitting fees totaling
approximately $28,000. The City does not currently have specific data on the value of retail business
improvement projects in FY 17-18.

Staff estimates that if the program is successful, the City may potentially forfeit $50,000 to $100,000 in
permitting fees in FY 18-19. However, in the long term the City should expect higher tax revenue from hotel
improvements, which will negate this short-term cost.
PRIOR CITY COUNCIL ACTION:
None.

ATTACHMENTS:

Resolution No. 2018-079


Attachment 1

CITY OF CARMEL-BY-THE-
SEA CITY COUNCIL

RESOLUTION NO. 2018-079

A RESOLUTION ADOPTING AN INCENTIVE PROGRAM WAIVING ALL PLANNING AND BUILDING


FEES FOR HOTEL IMPROVEMENT PROJECTS FOR THE REMAINDER OF FISCAL YEAR 2018-19

WHEREAS, Estimated Fiscal Year 18-19 revenue is $22,744,500; with 28% percent coming from
transient occupancy tax; and
WHEREAS, the City wishes to incentivize improvements to hotels for the purpose of improving visitor
experience and increasing tax revenue; and,
WHEREAS, permitting fees typically range from 2 to 5 percent of the total project value; and
WHEREAS, waving fees must be adopted by the City Council by Resolution.

NOW THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF CARMEL-BY-
THE-SEA DOES HEREBY:

Waive all planning and building fees associated with hotel improvement projects for the remainder Fiscal
Year 2018/19.

PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA this 7th
day of August 2018 by the following roll call vote:

AYES: COUNCIL MEMBERS:


NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
SIGNED:

_____________________________
Steve G. Dallas, MAYOR
ATTEST:

_____________________________________
Thomas A. Graves, MMC
CITY CLERK

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