‘MINUTES’ for Six Noteworthy 1 November 2011 City Council Agenda Items

“MINUTES”
REGULAR CITY COUNCIL MEETING
CITY OF CARMEL-BY-THE-SEA
Tuesday, November 1, 2011

Archived Video Streaming

City Hall
East side of Monte Verde Street between Ocean and Seventh Avenues

II. Roll Call
PRESENT: Council Members Burnett, Hazdovac, Sharp, Talmage, and Mayor McCloud
ABSENT: None
STAFF PRESENT (partial list):
Jason Stilwell, City Administrator
Heidi Burch, Asst. City Administrator/City Clerk
Don Freeman, City Attorney
Mike Calhoun, Interim Police Chief
Andrew Miller, Monterey Fire Chief

VII. Consent Calendar

E. Consider a Resolution amending the Memorandum of Understanding (MOU) between the City and the International Association of Fire Fighters (IAFF) Local 4579, Carmel Professional Firefighters.

F. Consideration of a Resolution amending the Memorandum of Understanding (MOU) with the Carmel Police Association (POA).

With regard to item E, Council Member Burnett clarified that new fire department employees hired by Carmel after June 30, 2012 would be hired under the second tier.

Council Member BURNETT moved to approve Consent Agenda Items including E and F, seconded by Council Member HAZDOVAC and carried unanimously.

Council Member Burnett recognized the three employees groups for agreeing to a second tier for new employees which reflects a more financially sustainable system.

IX. Ordinances

A. Consideration of an Ordinance amending Chapter 3.32 of the Carmel Municipal Code (Transient Occupancy Tax) to establish a Transient Occupancy Tax Incentive Program. (First reading)

Thompson Lange (owner Homescapes), Chair of Economic Advisory Committee, Carmel Chamber of Commerce, and Carrie Theis presented a power point presentation.

History of the Inn Incentive Program
• Palm Springs developed an incentive program in 2007 to encourage boutique hotels to refurbish their properties.
• In 2009, Tom Riser, Inns-by-the-Sea, sent a little to Sue McCloud describing this program and suggesting Carmel should look into the feasible of something similar.
• April 2010, this idea was brought to the Economic Advisory Committee who along with Rich Guillen, researched it and asked a Palm Springs representative, John Raymond, to come make a presentation in October of 2010.
• In May 2010, Thompson Lange and Carrie Theis introduced the topic to Jason’s Town Hall meeting.

Purpose of the Ordinance
• To encourage inn owners to make refurbishments
• To improve the quality of the hostelry facilities thereby enhancing the visitor experience.
• These improvements will result in the City’s hotel industry being more competitive.
• Therefore yielding higher TOT revenues for the City of Carmel.

Recommendations
• A minimum expenditure of $12,500 per room
• Renovations must be capitalized improvements
• The program is available to 20% of the City’s room inventory per year
• Property must apply for the program the application would include:
-A description of the capital improvements
-A schematic plan outlining the improvements
-A renovation schedule
-Budget estimate
-Financial projection for 10 year after completion date
• After approval, an agreement will be signed and recorded between the City and owner.
• Capital improvement must be underway within 6 months of the agreement.
• Renovations must be completed within 24 months.

Example of an Inn Incentive Program
• A 20 room inn spends $250,000 in renovations
Note: 20 room inn average size of inn in City
• Their Baseline Level TOT average is $74,460 per year for the last three years.
• After renovations, the first annual TOT payment goes up to $87,381.
• This is an increase of $12,921 of which half or $6,461 would be returned to the inn.
• Such payments would be made for a 10 year period.

TOT Incentive Matrix Sharing 50% of TOT Revenue Increases (Summary Highlights)
Base/2012
Occupancy: 60%
Average Rate: $170
Revenue: $744,600
TOT Gross: $74,460
TOT Net to City: $74,460

2013
Occupancy: 63%
Average Rate: $190
Revenue: $873,810
TOT Gross: $87,381
Increase Over Base: $12,921
50% of Increase: $6,461
TOT Net to City: $80,921

Totals after 10 Years: TOT Gross: $1,107,139
Increase Over Base: $362,539
50% of Increase: $181,270
TOT Net to City: $925,870

10 years without renovations @ 2% annual growth = $759,492
Difference between renovations being done & without renovations = $179,125 23.6% Increase of TOT

Assumptions:
Renovation of 20 Rooms and Public Areas = $250,000 (minimum spend per room needs to be $12,500)
Base year established by average of previous 3 years of TOT.
Renovation improvements must be expenditures that can be capitalized under GAAP.
Program available annually to a maximum of 20% of City inventory of hotel rooms.

Benefits
• Occupancy rates increase, yielding higher TOT.
• Put employees, i.e., plumbers contractors, electricians, landscapers, et cetera., to work.
• Increase economic vitality of inns.
• Property values increase with resultant increase in property tax revenues.

Council Member Burnett expressed concerns about correct baseline to prevent “windfalls.” He cited 5-year TOT change variable from a decrease of 11% (low) to an increase of 85% (high). In response, Carrie Theis stated that a 5-year period had a 5% difference in base. Council Member Burnett stressed that innkeepers should only receive credit for “above and beyond” actions. Council Member Talmage suggested aggregate number with market condition market factor.

Mayor McCloud opened the meeting to public comment.

Sixteen members of the public addressed Council, including, but not limited to, Barbara Livingston, Richard Stiles, James Emery, Keith Vandevere, Monta Potter (Carmel Chamber of Commerce CEO), Vinz Koller, Chris Fitz (representing Local 483 Union of La Playa and The Pine Inn employees) and David How (Carmel Lodge owner).

Comments addressed the Ordinance and the plight of former La Playa employees. Topics/Comments included the following: the fiscal effect of the Ordinance to the City; protection for workers laid off during renovations; benefit biased in favor of innkeepers; new owner, Classic Hotels & Resorts, included succession clause to San Francisco employees, but not La Playa employees and suggested Ordinance be modified in ways to prevent public money towards a subsidy for “despicable” behavior; a need for a balance between incentive program and living wages for employees; consideration of employee continuity; TOT is a fee to recover some of impacts that industry has on community based on influx of tourists, Ordinance offers subsidy to innkeepers, but not employees and Ordinance should be contingent on shared future revenues and contain successor clauses; Ordinance is “anti-worker” and beyond “anti-union” and urged the Council to not approve the Ordinance; Ordinance needs to include job protection for employees and the Ordinance should be delayed; the Economic Advisory Committee has worked on the proposal for about two years, data to support the idea that improving facilities allow innkeepers to increase rates, thereby increases occupancy and benefits City with a healthy budget; the spreadsheet figures show innkeepers keeping 90% of increase in revenues without Ordinance versus 95% increase in revenues with Ordinance and questioned consideration of Ordinance; the unintended consequences of public policy implemented with “good intentions” and La Playa situation offers an opportunity to make a correction and postpone Ordinance; the agenda item should be continued and the Council should rethink the Ordinance in “a major way;” including the issue of fairness for workers and employee protections, workers protection and recall ordinances in the Cities of Los Angeles, Berkeley, Emeryville and Santa Monica, represents an opportunity for “justice;” Monterey Bay Central Labor Council of 30,000 workers in opposition to current Ordinance
and an opportunity to reconsider Ordinance and improve it; and Ordinance is a “win-win’ for innkeepers/hotel owners and the City, “a sensible plan,” and the Ordinance is designed for the forty-eight plus or minus hotels/inns in the City, not La Playa.

Mayor McCloud closed the meeting to public comment.

Council Member Talmage stated that there are “two different discussions.” The Ordinance is an “excellent start;” he reviewed market adjustment factor, three financial variables including amount of the investment, percentage sharing relationship and period of years and suggested a scale, not a number. He stated shared relationship applied only if there is an increase of revenue and risk is the innkeepers. He urged the examination of financial model of Ordinance and continuation of agenda item. He addressed the employees of La Playa.

Council Member Burnett expressed willingness to assist City Administrator Jason Stilwell and Council Member Talmage with baseline issue and sliding scale issue. He stated Council should provide policy direction including description from applicant on the treatment of employees (a disclosure) and protection for workers language.

Mayor McCLOUD moved to continue Consideration of an Ordinance amending Chapter 3.32 of the Carmel Municipal Code (Transient Occupancy Tax) to establish a Transient Occupancy Tax Incentive Program, including policy direction to the city administrator and staff to research and brief council on labor issue, what exists in the county and state, rules and regulations regarding labor issue, seconded by Council Member SHARP and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT; HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

X. Resolutions

B. Consideration of a Resolution approving a contract with the City of Monterey for fire services.

Jason Stilwell, City Administrator, presented the staff report, including inclusion of complete attachment C, supplemented by Andrew Miller, Monterey Fire Chief, who addressed issues raised by Council, such as seniority system with respect to station open bidding process (Carmel Fire Fighters ineligible to bid for one year), fire hydrant testing on a ten-year cycle due to limitations by water restrictions (NFPA recommendation testing every 5 years), issues of flow testing water mains and annual maintenance of all fire hydrants, adherence to NFPA standards are prioritized, two-in, two-out (with ambulance) inclusion language, fire/ambulance integration language, clarification of fire services contract for five years with six-month termination clause, ambulance contract six months with 30-day termination clause, PERS issue, “closest” issue and Carmel response times will remain the same and not change. Fred Cohn, Assistant City Administrator, clarified length of ambulance term with respect to Monterey employees after July 2012 affected by two-tier system and addressed penalty provision.

Mayor McCloud opened the meeting to public comment.

Barbara Livingston, President, Board of the Carmel Residents Association, stated opposition to the Monterey “takeover” of the Carmel Fire Department and addressed the tradition and history of the Carmel Fire Department.

Richard Stiles addressed importance of two-in, two-out language in contract, including training. City Administrator Jason Stilwell clarified $2.2 million represents budgeted amount for fire services and ambulance subsidy and the difference between $2.2 and $1.7 million represents cost of ambulance, fire repairs and maintenance.

Roberta Miller stated that the actual cost of fire services is “uncertain.” She stated that the selection process had no competitive bid process and a lack of alternatives and cost/benefit analysis and accused Council of lack of due diligence.

Jerry stated support for the consolidation of Carmel’s fire department with Monterey.

Mayor McCloud closed the meeting to public comment.

Mayor McCloud defended City’s actions with regard to fire selection process.

Council Member Burnett stated his belief that the City will have better and more reliable service and lower cost through consolidation with “neighbors.”

Council Member TALMAGE moved to approve a contract with the City of Monterey for fire services, and direct city administrator and Monterey staff to include specific language pertaining to four issues, including testing every 5 years, 4th firefighter provided by ambulance and it unavailable by Monterey, operational integration of fire and ambulance including training, length of contract 2.5 years, omission of penalty clause requested of Monterey Council, seconded by Mayor McCLOUD and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT; HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

XI. Orders of Council

A. Receive, file and disseminate the report of the ad hoc Carmel CalPERS Pension Committee and direct staff to return with recommended implementation actions.

Jason Stilwell, City Administrator, presented the staff report, including review of the Carmel CAlPERS Pension Committee recommendations, and Governor Brown’s state-wide changes to public employees retirement systems.

Mayor McCloud opened and closed the meeting to public comment.

Council Member SHARP moved to receive, file and disseminate the report of the ad hoc Carmel CalPERS Pension Committee and direct staff to return with recommended implementation actions, seconded by Council Member HAZDOVAC and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT; HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

Council Member Burnett stated that in “the interest of the fiscal stability of the community,” every day that goes by costs the City over $1,000 in interest payments for the side fund debt alone and recommended the use of reserves of pay off some of the side fund debt in order to save interest costs.

C. Approve the City’s art collection deaccession policy.

Mayor McCloud presented the staff report, including the fact that the City accepted “six huge pieces of art” which the donors understood to be sold by the donors, and since the artworks are not well taken care of and, more importantly, the proceeds of sale could be used to maintain the art collection.

Council Member Talmage addressed the twelve criteria and suggested the deletion of item 6. He addressed his concern about “overrepresentation” language and stated that he would not limit the number of original artworks of good quality and condition of a single artist.
Note: 6. Deaccessioning of the object would help to eliminate an over-representation in an historical area of an artist or movement in the collection

Mayor McCloud stated she would contact Sheryl Nonnenberg about issues.

Council Member Burnett advocated for not deleting item 6 because it gives the Council “discretion.”

Mayor McCloud opened and closed the meeting to public comment.

Council Member HAZDOVAC moved to approve the City’s art collection deaccession policy, seconded by Council Member BURNETT and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT; HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE