Chapter 5.17

UNIFORM TRANSIENT OCCUPANCY TAX SHARING PROGRAM

The purpose of this chapter is to provide an economic development incentive program for the opening, operation, and expansion of hotels which: (1) enhance the quality of hotels available to the public and the City's residents; (2) provide desirable and attractive experiences for the City's residents and visitors; (3) promote job creation opportunities in the City; (4) encourage property upgrades and enhancements in the City; and (5) increase the uniform transient occupancy tax revenue to the City. In the implementation of this program, the City Council finds:

• A. The general welfare and material well-being of the residents of the City depend in substantial measure upon the growth and expansion of hotels in the City.

• B. The opening, operation, and expansion of the inventory of hotels in the City will: (1) enhance the quality of hotels available to the public and the City's residents; (2) provide desirable and attractive experiences for the City's residents and visitors; (3) promote job creation opportunities in the City; (4) encourage property upgrades and enhancements in the City; and (5) increase the City's uniform transient occupancy tax revenue.

• C. It is in the best interest of the City to induce and encourage the opening, operation, and expansion of hotels that might not otherwise exist or might not be as successful, thereby creating new sources of revenues for the City's general fund which supports the public services the City provides its residents and visitors.

• D. The authority granted and the purposes to be accomplished by this chapter are proper local governmental and public purposes for which public funds can be expended and that the opening, operation, and expansion of the inventory of hotels are of paramount importance to the City, its residents, and businesses.

• (Ord. 16-18, 2019)

For the purposes of this chapter, the following definitions shall apply:

"Approved hotel" means any existing hotel or new hotel, as defined in this chapter, located within the City which has submitted an application for participation in the program and been approved by the City to participate in the program through a participation agreement.

"Developer" means any person or entity in the business of developing real property for the purpose of operating a hotel thereon, and with whom the City Council may, in its sole discretion, enter into a participation agreement.

"Existing hotel" means a hotel in the hotel business which is subject to the uniform transient occupancy tax, which was operating with a valid business license anywhere within the City not less than five years prior to the filing of an application by the existing hotel for assistance under this chapter.

"Hotel" means any existing hotel or new hotel as defined in this chapter.

"New hotel" means a hotel in the business of, or which proposes to be in a business, which will be subject to the uniform transient occupancy tax, which desires to open within the City, and is not operating within the City as of the date of the application by the new hotel for assistance

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City of Orange, CA

BUSINESS TAXES AND REGULATIONS

§ 5.17.020

§ 5.17.020

under this chapter, and has not operated within the City within one year of the date of the application.

"Owner" or "operator" means the person or entity which owns and operates the hotel and has legal authority to enter into a participation agreement on behalf of the hotel with the City.

"Participation agreement" or "agreement" means an agreement between the City and an approved hotel which provides for the rebate from the City to the hotel owner of a portion of the hotel's uniform transient occupancy tax increment, at a rate and for a time period as determined by the City. Said agreements may include such provisions, restrictions, conditions or other provisions as the parties then agree are necessary to give effect to the intent and spirit of this chapter.

d an approved hotel which provides for the rebate from the City to the hotel owner of a portion of the hotel's uniform transient occupancy tax increment, at a rate and for a time period as determined by the City. Said agreements may include such provisions, restrictions, conditions or other provisions as the parties then agree are necessary to give effect to the intent and spirit of this chapter.

"Tax sharing report" means the report which shall be completed for any applicant hotel which shall analyze the projected economic factors relating to the expansion of an existing hotel, or construction of a new hotel, and the projected impact of such expansion or construction on the hotel's generation of occupancies which are subject to uniform transient occupancy tax and which generate general fund revenues to the City, which shall be considered by the City Council in making its decision as to a particular hotel, and which the City Council may use, along with other evidence presented, in its sole discretion, to determine whether the subject hotel is approved to participate in the program, and if so, the appropriate uniform transient occupancy tax sharing rate and time period for the participation agreement. The tax sharing report shall be prepared by staff or by a qualified economic consultant employed by the City. The cost of preparing the tax sharing report, whether prepared by staff or an outside consultant shall be paid by the owner of the hotel applying for participation in the program, unless the City, in its sole discretion, waives this requirement as part of the terms of the participation agreement.

"Uniform transient occupancy tax" means that tax imposed pursuant to Chapter 5.16, accrued on account of occupancy in a hotel that would be payable to the City by the hotel operator.

"Uniform transient occupancy tax base" means the historical production of uniform transient occupancy tax by an existing hotel as calculated in the uniform transient occupancy tax sharing report. The uniform transient occupancy tax base shall be calculated in a manner as to take into account the then-current economic state relative to the historical performance of the hotel. In addition, it shall use a method determined by the preparer of the tax sharing report, for averaging production over an appropriate period adjusted for inflation, or other similar adjustment index, it being the intent that an approved hotel should receive a tax sharing arrangement which does not reward the hotel for improvement in uniform transient occupancy tax arising from general economic conditions as opposed to the improvements made by the owner.

rer of the tax sharing report, for averaging production over an appropriate period adjusted for inflation, or other similar adjustment index, it being the intent that an approved hotel should receive a tax sharing arrangement which does not reward the hotel for improvement in uniform transient occupancy tax arising from general economic conditions as opposed to the improvements made by the owner.

"Uniform transient occupancy tax increment" means, on an annual basis, the difference between the uniform transient occupancy tax base and the amount of uniform transient occupancy tax actually generated by a hotel and received by the City after a hotel begins participating in the program. It is determined by reference to actual receipts by the City of uniform transient occupancy tax from the operator. With respect to new hotels, all uniform transient occupancy tax received shall be deemed to be uniform transient occupancy tax increment unless adjustment(s) and/or additional condition(s) are incorporated into the participation agreement and approved by City. Under no circumstance shall the City be liable for any reimbursement of uniform transient occupancy tax increment not actually received and permanently retained by the City.

"Uniform transient occupancy tax quarter" means a three-month quarterly period as designated by the City.

"Uniform transient occupancy tax sharing" means the disbursement amount from the City to the owner of an approved hotel of a portion of that hotel's uniform transient occupancy tax

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City of Orange, CA § 5.17.020

ORANGE CODE

§ 5.17.030

increment, as determined each year for which the agreement is valid. The payment of the approved hotel's portion of the uniform transient occupancy tax increment shall be paid to the approved hotel within a reasonable time after the conclusion of each uniform transient occupancy tax quarter, consistent with the City's ability to verify its actual uniform transient occupancy tax receipts relative to the approved hotel.

"Uniform transient occupancy tax sharing program" or "program" means the uniform transient occupancy tax program established by this chapter. A hotel's participation in the program extends as long as the time period provided for in a participation agreement. (Ord. 16-18, 2019)

• A. Eligible existing hotels include those hotels with an operating history of not less than five years or more in the City of Orange. Participation requirements include implementation of a minimum of four criteria listed below:

  1. Be a developer and/or owner of any existing hotel;

  2. Plan and implement renovation to the existing hotel property including, but not limited to rehabilitation work such as upgrading and expanding permanent building improvements, parking, landscaping, tenant improvements, signs and equipment that are permanently attached to the building;

  3. Plan and implement expansion to improve and/or expand the business operations;

  4. Plan and implement consolidation of operations to a location in the City;

  5. Retention and/or creation of employment opportunities in the City; and

  6. Generate a minimum of $1,000,000.00 in annual uniform transient occupancy tax reported in the City.

• B. Eligible new hotel shall include those developer(s) and/or owner(s) who desire(s) to open a hotel within the City, and is(are) not operating said hotel within the City as of the date of the application by the new hotel for assistance under this chapter, and has not operated such a hotel within the City within one year of the date of the application. Participation requirements shall include all of the following:

  1. Identify a suitable location in the City;

  2. Plan and implement development of a new hotel in the City; and,

  3. Create employment opportunities of not less than 50 full-time jobs in the City; and

  4. Generate a minimum of $1,000,000.00 in annual uniform transient occupancy tax reported in the City.

• C. Both eligible new and existing hotels are required to complete all the following:

  1. Submit to the City Manager a completed application for participation in the uniform transient occupancy tax sharing program on the City's official uniform transient occupancy tax sharing program application form; and

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City of Orange, CA

BUSINESS TAXES AND REGULATIONS

§ 5.17.030

§ 5.17.040

2. Receive approval for participation in the program from the City; and

3. If approved by the City, enter into a participation agreement in the form approved by the City.

• D. It is recognized that some hotels will be located in premises which are not owned by the owner of the hotel and are rented or leased from a third party. In such circumstances, the City and the hotel shall seek the permission of the owner of the property to record the operating covenants against the subject property, applicable only to the hotel. The City Council, at its sole discretion, may approve such terms or conditions as it deems appropriate in order to obtain the property owner's consent, or may, in its sole discretion, waive the requirement of recording the operating covenants. If the property owner and the owner are under common control, recording the operating covenants shall be a requirement of approval of the participation agreement.

• (Ord. 16-18, 2019)

• A. The City Council is authorized to enter into participation agreements with hotels in accordance with this section.

• B. In order to determine the appropriate rate of uniform transient occupancy tax sharing for each hotel that has submitted an application pursuant to Section 5.17.030, the City Manager or designee shall cause to be prepared a tax sharing report, which shall analyze factors including the following. The City Manager or designee, in his or her sole discretion, may consider additional factors, or require additional studies or reports, as deemed appropriate, which may include, but not be limited to:

  1. For existing hotels, the existing level of uniform transient occupancy tax generated by the existing hotel, and the projected uniform transient occupancy tax to be generated after a planned expansion project; and

  2. For new hotels, the projected uniform transient occupancy tax to be generated by the new hotel; and

  3. The amount of expected uniform transient occupancy tax increment; and

  4. For new and existing hotels, the type, quality, and price point of the new or existing hotel; and

  5. For new and existing hotels, the total projected cost to construct the new hotel or expand the existing hotel; and

  6. The impact and benefits of the proposed expansion or construction of the new or existing hotel on the residents and other businesses in the City and the surrounding region; and

  7. The necessity for public assistance.

• C. After considering the tax sharing report and such other factors, studies or reports as it, in its sole discretion, deems appropriate, the City shall determine the rate of uniform transient occupancy tax sharing to be provided to a hotel that will be necessary or appropriate to achieve the goals and intent of this chapter. The rate may vary over time as determined by

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City of Orange, CA § 5.17.040

ORANGE CODE

§ 5.17.070

the City Council in its sole discretion.

• D. After considering all of the material outlined in Section 5.17.040(C), the City shall determine, in its sole discretion, the time period over which uniform transient occupancy tax sharing will be necessary or appropriate to achieve the goals and intent of this chapter. The time period may be subject to possible reduction or termination as the City Council may determine in its sole discretion.

• E. The City Council shall hold a public meeting on all contemplated participation agreements. Notice of the time and place of the meeting shall be published pursuant to laws of the State of California. At this meeting, the City Council shall consider all evidence before it, including the information contained in the tax sharing report.

• F. The City shall make all tax sharing reports available for public inspection and copying, at a cost not to exceed the cost of duplication, no later than the time of publication of the first notice of the public meeting mandated by this section.

• G. As part of the public meeting on a contemplated participation agreement, the City Council may approve the participation agreement with the owner or developer. A participation agreement may provide for the City to rebate to a new or existing hotel an appropriate rate of uniform transient occupancy tax increment for an appropriate time period, as necessary to achieve the goals and intent of this chapter, as determined by the City Council in its sole discretion.

• (Ord. 16-18, 2019)

All uniform transient occupancy tax revenues or uniform transient occupancy tax increment remitted to the City by the operator, which were collected by a hotel, are general fund revenues of the City and shall be deposited in the City's general fund. (Ord. 16-18, 2019)

The City may terminate the participation agreement on 10 days' notice, or a longer time period so specified in the participation agreement if the hotel violates any of the provisions in the participation agreement, this chapter, or local, state or federal law, provided that such violation or violations continue to exist at the end of said 10-day period, the time period provided for in the participation agreement, or as determined by a court of competent jurisdiction. The City shall give notice to the owner as required by the terms of the participation agreement. (Ord. 16-18, 2019)

Consistent with the intent and goals of this chapter, the City Manager may adopt administrative rules and regulations for implementation and furtherance of the requirements of this chapter. (Ord. 16-18, 2019)

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City of Orange, CA

BUSINESS TAXES AND REGULATIONS

§ 5.30.010

§ 5.30.050