One year ago, the Coronado City Council passed their FY 2019-20 budget. Generally speaking the financial outlook was rosy, with the City’s big three sources of revenue in order, Property Tax, Transient Occupancy Tax (TOT or sometimes referred to as the ‘Hotel Tax’) and Sales Tax, either holding their own or showing modest gains. TOT was conservatively expected to grow by $708,000 to $16.735 million.
One year later the COVID-19 Crisis has sent the TOT projections spiraling downward to $10.835 million for the current fiscal year which ends June 30, 2020. Virtually all TOT income is derived from hotel bookings which occurred in the first three quarters of FY 2019-20. With the city’s two largest destination hotels, the Hotel Del Coronado and the Loews Coronado Bay Resort currently closed, a reasonable expectation would be another TOT revenue decline in FY 2020-21.
A concept that was born out of the Recession of 2008, was the Coronado Tourism Improvement District, established June 15, 2010, and now formally named ‘Discover Coronado.’ The CTID is currently comprised of two legally distinct districts, each of which levies a one-half percent (0.5 percent) taxes on the four largest hotels in the city including the Coronado Island Marriott Resort & Spa, the Glorietta Bay Inn, the Hotel Del, and Loews. The income from the two districts help fund the sales and marketing of the four hotels, and by extension, helps keep the City’s TOT revenue in solid shape, except perhaps during the onslaught of a pandemic.
A constant figure throughout the history of Discover Coronado has been Executive Director Todd Little, who addressed the City Council via speaker phone and a PowerPoint presentation, at the Council meeting of Tuesday, April 21, 2020. Little said in the period from Feb. 2, 2020 to April 5, 2020, “Conventions are down 87 percent, which is significant plummet in a very short time. Families are down 81 percent and leisure couple bookings are down 77 percent.” He also noted the bookings resulted in loss of income from food and beverage operations and spa services at most of the member hotels.
Despite that gloomy economic snapshot, the four hotels still booked 427,501 overall room nights, which had an economic impact in the city of $92 million overall during their last reporting period. However, the overall operational budget for Discover Coronado for FY 2020-21 has also dropped from an original amount of $1.2 million to the interim approved amount of $950,000 representing a 33 percent decline. Little referenced during his presentation to the Council that a revised budget of $620,000 was now on the table, an amount which was formally approved by the Discover Coronado Board of Directors at their meeting of April 22, 2020.
“The Board thinks that’s a pretty good budget,” Little said by phone earlier this week. “We’re confident we can knock out a good portion of that goal. We will get through this. We are kind of used to this, as the organization was built out of the ruins of the recession and we have a lot of experience to draw from. Coronado is uniquely set up to benefit from leisure travel and there will be a huge pent-up demand. According to our research, most people are going to drive to their next vacation. And I think small towns and little cities will benefit. Now we need to get these resorts open.”
Little included several thoughts relating to the quickest path to Revenue and TOT recovery, including Gated re-opening of resorts; Staggered opening of services; Prioritization of leisure travel at first, the only currently available area of revenue growth; a focus on Domestic, regional and local guests; Promotion of Stay-cations now and Groups soon; Promotion of the strengths of Coronado; and Promotion of the value of face-to-face meetings.
By a 4-0 vote, the City Council approved Discover Coronado’s Annual Report and Management Plan, with Councilmember Bill Sandke recusing himself from consideration of the agenda item, as his photography business is located in the Hotel Del Coronado. Approval of the report and plan is the first step in the legally mandated approval process for Discover Coronado. May 19, 2020, a public hearing to approve the Resolution of Intent will be considered by the Council.
If you are a big fan of having the State of California dictate housing policy in local municipalities, then this next section is right up your alley. Coronado’s Director of Community Development, Redevelopment Services and Housing Richard Grunow said to the Council, “Over 30 new bills aimed at increasing housing production and affordability were passed by the State Legislature last year. Most of the new legislation does not significantly affect Coronado.”
Having said that, Grunow proceeded to delineate 10 Bills that would require the City of Coronado to modify their Municipal Code relating to Accessory Dwelling Units (ADUs). According to Grunow, the key elements include:
One ADU and one Junior ADU (JADU) are allowed on properties developed with a single-family dwelling unit.
The new State law mandates ADU sizes of 850 square feet for studios and one-bedroom units; 1,000 square feet for two-bedroom units; and JADUs of 500 square feet.
Relating to parking requirements, the new State Law says that cities shall not require the correction of non-conforming zoning conditions.
One JADU shall be allowed per property, developed with a single-family dwelling unit. Owner occupancy of either the JADU or the main dwelling can be required, and off-street parking is not required for the JADU.
Compliance with the parking requirements, or in this case the lack of parking requirements, will be an interesting proposition. The California Coastal Commission’s main mission is to guarantee access to the state’s beaches, which would appear to be contrary to the State’s stance on eliminating parking restrictions tied to real estate. Coronado City Attorney Johanna Canlas weighed in on the issue and said, “The requirements of the Coastal Act supersede the new State law. The City of Coronado is completely within the Coastal Zone, and the City Council can honor and promote Coastal access, with would require parking to accomplish that.”
To address these issues, two motions were made and passed by a unanimous 4-0 vote. Councilmember Whitney Benzian who has been affiliated with the California Apartment Association, recused himself from consideration of this topic.
The first motion was to direct city staff to require replacement parking for ADUs to protect public access. The second motion was to direct city staff to work with Canlas to analyze and determine the City’s ability to apply local control to the construction of new developments, which includes ADUs. In the interim, the city staff can approve housing construction separate from the approvals for ADUs.
Another important City Council decision was a unanimous 5-0 vote to approve the Local Business Lifeline Loan Program, which would benefit the City’s 124 Tier I business with bridge loans to enrollment in the Federal Payroll Protection Plan or Small Business Administration Loan Program. The staff recommendation included:
Adopt a resolution of the City Council reserving $2 million in General Funds for the purpose of providing Local Business Lifeline Loans.
Authorize the City Manager to enter into an agreement with Cal Private Bank to provide loan servicing and other related services.
Approve the tiered classifications of Coronado businesses.
Approve loan terms for Tier I businesses: $20,000 for each business: Maximum loan term of 60 months; Zero percent loan interest, with consideration of loan forgiveness depending upon circumstances; No loan to collateral percentage; Evidence of application for Federal or State COVID related business assistance; Suspend the Lifeline Loan Program if it is not totally subscribed within two months of initiation.
There was wide-spread community support of the Lifeline Business Loans as 116 of the 119 written public comments submitted to the Council were in favor of the program. One writer opposed the concept and two submissions did not state a position. Items 1-3 and 5 listed above met with immediate approval by the Council. Councilmember Marvin Heinze took the approach of potentially helping more people, with smaller loans and recommended the loans be capped at $10,000 per business. Later when asked, City Manager King noted the original working figure for the loan cap of $25,000 was, “Coming from what other cities are doing.”
Mayor Richard Bailey said, “We have a limited pot of money. The truth of the matter is, for all the small businesses out there, we want to serve as the bridge loan while the Federal government is getting their act together.” Councilmember Whitney Benzian added, “If the pot of money is small, I want the right people to get it. This is about supporting the community and the charm of our small town. I want companies there when the economy comes roaring back.”
Councilmember Bill Sandke noting a sense of urgency said, “We need to move on this.” Councilmember Mike Donovan said, “We should revisit this in 30 days and see how much money has been given out, how many loans have been applied for, and we know what is going on with the virus.”
After the 5-0 vote passing the motion, with the loan level pegged at $15,000 per business, King said, “This is just an observation, but there’s a hurricane going on right now and we’re trying to build a house in the middle of a hurricane. The man with one watch knows what time it is and a man with two watches is confused. This is a way to offer assistance. What you (the Council) are struggling with is an acceptable amount of imperfection. We have the choice of an imperfect plan and acceptance of an amount of imperfection. We are relying on the Coronado Business Community to make this work. We need to keep it simple and try to do the best we can to make the plan work.”
In other City Council meeting developments:
During his City Manager’s report, King said the format of keeping the City Council’s meeting minutes may be addressed, changing from the current semi-narrative form to just reflecting the date, attendance and actions of the Council. City Attorney Canlas said, “The tradition of the meeting minutes in Coronado extends from pre-live streaming video. Action minutes are the most common and legally preferred.” King said he would bring a report to a future Council meeting regarding the way the minutes should be kept. The Council voted 5-0 to a motion to support that concept.
By a 5-0 vote the City Council responded to interest from the public for COVID-19 testing, directing staff to implement a cost-neutral serology testing program that would be Coronado-centered. Sharp Coronado Hospital was mentioned during the Council’s discussion of the motion as a possible partner in the testing program.
The next meeting of the Coronado City Council will be held Tuesday, May 5, 2020 at 4 p.m. In-person attendance at the meetings has been curtailed as a health precaution during the COVID-19 crisis, but the meetings can be live-streamed through the City’s website at www.coronado.ca.us. The meetings can also be viewed live on Spectrum Cable’s Community Access Channel 19.