REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Jennifer Villasenor, Director of Community Development
PREPARED BY: Christopher Kennedy, Economic Development Project Manager
Subject:
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Approve the Annual Report and Budget for the Huntington Beach Downtown Business Improvement District (District) for Fiscal Year 2025-2026 and adopt Resolution No. 2025-51 to continue collecting an annual fee from businesses in the District, with a public hearing scheduled for October 7, 2025
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Statement of Issue:
The Huntington Beach Downtown Business Improvement District was established by the City Council in 2004 to fund services and improvements that support businesses in the Downtown area. Each year, the City Council is required to approve the District's Annual Report and Budget and adopt a resolution declaring its intent to levy annual assessments on businesses within the District. This action also sets a public hearing to allow business owners to comment on or protest the assessment.
Financial Impact:
The District's proposed Fiscal Year 2025-2026 assessment budget totals approximately $115,000, which is expected to be collected from business assessments. The City's FY 2025-2026 Operating Budget (Fund 710) includes $125,000 in related revenue and matching expenditures.
Although the nonprofit organization that operates the District, Downtown HB, has a total organizational budget of approximately $972,445 for FY 2025-2026, the City Council's authority is limited to reviewing and approving the portion of the budget funded by business assessments. The remaining revenue comes from other sources, including vendor fees, sponsorships, donations, and event income from Surf City Nights, the Surf City Artisan Fair, and other programs.
Recommended Action:
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A) Approve the Huntington Beach Downtown Business Improvement District Annual Report and Budget for FY 2025-2026; and
B) Adopt Resolution No. 2025-51, "A Resolution of the City Council of the City of Huntington Beach Declaring the City's Intention to Levy an Annual Assessment For Fiscal Year 2025-2026 within the Huntington Beach Downtown Business Improvement District" and schedule a public hearing for October 7, 2025, to consider continuation of the District.
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Alternative Action(s):
Do not approve the Annual Report and Budget or modify the proposed assessment plan, and/or deny the Resolution.
Analysis:
Business Improvement Districts are special assessment districts established by local governments to fund services and activities that benefit businesses within a defined area. These services must be in addition to those already provided by the City. Common examples include enhanced cleaning, security, marketing, and special events designed to attract foot traffic and support business vitality.
The District was created by the City Council in 2004 under the authority of the California Streets and Highways Code, which governs how Business Improvement Districts are formed, managed, and renewed. This state law outlines the required steps for levying assessments and ensures that funds are spent only on services that directly benefit businesses within the district. It includes approximately 255 businesses in the core Downtown area. Businesses within the District are assessed annually based on factors such as location, size, and business type, with assessment rates ranging from $80 to $1,404 per year, plus a $12 processing fee.
Downtown HB, a nonprofit 501(c)(6) corporation formed by Downtown business owners, serves as the City-appointed Advisory Board for the District. Under an agreement with the City, Downtown HB is responsible for managing District funds and overseeing day-to-day operations related to the assessment-funded programs. The organization also coordinates a range of events, promotions, and services that are funded through additional, non-assessment sources.
This distinction is important - while the District refers specifically to the City-established assessment district and its associated revenues ($115,000), Downtown HB's full annual operating budget is significantly larger ($972,445) due to revenue generated from events and sponsorships. The City Council only has oversight over the District portion of the budget, not Downtown HB's broader financial operations.
As required by state law, an Annual Report has been submitted outlining:
* The improvements and activities proposed for the upcoming year;
* A detailed budget for assessment-funded services;
* Any changes to the boundaries or assessment formula (none proposed);
* Surplus or deficit revenues from prior years; and
* Contributions from non-assessment sources.
The table below compares the FY 2024-2025 and FY 2025-2026 BID assessment budgets:
While the amount of the budgeted line item may have changed, the total amount budgeted for each line item may exceed the assessment budget by using funds from Downtown HB's annual operating budget.:
* Ambassador Security Program - $35,000 (30%): Safety ambassadors provide a visible presence throughout Downtown, assist visitors, deter nuisance activity, and work closely with HBPD. Expanded weekend and event coverage began earlier this year.
* Enhanced Maintenance - $21,000 (18%): These funds support additional cleaning and porter services, beyond those provided by the City, especially during busy weekends and large events.
* Holiday Beautification - $25,800 (22%): Downtown is decorated annually with lights, snowflakes, and a holiday tree on Main Street. This year, the program will expand with new decorations through the fourth block.
* Marketing - $10,000 (9%): Supports digital campaigns, social media, website updates, and email communications to promote Downtown businesses and events.
* Community Events - $18,000 (16%): Funds annual public events such as the Independence Day Block Party, Surf City Spooktacular, and Magic on Main Street, which increase visitation and strengthen community engagement.
* CRM Software - $3,000 (3%): Supports the District's stakeholder database and vendor management tools, helping track participation and improve outreach.
* Financial Services - $2,200 (2%): Covers third-party accounting services to ensure transparency, accuracy, and compliance in the District's financial reporting.
Downtown HB also maintains approximately $163,570 in reserves, which are available for future one-time projects, seasonal needs, or economic emergencies affecting the Downtown area.
State law requires the City Council to adopt a Resolution of Intention and set a public hearing date (October 7, 2025) before levying assessments for the upcoming year. During the hearing, business owners may submit written or oral protests. If owners representing 50% or more of the total assessments protest, the District may not be renewed for one year.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(4), government fiscal activities that do not result in a physical change in the environment and do not commit the lead agency to any specific project, do not constitute a project. Therefore, these activities are exempt in accordance with CEQA Guidelines Section 15060(c)(3).
Strategic Plan Goal:
Goal 1 - Economic Development, Strategy A - Develop an updated economic development strategy to ensure business retention, local investments and job growth.
Attachment(s):
1. Resolution No. 2025-51
Exhibit A: Annual Report and Proposed Budget for FY 2025-2026
Exhibit B: Boundary Map, Business List, and Assessment Schedule
Exhibit C: Improvements and Activities Proposed to be Funded
2. PowerPoint Presentation