DATE: April 10, 2018
SUBJECT:
Title
RESOLUTION AUTHORIZING AN AGREEMENT WITH EXTREME SAN DIEGO, LLC FOR SPONSORSHIP OF AN EXTREME SAILING SERIES EVENT IN OCTOBER 2018 IN AN AMOUNT NOT TO EXCEED $150,000 IN FUNDING AND UP TO $75,000 IN DISTRICT SERVICES; FUNDS REQUIRED FOR FY 2018 EXPENDITURES ARE BUDGETED, AND FUNDS REQUIRED FOR FY 2019 WILL BE BUDGETED IN THAT FISCAL YEAR, SUBJECT TO BOARD APPROVAL UPON ADOPTION OF THAT FISCAL YEAR’S BUDGET
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EXECUTIVE SUMMARY:
In 2017, the Extreme Sailing Series was held around the world in eight countries on four continents and featured a special waterfront experience with 32-foot foiling catamarans, representing multiple countries and international corporate sponsors, racing on a tight course. Last year, the District sponsored the 2017 Extreme Sailing Series event that was held on San Diego Bay, at Harbor Island, from October 19-22, 2017. As part of the 2017 sponsorship, the District provided $100,000 in funding and up to $75,000 in District services which included public safety support from the San Diego Harbor Police and rental of Harbor Island Park and its adjacent parking lot. The 2017 Extreme Sailing event on San Diego Bay exhibited signs of positive growth potential as well as generated a financial and promotional return to the District to an extent that merits consideration of a second event and additional sponsorship support for a 2018 event in San Diego. Based on that, for 2018, staff is recommending an increase of $50,000 in District funding, for a total of $150,000 in event funding, and the same amount of District services provided in 2017 in the amount of $75,000.
This agenda item is being brought forward for the Board to adopt a resolution to authorize an agreement with Extreme San Diego, LLC for District sponsorship of a 2018 Extreme Sailing Series special event on the waterfront in San Diego in October 2018.
RECOMMENDATION:
Recommendation
Adopt a resolution authorizing an agreement with Extreme San Diego, LLC for sponsorship of an Extreme Sailing Series event in October 2018, in an amount not to exceed $150,000 in funding and up to $75,000 in District services. Funds required for FY 2018 are budgeted and funds required for District services will be incurred in FY 2019.
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FISCAL IMPACT:
While the Extreme Sailing Series event for which this proposed sponsorship will occur during FY 2019, the special event expenditure in amount of $150,000 will be incurred during the FY 2018 budget year due to the lead time required for the event sponsor to effectively market and promote an international sailing event of this scale and magnitude. Funds are available in the FY 2018 Waterfront Arts and Activation Department budget to cover this sponsorship.
This event is anticipated to generate direct revenue in the form of percentage fees from the sale of tickets and merchandise; and indirect revenue consisting of concession rent from District tenant hotels, restaurants, retail enterprises and tenant/operator parking facilities. Additionally, we anticipate indirect value from the promotional considerations to be provided to the District through this proposed sponsorship.
Compass Strategic Goals:
An Extreme Sailing Series event on San Diego Bay that uses Harbor Island for spectator viewing and event-related attractions will activate this area of the District tidelands with several thousand visitors who will experience San Diego Bay and the waterfront, contribute to the social media following of the District and its activities, and generate revenue to the District and its tenants. This agenda item therefore supports the following Strategic Goal(s):
• A thriving and modern maritime seaport.
• A vibrant waterfront destination where residents and visitors converge.
• A Port that is a safe place to visit, work and play.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
The 2017 Extreme Sailing Series event in San Diego took place in October on the San Diego Bay in a course approximately 1 kilometer long adjacent to Harbor Island. The event utilized Harbor Island Park, its parking lot and much of the linear open space along Harbor Island for spectator seating - with VIP, general admission, and free-to-the-public spectator options - as well as corporate chalets and sponsor activations; and space in the Marina Cortez leasehold directly across from Harbor Island Park for pit areas for each of the competing teams.
Based on an economic impact analysis completed by the San Diego State University Tourism Center for Hospitality Research, the October 2017 Extreme Sailing Series event in San Diego generated $2.5 million in revenue to the region. An estimated 9,464 people attended the 2017 event, of which one-third were non-local visitors. The 2017 San Diego event generated 3,303 hotel room-nights to District tenant hotels. District tenant businesses that benefited from the event also include restaurants, retail establishments, parking facilities and tourist attractions. In total, the 2017 San Diego event generated $2.3 million to District tenants in incremental revenue that resulted in $115,000 in indirect revenue (concession rent) from the aforementioned tenant establishments, as well as $7,000 in direct revenue (ticket and merchandise percentage fees paid by the event organizers) to the District, for an estimated total of $122,000 in revenue to the District.
In addition to its financial impacts, the 2017 event included promotional benefits to the District in the form of presence in a variety of print, electronic and social media, prominent space for the District’s new Wonderfront dream booth with a photo opportunity backdrop and staffing to interact with attendees, and a District-branded Wonderfront banner that extended across the rip-rap between the park and the sailing course and was highly visible in filming and photography of the event from the water side. Another notable contribution of the 2017 San Diego event was the outreach component, which included STEM (Science, Technology, Mathematics and Engineering) education classes for local youth that were held onboard the USS Midway and focused on the STEM aspects of sailing and foiling; and an Extreme Sailing Day at the National City Aquatic Center that featured educational stations and the opportunity to explore one of the competing vessels from the 2017 San Diego event that ESD representatives brought to the facility. Eighty middle school students from the South Bay participated in the Extreme Sailing Day.
In return for the sponsorship considerations granted to it, the District supported the 2017 San Diego event with $100,000 in funding and $75,000 in waivers of fees for District services that included facility use fees for Harbor Island Hotel and its adjacent parking lot, public safety services on land and water from the San Diego Harbor Police, and CEQA/Coastal review of the proposed event. District staff from the Waterfront Arts & Activation Department worked closely with the event organizers and production team to ensure that the District provided prompt and thorough logistical support for the 2017 San Diego event and that the event organizers met their obligations related to site use, public access and compliance with the District’s permitting requirements.
The San Diego Tourism Marketing District (TMD) was also a major supporter of the 2017 San Diego event, providing $400,000 in funding to Extreme San Diego.
The principals of Extreme San Diego, LLC and the brand owners of Extreme Sailing, known as OC Sport based in London, have met with District staff on several occasions between October 2017 and March 2018 to review the results, impacts and lessons learned from the 2017 San Diego event and negotiate terms for a proposed District sponsorship of a 2018 Extreme Sailing Series event on San Diego Bay. The 2018 Extreme Sailing Series has events currently scheduled in eight cities- including San Diego - spanning three continents including locations in Barcelona, St. Petersburg and Muscat, Oman.
Following its review of the financial and promotional impacts versus the costs to the District of the 2017 San Diego event and informed by highly positive feedback from a number of District tenants regarding the event, staff concluded that the District would benefit from sponsorship of a 2018 San Diego event. Staff determined with Extreme San Diego, LLC that additional funding from the District in 2018 above that provided in 2017 would increase the resources available to Extreme San Diego, LLC to market the event, with the intended result being earlier and more widespread promotion to the target demographic inside and outside of the San Diego region; and that the event would in turn benefit from higher attendance and additional sponsors garnered through more comprehensive promotion.
Based on the foregoing, staff is recommending that the District sponsor a 2018 Extreme Sailing Series event in San Diego in the amount of $150,000 in funding - an increase of $50,000 from the funding provided by the District for the 2017 San Diego event - and with up to $75,000 in District service fee waivers for facility use, public safety and CEQA/Coastal review, for a total of $225,000 in sponsorship value to Extreme San Diego, LLC. With Board review and resolution, the District will be rendering its sponsorship decision for a 2018 San Diego event in advance of that of the TMD, which is currently expected to render its funding decision later in April 2018.
The attached agreement (Attachment A) contains the financial and promotional considerations that the District and Extreme San Diego, LLC will provide to the other entity. Excluding the increase in the District’s financial support to the event, this agreement is in large part identical to the agreement for the 2017 San Diego event. The additional promotion anticipated to occur in advance of the 2018 San Diego event is anticipated to increase the attendance and, by extension, the financial and promotional impacts to the District, its tenants and the region.
General Counsel’s Comments:
The Office of the General Counsel has reviewed the agreement with Extreme San Diego, LLC and approves as to form and legality.
Environmental Review:
The proposed Board action to authorize an agreement for sponsorship of a sailing event is Categorically Exempt pursuant to California Environmental Quality Act (CEQA) Guidelines Sections 15304 (Class 4 - Minor Alterations to Land) and 15323 (Normal Operations of Facilities for Public Gatherings) and Section 3.d. (6) of the District’s Guidelines for Compliance with CEQA because the project in question would not involve the removal of mature, scenic trees, would not have any permanent effects on the environment, and would consist of the normal operations of existing facilities for public gatherings. The District has determined none of the six exceptions to the use of a categorical exemption apply to this project (CEQA Guidelines Section 15300.2). No further action under CEQA is required.
The proposed Board action complies with Section 87 of the Port Act, which allows for the construction, reconstruction, repair, maintenance, and operation of public buildings, public assembly and meeting places, convention centers, parks, playgrounds, bathhouses and bathing facilities, recreation and fishing piers, public recreation facilities, including, but not limited to, public golf courses, and for all works, buildings, facilities, utilities, structures, and appliances incidental, necessary, or convenient for the promotion and accommodation of any of those uses. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board action is consistent with the Public Trust Doctrine.
In addition, the proposed Board action is considered “excluded development” pursuant to Section 8.d. (5) (Minor Alterations to Land) of the District’s Coastal Development Permit Regulations because the project in question would not involve the removal of mature, scenic trees or have any permanent effects on the environment; therefore, issuance of a Coastal Development Permit is not required.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Jim Hutzelman
Manager, Business Development & Recreation Services
Waterfront Arts & Activation
Yvonne Wise
Director, Waterfront Arts & Activation
Attachment(s):
Attachment A: Agreement between San Diego Unified Port District and Extreme San Diego, LLC