DATE: August 13, 2019
SUBJECT:
Title
RESOLUTION AUTHORIZING AMENDMENT NO. 1 TO AGREEMENT WITH STAY CLASSY SAN DIEGO, LLC FOR SPONSORSHIP OF A FESTIVAL ON THE DOWNTOWN SAN DIEGO WATERFRONT, ADDING $150,000 IN FUNDING, AND ASSIGNING ALL RIGHTS AND OBLIGATIONS OF STAY CLASSY SAN DIEGO, LLC TO WONDERLUST EVENTS, LLC. FY 2020 EXPENDITURES ARE BUDGETED.
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EXECUTIVE SUMMARY:
At the July 24, 2019, Board of Port Commissioners Meeting, the Board asked the Waterfront Arts & Activation department to follow up with additional details regarding the value of the District’s sponsorship for the 2019 Wonderfront Festival, an inaugural three-day arts and music festival to be held on seven locations on District tidelands from November 22-24, 2019.
Based on staff’s analysis, the Wonderfront Festival is estimated to generate $236,000-$422,000 in revenue to the District through tenant concession and ticket sales revenue. Additionally, in exchange for the District sponsorship, the organizer will provide 3,000 free tickets to underserved communities nearby and host 14.5 hours of free live music programming during the festival, with an estimated value of over $1 million. The District’s sponsorship -- in the amount of $150,000 direct cash under this proposed agenda item and up to $350,000 in in-kind services previously approved on July 17, 2018 -- represents 5% of the total 2019 Wonderfront Festival cost and is equal to the contribution from the San Diego Tourism and Marketing District.
The Board action under this agenda item will amend the existing agreement (Attachment A) to add $150,000 in funding, assign the rights and obligations of Stay Classy San Diego, LLC (SCSD) to Wonderlust Events, LLC-an entity wholly owned and operated by SCSD-and provide licensing of the name Wonderfront by the District to define its usage by the event organizers. The amendment also explicitly requires that the Wonderfront Festival performance venues be on District-owned land.
RECOMMENDATION:
Recommendation
Adopt a Resolution authorizing Amendment No. 1 to Agreement with Stay Classy San Diego, LLC for sponsorship of a festival on the downtown San Diego waterfront, adding $150,000 in funding, and assigning all rights and obligations of Stay Classy San Diego, LLC to Wonderlust Events, LLC and provide licensing of the name Wonderfront by the District to define its usage by the event organizers. Funds are available in the Waterfront Arts & Activation department’s budget and will be expended in fiscal year 2020.
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FISCAL IMPACT:
The proposed amendment to the agreement adds $150,000 in District funding for the Wonderfront Festival, which is anticipated to be spent in FY 2020. Funds are available in the District’s Waterfront Arts & Activation department’s non-personnel expense budget for FY 2020.
The existing agreement with Stay Classy San Diego, LLC already includes the previously Board-approved amount of up to $350,000 in waived fees for District services that include the use of substantial pier, park, open and parking spaces, as well as the services of the San Diego Harbor Police, General Services and a variety of departments involved with permitting and entitlements. Expenses associated with waived service fees will be tracked and accounted for throughout the year. No other ongoing costs are associated with this action.
The Wonderfront Festival is anticipated to generate direct revenue to tenant businesses including hotels, restaurants, retail enterprises, parking facilities and visitor attractions. This business revenue, in turn, results in concession rent and ticket sale revenue share to the District estimated at $236,000-$422,000.
Compass Strategic Goals:
District sponsorship of select Business Negotiated Events generate direct and indirect incremental revenue through increased concession rents from tenant businesses that benefit from these events and increased use of District parking assets. The District also realizes promotional benefit for the tidelands as a visitor destination, as well as the fulfillment of its objective to attract visitors to enjoy activities on San Diego Bay. This agenda item supports the following Strategic Goal(s):
• A Port that the public understands and trusts.
• A vibrant waterfront destination where residents and visitors converge.
• A Port with a healthy and sustainable bay and its environment.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
As background, sponsorship of the 2019 Wonderfront Festival was approved by the Board on July 17, 2018 through an agreement (Attachment B) with Stay Classy San Diego, LLC (SCSD) for sponsorship a three-day music and arts festival on District tidelands.
At the July 9, 2019, Board meeting, staff presented an update on the festival as well as a proposed amendment to the agreement to add $150,000 in funding. During the meeting, the Board requested that staff provide additional information regarding the potential revenue to the District, cost of the festival, and expected outcomes at the next Board Meeting. This agenda sheet includes the requested information; a more comprehensive background on the festival itself is included in the previous agenda (Attachment C).
As detailed below, the Wonderfront Festival is expected to generate several benefits for the District. First, the Wonderfront Festival will bring an estimated 20,000-30,000 people to the District daily over its three days in November. This is a period when tourism to the San Diego region is typically low in comparison with the rest of the year and, as such, this presents an opportunity to activate District tidelands with high-quality family-friendly entertainment and attractions and provide economic return to the region. Staff estimates that the festival will result in between $236,000-$422,000 in concession rent to the District generated by visitors to hotels and other tenant businesses on Tidelands. Second, the Wonderfront Festival will include 3,000 free tickets to underserved communities and a free music stage with 14.5 hours of free programming, allowing the general public in the community experience San Diego Bay in a unique manner.
Summary of Event Costs, Funding Partners, and Expected Outcomes of District Investment
With seven stages and diverse lineup of 80+ musicians, the Wonderfront Festival is estimated to cost $10M to produce on the San Diego Bay. As such, the festival organizers have partnered with several entities for financial and in-kind support:
• $500,000 from the Port of San Diego (up to $350,000 of in-kind services for permitting and security-related expenses; and $150,000 in cash proposed by this agenda item);
• $7.5 million from investors and sponsors from the San Diego business community, as well as three California celebrity brand ambassadors: Tony Hawk, Rob Machado, and Trevor Hoffman;
• $500,000 from the San Diego Tourism and Marketing District, which includes support for event production, advertising, and PR/entertainer fees.
Additionally, $1.5 million in expenses will be covered through ticket sales, concession and merchandise sales, and after-party revenues. Many expenses come due after the event is concluded, and the sales revenues will be used to pay those expenses.
In the first year, the festival organizers and investors are working to build the Wonderfront Festival brand and do not expect to realize a profit until later years. The Wonderfront Festival is competitively priced to attract visitors and will include a broad array of music genres. The price of a three-day pass to the Wonderfront Festival ranges from $229 for general admission to $1,200 for special VIP packages. By way of reference, the three-day pass for admission to the Coachella Valley Music and Arts Festival starts at $399, and event parking or shuttles add $75-$140 to that price. A three-day pass to Kaboo Musical Festival in Del Mar ranges from $339 for general admission to a VIP pass for $3,999. The Wonderfront Festival is being advertised throughout Southern California and Arizona to attract as many visitors as possible during a relatively slow tourism weekend.
In response to questions during the July 9, 2019, Board meeting, staff has quantified the various benefits of the festival based on low, medium and high potential attendee levels. The table contains estimates for the District’s potential concession revenues and benefits to the public at three different attendance levels. In each scenario, the District generates more than the proposed $150,000 of direct event funding, and as the number of attendees increases, the District recovers an increasing share of the $350,000 in in-kind support provided for the event. In calculating the revenues, staff used conservative assumptions for the number of attendees that would stay in a hotel on Tidelands (25%) or park in a District parking lot (12.5%); and if relatively more attendees were to stay at those hotels or parking lots, the concession payments to the District would grow as well.
The analysis also estimates that the Wonderfront Festival will generate over $1 million in public benefits through the free tickets and free concerts. The District’s $150,000 in cash contributions would be used to help fund the event planning, permitting, and operation of the free community music stage. This stage would serve as a District contribution to San Diego 250, a year-long initiative recognizing the 250th anniversary of the founding of San Diego. The stage venue will host 14.5 free hours of live music at and the Tony Hawk Huckjam Ramp, featuring skateboard demonstrations, during the Wonderfront Festival. To ensure broad community access to the Wonderfront Festival, the festival will provide 3,000 free tickets to individuals in the local underserved communities. Additionally, District funding may be used in part to pay for consulting services that will provide key data and recommendations in support of both the Wonderfront Festival transportation and mobility plan and the mobility portions of the District’s Port Master Plan Update efforts in the Embarcadero area.
The analysis above does not include the promotional value that the District is receiving from this sponsorship and its designation as one of five presenting sponsors. The benefits of this sponsorship level include logo placement on all print and electronic marketing materials and messaging, designating the District as a Presenting Sponsor; District banner placement in multiple locations including prominent placement near festival stages; District information and website links on the festival website, a full page ad in the festival program, and a variety of scripted verbal mentions of the District throughout the time of the festival.
The amendment also assigns the rights and obligations of Stay Classy San Diego, LLC (SCSD) to Wonderlust Events, LLC (WLE), an entity wholly owned by SCSD. No other elements of the existing sponsorship agreement will change as a result of this assignment. Additionally, the amendment includes the licensing of the name Wonderfront to limit the use of the word Wonderfront by Wonderlust Events, LLC to references to the proposed festival event only.
Post-Event Analysis
At the end of the 2019 event, the Waterfront Arts & Activation department will require SCSD to complete an analysis of the economic, media and, promotional impacts of the Festival. This analysis will inform the District of indirect revenue impacts of the Festival from tenant concession rent, as well as provide an estimated value of the branding and promotional considerations provided to the District by SCSD. When the District has received and evaluated this analysis, staff will provide a review of the impacts of the festival to the Board. This data will also be used in evaluating future partnerships.
General Counsel’s Comments:
The Office of the General Counsel has reviewed and approved this agenda, the proposed amendment, and resolution, as presented, as to form and legality.
Environmental Review:
The proposed Board action, including without limitation, a resolution authorizing an amendment to the agreement with Stay Classy San Diego, LLC for sponsorship of a San Diego Festival to add additional funding and licensing for use of the name ‘Wonderfront’ was adequately covered in the Categorical Exemption for the Agreement to Stay Classy San Diego, LLC for Funding of an Entertainment Festival filed on September 13, 2018. The project was determined to be exempt pursuant to California Environmental Quality Act (CEQA) Guidelines Sections 15301 (Existing Facilities), 15304 (Minor Alterations to Land), 15311 (Accessory Structures), and/or 15323 (Normal Operations of Facilities for Public Gatherings) and Sections 3.a., 3.d. (6), and/or 3.i. of the District’s Guidelines for Compliance with CEQA because the project in question proposes a temporary event occurring over 3 days, with a maximum set up and break down of 7 days, that would involve a negligible expansion of use beyond that previously existing, would not involve the removal of mature scenic trees, would have no permanent effects on the environment, would involve the erection of temporary structures that would be disassembled at the end of the event, 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), because the location of this project would not result in an impact that would ordinarily be considered insignificant, no cumulative impacts would result from this projects, as the facilities would have substantially the same purpose and capacity, there is no reasonable possibility that the project would result in a significant impact, the project site would not result in damage to scenic resources, especially within a state scenic highway, the project site is not located on within a hazardous waste site, and the project would not result in a substantial adverse change in the significance of a historical resource. The proposed project is not a separate “project” for CEQA purposes but is a subsequent discretionary approval related to a previously approved project. (CEQA Guidelines § 15378(c); Van de Kamps Coalition v. Board of Trustees of Los Angeles Comm. College Dist. (2012) 206 Cal.App.4th 1036.) Additionally, pursuant to CEQA Guidelines Sections 15162 and 15163, and based on the review of the entire record, including without limitation, the exemption, the District finds and recommends that the approval of the amendment to the agreement to include additional funding and licensing of the name ‘Wonderfront’ does not require further environmental review as: 1) no substantial changes are proposed to the project and no substantial changes have occurred that require major revisions to the exemption due to the involvement of new significant environmental effects or an increase in severity of previously identified significant effects; and 2) no new information of substantial importance has come to light that (a) shows the Project will have one or more significant effects not discussed in the exemption (b) identifies impacts would not be more severe than those analyzed in the exemption, (c) shows that mitigation measures or alternatives are now feasible that were identified as infeasible and those mitigation measures or alternatives would reduce significant impacts, and (d) no changes to mitigation measures or alternatives have been identified or are required. Because none of these factors have been triggered, the District has the discretion to require no further analysis or environmental documentation (CEQA Guidelines §15162(b)). Pursuant to CEQA Guidelines §15162(b), the District finds and recommends that no further analysis or environmental documentation is necessary. Accordingly, the proposed Board action is merely a step in furtherance of the original project for which environmental review was performed and no supplemental or subsequent CEQA has been triggered, and no further environmental review is required.
In addition, the proposed Board direction or action complies with Sections 35, 82, and 87 of the Port Act, which allow for: the Board to do all acts necessary and convenient for the exercise of its powers; the use of funds for advertising the commercial and other advantages of the District and encouraging and promoting commerce; and 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.
Finally, the proposed Board action does not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit (CDP) Regulations because they will not result in, without limitation, a physical change, change in use or increase the intensity of uses. Therefore, issuance of a CDP or exclusion is not required at this time. However, future development of the project will require issuance of a CDP by the District and the item will come to the Board at a future date. The project’s future development, as defined in Section 30106 of the Coastal Act, will remain subject to its own independent review pursuant to the District’s certified CDP Regulations, PMP, and Chapters 3 and 8 of the Coastal Act. The Board’s direction or action in no way limits the exercise of the District’s discretion under the District’s CDP Regulations. Therefore, issuance of a CDP or exclusion is not required at this time.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Jim Hutzelman
Manager, Waterfront Arts & Activation
Yvonne Wise
Director, Waterfront Arts & Activation
Attachment(s):
Attachment A: Amendment No. 1 to agreement with Stay Classy San Diego, LLC (Clerk’s Document #68854) for sponsorship of the Wonderfront Festival
Attachment B: Agreement between San Diego Unified Port District and Stay Classy San Diego, LLC.
Attachment C: July 24, 2019 Agenda Sheet without attachments