An effort to enhance visitor and resident enjoyment in Laguna Beach’s downtown will get some extra oomph from a new agreement for Visit Laguna Beach to give $5.5 million to the city over the next 11 years to improve the area.

The tourism bureau’s contribution will fund downtown improvements and services with about $500,000 each year through June 30, 2035, with a special focus on the historical, cultural and environmental components unique to the increasingly popular beach town’s downtown, officials said. Some possible improvements include beautification, more parking and helping out with funding for the city’s Promenade on Forest.

“If the residents aren’t happy, the tourists can’t be happy,” Karyn Philippsen, founding chairman of Visit Laguna Beach, said during this week’s City Council meeting discussing the new agreement.

She said that realization of discontent was “eye-opening” for her organization and put it on a path toward more closely working with the city on what tourism could look like over the next few years and decade.

The agreement, which received unanimous support from the City Council, relies on the council approving the next extension of the Laguna Beach Tourism Marketing District in March.

The marketing district comprises all the town’s hotels, which volunteered with the special district’s creation to collect a 2% fee on lodgings. Half of the 2% goes to the local arts, and the other half goes to Visit Laguna Beach to market the town to tourists.

That 2% is separate from the 12% bed tax on a night’s stay collected from the hotels by the city, which generates more than $15.4 million annually in revenue for city coffers.

“This investment is going to hurt; it’s not going to be easy for our organization,” Philippsen said, but added, “It’s the right investment that is going to bring us up to the next level of the quality of tourism that this community is looking for.”

The agreement begins with a payment of $500,000 in fiscal year 2024-25, divided into two installments: $200,000 at the execution of the agreement to be dedicated toward artist workspace and living space and another $300,000 in March. The first payment is to be made Jan. 1, officials said.

Following the initial contribution, annual contributions will continue for 10 years unless the council does not extend the district’s lifespan or it is extended for a shorter term, then the agreement would terminate with the district, said Gavin Curran, assistant city manager.

“Laguna’s occupancy in hotels is falling, while surrounding communities are not,” said Councilmember Mark Orgill. “We hear comments that there is a concern our amenities have become worn and tired and we should probably look at what that will do. As occupancy drops, so does revenue from (the bed tax).”

Several residents who spoke at the recent council meeting called the agreement “very generous,” but wondered why the proceeds could not be more evenly distributed to other parts of the town, which they said would also benefit visitors spending the night at local resorts.

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“We think applying this only to the downtown is inequitable,” said Ann Christoph, representing the South Laguna Civic Association. “Nearly 50% of the Laguna Beach tourism market comes from South Laguna hotels like the Montage and the Ranch, yet none of this disbursement is planned to be spent on projects in South Laguna. Thousands (of dollars) have been spent on consultants for the downtown, from parking studies to the promenade. For other commercial districts that need it more, nothing has been spent.”

Others, like resident John Thomas, said the proceeds from the hotels could be used to mitigate “some of the negative impacts on the community from the over-tourism.”

“Shouldn’t a substantial amount of these funds be used to help mitigate some of the problems you heard so much about this summer and that you expressed so much concern about?” he said. “Better enforcement citywide, better maintenance in South Laguna, north Laguna and in the H.I.P. District? Accept the funding, but don’t commit 100% of it to the downtown. And include residents as well as Visit Laguna in discussion for upcoming projects.”

Another resident, Deborah Laughton from Bluebird Canyon, said city officials had made all sorts of promises related to amenities coming to the St. Catherine’s of Sienna Parish School property that the city bought from the Diocese of Orange in 2022, such as a citywide pool, skate park and that musicians could make use of the old chapel there for concerts.

“A lot of promises made for funding,” she said. “But we’re just tying this up in one place – downtown.”

Curran explained that per the agreement that created the tourism district, use of the money generated from the extra 2% “must be used to improve overnight stays” and can’t be used to “supplant operations in the city.”

“The hotels want something for this money; they’re not giving it to us to do whatever we want with it,” said Mayor Sue Kempf.  “They’re looking to have a better experience for visitors and want to use the money to send them downtown.”

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