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4 ATTACHMENT A
Draft Hotel Operations Incentive Program
Ordinance
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4 ORDINANCE NO. ____
AN ORDINANCE OF THE CITY OF PALM SPRINGS,
CALIFORNIA, ADDING CHAPTER 5.27 TO THE PALM
SPRINGS MUNICIPAL CODE, RELATING TO A
RESTRUCTURED HOTEL OPERATIONS INCENTIVE
PROGRAM
City Attorney’s Summary
The existing hotel operations incentive program is limited to hotels constructed and/or renovated during specific periods of time, and over time, this has resulted in fewer hotels being eligible to apply for the program. This ordinance creates a restructured hotel operations incentive program with broader and more streamlined criteria to allow more hotels to apply for the program.
WHEREAS, the City of Palm Springs is a charter city organized pursuant to Article XI of the California Constitution and pursuant to the authority granted the City by Section 5 of Article XI, the City has the power to make and enforce within its limits all ordinances and regulations in respect to municipal affairs not in conflict with general laws and its own charter. Such police powers include without limitation the ability to adopt comprehensive zoning regulations and regulations upon the use of land and property within the City; and WHEREAS, the City has an existing hotel operations incentive program set forth in Chapter 5.26 of the Palm Springs Municipal Code; and WHEREAS, the ability of hotels to qualify for the existing hotel operations incentive program has become increasingly difficult due to specific criteria requiring that qualifying hotels have been constructed and/or renovated during specific periods of time; and WHEREAS, the hotel operations incentive program generated an economic benefit to the City; and
WHEREAS, the City wishes to continue providing a hotel operations incentive program while broadening the criteria to apply for the program; and WHEREAS, the City Council has carefully reviewed and considered all of the evidence presented in connection with the proposed ordinance, including, but not limited to, the staff report, and all written and oral testimony presented.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES ORDAIN AS FOLLOWS:
SECTION 1. The above recitals are true and correct and are incorporated herein by this reference as material findings in support of this Ordinance. 55575.38285\44439092.4
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4 SECTION 2. Chapter 5.27 is hereby added to the Palm Springs Municipal Code and reads as follows:
Chapter 5.27, Hotel Operations Incentive Program
5.27.010. Purpose.
5.27.020 Definitions.
5.27.030 Approval Process
5.27.040 Incentive Tiers.
5.27.050 Incentive Package Use Distribution.
5.27.060 Operating Covenants.
5.27.070 General Fund Revenues.
5.27.080 Administrative Rules and Regulations.
5.27.090 Program Sunset.
5.27.010. Purpose.
The purpose of this chapter is to provide an incentive program for the operation and maintenance of hotel facilities which enhance the tourist and travel experience for visitors to the city of Palm Springs, maximize the use of the Convention Center, provide attractive and desirable visitor serving facilities and experiences, and assist the city in achieving its tourism goals. In the implementation of this hotel operations incentive program, the city council finds:
A. The general welfare and material wellbeing of the residents of the city of Palm Springs depend in large measure upon the growth and expansion of the tourism and travel industries in the city.
B. The operation, maintenance, and expansion of the inventory of hotels in the city of Palm Springs will create desirable visitor serving facilities that will contribute to the growth and expansion of tourism and travel opportunities in the city, ensure utilization of the Convention Center, provide employment opportunities for the residents of the city, and promote and enhance the economy of the city.
C. It is in the best interest of the city of Palm Springs to induce and encourage the, operation, and maintenance of hotel facilities that would not otherwise exist, thereby creating new sources of tax revenues for the city’s general fund which supports the public services that the city provides its residents.
D. The authority granted and the purposes to be accomplished by this chapter are properly local governmental and public purposes for which public funds can be expended and that the operation, maintenance, and expansion of the inventory of hotels is of paramount importance to the city of Palm Springs, its residents, and businesses.
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4 5.27.020 Definitions.
For the provisions of this chapter, the following definitions shall apply:
“Actual documented investment” or “ADI” means the total verifiable amount spent by the operator on a project developed pursuant to this chapter. ADI includes actual construction costs; furniture, fixtures, and equipment; and soft goods (e.g. bedding, towels, etc.). ADI does not includes professional services costs. “Construction” means the process of making, building, fabricating, installing, and setting up tangible physical enhancements to a hotel that include without limitation, one or more of the following: (1) modification of an existing structure or amenity, (2) new or upgraded furniture, fixtures or equipment, and/or (3) new or upgraded landscaping. Construction may address hotel rooms, common areas, and/or other areas for guest use.
“Convention Center” means, collectively, the Palm Springs Convention Center located at 277 N. Avenida Caballeros, the Jackie Lee Houston Plaza located at the southwest comer of Amado Road and Calle Alvarado, and the East Lot (also known as the 8.86 acre parcel located at the northwest corner of Avenida Caballeros and Amado Road).
“Convention Center Hotel” means a hotel with 125 rooms or more, including onsite restaurant and bar, and at least a Tier 1 level investment. “Entitlements” means all discretionary permits and approvals from the city required for the development of a project.
“Hotel” means any property containing guest rooms designed, intended, and used as transient occupancy accommodations in exchange for compensation. “Operator” means the person who is proprietor of a hotel, whether in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee, franchisee, or any other capacity, or the assignee or designee of such proprietor. “Transient occupancy tax base” means the average of the last 36 months of annualized transient occupancy tax owed to the city by an existing hotel prior to the commencement of a qualified renovation program.
“Transient occupancy tax increment” means the difference between the transient occupancy tax base and the amount of transient occupancy tax owed to the city by an existing hotel after the recordation of the operating covenants by the city. “Transient occupancy tax” or “TOT” means the tax described in Chapter 3.24 of this Code.
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4 “Transient occupancy” means an uninterrupted stay of no more than 28 consecutive calendar days.
5.27.030 Approval Process
A. To apply for an incentive package pursuant to this chapter, the operator of a hotel shall complete and submit to the City Manager, the city’s application for participation in the hotel operations incentive program prior to receiving entitlements for the proposed project.
B. The application must:
1. Provide a general description of the project, the project location, projected tax revenue generation, estimated timeline and costs for project;
2. Specify the investment level in Section 5.27.040 that qualifies the project for a specific tier of the hotel operations incentive program; and
3. Include any other information as required by the city.
C. Upon receipt of a completed application, City Manager or his/her designee will review the application and request that city staff perform a fiscal analysis of the proposal and requested incentive tier.
D. Following the completion of the fiscal analysis, the city will negotiate with the operator and develop a proposed incentive package which will be incorporated into a draft agreement for City Manager or City Council consideration and approval, along with the project’s entitlements.
1. The City Manager or his/her designee shall have discretionary approval over incentive packages awarded as part of the hotel operations incentive program valued at less than One
Hundred Thousand Dollars ($100,000.00).
2. The city shall process incentive packages awarded as part of the hotel operations incentive program valued at, or greater than, One Hundred Thousand Dollars ($100,000.00),
pursuant to all requirements of California Government Code 53083 applicable to grants of economic development
subsidies.
E. Applications for the hotel operations incentive program shall be denied if the proposed project has already received entitlements from the city.
F. The city shall not award an incentive package that is greater than the amount equal to ADI.
G. The operator must operate at least 90% of the subject property as a hotel, and make a minimum investment of One Hundred Thousand 55575.38285\44439092.4
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4 ($10,000) per room of the subject hotel, to be eligible for an incentive package pursuant to this chapter.
H. Funding for the hotel operations incentive program, and the award of any incentive packages, is at sole discretion of the city and contingent on available TOT funds.
5.27.040 Incentive Tiers.
The amount of the incentive package that the city can award to an operator for their project is categorized into the following tiers based on the specified factors. The term of an incentive program agreement awarded based on any of the following tiers shall commence on the date of the issuance of the certificate of occupancy.
A. Base Tier. An operator investing a minimum of Ten Thousand Dollars ($10,000) per room is eligible to receive an amount equal to fifty (50) percent of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code and such payments shall be made for a total of ten (10) years, or until the operator has received an amount equal to ADI, whichever event occurs first.
B. Tier 1. An operator investing a minimum of One Hundred Thousand Dollars ($100,000) per room is eligible to receive an amount equal to fifty-five (55) percent of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code and such payments shall be made for a total of ten (10) years, or until the operator has received an amount equal to ADI, whichever event occurs first.
C. Tier 2. An operator investing a minimum of Two Hundred and Fifty Thousand Dollars ($250,000) per room is eligible to receive an amount equal to ninety (90) percent of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code for five (5) years, thereafter decreasing to sixty (60) percent, and such payments shall be made for a total of twenty (20) years, or until the operator has received an amount equal to ADI, whichever event occurs first.
D. Tier 3. An operator investing a minimum of Four Hundred and Fifty Hundred Thousand Dollars ($450,000) per room is eligible to receive an amount equal to ninety (90) percent of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code for five (5) years, thereafter decreasing to sixty-five (65) percent, and such payments shall be made for a total of twenty-five (25) years, or until the operator has received an amount equal to ADI, whichever event occurs first.
E. Tier 4. An operator investing a minimum of Seven Hundred and Fifty Hundred Thousand Dollars ($750,000) per room is eligible to receive an amount equal 55575.38285\44439092.4
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4 to ninety (90) percent of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code for five (5) years, thereafter decreasing to seventy-five (75) percent, and such payments shall be made for a total of thirty (30) years, or until the operator has received an amount equal to ADI, whichever event occurs first.
F. Projects awarded an incentive package pursuant to this chapter, may be eligible for bonus incentives if the below criteria are met. An operator may only elect to receive one of the following bonuses to their incentive package.
1. Hotels that are Class 1 or Class 2 Historic Resources as defined in Palm Springs Municipal Code Chapter 8.05, shall be eligible to receive an additional five (5) percent of the transient occupancy tax increment collected and remitted to the city beginning in the sixth (6 th) year of the incentive package agreement.
2. Convention Center Hotels shall be eligible to receive an additional ten (10) percent of the transient occupancy tax increment collected and remitted to the city beginning in the sixth (6 th) year of the incentive package agreement.
5.27.050 Incentive Package Use Distribution.
A. In order to receive distributions from an incentive package awarded pursuant to this chapter, the operator shall:
1. Complete the project and have received an approved
certificate of occupancy prior to reimbursement;
2. Provide the city with copies of permits and business licenses of contractor for construction of the project;
3. Demonstrate to the city the costs incurred using original receipts, invoices, construction drawings and/or other form of customarily recognized cost documentation;
4. Maintain an active, operating city business license;
5. Remain current with all TOT payments, and other city fees and obligations, before, during, and after the term of the incentive program agreement; and
6. Provide any and all forms, documents, and records as may be reasonably requested by the city.
B. At least eighty (80) percent of distributions received from an incentive package must be used towards costs associated with construction and furniture, fixtures, and equipment. No more than twenty (20) percent of distributions received from an incentive package may be used towards costs associated with soft goods.
C. The city reserves the right to withhold any distribution from an incentive package should operator violate any of the terms of this chapter. Operator shall have the right to cure any violations of this 55575.38285\44439092.4
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4 chapter within 30 days of receiving a notice of such violation from the city.
5.27.060 Operating Covenants.
A. Each operator participating in the city’s hotel operations incentive program shall execute an operating covenant agreement negotiated between the city and the operator, approved by the City Council, and recorded in the official records of Riverside County at or after the issuance of the certificate of occupancy, against the property where the project receiving the incentive package is being developed.
B. No incentives, rebates, or credits authorized by this code shall be distributed for a project until the operating covenant agreement is approved and recorded against the property.
C. The term of the operating covenant agreement will run from the recording of the operating covenant agreement to the end of the specified term of the incentive package agreement or until the operator has received an amount equal to ADI, whichever event occurs first.
D. Each operating covenant agreement shall include:
1. A requirement that the hotel operate as a hotel open to the public with rooms designed and intended as temporary or overnight accommodations.
2. A requirement that the hotel maintain the applicable qualifying criteria that its particular incentive was contingent on.
3. A requirement that laborers employed relative to the construction of the project be paid the prevailing per diem wage rate for their labor classification, as determined by the State of California, pursuant to Labor Code Sections 1720, et seq. and Palm Springs Municipal Code Section 7.06.030(1), if the total contribution of the city exceeds Six Hundred Thousand Dollars ($600,000) and 2% of total project cost.
2. A general indemnification whereby the operator agrees, for itself and for its successors and assigns, to indemnify, defend with counsel acceptable to the city, and hold the city, together with its officers, members, officials, employees, agents, volunteers, and
representatives, harmless from and against any loss, liability, claim, or judgment arising from or related to the operator’s participation in the hotel operations incentive program pursuant to this chapter. 55575.38285\44439092.4
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4 E. The City Council, in its sole discretion, may include other conditions in an operating covenant agreement to preserve the goals and intent of this chapter.
5.27.070 General Fund Revenues.
Notwithstanding the provisions of Sections 3.24.030, 3.24.035, and 3.24.310 of this code, all transient occupancy tax revenues or transient occupancy tax increment remitted to the city by an operator of a hotel covered by operating covenants as provided in this chapter shall be deemed general fund revenues of the city and shall be deposited in the city’s general fund.
5.27.080 Administrative Rules and Regulations.
Consistent with the intent and goals of this chapter, the City Manager may adopt administrative rules and regulations for implementation and furtherance of the requirements of this chapter.
5.27.090 Program Sunset.
The hotel operations incentive program set forth in this chapter shall cease accepting applications on December 31, 2030.
(Ord. 1730 § 2, 2008; Ord. 1742 § 1, 2008; Ord. 1772 § 1, 2010; Ord. 1786 § 1, 2011; Ord. 1821 § 1, 2013; Ord. 1972 § 1, 2019; Ord. 2087, 9/14/2023) SECTION 4. The ordinance and incentive program does not constitute a “Project” under the California Environmental Quality Act (CEQA), as it can be seen with certainty that there is no possibility for it to cause a direct physical change in the environment (CEQA Guidelines §15061(b)(3)). The ordinance involves the creation of an economic assistance program (a governmental financing mechanism) and does not directly authorize any specific development or construction activity. Each hotel development or renovation project that may utilize this program will undergo its own discretionary review and environmental assessment, as applicable, at the time of its entitlement. This action is an organizational/administrative activity of the City in furtherance of its economic development goals and thus is not a “project” as defined in CEQA Guidelines §15378(b)(5).
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4 55575.38285\44439092.4
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4 PASSED, APPROVED, AND ADOPTED BY THE PALM SPRINGS CITY COUNCIL THIS _____ DAY OF ______________, 2026.
NAOMI SOTO
MAYOR
ATTEST:
BRENDA PREE, MMC, CERA
CITY CLERK
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4 55575.38285\44439092.4
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4 CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, BRENDA PREE, City Clerk of the City of Palm Springs, California, do hereby certify that Ordinance No. ____ is a full, true, and correct copy, and was introduced at a regular meeting of the Palm Springs City Council on _________ and adopted at a regular meeting of the City Council held on __________ by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this ______ day of ______________, _________.
BRENDA PREE, MMC, CERA
CITY CLERK