CITY COUNCIL STAFF REPORT
DATE: February 11, 2026 BUSINESS & LEGISLATIVE
SUBJECT: RE-INTRODUCTION OF AN ORDINANCE ADDING CHAPTER 5.27 TO
THE PALM SPRINGS MUNICIPAL CODE, RESTRUCTURING THE
CITY’S HOTEL OPERATIONS INCENTIVE PROGRAM (CITYWIDE)
FROM: Scott C. Stiles, City Manager
BY: Economic Development
SUMMARY:
This report proposes an update to the Hotel Operations Incentive Program (5.62) with a new Ordinance (Attachment A) (5.27) that establishes a restructured and simplified citywide Hotel Operations Incentive Program. The existing Hotel Operations Incentive Program, first adopted in 2007 and amended in 2013, 2019, and 2023, has successfully stimulated hotel renovations over the last decade.
The City Council reviewed the first draft of the new ordinance during its January 28, 2026 meeting and requested staff return with edits to the ordinance before approving its first reading. This report transmits the updated ordinance language for Council review.
RECOMMENDATION:
1. Waive the reading of the ordinance text in its entirety and read by title only; and introduce for first reading an Ordinance entitled, “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,” and approve the ordinance. (The new Chapter 5.27 will replace the current Chapter 5.26 program for future agreements.)
2. Authorize the City Manager and City Attorney to make minor non-substantive changes to the ordinance and execute all necessary documents to implement the program.
BUSINESS PRINCIPAL DISCLOSURE:
Applicants to the updated program will be required to supply the appropriate business disclosure forms at the time of application to the program.
City Council Staff Report
Feb 11, 2026 -- Page 2
Re-Introduction of an Ordinance, Restructuring the City’s Hotel Operations Incentive Program (Citywide) 55575.38285\44642455.2
BACKGROUND:
On January 28, City staff presented an updated ordinance to Chapter 5.26, the Palm Springs Hotel Incentive Program (to be 5.27) (Attachment B). The Council was generally supportive of the program, but requested several additions to the program. Those are highlighted below.
STAFF ANALYSIS:
Several questions were raised during the January 28, 2026, meeting. The comments relating specifically to the ordinance language include:
1. Can we restrict the time allowed from incentive award to construction start?
2. Can we restrict the time allowed from construction start to Certificate of Occupancy?
3. Can we consider harsher penalties for non-paying enrollees in the program?
4. Can we ensure the program benefits convention hotels that may not meet the higher thresholds?
The questions are addressed with suggested changes to the ordinance, below:
1. Provide a deadline in which a project participating in the incentive program must commence (i.e., set a date at which construction must begin following project approval from City Council). Recommended: 12 months;
2. Provide a deadline in which a project participating in the incentive program must be completed (i.e., set a date at which construction is complete and Certificate of Occupancy is be issued). Recommended: 30 months;
3. Provide default provisions for operators who are enrolled in the incentive program but fail to stay current on transient occupancy tax payments;
4. Incorporate the 90/10 split of collected and remitted transient occupancy tax increment for first 5 years into Incentive Tier 1; (i.e., only the Base Tier does not receive the 90/10 split in first 5 years).
Other comments included: continue outreach to languishing hotel projects, past participation in incentives of certain hotels, distribution of pro forma models, working with the Convention Center on a hotel availability program, and the possibility of extending a similarly structured incentive to restaurants are either administrative in nature and have been or will be addressed by staff, or will require separate policy development (i.e., restaurant incentive).
Tier Summary
For the sake of clarity, the Tiers are re-stated here:
City Council Staff Report
Feb 11, 2026 -- Page 3
Re-Introduction of an Ordinance, Restructuring the City’s Hotel Operations Incentive Program (Citywide) 55575.38285\44642455.2
Tier Min $/Key Split*
(Owner/City)
Base $10,000 50/50 year 1-10
1 $100,000 90/10 first 5 years
55/45 year 6-15
2 $225,000 90/10 first 5 years
60/40 year 6-20
3 $350,000 90/10 first 5 years
65/35 year 6-25
4 $600,000 90/10 first 5 years
75/25 year 6-30
*In no case will reimbursement exceed the Actual Document Investment (ADI) which is determined by the City in its sole discretion.
ENVIRONMENTAL:
Unchanged from the previous report.
FISCAL IMPACT:
Unchanged from previous report, other than this proposes expanding the 90/10 increment split to Tier 1 ($100,000/key). As a result, this would reduce the City’s TOT intake for projects in Tier 1 going forward.
REVIEWED BY:
Department Director: Wayne Olson
City Attorney: Seth Merewitz
City Manager: Scott Stiles
ATTACHMENTS:
A. Staff Report from January 28, 2026
B. Redlined Ordinance adding Chapter 5.27
C. Ordinance adding Chapter 5.27 – An Ordinance of the City of Palm Springs, California, Adding Chapter 5.27 to the Municipal Code “Hotel Operations Incentive Program.”