CITY COUNCIL STAFF REPORT
DATE: FEBRUARY 25, 2026 CONSENT CALENDAR
SUBJECT: SECOND READING 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 agenda item provides the City Council with the opportunity to conduct a second reading (adoption) of an ordinance adding a revised Hotel Operations Incentive Program.
The ordinance 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.
RECOMMENDATION:
Waive the full reading of the ordinance text in its entirety and read by title only; and conduct a second reading of Ordinance No. 2126, “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”
BACKGROUND:
On January 28, City staff presented an updated ordinance to revise Chapter 5.26 of the Palm Springs Municipal Code (Palm Springs Hotel Incentive Program), to be codified at Chapter 5.27 of the Palm Springs Municipal Code. The Council was generally supportive of the program but requested several additions to the program.
Specifically, the following updates were made to the draft Ordinance based on comments from the City Council:
City Council Staff Report
February 25, 2026 -- Page 2
Second Reading (Adoption) of an Ordinance, Restructuring the City’s Hotel Operations Incentive Program
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 must end and Certificate of Occupancy must 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).
These revisions were presented to the City Council at the February 11, 2026 Council meeting, at which time the City Council conducted another first reading of the ordinance.
At the February 11, 2026 Council meeting, the Council also revised the ordinance’s language regarding participating operators who become delinquent in the payment of their TOT obligations. Specifically, the Council reduced the number of times that the City would send a notice/opportunity to cure, from four (4) to two (2), and the corresponding amount of time from 120 days to 60 days. This change was incorporated to the ordinance at the first reading and is contained in this version presented for second reading.
The Council voted unanimously to introduce the ordinance at the February 11, 2026 Council meeting.
Therefore, City staff and the City Attorney recommend that the City Council conduct a second reading (adoption) of this ordinance. If adopted, the ordinance would go into effect thirty (30) days following adoption.
A redlined version of the ordinance, showing all changes made since the January 28 accompanies this staff report as Attachment A. A clean copy of the ordinance accompanies this staff report as Attachment B.
ENVIRONMENTAL ASSESSMENT:
Unchanged from previous report.
FISCAL IMPACT:
Unchanged from January 28 staff report, other than this ordinance 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.
City Council Staff Report
February 25, 2026 -- Page 2
Second Reading (Adoption) of an Ordinance, Restructuring the City’s Hotel Operations Incentive Program City Council Staff Report
February 25, 2026 -- Page 3
Second Reading (Adoption) of an Ordinance, Restructuring the City’s Hotel Operations Incentive Program REVIEWED BY:
City Attorney: Jeffrey S. Ballinger
City Manager: Scott Stiles
ATTACHMENTS:
A. Ordinance No. 2126 – An Ordinance of the City of Palm Springs, California, Adding Chapter 5.27 to the Municipal Code “Hotel Operations Incentive Program” (Redline)
B. Ordinance No. 2126 – An Ordinance of the City of Palm Springs, California, Adding Chapter 5.27 to the Municipal Code “Hotel Operations Incentive Program” (Clean)