CITY COUNCIL STAFF REPORT
DATE: April 22, 2026 PUBLIC HEARING
SUBJECT: CONDUCT A PUBLIC HEARING UNDER SECTION 53083 OF THE
CALIFORNIA GOVERNMENT CODE TO APPROVE A HOTEL
OPERATIONS COVENANT BY AND BETWEEN THE CITY OF PALM
SPRINGS AND 888 N. INDIAN CANYON, LLC, THE TERRA PALM
SPRINGS LOCATED AT 888 N INDIAN CANYON DRIVE (APN 507-161- 001) PURSUANT TO MUNICIPAL CODE CHAPTER 5.26 OF THE CITY'S
HOTEL OPERATIONS INCENTIVE PROGRAM
FROM: Scott C. Stiles, City Manager
BY: Economic Development
SUMMARY:
This item satisfies the requirements of California Government Code Section 53083 and requests City Council approval of an economic development subsidy in the form of a Hotel Operations Covenant Agreement (“Covenant”) with 888 North Indian Canyon, LLC, (“Operator”) (Attachment A), in support of a completed hotel renovation project of The Terra Palm Springs at 888 N Indian Canyon Drive (507-161-001 APN) (“Property”).
RECOMMENDATION:
1. Open the public hearing and receive public testimony.
2. Approve a Hotel Operations Covenant Agreement with Terra Palm Springs Hotel located at 888 N Indian Canyon Dr., Palm Springs.
3. Authorize the City Manager and City Attorney to make non-substantive changes as needed and execute all necessary documents
BUSINESS PRINCIPAL DISCLOSURE:
The property is owned by 888 N. Indian Canyon, LLC including Carrick Young, Soli Cayetano, and Diana Ossa. A Public Integrity Disclosure form is provided herein (Attachment B).
City Council Staff Report
April 22, 2026 -- Page 2
Hotel Operations Covenant – Terra Palm Springs Hotel
BACKGROUND:
The City of Palm Springs adopted Chapter 5.26 of the Palm Springs Municipal Code in 2007 establishing the Hotel Operations Incentive Program (“Program”) to support the operation and maintenance of hotel facilities that enhance tourism, support convention center utilization, and strengthen the local economy. The Program was subsequently amended in 2019 to re-establish eligibility for renovation hotel projects and extended in 2023 through December 31, 2028.
California Government Code Section 53083 requires that prior to approving an economic development subsidy of $100,000 or more, the City must conduct a public hearing and provide specified information regarding the subsidy.
On December 12, 2025, 888 N. Indian Canyon, LLC applied to the Program for its hotel property, The Terra Palm Springs at 888 N. Indian Canyon. The project consists of the renovation of a 12-room boutique hotel into a 13-room boutique hotel and qualifies as a renovation project under the Program terms Section 5.26.
The renovation project commenced in late 2024 and was completed in early 2025.
STAFF ANALYSIS:
The Operator has completed a qualifying renovation project with a total investment of approximately $1,049,150.24, equating to approximately $84,429 per room, exceeding the Program’s minimum requirement of $5,000 per room under Sec 5.26.
Improvements include (photos, Attachment C):
Full interior renovation of guest rooms (finishes, furnishings, fixtures, appliances) Exterior repainting and landscaping improvements
Upgraded signage and guest amenities
Pool and common area enhancements
Pursuant to the Covenant, the Operator agrees to:
Operate the property as a hotel for a term of ten (10) years Maintain the hotel in a first-class condition
Participate in the Palm Springs Convention Center Committable Rooms Program Provide up to two (2) room nights per month for City use, subject to availability
In exchange, the City agrees to provide an economic development subsidy in the form of a Transient Occupancy Tax (TOT) increment rebate, consistent with Program guidelines.
This application is being considered under Sec 5.26 of the Municipal Code because the applicant began the process prior to approval of Sec. 5.27. There is no net effect in consideration under 5.26 since the split in 5.26 is the same under Base Tier in 5.27.
City Council Staff Report
April 22, 2026 -- Page 3
Hotel Operations Covenant – Terra Palm Springs Hotel
Photo report attached (Attachment C).
HEARING REQUIRED INFORMATION:
Consistent with the provisions of the Program, the Operator now agrees to place restrictions upon the use and operation of the hotel, to ensure that the Project shall be operated and maintained continuously as a hotel available for short-term rentals. The hotel operator also agrees to participate in the Palm Springs Convention Center's Committable Rooms Program and provide designated room-nights per month for official City use. City will share a percentage of Transient Occupancy Tax Increment with Operator pursuant to the Program guidelines.
As noted above, California Government Code Section 53083 requires a public hearing for economic development subsidies where expenditure of public funds is in the amount of one hundred thousand dollars ($100,000) or more, for the purpose of stimulating economic development within the jurisdiction of a local agency. Accordingly, before approving such economic development subsidies, the local jurisdiction is to provide specific information in written form available to the public, and through its Internet Web site.
For the Terra Palm Springs Hotel, the information is as follows:
1. The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy, if applicable.
Operator is a single purpose entity domiciled in the State of California doing business from 888 N. Indian Canyon Drive, Palm Springs, CA 92262. The Agent for service of process to Operator is Terra Palm Springs Hotel, doing business at 888 N. Indian Canyon Drive, Palm Springs, CA 92262.
2. The start and end dates, and schedule, if applicable, for the economic development subsidy.
If approved, the Covenant would provide an economic subsidy to Operator through a term of ten (10) years, or until the Operator has received $1,049,150.24 pursuant to the Program, whichever event occurs first.
3. A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy.
A. The Program provides operating assistance to hotels in the form of a rebate of adjusted transient occupancy tax ("Adjusted TOT") at a fixed level for existing hotels that meet Program criteria. The City Council has adopted the Phase II City Council Staff Report
April 22, 2026 -- Page 4
Hotel Operations Covenant – Terra Palm Springs Hotel
Renovation Project Program for improvement projects constructed by an existing hotel that invests no less than the equivalent of five thousand dollars ($5,000) per room, including this project.
B. Per the Program, the existing hotel project planned by Operator is rebated 50% of adjusted TOT for ten (10) years or until the rebate totals $1,049,150.24, whichever comes first. For purposes of the Covenant, an existing Hotel is defined as a property improvement project constructed by an existing hotel that invests no less than the equivalent of five thousand dollars ($5,000) per room.
The renovation project must commence no more than twelve (12) months after the City's execution of the Operation Covenant Agreement and be completed no later than December 31, 2025.
C. The public funds to be spent if the City approves this Covenant will be the staff costs of administration, and statutorily mandated reporting through the term of the Program rebate/subsidy.
4. A statement of the public purposes for the economic development subsidy.
A. The City Council established the incentive program for the operation and maintenance of quality and first-class hotel facilities which enhance the tourist and travel experience for visitors to the City of Palm Springs, maximize the use of the City's 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 program, the City Council determined: (1) 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; (2) The operation, maintenance, and expansion of the inventory of quality hotels and first class 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 City's convention center, provide employment opportunities for the residents of the City, and promote and enhance the economy of the City; (3) 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; and (4) The authority granted and the purposes to be accomplished 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 quality and first class hotels is of paramount importance to the City of Palm Springs, its residents, and businesses. (Ord. 1730 § 2, 2008)
B. No less than five thousand dollars ($5,000) per room, or if the project includes any common area or amenity, or any other area for guest use at the hotel, the amount of the investment shall not be less than the amount, if any, invested in rooms, added to the total number of rooms at the hotel that will exist at the end of the project multiplied by five thousand dollars ($5,000).
City Council Staff Report
April 22, 2026 -- Page 5
Hotel Operations Covenant – Terra Palm Springs Hotel
C. The Project would help beautify the neighborhood through and implement energy saving and sustainable components.
5.Projected tax revenue to the local agency as a result of the economic development subsidy.
A. Per the Program, the City will receive 50% of Adjusted TOT for ten (10) years or until the rebate to the Operator totals $1,049,150.24, whichever comes first. After ten (10) years, the City will receive 100% of the TOT revenue (Adjusted TOT plus Unadjusted TOT). The Sales Tax the project may potentially generate are projected to be $999,297 over the course of the 10-year term.
6. Estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions.
The Operator anticipates increasing employment by four (4) full-time positions and six (6) part-time positions, for a total of 10 FTEs. The estimated annual payroll for employees and contracted maintenance services is estimated to be $370,000.
ENVIRONMENTAL ASSESSMENT:
The extension of the Program considered at this time is not a "project" for purposes of the California Environmental Quality Act (CEQA), as that term is defined by CEQA guidelines (Guidelines) section 15378. This action is organizational or administrative activity by the City of Palm Springs in furtherance of its police power and will not result in a direct or indirect physical change in the environment, per section 15378(b)(5) of the Guidelines.
ALIGNMENT WITH STRATEGIC PLANNING:
Citywide Goal:
Support a vibrant economy, including tourism and hospitality sectors.
Economic Development Strategic Framework:
Principle C: Bolster Core Industries
Principle 2: Reinvigorate the Business Climate
Activation Priority IV: Economic Development Toolkit
Action Item B2.2: Implement incentive tools to support business investment and expansion
This project directly supports reinvestment in existing hospitality assets and strengthens the City’s tourism economy.
City Council Staff Report
April 22, 2026 -- Page 6
Hotel Operations Covenant – Terra Palm Springs Hotel
FISCAL IMPACT:
The Operator’s investment of $1,049,150.24 qualifies them for incentive under 5.26:
Illustrative structure:
Baseline: $0
Increment: $X
Years 1 up to 10, City receives: $0 + (X / 2)
Operator receives: X / 2
Beyond maximum payment: City receive 100% of TOT
The total subsidy shall not exceed $1,049,150.24 for not greater than ten (10) years, whichever occurs first.
Following the incentive period, the City will receive 100% of all TOT revenues, including both baseline and incremental amounts.
REVIEWED BY:
Department Director: Wayne Olson
Finance Director: Kristopher J. Mooney
City Manager: Scott Stiles
ATTACHMENTS:
A. Hotel Operations Covenant Agreement
B. Public Integrity Disclosure Form
C. Photo Report