CITY COUNCIL STAFF REPORT
DATE: MAY 12, 2026 PUBLIC HEARING
SUBJECT: CONDUCT A PUBLIC HEARING UNDER SECTION 53083 OF THE
CALIFORNIA GOVERNMENT CODE TO APPROVE A HOTEL
OPERATIONS COVENANT BETWEEN THE CITY OF PALM SPRINGS
AND THE ALCAZAR PALM SPRINGS, LLC 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 action seeks to satisfy the conditions of a public hearing and seeks approval of the economic development subsidy in the form of TOT Operations Covenant Agreement with The Alacazar Palm Springs in support of the renovation of their property located at 622 North Palm Canyon Drive, Palm Springs.
RECOMMENDATION:
1) Open the public hearing and receive public testimony. 2) Approve a Hotel Operations Covenant Agreement with Alcazar Palm Springs located at 622 N. Palm Canyon Drive, Palm Springs.
3) Authorize the City Manager and City Attorney to make non-substantive changes and execute all necessary documents related to the subsidy.
BUSINESS PRINCIPAL DISCLOSURE:
The property is owned by Alcazar Palm Springs, LLC. A Public Integrity Disclosure form is provided as Attachment A.
BACKGROUND:
The City Council adopted Chapter 5.26 of the Palm Springs Municipal Code in December 2007 (amended on May 15, 2013, February 6, 2019, and September 14, 2023) to provide the Program for the operation and maintenance of hotel facilities that enhance the tourist and travel experience for visitors to the City, maximize the use of the City's Convention
City Council Staff Report
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Public Hearing – Alcazar Palm Springs Hotel Operations Covenant Center, provide attractive and desirable visitor serving facilities and experiences, and assist the City in achieving its tourism goals.
In October 2013, Section 53083 was added to the California Government Code. Section 53083 states that before granting an economic development subsidy, each local agency shall provide public notice and conduct a hearing regarding the economic development subsidy. "Economic development subsidy" under Section 53083 means any expenditure of public funds or loss of revenue to a local agency 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, including, but not limited to, bonds, grants, loans, loan guarantees, enterprise zone or empowerment zone incentives, fee waivers, land price subsidies, matching funds, tax abatements, tax exemptions, and tax credits.
This hotel was in the application queue prior to the approval of the new code section 5.27, and as a result, this application is being considered under 5.26.
STAFF ANALYSIS:
Operator has committed to a property improvement project that will invest no less than the equivalent of five thousand dollars ($5,000) per room. The renovation project was completed in Fall of 2025. Upon City Council approval and after the City’s execution of the Operation Covenant Agreement (Attachment B), Alcazar Palm Springs will provide satisfactory documentation certifying its recent renovation and completion of the project as a qualified renovation under the Program.
The Alcazar Palm Springs is located at 622 N. Palm Canyon Drive and consists of 33 total hotel rooms. The renovation project included redoing both the existing pool and spa along with the entire concrete decking and patio areas within the interior areas of the hotel. The project also included new fencing/gates surrounding the entire pool and spa area along with redoing all of the landscaping.
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 City Council Staff Report
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Public Hearing – Alcazar Palm Springs Hotel Operations Covenant specific information in written form available to the public, and through its Internet web site.
For the Alcazar Palm Springs, 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 622 North Palm Canyon Drive, Palm Springs, CA 92262. The Agent for service of process to Operator is The Alcazar Palm Springs, LLC., doing business at 622 North Palm 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 $219,601.00 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 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 $219,601.00, 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.
City Council Staff Report
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Public Hearing – Alcazar Palm Springs Hotel Operations Covenant
4. A statement of the public purposes for the economic development subsidy.
A. The City Council established an 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).
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 $219,601.00, whichever comes first.
After ten (10) years the City will receive 100% of the TOT revenue (Adjusted TOT plus Unadjusted TOT).
City Council Staff Report
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Public Hearing – Alcazar Palm Springs Hotel Operations Covenant
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 zero (0) full-time position and zero (0) part-time positions, for a total of zero FTEs. The estimated annual payroll for employees and contracted maintenance services is estimated to be $524,213.51.
Project Description
The Alcazar Palm Springs is located at 622 North Palm Canyon Drive and consists of 33 total hotel rooms. The project location is shown below in Figure 1.
Figure 1
No square footage additions were added to the existing Alcazar Hotel buildings. All improvements occurred within the current footprint of the site. Additionally, The Alcazar Hotel expects renovations, upgrades, and enhancements to bring a heightened level of experience to the guests, thereby increasing occupancy, revenues and tax receipts.
City Council Staff Report
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Public Hearing – Alcazar Palm Springs Hotel Operations Covenant Images of the upgrades are found in Attachment C.
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. The City finds that the approval of this Covenant is Categorically Exempt from CEQA under section 15301 of the California Administrative Code as the Hotel Operations Incentive Program applicable to Owner’s Hotel applies to the operation, repair, maintenance, or minor alteration of existing structures, facilities, mechanical equipment involving no material expansion or use beyond that previously existing.
ALIGNMENT WITH STRATEGIC PLANNING:
Citywide Goal: Support a vibrant economy, including tourism and hospitality sectors.
Economic Development Strategic Framework:
Principle C: Bolster Core Industries
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.
FISCAL IMPACT:
This Operator “retired” from the program under 5.26 in January of 2026. As a result, the Operator’s new investment of $219,601 qualifies them for incentive under 5.26:
• Baseline: $201,625.68
• Increment: $X
• Years 1 up to 10, City receives: $201,625.68 + (X / 2) • Operator receives: X / 2
• Beyond maximum payment: City receive 100% of TOT
The total subsidy shall not exceed $219,601 for not greater than ten (10) years, whichever occurs first. Following the incentive period, the City will receive 100% of all TOT revenues.
REVIEWED BY:
Department Director: Wayne Olson
City Manager: Scott Stiles
City Council Staff Report
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Public Hearing – Alcazar Palm Springs Hotel Operations Covenant ATTACHMENTS:
A. Public Integrity Disclosure Form
B. Hotel Operations Covenant Agreement – The Alcazar Palm Springs C. Photo Report