HomeMy WebLinkAboutOrd 1336 - Establishment of a Hotel Operations Incentive PgrmSTAFF REPOR� f_G,
CITY OF PALM DES R
ECONOMIC DEVELOP ENT
MEETING DATE: March 22, 2018
PREPARED BY: Martin Alvarez, Director of Economic Development
REQUEST: Approval of an Ordinance Establishing a Hotel Operations Incentive
Program.
Recommendation
Waive further reading and pass to second reading Ordinance No. 1336 , establishing
a hotel operations incentive program.
Strateqic Plan Objective
The approval of a hotel operations incentive program aligns with the City's Envision
Palm Desert Strategic Plan, Economic Development Priority 1: Expand job and
business creation opportunities and the Tourism & Marketing's Priority 2: Attract new
and developing travel and tourism markets.
The proposed ordinance and program also aligns with the City's 2018 Economic
Development Plan: Action Plan Item E: Marketing of Key Development Sites — Continue
to actively market City -controlled development opportunity sites (as well as privately -
owned underperforming properties). This initiative is also listed in the City's 2018 Goals.
Executive Summary
Approval of the proposed hotel operations incentive ordinance will allow eligible new
first class hotels located on Highway 111, El Paseo and Desert Willow to receive 50
percent of the annual adjusted transient occupancy tax (TOT) equal to $100,000 per
new hotel room constructed. New first class hotels are defined as those meeting the 4-
star hotel rating or greater as defined by the American Automobile Association (AAA)
hotel rating criteria and in operation by 2023. Eligible hotels will be required to enter
into an operating covenant agreement with the City requiring the hotel construction to
utilize prevailing wage for all labor and to meet and maintain the "first class" hotel rating
criteria for the life of the TOT rebate. The new first class hotel TOT generation will vary
based on the size of the hotel, but the new TOT to the City for a 100 room hotel is
estimated to be $704,000 annually and the 50 percent rebate would be approximately
$352,000 annually.
March 22, 2018
Hotel Operations Incentive Program
Page 2 of 4
Background Analysis
The attraction of new hospitality projects that help bring new visitors, TOT, and sales
tax, is a goal identified in the City's Envision Palm Desert Strategic Plan and the City's
2018 Economic Development Plan. The development and financing of first class hotels
is a challenge many local jurisdictions that are considered resort destinations are facing.
With the elimination of redevelopment agencies in California, tools available to assist
developers in filling financing gaps are limited. Another challenge that the Coachella
Valley faces in attracting additional hospitality projects is the seasonality of the hotel
industry, as a result of our extreme summer climate conditions. These factors have
made it difficult to secure investors and financing for new first class hotel developments
with a 4-star rating or higher. Limited average daily rates (ADR) and limited annual
occupancy percentages restrict the annual revenue levels required to achieve a
standard return on investment to make hotel projects feasible in our market.
Discussion
In an effort to address the above -mentioned challenges in attracting the development of
new first class hotels in the city, staff developed an ordinance that would incentivize the
construction of new hotels by rebating a portion of any new TOT generated. The goal of
the ordinance is to provide an incentive program for the operation and maintenance of
quality first class hotel facilities. This program also aims to enhance the visitor's travel
experience within the city and assist in achieving the City's economic development
goals.
In order to qualify for the program, the new hotel must be considered a "first class"
hotel. This is defined as a hotel that provides quality physical features and operation of
the hotel on a 24 hours per day/seven days a week basis, with the following services:
• Food and beverage services, room service, banquet and meeting services,
• Housekeeping service,
• Concierge and bellman services, and
• Parking services.
In addition, in order to qualify as a "first class" hotel, the facility must meet or exceed the
Four Diamond Rating criteria established for hotels by the AAA and be in operation by
2023. A detailed description of the AAA hotel rating criteria is identified on the attached
Exhibit A.
The hotel incentive ordinance proposes an annual TOT rebate for any new "first class"
hotels developed in any of the following key economic development strategic areas:
1. El Paseo,
2. Highway 111 Downtown Core; and
3. The Desert Willow Lot Pads.
G \Econ Development\Martin Alvarez\2018\SR\TOTRebateSR 3-8-18a1 CLEAN doc
March 22, 2018
Hotel Operations Incentive Program
Page 3 of 4
Eligible hotels in operation before 2023 would receive 50 percent of the annual adjusted
TOT rate, up to $100,000 per hotel room constructed. For example, a "first class" 100-
room hotel would receive up to $10,000,000 in TOT rebate and a 150- room hotel would
receive up to $15,000,000.
The proposed TOT rebate criteria and caps were developed by evaluating several TOT
generation scenarios that include conservative figures for annual ADR, annual room
occupancy percentages and a three percent annual room rate escalation. Attached to
this report, staff has provided three TOT generation scenarios that illustrate annual TOT
generation at 11 percent for different sized hotels with the following characteristics:
• 100-room boutique hotel - $270 ADR, 65% annual room occupancy
• 150-room boutique hotel - $260 ADR, 65% annual room occupancy
• 200-room resort hotel - $240 ADR, 65% annual room occupancy
The scenarios illustrate the annual projected TOT generated, the eligible 50 percent
developer rebate, as well as the cumulative TOT generation/rebate over 15, 20, 25 and
30 years. The table below identifies the TOT cap per the size of hotel, the annual TOT
generated, the annual TOT at net present value, the TOT rebate, and the number of
years estimated to meet the TOT rebate cap.
Hotel TOT Cap Est. Est. Annual TOT (Net Est. Annual Est.
Size Annual Present Value) TOT Years to
TOT Rebate Meet Cap
100 $10,000,000 $ 704,000 $6,841,092 $352,000 20-21
rooms (NPV 3% at 20
years)
150 $15,000,000 $1,000,000 $9,881,577 $500,000 21-22
rooms (NPV 3% at 20
years)
200 $20,000,000 $1,250,000 $12,161,941 $625,000 22-23
rooms (NPV 3% at 20
years)
If ADR and/or occupancy numbers are better in the market, then the number of years it
takes to meet the rebate cap would be reduced. It is important to note that any new
hotel participating in the TOT rebate program will have to secure approval of an
operating covenant agreement from the City requiring the hotel construction to utilize
prevailing wage for all labor and to meet and maintain the "first class" hotel rating
criteria for the life of the TOT rebate.
Staff recommends approval of the proposed ordinance establishing a hotel operations
incentive program. The ordinance as proposed has the potential to incentivize new hotel
developments in strategic economic development areas such as El Paseo, Highway
111 and at Desert Willow Golf Resort. The rebating of 50 percent of any new TOT
G \Econ Development\Martin Alvarez\2018\SR\TOTRebateSR 3-8-18a1 CLEAN doc
March 22, 2018
Hotel Operations Incentive Program
Page 4 of 4
generated for first class hotels is a tool that will assist with filling the financing gaps that
currently exist in developing quality hotels in our market.
In addition, by including the hotel incentive program as part of the City's Municipal
Ordinance, perspective hotel developers will gain certainty as to the level of incentive
the city can provide. The 50 percent TOT rebate and cap will assist developers in
preparing and evaluating the project's feasibility proforma.
New hotels in our target economic development areas have the potential to stimulate
economic growth, job creation and provide additional TOT and sales tax to assist the
City in funding public services for our residents and visitors.
Fiscal Analysis
The proposed hotel operations incentive program has the potential to incentivize new
hotel developments in the City of Palm Desert. Based on the TOT generation scenarios
identified above, a new 100-room, "first class" hotel has the potential of generating
$705,000 in annual TOT and $18.9 million over a 20-year period. With the
implementation of the 50 percent TOT rebate, the City would retain $352,300 in new
annual TOT and $9.4 million over a 20-year period ($6,841,092 net present value). The
net present value measures the stream of cash flows accounted for to determine
today's value of the stream of payments, using the expected City's rate of return during
the same period.
A new 200-room, "first class" hotel has the potential of generating $1.2 million in annual
TOT. With a 50 percent TOT rebate, the City would retain approximately $626,000 in
annual TOT and $16.8 million over a 20-year period ($12,161,941 net present value). In
addition to generating new TOT, the development of hotel projects will generate permit
fees, increased property tax, sales tax and will increase the number of visitors to the
City and other shopping and dining areas.
Any new hotel development would also generate new permit fees, sales tax and
additional visitors to key economic development areas such as El Paseo and Desert
Willow Golf Resort.
LEGAL REVIEW
Robert W. Hargreaves
City Attorney
Martin Alvarez
Economic
Development
Director
DEPT. EVIEW FINANCIAL REVIEW CITY MANAGER
z—
auri Aylaian
City Manager
Janet Moore
Director of Finance
ATTACHMENTS: Exhibit A — First Class Hotel Criteria
TOT Generation Scenarios
Ordinance No. Hotel Operations Incentive Program
G \Econ Development\Martin Alvarez\2018\SR\TOTRebateSR 3-8-18a1 CLEAN doc
EXHIBIT "A"
American Automobile Association (AAA)
AAA Four Diamond
More attention has been paid to style and decor, and amenities and services have been
added:
• Excellent curb appeal, landscaping, and lighting in the parking lot; impressive
architectural features; added security
• Upscale decor and furniture; excellent quality flooring (marble, wood, granite,
etc.); plenty of seating in a larger registration area; bell desk; better luggage carts
• Upscale gift shop
• Swimming pool with food served poolside, hot tub, steam room, exercise room
with state-of-the-art equipment and lockers
• At least one upscale, full -service restaurant and a lounge
• Larger guest rooms with upscale or designer furniture and decor, excellent bed
linens; comforters with duvet covers; closet with wood hangers; luggage racks;
oversized desk; TV in a closed armoire; mini bar; iron and ironing board; marble
or higher -grade tile bathrooms; upgraded shower heads; plush towels; free-
standing hair dryer; makeup mirror; five -piece amenity set (shampoo, body lotion,
etc.)
• High-speed Internet access, service elevators for staff, valet laundry
• Example: Disney's Grand Floridian Resort & Spa, Gaylord Palms Resort,
and Hyatt Reaencv Grand Cypress
AAA Five Diamond
A much higher level of service is required for Five Diamond status, and the facilities
must be quite luxurious; fewer than 100 hotels are on the list.
• Stunning curb appeal and architectural features; extensive landscaping; valet
parking
• Antiques and paintings; live floral arrangements; highest quality flooring (polished
marble, stone, distinctive tile); concierge area
• Upscale shops
• Swimming pool with attendants; full -service spa; exercise room with customized
fitness programs
• Multiple upscale full -service restaurants and a lounge
• Elegantly appointed guest rooms with high -quality furniture; outstanding linens
and comforters; triple sheeting; multiple pillow choices; lit closets with at least ten
hangers; umbrella; robe and slippers; CD player with at least one CD; fax
machine; separate shower; toilet in its own room; seven -piece amenity set
1
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
3❑
Room Revenue
(3% Escalation)
$6,405,750
6,597,923
6,795,860
6,999,736
7,209,728
7,426,020
7,648,800
7,878,265
8,114, 612
8,358,051
8,608,792
8,867,056
9,133,068
9,407,060
9,689,272
9,979,950
10,279,348
10,587,729
10,905,361
11,232,521
11,569,497
11,916,582
12,274,079
12,642,302
13,021,571
13,412,218
13,814,585
14,229,022
14,655,893
15,095,569
Cummulative TOT
10 Years
Tata I
15 Years
Total
20 Years
Total
25 Years
Total
30 Years
Total
$8,077,822
$13,105,399
$18,933,739
$25,690,383
$33,523,184
NEW HOTEL TOT GENERATION
100 Rooms @ $270 ADR and 65% Occupancy
ANNUAL TOT
(11%)
$704,633
725,771
747,545
769,971
793,070
816,862
841,368
866,609
892,607
919,386
946,967
975,376
1,004,637
1,034,777
1,065,820
1,097,794
1,130,728
1,164, 650
1,199,590
1,235,577
1,272,645
1,310,824
1,350,149
1,390,653
1,432,373
1,475,344
1,519,604
1,565,192
1,612,148
1,660,513
50% Subsidy
$352,316
362,886
373,772
384,985
396,535
408,431
420,684
433,305
446,304
459,693
473,484
487,688
502,319
517,388
532,910
548,897
565,364
582,325
599,795
617,789
636,322
655,412
675,074
695,327
716,186
737,672
759,802
782,596
806,074
830,255
Cummulative
10 Years
Total
15 Years
Total
20 Years
Total
25 Years
Total
30 Years
Total
Cummulative
TOT
$704,633
1,430,404
2,177,949
2,947,920
3,740,990
4,557,852
5,399,220
6,265,829
7,158,436
8,077,822
9,024,789
10, 000,165
11, 004, 803
12,039,579
13,105,399
14,203,194
15,333,922
16,498,572
17,698,162
18,933,739
20,206,384
21,517,208
22,867,357
24,258,010
25,690,383
27,165,727
28,685,331
30,250,523
31,862,671
33,523,184
50% Subsidy
$4,038,911
$6,552,700
$9,466,870
$12, 845,191
$16,761,592
50% Subsidy
(Cummulative)
$352,316
715,202
1,088,974
1,473,960
1,870,495
2,278,926
2,699,610
3,132, 914
3,579,218
4,038,911
4,512,395
5,000,083
5,502,401
6,019,790
6,552,700
7,101,597
7,666,961
8,249,286
8,849,081
9,466,870
10,103,192
10, 758, 604
11,433,678
12,129,005
12, 845,191
13,582,863
14,342,665
15,125,262
15,931,336
16,761,592
Room Revenue
Year (3% Escalation)
1 $9,252,750
2 9,530,333
3 9,816,242
4 10,110,730
5 10,414,052
6 10,726,473
7 11,048,267
8 11,379,715
9 11,721,107
10 12,072,740
11 12,434,922
12 12,807,970
13 13,192,209
14 13,587,975
15 13,995,615
16 14,415,483
17 14,847, 948
18 15,293,386
19 15,752,188
20 16,224,753
21 16,711,496
22 17,212,841
23 17,729,226
24 18,261,103
25 18,808,936
26 19,373,204
27 19,954,400
28 20,553,032
29 21,169,623
30 21,804,711
Cummulative TOT
10 Years
Tota I
15 Years
Total
20 Years
Total
25 Years
Total
30 Years
Total
$11,667,965
$18,930,021
$27,348,734
$37,108,330
$48,422,377
NEW HOTEL TOT GENERATION
150 Rooms @ $260 ADR and 65% Occupancy
ANNUAL TOT
(11%)
$1,017,803
1,048,337
1,079,787
1,112,180
1,145, 546
1,179,912
1,215,309
1,251,769
1,289,322
1,328,001
1,367,841
1,408,877
1,451,143
1,494,677
1,539,518
1,585,703
1,633,274
1,682,272
1,732,741
1,784,723
1,838,265
1,893,412
1,950,215
2,008,721
2,068,983
2,131,052
2,194,984
2,260,834
2,328,659
2,398,518
50% Subsidy
$508,901
524,168
539,893
556,090
572,773
589,956
607,655
625,884
644,661
664,001
683,921
704,438
725,571
747,339
769,759
792,852
816,637
841,136
866,370
892,361
919,132
946,706
975,107
1,004,361
1,034,491
1,065,526
1,097,492
1,130,417
1,164,329
1,199,259
Cummulative
TOT
$1,017,803
2,066,139
3,145,926
4,258,106
5,403,652
6,583,564
7,798,873
9,050,642
10,339,964
11,667,965
13,035,806
14,444,683
15,895,826
17,390,503
18,930,021
20,515,724
22,148,998
23,831,271
25,564,011
27,348,734
29,186,999
31,080,411
33,030,626
35,039,347
37,108,330
39,239,383
41,434,367
43,695,200
46, 023, 859
48,422,377
Cummulative 50% Subsidy
10 Years
Total
15 Years
Total
20 Years
Total
25 Years
Total
30 Years
Tota I
$5,833,983
$9,465,011
$13,674,367
$18,554,165
$24,211,189
50% Subsidy
(Cummulative)
$508,901
1,033,070
1,572,963
2,129,053
2,701,826
3,291,782
3,899,437
4,525,321
5,169,982
5,833,983
6,517,903
7,222,342
7,947,913
8,695,252
9,465,011
10,257,862
11,074,499
11,915,635
12,782,006
13,674,367
14,593,499
15,540,206
16,515,313
17,519,674
18,554,165
19,619,691
20,717,183
21,847,600
23,011,929
24, 211,189
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Room Revenue
(3% Escalation)
$11,388,000
11,729,640
12,081,529
12,443,975
12,817,294
13,201,813
13,597,868
14,005,804
14,425,978
14,858,757
15,304,520
15,763,655
16,236,565
16,723,662
17,225,372
17,742,133
18,274,397
18,822,629
19,387,308
19,968,927
20,567,995
21,185,035
21,820,586
22,475,203
23,149,459
23,843,943
24,559,261
25,296,039
26,054,920
26,836,568
Cummulative TOT
10 Years
Total
15 Years
Total
20 Years
Total
25 Years
Total
30 Years
Total
$14,360,572
$23,298,487
$33,659,981
$45,671,791
$59,596,772
NEW HOTEL TOT GENERATION
200 Rooms @ $240 ADR and 65% Occupancy
ANNUAL TOT
(11%)
$1,252,680
1,290,260
1,328,968
1,368,837
1,409,902
1,452,199
1,495,765
1,540,638
1,586,858
1,634,463
1,683,497
1,734,002
1,786,022
1,839,603
1,894,791
1,951,635
2,010,184
2,070,489
2,132,604
2,196,582
2,262,479
2,330,354
2,400,264
2,472,272
2,546,441
2,622,834
2,701,519
2,782,564
2,866,041
2,952,022
50% Subsidy
$626,340
645,130
664,484
684,419
704,951
726,100
747,883
770,319
793,429
817,232
841,749
867,001
893,011
919,801
947,395
975,817
1,005,092
1,035,245
1,066,302
1,098,291
1,131, 240
1,165,177
1,200,132
1,236,136
1,273,220
1,311,417
1,350,759
1,391,282
1,433,021
1,476,011
Cummulative
10 Years
Total
15 Years
Total
20 Years
Total
25 Years
Total
30 Years
Total
Cummulative
TOT
$1,252,680
2,542,940
3,871,909
5,240,746
6,650,648
8,102,848
9,598,613
11,139,252
12,726,109
14,360,572
16,044,070
17,778,072
19,564,094
21,403,697
23,298,487
25,250,122
27,260,306
29,330,795
31,463,399
33,659,981
35,922,460
38,252,814
40,653,078
43,125,351
45,671,791
48,294,625
50,996,144
53,778,708
56,644,749
59,596,772
50% Subsidy
$7,180,286
$11,649,244
$16,829,990
$22,835,896
$29,798,386
50% Subsidy
(Cummulative)
$626,340
1,271,470
1,935,954
2,620,373
3,325,324
4,051,424
4,799,307
5,569,626
6,363,055
7,180,286
8,022,035
8,889,036
9,782,047
10,701,848
11,649,244
12,625,061
13,630,153
14,665,397
15,731,699
16,829,990
17,961,230
19,126,407
20,326,539
21,562,675
22,835,896
24,147, 312
25,498,072
26,889,354
28,322,375
29,798,386
ORDINANCE NO. 1336
AN ORDINANCE OF THE CITY OF PALM DESERT, CALIFORNIA
ADDING CHAPTER 3.28.270 TO THE PALM DESERT MUNICIPAL
CODE, RELATING TO THE ESTABLISHMENT OF HOTEL
OPERATIONS INCENTIVE PROGRAM.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES
HEREBY ORDAIN, AS FOLLOWS:
CHAPTER 3.28 TRANSIENT OCCUPANCY TAX
3.28.270 Hotel operations incentive program.
A. Purpose.
The purpose of this chapter is to provide 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 Desert, 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 finds:
a) The general welfare and material well-being of the residents of the City of Palm
Desert 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 quality hotels and
first class hotels in the City of Palm Desert will create desirable visitor serving facilities
that will contribute to the growth and expansion of tourism and travel opportunities in
the City, 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 Desert 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 quality
and hotels is of paramount importance to the City of Palm Desert, its residents, and
businesses.
B. Definitions.
For the provisions of this Chapter, the following definitions shall apply:
"Adjusted tax rate" means the hotel operations incentive program
ORDINANCE NO. 1336
tax rates which shall be exclusively utilized for the calculation of the operating
assistance to be paid by the City to qualified operators of hotels participating in the hotel
performance incentive program. Adjustment to tax rate shall include cost to the City or
regional tourism authority to encourage, promote and enhance convention and tourism
in the region as well as costs associated with periodic reviews of operators' collection of
transient occupancy tax required under Chapter 3.28 Transient Occupancy Tax of the
Palm Desert Municipal Ordinance.
"Downtown Hotel" means a hotel which is a First class hotel and located in the
Downtown Core/Edge, P.C. zoning districts.
"Desert Willow Hotel" means a hotel which is a First class hotel, and is located in
the Desert Willow Golf Resort and on Lot Pads A, B, C, D or E.
"Existing hotel" means a property that was constructed, occupied, and used as a
hotel on or before January 1, 2018.
"First class hotel" means a hotel which provides standards of physical features
and operational services which meet or exceed the 4 diamond rating criteria established
for hotels by the American Automobile Association or an equivalent rating.
"First class hotel standard" means standards of physical features and operation
that qualify a hotel as a first class hotel and that include operation of the hotel on a
twenty-four hours per day/seven day a week basis with housekeeping services, food
and beverage services, room services, banquet and meeting services, concierge and
bellman services, and parking services.
"Fully entitled" means a hotel that has received and/or been issued all
discretionary permits and entitlements from the City required for the construction of a
new hotel.
"Hotel" means any property containing four (4) or more guest rooms used by four
(4) or more guests for compensation and where the guest rooms are designed and
intended as transient occupancy accommodations.
"New Hotel" "First Class New Hotel," and "Downtown New Hotel" means a first
class hotel or "Downtown Hotel" or "Desert Willow New Hotel" that is or was fully entitled
as a hotel after January 1, 2018, and must commence operation no later than December
31, 2023. The term "new hotel" does not include all, or any portion of, or addition to, an
existing hotel.
"Operating covenants" means the covenants described in Section 3.28.050 of this
Code.
"Operator" means the person who is proprietor of a hotel, whether in the capacity
of owner, lessee, sub -lessee, mortgagee in possession, licensee, franchisee, or any
other capacity, or the assignee or designee of such proprietor.
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ORDINANCE NO. 1336
"Transient occupancy" means an uninterrupted stay of no more than twenty-eight
consecutive calendar days.
"Transient occupancy tax base" means the existing transient occupancy rate in
place at the adoption of this ordinance, eleven (11 %) percent.
C. Eligibility for incentive program.
a) To qualify for the hotel operations incentive program for any hotel, the operator
shall:
(1) Complete and submit to the Director of Economic Development, the City's
application for the hotel operations incentive program and outline the following expected
from the hotel:
i. New full time and part-time jobs to be created;
ii. New hospitality uses to capture share of regional tourism economy and
attract additional hospitality uses to City;
iii. Local tax generation from uses (transient occupancy tax, sales taxes, and
increased level of property taxes) to improve the quality of life in the City.
(2) Provide free use of meeting facilities in the hotel for City events and Palm Desert -
based public entities, not -for -profit charities, and community organizations.
(3) Provide independent, third -party, certification acceptable to the City of the level of
quality of the First class hotel and the Downtown Hotel.
(4) Execute the operating covenants which shall include provisions regarding
continuing use, maintenance, non-discrimination, and such other provisions as the City
Council in its sole discretion, may reasonably determine are necessary or appropriate to
preserve the goals and intent of this chapter.
D. Incentive program.
a) New Downtown Hotels or New Desert Willow Hotels.
(1) The City shall pay to an operator of a New Downtown or Desert Willow Hotel an
amount equal to fifty percent (50%) of the annual transient occupancy tax collected at
the adjusted tax rate equal to $100,000 per hotel room constructed and in operation
after the certificate of occupancy is issued.
Without regard to any preceding conditions of this Section, the program shall
terminate at any point the first class new hotel is not operated as a first class hotel.
E. Operating covenants.
Each operator eligible to participate in the City's hotel operations
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ORDINANCE NO. 1336
incentive program shall execute operating covenants approved by the City Council, and
recorded with the county of Riverside recorder's office.
F. General fund revenues.
All transient occupancy tax revenues 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 and subject
to an annual appropriation by the City Council.
G. 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.
H. The City Clerk shall certify to the passage and adoption of this ordinance and
shall cause the same to be published once in the Desert Sun, a newspaper of general
circulation, printed and published within the County of Riverside, and circulated within
the City of Palm Desert, and shall be in full force and effect thirty (30) days after its
adoption.
PASSED, APPROVED and ADOPTED by the City Council of the City of Palm Desert,
California, at its regular meeting held on the day of , 2018.
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
RACHELLE D. KLASSEN, CITY CLERK
CITY OF PALM DESERT, CALIFORNIA
SABBY JONATHAN, MAYOR
4
WEST
March 22, 2018
Dear Council Members,
RIVER INC.
real estate
We have accomplished a lot in the last few years. Everyone in the City and on my team has worked hard to
build an exceptional Hotel Paseo. It's already been featured in national magazines, newspapers and across
social media. The response has been fantastic!
We are totally supportive of incentives to help hotels get off the ground. They can produce great revenue to the
City and support additional economic development for the community.
However, the ordinance as proposed could bankrupt our project. The seasonal desert market is difficult to
navigate. We accepted the challenge and invested $40 million dollars, while createing over 110 new jobs.
However, we reasonably assumed we were going to play on a level playing field in Palm Desert with future
competition.
A One Hundred Thousand ($100,000) dollars per room incentive for new hotels would mean those hotels could
build near us and charge $100 per night less than us and be much more profitable.
Hotel Paseo was given a Twelve Thousand ($12,000) dollar per room incentive to help offset land costs, risked
a total of Forty Million ($40,000,000) dollars, while being in the middle of the second worst recession in U.S.
history.
The Union Bank property is for sale on El Paseo. Three hotel companies including my firm West River, OTO
Development and 24/7 Hotels have already submitted bids with no incentives. The previous Rosewood site is
also available. I would venture a guess that their interests have been generated by Hotel Paseo.
There are some challenges to keep the El Paseo District vibrant. However, the unintended consequences of
this incentive program could include devastating Hotel Paseo, inflating already high land prices, and driving up
construction costs.
We are not against competition or incentives for hotels as they are tough to build and launch. We benefited from
your help.
Hotel Paseo did not open for business until after January 1, 2018, nor has it received a permanent Certificate of
Occupancy. If smarter minds than me feel the proposed incentive program is a must, then we feel we meet the
description of a "New Hotel" and should qualify as such. We've have taken the earliest, highest risk, and
delivered the quality luxury hotel that you were requesting.
Please don't tilt the playing field to where we can't compete against both the competition and the government.
Sincerely,
Robert Leach
President
West River Inc.
Managing Member
El Paseo Hotel, LLC
Cell# 916 798-3649
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