HomeMy WebLinkAboutDevelopment Agreement 96-1 Amendment 2-HTE 15-200 - WVC Rancho Mirage, Inc.CITY OF PALM DESERT ordinance No. 1289
DEPARTMENT OF COMMUNITY DEVELOPMENT
STAFF REPORT
REQUEST: CONSIDERATION OF AN AMENDMENT TO A DEVELOPMENT
AGREEMENT FOR STARWOOD VACATION OWNERSHIP LOCATED
AT 39-500 PORTOLA AVENUE.
SUBMITTED BY: Tony Bagato, Principal Planner
APPLICANT: WVC Rancho Mirage, Inc.
c/o: Starwood Vacation Ownership
9002 San Marco Court
Orlando, FL 32819
CASE NOS.: DA 96-1 Amendment 2/HTE 15-200
DATE: August 27, 2015
CONTENTS: Ordinance No. 1289 , Exhibit "A" DA 96-1 Amendment #2
Starwood Fiscal Analysis
Legal Notice
Recommendation
That the City Council waive further reading, and pass Ordinance No. to
second reading approving Development Agreement 96-1 Amendment 2, which
provides a 10 year time extension and modifies payment schedule of the Project
Amenity Fee.
Planning Commission
On August 18, 2018, the Planning Commission reviewed and unanimously recommended
approval of Development Agreement 96-1 Amendment #2.
Executive Summary
Approval of staff's recommendation will recommend to the City Council approval of an
amendment to Development Agreement ("DA") 96-1. The amendment focuses on two (2) items:
a time extension, and a waiver of the Minimum Project Amenity Fee (PAF).
The first substantive change will extend the term of the DA by 10 years. The project entitlement
is currently set to expire in 2016. The 10-year amendment will extend the term of the DA to
February 27, 2026. The second substantive change to the DA is related to the waiver of a PAF
that is required by the DA with the payment schedule identified in the Disposition and
Development Agreement (DDA) that was executed by the City's former Redevelopment Agency.
Staff Report
DA 96-1 Amendment 2 — HTE 15-200
Page 2
August 27, 2015
Background:
A. Desert Willow:
Desert Willow Golf Resort was originally planned and constructed as a long-term economic
tool for the City. The Master Plan, approved in 1994, provided for the development of a
championship golf course, a resort course, a clubhouse, 600 timeshare units, a conference
center, and four (4) hotels (two (2) around the clubhouse and two (2) at the southwest
corner of Cook Street and Frank Sinatra Drive), totaling 1,050 rooms. The two (2) hotel sites
on the southwest corner of Cook Street and Frank Sinatra Drive have been developed with
a Residence Inn and Courtyard by Marriot for a total of 281 hotel units.
In February of 1997, the City Council approved Development Agreement ("DA") 96-1, a
precise plan of design and conditional use permit associated with a tentative tract map to
allow 61 buildings totaling 311 timeshare units for Intrawest Resort Ownership Corporation
within Desert Willow. Intrawest built 55 units and is planning on building 41 additional units
in the future.
In 2006, Intrawest sold the development rights for 215 units to Starwood Vacation
Ownership.
In 2007, the City Council approved Ordinance No. 1135, amending DA 96-1 by providing a
total of 300 timeshare units for Starwood Vacation Ownership.
B. Adjacent Zoning and Land Use:
North: P.R.5 / Golf Course (18th green and vacant property)
South: P.R.5 / Golf Course (12th green)
East: P.R.5 / Golf Course (14th & 151h green and vacant)
West: P.R.5 / Golf Course (131h, 16th, and 171h green)
Proiect Descriotion
The applicant is requesting approval of a second amendment to DA 96-1 as it relates to the
entitlement term and the PAF that is required in the current DA.
The first substantive change will extend the term of the DA by 10 years. The project entitlement
is currently set to expire in 2016. The 10-year amendment will extend the term of the DA to
February 27, 2026.
The second substantive change to the DA will modify the minimum PAF payable under the
DDA. PDMC Section 25.34.060 requires that all timeshare be developed in conjunction with a
resort hotel having 500 or more rooms and an 18-hole golf course of not less than 6,400 yards.
When a timeshare project cannot be built in conjunction with these requirements, the City has
negotiated a fee that is paid to the City for providing the amenities for timeshare users.
The original DA did not provide any adjustments of this fee if the actual projected number of
units were not built in the time expected according to a projected build -out schedule in the
Staff Report
DA 96-1 Amendment 2 — HTE 15-200
Page 3
August 27, 2015
original DDA. With the downturn in the economy, the applicant has not built the units as rapidly
as was projected. The City Council has granted several amendments to the DDA and a recent
waiver of the PAF payments to reflect the actual number of units that have been built by the
applicant, rather than the higher number that were projected during more robust economic
times. As part of this amendment, the applicant is requesting that the PAF permanently be
based on actual units built instead of a projected number, for which they continue to seek
amendments and waivers.
Starwood will continue to construct additional units, but at a slower pace than what was
originally anticipated. With fewer units built, there is less of an impact on the golf course, which
the fee is intended to support. Staff believes that requiring the fee based on units actually built
is a fair request by the applicant.
Environmental Review:
According to the California Environmental Quality Act (CEQA), staff must determine whether a
proposed activity is a project subject to CEQA. If the project is subject to CEQA, staff must
conduct a preliminary assessment of the project to determine whether the project is exempt
from CEQA review. If a project is not exempt, further environmental review is necessary. Further
review from a non-exempt project would result in a Negative Declaration, a Mitigated Negative
Declaration, or an Environmental Impact Report (EIR). Generally, an EIR must be prepared if a
project may have a significant impact on the environment.
In this case, the City of Palm Desert, in its capacity as the Lead Agency for this project under
the CEQA, has determined that the proposed project will have no forseeable impact on the
environment and is therefore exempt from CEQA. The proposed project will merely change
policy decisions made during the previous review. The project will not impact the environment.
All development impacts were previously addressed in 2006 and the EIR previously approved
for Desert Willow.
Fiscal Analysis
One (1) of the substantive amendments to the DA provides a waiver of the current PAF
payment that is due under the DDA. The original DDA has a schedule for the payment
of the PAF, which was calculated based on a number of anticipated units being built by
the end of certain years. The amendment in the DA will change the timing of the PAF
fees paid by Starwood to the City resulting directly from the change in the construction
schedule, however, Starwood will continue to pay the PAF on all completed units, as
opposed to the burden of paying PAF or units not currently built. The amended DA will
allow Starwood to obtain corporate funding to continue to construct one building at a
time.
Staff prepared an economic analysis of the projected change in revenue based on two
(2) assumptions; first that Starwood will build one (1) building per year with an average
of 18 units per building, and the second assumption is that the Consumer Price Index
(CPI) will average at 3 percent each year based on the per unit PAF payment of $6,005
last year. Based on these two (2) assumptions, staff has projected delay of expected
Staff Report
DA 96-1 Amendment 2 — HTE 15-200
Page 4
August 27, 2015
revenues of $3,543,020.56 based on the changed schedule. (See attached
spreadsheet).
The PAF payment is deposited into Fund 441 for capital improvements to Desert
Willow. Staff does not anticipate any shortfall between needs and resources at Desert
Willow that could be impacted by the change in revenues and the timing of these
payments. Fund 441 has adequate reserves to fund the current 5-year capital plan for
Desert Willow Golf Resort. Additionally, the current PAF revenue stream for the next 5-
years, based on current conditions (Intrawest & Starwood), is projected to be $7.57
million.
Although modifying the PAF payment schedule will reflect a change in the projected
units built versus actual units, directly changing the expected revenues versus actual
revenues, Starwood has paid 100% of the PAF for all units built. Unfortunately,
Starwood has not built as many units as anticipated in 2006 because of the slow pace
of sales associated with the downturn in the economy, and the fact that Starwood had to
build a majority of the major amenities in the first phase of the project before there were
a large number of units to offset the cost of the amenities. The original construction
schedule was aggressive, and created to prevent the developer from delaying or
ceasing construction. However, because of the economic downturn and the slow
recovery of the economy, the Starwood property is competing with other Westin projects
for investment dollars; and only those projects perceived as viably profitable projects
are allocated funds. The burden of paying the PAF on units not completed hinders the
project from obtaining corporate dollars to continue to construct one building per year.
As a result, Starwood could be at risk of ceasing construction until the project is
perceived by the corporate decision -makers as a viable project.
Another revenue stream that will be impacted if Starwood decides not to continue to
build out the remaining 144 units after this year is the Transient Occupancy Tax (TOT),
which is recognized by the City General Fund when the Starwood properties are rented
out to the general public as opposed to the timeshare property owners. If the remaining
units are not built, the City General Fund could potentially lose $3,162,000 dollars in
Transient Oriented Taxes (TOT) (based on current average TOT per Starwood unit)
during the nine- year period of 2015-2023)
In addition to lost TOT, an incomplete project sitting vacant would have a negative
impact on Desert Willow and the built portion of the Starwood timeshare project.
Staff recommends that the City Council approve the amendment to the Development
Agreement, changing the projected construction schedule and PAF payments based on
completed units as opposed to an anticipated completed unit schedule. There are
currently 134 units completed and one (1) more building being constructed. The
amended DA will provide PAF fees to the City per completed units and allow Starwood
to continue to receive funding to ultimately complete construction of all 300 anticipated
Staff Report
DA 96-1 Amendment 2 — HTE 15-200
Page 5
August 27, 2015
units. The impact of the timing difference of PAF fees based on the amended DA is
overshadowed by the goal to have the construction of all the building completed; and in
the current economic climate of limited construction funds, certain changes should be
considered by all parties to the DA to provide the foundation for a continuation of the
Starwood Project at Desert Willow.
Submitted By:
11
Tony Bagato,
Principal Planner
Reviewed:
y Ac6sta, Assistant City Manger
Paul Gibson, Director of Finance
M. Wohlmuth, City Manager
Department Head: /
Lauri Aylaian,
Director of Community Development
ORDINANCE NO. 1289
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM
DESERT, CALIFORNIA, APPROVING A SECOND AMENDMENT TO A
DEVELOPMENT AGREEMENT FOR STARWOOD VACATION
OWNERSHIP LOCATED AT 39-500 PORTOLA AVENUE.
CASE NOS: DA 96-1 AMENDMENT 2/HTE 15-200
WHEREAS, the Planning Commission of the City of Palm Desert, California, did
on the 18th day of August, 2015, hold a duly noticed public hearing to consider the
request and adopted Planning Commission Resolution 2654 recommending approval to
the City Council; and
WHEREAS, the City Council of the City of Palm Desert, California, did on the 27tn
day of August 2015, hold a duly noticed public hearing to consider the request by WVC
Rancho Mirage, Inc. for approval of the above noted; and
WHEREAS, according to the California Environmental Quality Act (CEQA), the
City must determine whether a proposed activity is a project subject to CEQA. If the
project is subject to CEQA, staff must conduct a preliminary assessment of the project
to determine whether the project is exempt from CEQA review. If a project is not
exempt, further environmental review is necessary. The application has complied with
the requirements of the "City of Palm Desert Procedure for Implementation of the
California Environmental Quality Act," Resolution No. 2014-41, in the Director of
Community Development has determined that the proposed project is related to City
policy decisions only and will not result in any significant impacts to the environment;
and
WHEREAS, at said public hearing, upon hearing and considering all testimony
and arguments, if any, of all interested persons desiring to be heard, said City Council
did find the following facts and reasons, which are outlined in the staff report reasons to
recommend approval of the said request:
NOW, THEREFORE the City Council of the City of Palm Desert, California, DOES
HEREBY ORDAIN, AS FOLLOWS:
SECTION 1: That the Development Agreement 09-507, Exhibit "A" attached
hereto, by Ordinance No. 1289 is hereby approved.
SECTION 2: That the City Clerk of the City of Palm Desert, California, is hereby
directed to publish this ordinance in the Desert Sun, a newspaper of general circulation,
published and circulated in the City of Palm Desert, California, and shall be in full force
and effect thirty (30) days after its adoption.
Ordinance No. 1289
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Palm
Desert, California, at its regular meeting held on the 27th day of August 2015, by the
following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Susan Marie Weber, Mayor
ATTEST:
RACHELLE D. KLASSEN, CITY CLERK
CITY OF PALM DESERT, CALIFORNIA
Ordinance No. 1289
SECOND AMENDMENT TO DEVELOPMENT AGREEMENT
THIS SECOND AMENDMENT TO DEVELOPMENT AGREEMENT (the "Second
Amendment"), dated as of , 2015 ("Effective Date") is entered into by and
between the CITY OF PALM DESERT, a municipal corporation (the "City") and WVC
RANCHO MIRAGE, INC., a Delaware corporation ("Starwood").
RECITALS
This Second Amendment is entered into with reference to the following facts:
A. City and Intrawest Resort Ownership Corporation, a corporation organized
and existing under the laws of the Province of British Columbia, Canada ("IROC"),
entered into a Development Agreement dated February 27, 1997 (the "DA"), which DA
was recorded on August 29, 1997 as instrument number 315819 in the official records
of the County Recorder for the County of Riverside, California. All capitalized terms
used herein without definition when first used shall have the meanings set forth in the
DA.
B. The DA provided IROC with a vested right to develop certain real property
in the City of Palm Desert ("IROC Property') as a resort club and time shares (the
"Intrawest Project").
C. The Palm Desert Redevelopment Agency ("RDA") and IROC entered into
that certain Disposition and Development Agreement dated February 13, 1997 which
set forth the conditions for the sale of the IROC Property from the RDA to IROC,
including but not limited to the payment of a Project Amenity Fee ("PAF") to the owner
of the Resort Golf Course for each Unit to be built on the IROC Property, with payment
based on a set schedule reflecting the anticipated rate of development of Units on the
IROC Property. The Disposition and Development agreement was subsequently
amended by a First Amendment (August 1, 1997), Second Amendment (January,
2003), Third Amendment (March 22, 2007) and Forth Amendment (2010) (collectively
"DDA"). Pursuant to section 10.11 of the DDA, the City is a third party beneficiary to the
DDA, with the right to enforce obligations on the City's behalf.
D. On or about February, 1997, the City acquired the Resort Golf Course
from the RDA and became the Resort Golf Course Owner as defined in the DDA.
E. On or about October 12, 1998, IROC assigned and conveyed to Resort
Ventures, L.P., a California limited partnership ("RV') all of IROC's rights, title, interest
and obligations under and to the DA and all related project documents.
F. On or about June 26, 2006, RV sold to Starwood all of its rights, title and
interest in and to that portion of IROC Property described on Exhibit "A" attached hereto
and incorporated herein by this reference (the "Starwood Property"). The City gave its
consent to the transfer from RV to Starwood of any and all rights and obligations under
the terms of the DA to the extent that such rights and/or obligations arise from
3
Ordinance No. 1289
ownership of the Starwood Property, and the RDA gave its consent to the transfer from
RV to Starwood of any and all rights and obligations under the DDA to the extent that
such rights and/or obligations arise from ownership of the Starwood Property.
G. On or about June 26, 2006, Starwood applied for and the City approved a
conceptual master plan (hereinafter the "Stanwood Master Plan") which provides for the
development of 300 two -bedroom lockoff time share units in 18 two-, three- and four-
story buildings and a one-story sales/clubhouse facility of approximately 40,000 square
feet, along with recreational amenities (hereinafter collectively referred to as the
"Starwood Project").
H. City and Starwood entered into that certain Amendment to Development
Agreement (Development Agreement 06-03) dated as of May 10, 2007 (the "First
Amendment") to revise the terms of the DA as it applies to the Starwood Property only,
in order to facilitate the development of the Starwood Project. The RDA and Starwood
concurrently entered into that certain Third Amendment to the Disposition and
Development Agreement ("Third DDA Amendment,") which set forth a schedule for
payment of the PAF on Starwood Units based on the then anticipated rate of
development of the Starwood Property.
I. In 2013, by State action, the RDA was dissolved, and the City became the
successor agency to the RDA.
J. City and Starwood now desire to amend the DA to extend the term of the
DA, and to waive the payment of PAF on un-built Units.
K. City has given notice of its intention to adopt this proposed Second
Amendment, has conducted public hearings thereon pursuant to Government Code
Section 65867 and Palm Desert Municipal Code Ordinances Nos. 341 and 589, has
taken action in accordance with the California Environmental Quality Act, and has found
that the provisions of this Second Amendment and its purposes are consistent with the
objectives, policies, general land uses and programs specified in the City's General
Plan and any applicable specific plan.
L. The City, by electing to enter into this Second Amendment, acknowledges
that the obligations of the City hereunder shall survive beyond the terms of the present
City Council members of the City, and that such action will serve to bind City and future
Councils to the obligations thereby undertaken.
M. This Second Amendment and the consent of Starwood to each of its terms
and conditions will eliminate uncertainty in planning and provide for the orderly
development of the Starwood Property, eliminate uncertainty about the validity of
exactions imposed by the City, and generally serve the public interest.
4
Ordinance No. 1289
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and of the mutual
covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. The original DA specified a term of fifteen (15) years. That original term
was extended for an additional four (4) years by the First Amendment. The parties now
acknowledge that, through no fault of either party, the economic conditions in recent
years have resulted in a much slower rate of development than was originally
anticipated. Therefore, to assure full development of the Starwood Property as
anticipated by both parties, the parties agree that the term of the DA shall hereby be
extended for an additional ten (10) years beyond the term specified in the First
Amendment, making the new expiration date for the DA February 27, 2026.
2. The DDA provides that the PAF is to be paid to the owner of the Resort
Golf Course. As the owner of the Resort Golf Course, the City hereby waives the right
to collect the PAF on un-built Units. The PAF shall be paid to the City for all Units that
are built by Starwood Property. When a new Unit is constructed, the first annual
payment of PAF for such Unit(s) shall be prorated based on the actual date of the
Certificate of Occupancy for the building in which that Unit is located, and shall be due
on the last day of the Payment Period during which that Unit's Certificate of Occupancy
is issued. The PAF for previously built Units shall continue be due annually as set forth
in the DDA.
3. Except as specifically amended by the First Amendment and this Second
Amendment, the DA shall remain in full force and effect in accordance with its original
terms and conditions, which are hereby restated and incorporated herein by reference.
4. Miscellaneous.
4.1 Binding Effect. This Second Amendment shall bind and benefit the
heirs, successors, and assigns of Starwood and the City, respectively.
4.2 No Waiver. None of the terms or provisions of this Second
Amendment may be waived, altered, modified, limited, or amended except by an
agreement expressly referring hereto and to which the parties to be bound consent in
writing.
4.3 Governing Law. This Second Amendment shall be governed by the
laws of the State of California.
4.4 Reliance on Counsel/Entire Agreement. In executing this Second
Amendment, no Party has relied on any inducements, promises, or representations by
any other Party or its attorney, other than those set out in this Second Amendment.
This instrument constitutes the entire, integrated understanding of the Parties with
respect to the subject matter contained herein, and there are no other prior or
5
Ordinance No. 1289
contemporaneous oral or written agreements or understandings except as expressly set
forth herein.
4.5 Severability. Each and every provision of this Second Amendment is
and shall be construed as a separate and independent covenant and agreement. If any
term or provision of this Second Amendment or the application thereof shall to any
extent be held to be invalid or unenforceable, the remainder of this Second Amendment,
or the application of such term or provision to circumstances other than those to which it
is invalid or unenforceable, shall not be affected hereby, and each term and provision of
this Second Amendment shall be valid and shall be enforced to the extent permitted by
law.
4.6 Execution in Counterparts. This Second Amendment may be
executed in two or more counterparts, each of which shall be an original, but all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have entered into this Second
Amendment as of the day and year first written above.
"STARWOOD"
WVC RANCHO MIRAGE, INC., a
Delaware corporation
By:
Its:
By:
Its:
"CITY"
CITY OF PALM DESERT, a municipal
corporation
By:
Mayor
ATTEST:
City Clerk
2
Ordinance No. 1289
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Date Here Insert Name and Title of the Officer
personally appeared
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or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws
of the State of California that the foregoing paragraph
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WITNESS my hand and official seal.
Signature
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CITY OF PALM DESERT
LEGAL NOTICE
CASE NOS DA 96-1 AMENDMENT #2 — HTE 15-200
NOTICE OF A PUBLIC HEARING BEFORE THE PALM DESERT CITY COUNCIL FOR
CONSIDERATION OF A RECOMMENDATION FOR APPROVAL OF AN AMENDMENT TO A
DEVELOPMENT AGREEMENT FOR STARWOOD VACATION OWNERSHIP.
The City of Palm Desert (City), in its capacity as the Lead Agency for this project under the
California Environmental Quality Act (CEQA), has determined that this project will have
absolutely no environmental impacts from amending the Development Agreement as it related
to policy decisions made by the City. No development will be associated with this project, and all
development impacts were previously addressed in 2006 and the EIR previously approved for
Desert Willow.
Project Location/ Description:
Proiect Location: 39-500 Portola Avenue
Proiect Description: The applicant is requesting approval of a second amendment to DA 96-1 as
it relates to the entitlement length and the Project Amenity Fee (PAF) that is due under the
Disposition and Development Agreement (DDA).
The first substantive change will extend the term of the Development Agreement (DA) by 10
years. The project entitlement is currently set to expire in 2016. The 10 year amendment will
extend the term of the DA to February 27, 2026.
The second substantive change to the DA will modify the PAF payable to the City under the
DDA. Palm Desert Municipal Code (PDMC) Section 25.34.060 requires that all timeshare be
developed in conjunction with a resort hotel having 500 or more rooms and an 18-hole golf
course not less than 6,400 yards. When a timeshare project cannot be built in conjunction with
these requirements, the City has negotiated a fee that is paid to the City for providing the
amenities for timeshare users. In this case, the DDA required the applicant to pay a fee with
payment schedule based on the number of anticipated units built each year.
Recommendation: Staff is recommending approval of the amendments.
Public Hearing: The public hearing will be held before the City Council on August 27, 2015, at
4.00 pm.
Comment Period: Based on the time limits defined by CEQA, your response should be sent at
the earliest possible date. The public comment period on this project is from August 17, 2015
to August 27, 2015
Public Review: The amended Development Agreement and related documents are available
for public review daily at City Hall. Please submit written comments to the Planning Department.
If any group challenges the action in court, issues raised may be limited to only those issues
raised at the public hearing described in this notice or in written correspondence at, or prior to
the Planning Commission hearing. All comments and any questions should be directed to:
Tony Bagato, Principal Planner
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
(760) 346-0611
tbagato@cityofpalmdesert.org
PUBLISH: DESERT SUN RACHELLE KLASSEN, City Clerk
August 17, 2015 Palm Desert, California