HomeMy WebLinkAboutPost-Meeting Agenda Package - StudySession_Jul11_2024
PALM DESERT CITY COUNCIL,
SUCCESSOR AGENCY TO THE PALM DESERT REDEVELOPMENT
AGENCY,AND HOUSING AUTHORITY
STUDY SESSION MEETING
STUDY SESSION POST-MEETING AGENDA
Thursday, July 11, 2024
2:45 p.m.
Council Chamber, City Hall
73-510 Fred Waring Drive
Palm Desert, California
NOTICE IS HEREBY GIVEN that the purpose of the Study Session is to review the items listed on the
agenda. No action will be taken.
This is a joint meeting of the Palm Desert City Council, Successor Agency to the Palm Desert
Redevelopment Agency, and the Palm Desert Housing Authority. Pursuant to Assembly Bill 2449, this
meeting may be conducted as a hybrid meeting allowing public access via teleconference or in
person, and up to two Councilmembers may attend remotely.
WATCH THE MEETING LIVE: Watch the City Council meeting live at the City’s website:
https://palmdesert.zoom.us/ or on the City’s YouTube Channel.
OPTIONS FOR PARTICIPATING IN THIS MEETING:
Send your comments by email to: CouncilMeetingComments@palmdesert.gov.
Emails received prior to 10:00 a.m. on the day of the City Council meeting will be made part of the
record and distributed to the City Council. Emails will not be read aloud at the meeting.
Pages
1.CALL TO ORDER - STUDY SESSION
2.STUDY SESSION TOPICS
2.a STUDY SESSION: IMPERIAL IRRIGATION DISTRICT’S ENERGY
INFRASTRUCTURE PARTNERSHIP
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RECOMMENDATION:
Provide direction to staff on whether to participate in Imperial Irrigation
District’s energy infrastructure partnership agreement.
2.b STUDY SESSION: DESERT HEALTHCARE DISTRICT’S PROPOSED
HOSPITAL LEASE AGREEMENT “NON-COMPETE” PROVISION, WHICH
RESTRICTS TAXPAYER FUNDS AND ELECTED BOARD’S OVER THE
NEXT 30 YEARS
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RECOMMENDATION:
Receive a presentation and provide feedback regarding the Desert
Healthcare District’s proposed new Hospital Lease Agreement with Tenet
Healthcare which includes a “non-compete” provision.
3.ADJOURNMENT
4.PUBLIC NOTICES
NOTE: Pursuant to Assembly Bill 2449, this meeting may be conducted by
teleconference. Study Session is accessible in person or on the City’s website:
www.palmdesert.gov under the Council Agenda link at the top of the page.
Agenda Related Materials: Pursuant to Government Code §54957.5(b)(2) the
designated office for inspection of records in connection with this meeting is the
Office of the City Clerk, Palm Desert Civic Center, 73-510 Fred Waring Drive,
Palm Desert. Staff reports for all agenda items considered in open session, and
documents provided to a majority of the legislative bodies are available for
public inspection at City Hall and on the City’s website at www.palmdesert.gov
by clicking “Council Agenda” at the top of the page.
Americans with Disabilities Act: It is the intention of the City of Palm Desert to
comply with the Americans with Disabilities Act (ADA) in all respects. If, as an
attendee or a participant at this meeting, or in meetings on a regular basis, you
will need special assistance beyond what is normally provided, the City will
attempt to accommodate you in every reasonable manner. Please contact the
Office of the City Clerk, (760) 346-0611, at least 48 hours prior to the meeting to
inform us of your needs and to determine if accommodation is feasible.
AFFIDAVIT OF POSTING
I, Níamh M. Ortega, Assistant City Clerk of the City of Palm Desert, do hereby
certify, under penalty of perjury under the laws of the State of California, that the
foregoing agenda for the Palm Desert City Council, Successor Agency for the
Palm Desert Redevelopment Agency, and Housing Authority, was posted on the
City Hall bulletin board and City website www.palmdesert.gov no less than 72
hours prior to the meeting.
/S/ Níamh M. Ortega
Assistant City Clerk
City Council Study Session
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Page 1 of 4
CITY OF PALM DESERT
STAFF REPORT
MEETING DATE: July 11, 2024
PREPARED BY: Chris Escobedo, Assistant City Manager
REQUEST: STUDY SESSION: IMPERIAL IRRIGATION DISTRICT’S ENERGY
INFRASTRUCTURE PARTNERSHIP
RECOMMENDATION:
Provide direction to staff on whether to participate in Imperial Irrigation District’s energy
infrastructure partnership agreement.
BACKGROUND/ANALYSIS:
In 2023, City staff worked with Imperial Irrigation District (IID) to secure a will-serve letter for an
affordable housing development in the north sphere, as well as for the City’s fourth fire station
(Fire Station 102), which is currently in design. During that process, staff learned of IID’s energy
infrastructure challenges specific to the portion of Palm Desert they serve in the north sphere.
The rest of Palm Desert is served by Southern California Edison. Without new substation(s) and
distribution lines to serve the north sphere, IID will not issue an y additional will-serve letters for
new and planned development.
Since 2023, the discussions have evolved from each jurisdiction or developer needing to pay for
their own substations, which range from $25 Million to $30 Million each and Palm Desert needi ng
two to serve the north sphere. Now, the discussions include multiple parties entering a potential
partnership for one large substation and paying for their respective , and lower cost, energy
needs.
To get to this point, staff has engaged in the following activities:
Retained NV5, which is a technical engineering and consulting firm, to analyze and
project the IID service area energy demand at build-out,
Held several meetings with IID staff to verify this information, work through solutions to
Palm Desert’s needs, and work through IID’s energy infrastructure standards,
Held three property owner feedback and input meetings,
Conducted financial forecasts and explored financing options,
Met with other impacted agencies and developers including the City of Rancho Mirage
and the Berger Foundation, and
Worked with IID to develop the energy infrastructure partnership solution.
NV5 Technical Analysis
In 2023, the staff initiated a comprehensive study with NV5 on the requirements and energy load
analysis for build-out of the north sphere. NV5 worked alongside IID’s infrastructure team to
factor in the requirements, distribution, and site locations for substation s. Additionally, NV5
received information on land development plans from the City’s Development Services
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City of Palm Desert
IID Energy Infrastructure Partnership
Page 2 of 4
Department and communicated with various property owners in the north sphere who need
energy. At build-out, NV5 concluded that 15 Megawatts (MW) would be needed to energize the
north sphere.
Project Scope
The 15 MW need, factored into the proposed substation would be located just north of the I-10
freeway on Cook Street, which has existing energy conduit and serves as the most efficient
routing point for all parties. It is for a 2-50 MVA substation bank, which includes engineering,
procurement, and construction of the 2-50 MVA, 92/13.2kV power transformer associated
equipment including transmission and supporting infrastructure. Each entity would be requested
to pay in for their share, and IID would then commence ordering of equipment, design, and
construction.
High Level Total Substation Cost
Substation $20.76 Million
Distribution Gateways $4.00 Million
Transmission Line Upgrade 2-92 kV $2.53 Million
Total $27.29 Million
Property Owner Feedback and Input Meetings
During the first round of property owner meetings in 2023, before the partnership solutions were
identified, the property owners expressed their disinterest due to the high cost of the
infrastructure. During this last round in April of 2024 when the energy partnership was presented,
the property owners expressed strong support for it, recognizing the lower cost and ability to pay
over 30 years. Additional property owner input meetings are needed should the City Council
express interest in pursuing the partnership option.
Multi-Party Project Agreement
The energy infrastructure partnership would have 8 entities pay their proportional share of t he
substation. The table below provided by IID shows the entities being asked to participate, their
energy demand, and their respective cost share.
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City of Palm Desert
IID Energy Infrastructure Partnership
Page 3 of 4
The red box outlined shows Palm Desert’s energy demand at build-out and cost share. Included
in Palm Desert’s amount is the energy needs for the build-out of California State University, San
Bernardino – Palm Desert Campus. While they cannot financially participate, the staff has
negotiated other benefits with them including use of the CSU property for flood infrastructure,
wind fence improvements, and joint use of sports fields. The total amount estimated for Palm
Desert is $5 Million ($1.65 Million for CSUSB-PD) for the substation and IID has identified up to
an additional $2 Million to pay for transmission lines. The transmission lines would be the
developer’s proportionate cost as is done now with current IID development practice.
Financing Plan
At the request of the property owners, the City may form a Benefit Assessment District or
Community Facilities District and issue bonds to finance the amount necessary for the
infrastructure needs to energize the area. This mechanism would provide a financing option for
them to cover their share of the costs. Each property owner would pay their respective amount
(either up front or over a 30-year period). Where necessary, and in order to ensure timelines are
met, the City may enter into reimbursement agreements with the property owners. This would
allow the City to be reimbursed for each private party’s energy amount through bond proceeds,
and in turn they would be guaranteed will-serve letters for energy from IID.
Future Build-Out Impact to the General Fund
Staff engaged Keyser Marston Associates (KMA) to analyze city revenue projections at build -
out for this area being served by IID, based on three build-out scenarios with the most aggressive
scenario being one with hotel development in this area. KMA’s analysis projects that the City
stands to receive approximately $1.3 Million (lease aggressive scenario) to $2 Million (most
aggressive scenario) annually in TOT, Property Taxes, and Sales and Use Taxes upon full build -
out of the area.
Timeline
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City of Palm Desert
IID Energy Infrastructure Partnership
Page 4 of 4
IID has outlined the following timeline in order to understand the interest of the parties and
identify the key milestones including:
July 11, 2024 – Identify long lead equipment and funding requirements,
July 31, 2024 – Finalize pre-arrangement with governmental participants,
August 15, 2024 – Long lead equipment funding, which is mainly for the transformers
taking the longest time to procure,
September 11, 2024 – Finalize multi-party party agreement, which staff would bring back
to the City Council
Substation in service 24-30 months from the signed date of the multi-party project
agreement.
Staff is seeking Council’s feedback on this partnership and will have a presentation to walk
through its components. Staff will return to the meeting in August to request formal City Council
action.
Legal Review:
This report has been reviewed by the City Attorney’s office and Bond Counsel.
FINANCIAL IMPACT:
Based on the total estimated cost of $27.29Million for the 15MW Substation partnership, the City
would be required to front approximately $5 Million for the Palm Desert property owners share
of costs in order to facilitate the project collaboratively and expeditiously. With the approval of
a Community Facilities District by the Palm Desert property owners in need of service,
preliminary analyses indicate that the City could recoup approximately 80 -90% of the $5 Million
through reimbursement from bond proceeds, that would be issued on behalf of the CFD property
owners. Debt service for the CFD bonds would be paid annually through a mello-roos special
tax collected on the property owners’ property tax bill. The max impact/risk the General Fund is
the $5 Million payment to ensure the project is funded and commenced quickly. KMA has
projected anywhere from $1.3 Million to $2.2 Million in annual revenue to the General Fund after
build-out of the associated development area.
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IID ENERGY INFRASTRUCTURE PARTNERSHIP
Chris Escobedo
Assistant City Manager
July 11, 2024
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7/11/2024 2
WHY WE’RE HERE
•IID has a limited service
territory within Palm Desert
•Limited infrastructure – no new
development
•IID not PUC regulated like SCE
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7/11/2024 PRESENTATION TITLE 3
IID Service Area
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4
•Areas of Impact and Current
Development
•Vacant land
•Commercial and hospitality areas lack infrastructure
•Area of Impact
•Zone 1 Demand = 10 MW new demand
•Zone 2 Demand = 5 MW new demand
•Combined = 15 MW new demand
Areas of Impact & Demand Study
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5
Cook Street
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612
713
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High Level Total Substation Cost & City Amount
Substation $20.76 Million
Distribution Gateways $4.00 Million
Transmission Line Upgrade 2-92 kV $2.53 Million
Total $27.29 Million
Palm Desert Amount $5 Million
30 Year Bond Financing
Total Substation Cost $ 27.29 Million
City of PD Loan*$ 5 Million
Est. Bond Proceeds**$ 4.6 Million
Est. GF Tax Revenue at Buildout
(Including Property Tax, TOT, Sales Tax)
$1.3 Million - $2 Million
Cost & Financing
*PD Loan necessary to assist PD property owners and expedite project. Loan Agreement terms to be reimbursed by CFD infrastructure bond proceeds.
**Bond Proceeds estimated with a conservative 2% increase in value over term of bonds. Annual CFD special tax to repay debt.
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Timeline
9
July 11 – City Council
guidance
August 15 – IID to
outline all items needed
for substation
August – Return to City
Council for action
September – Finalize
multi-party agreement
Substation in service
24-30 months from
signed date agreement
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Policy Questions
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Proceed with multi-
party agreement?
Initiate BAD or CFD
for the Palm Desert property owners share?
August – Return to
City Council for
action
September –
Finalize multi-party
agreement
District Formation and Bond Issuance
Substation in
service 24-30
months from signed
date agreement
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THANK YOU
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Page 1 of 1
CITY OF PALM DESERT
STAFF REPORT
MEETING DATE: July 11, 2024
PREPARED BY: Anthony J. Mejia, City Clerk
REQUEST: STUDY SESSION: DESERT HEALTHCARE DISTRICT’S PROPOSED
HOSPITAL LEASE AGREEMENT “NON-COMPETE” PROVISION, WHICH
RESTRICTS TAXPAYER FUNDS AND ELECTED BOARD’S OVER THE
NEXT 30 YEARS
RECOMMENDATION:
Receive a presentation and provide feedback regarding the Desert Healthcare District’s
proposed new Hospital Lease Agreement with Tenet Healthcare which includes a “non-compete”
provision.
BACKGROUND:
On May 28, 2024, the Desert Healthcare District (the “District”) Board received a presentation
from Tenet Healthcare (“Tenet”) regarding a new Hospital Lease Agreement for Desert Regional
Medical Center (the “Lease”). The presentation referenced a new 30 -year Lease, which would
allow Tenet, a Dallas-based entity, to take ownership of the hospital at the end of the 30 -year
lease. The new Lease would include a “non-compete” provision similar to the current lease. If
approved by the District Board, this item would be put on the November 5, 2024, ballot for District
voters to decide.
The City Council is requested to receive a presentation and provide feedback regarding the
proposed lease. There is a companion item on tonight’s agenda under the Action Calendar,
requesting the City Council consider adopting a resolution opposing the “non-compete” provision.
Legal Review:
This report has been reviewed by the City Attorney’s office.
FINANCIAL IMPACT:
There is no financial impact associated with this study session.
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Desert Healthcare District Background (DHCD)
The DHCD created in 1948 for the purpose of providing hospital services to the
residents of the district.The Board then built and operated Desert Hospital, now
known as Desert Regional Medical Center (DRMC)
Annual revenue approx. $13M with $9M of that funded through property tax
dollars within the original district
$87M in totals assets as of May 31, 2024, with $71M of that in cash and
investments.
Since 1999, more than $70 million has been allocated through a best-practices,
grant administration department. District revenues from property tax, a medical
building asset, and an investment portfolio support these efforts.
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Desert Healthcare District Background (DHCD) (continued)
On Election Day, November 6, 2018, Coachella Valley voters overwhelmingly
approved extending the district boundaries east of Cook Street. More than
doubling the coverage area, the expansion enlarged the District to include La
Quinta, Indio, Coachella, the rest of Palm Desert and Indian Wells, Bermuda Dunes,
Thermal, Mecca, North Shore and other unincorporated communities.
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Desert Regional Medical Center
Desert Regional Medical Center is a 385-bed acute care hospital and El Mirador
Medical Plaza a 163,000 sq. ft. Medical Office Building located in Palm Springs.
In 1997, the Board voted to lease the hospital to Tenet Systems for 30 years with a
prepaid lease.
DHCD is currently in the final stages of negotiating a lease/purchase agreement
with a planned vote by their board on July 23
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The Non-Compete Clause
The restrictive covenant states:
Neither the DHCD nor its Foundation
Will directly or indirectly
Provide financial assistance
To any hospital or other health care facility, provider, or business within the geographical
boundaries of the District Without Tenet’s prior written consent (which Tenet may withhold in its
sole and absolute discretion
This restriction is even broader than in the current lease; arguably, by including
“other health care facilities” and “other health care providers,” the lease prohibits
the DHCD and its Foundation from awarding grant funds to organizations (like DAP
Health) and other similar local facilities/providers (unless Tenet approves the grant
application).
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The Non-Compete Clause (continued)
Interestingly, in addition to the core restrictive covenant language, the clause includes a direct
statement that the DHCD and its Foundation cannot provide financial support to another acute care
hospital within the District’s boundaries.
The DHCD and Tenet also included a new concept in the draft lease that seemingly permits the
DHCD to work with Eisenhower to improve access to healthcare for District residents –but such
projects must be “outside the scope of Eisenhower’s licensure” and must be “provided free of charge
. . . or otherwise do not generate revenue that is reflected on the financial statements” of
Eisenhower.
Not only has Tenet reserved the power to approve/disapprove grant applications, but in the new
lease, the DHCD and its Foundation must provide written notice to Tenet of any grant application
that may implicate the non-compete clause.And Tenet has 30 days in which to review the notice
and either approve/deny the application.
There is new language at the end of the new non-compete clause that contemplates a legal
challenge to the language –i.e., the DHCD has to defend, indemnify and hold harmless Tenet in any
such claim/lawsuit.
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The Non-Compete Clause (The Policy Problem)
Allowing an out-of-state, for-profit company to control and restrict the distribution
of our local taxpayer funds is a direct violation of fundamental public policy
principles.
This arrangement undermines the Desert Healthcare District's mission -and its
purpose for existence -to serve the healthcare needs of our community without
external corporate interference.
It is crucial to safeguard our local resources and ensure that decisions about their
use are made by those who genuinely prioritize and understand the needs of our
community. We must reject any agreement that compromises our autonomy and the
well -being of our residents
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