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HomeMy WebLinkAboutDSRT SURF Economic Development Subsidy Report AB562ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT CODE SECTION 53083 FOR A TRANSIENT OCCUPANCY TAX SHARING AGREEMENT WITH DESERT WAVE VENTURES, LLC IN CONNECTION WITH THE DEVELOPMENT OF AN UPPER UPSCALE OR LUXURY HOTEL AND VILLAS LOCATED WITHIN THE DESERT WILLOW GOLF RESORT (DWGR) ON PARCEL “B” AND CITY LOTS Pursuant to Government Code Section 53083, the City Council of the City of Palm Desert must hold a noticed public hearing and, prior to the public hearing, provide all of the following information in written form and available to the public and through the City’s website, regarding a proposed economic development subsidy provided by the City pursuant to a Transient Occupancy Tax Sharing Agreement by and between the City of Palm Desert and Desert Wave Ventures, LLC(Agreement), in connection with the development of a property located within the Desert Willow Golf Resort on Parcel “B” and City Lots. The Dsrt Surf Resort is a 5.5 acre surf lagoon, surf center, hotel and villas (collectively, “Dsrt Surf”). Notice was published on the City’s website for a public hearing to be held on November 14, 2019. The purpose of this report is to provide the information required pursuant to Government Code Section 53083 in regards to the Agreement. This report shall remain available to the public and posted on the City’s website until the end date of the economic development subsidy, as further described in number 2 below. 1. The name and address of all corporations or any other business entities, except for sole proprietorships, that are beneficiary of the economic development subsidy. The Agreement is with Desert Wave Ventures, LLC a California Limited Liability Corporation, who proposes to develop Dsrt Surf that will benefit from the economic development subsidy: Desert Wave Ventures, LLC Attn: Doug Sheres/John Luff, P.O Box 147 Solana Beach, CA 92075 2. The start and end dates and schedule, if applicable, for the economic development subsidy. The proposed Agreement is expected to extend for a period of twenty (20) years from the first year of occupancy and commercial operation. The economic development subsidy will be paid quarterly, within sixty (60) days of the end of each quarter. In no case shall the subsidy exceed $16.1 million. If the not-to-exceed amount is reached sooner than the proposed term of twenty (20) years, the agreement terminates. In addition, the City proposes purchasing $20 million of public improvements at the site, upon completion of construction of those public improvements. Source of those funds is one time bond funds, designated for this purpose within the DWGR. In addition, the City proposes offering the City portion of land to the developer for a cost of one hundred dollars ($100) for a subsidy of $454,900. The total subsidy proposed is therefore $36,454,900. 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. The economic development subsidy is equal to up to fifty percent (50%) of the hotel room transient occupancy tax revenue (TOT), and seventy-five (75%) of villa rental transient occupancy tax revenue (TOT) received by the City of Palm Desert from Desert Wave Ventures, LLC. The estimated total economic development subsidy of TOT revenue received by the City for up to twenty (20) years shall not exceed $16.1 million. The bond proceeds available for acquisition of public improvements is $20 million. The land subsidy will be accounted for at the time of close of escrow, and it totals $454,900. 4. A statement of the public purposes for the economic development subsidy. This facility is a first-of-its-kind in the nation. In addition to the impact catalytic developments can have to regional and Citywide economy, many specific local benefits can be described. In addition, hotels provide an important service to cities by providing facilities for tourists and conventioneers to stay, providing direct benefits to the City, its nearby retail establishments, surrounding tourist attractions, and Convention Center activities. These direct benefits include increased revenues from property, sales, parking, business license, utility and hotel taxes and enhanced economic benefits for the supporting food and beverage establishments. A return on cost methodology was used to analyze the feasibility gap of the project, which totaled $36.6 million. As a result, the project development is not economically viable with market support alone. The public benefits received by the development, construction and operation of a hotel at this strategic location outweighs the subsidy being proposed. Additional public benefits that justify the participation of City funds may include:  Increased jobs and economic growth both at DWGR and Citywide  Additional entertainment and leisure activities for the residents and visitors  Growth of tourism and associated spending  For participating residents, increased health benefits of a sports facility  Impact fees and other associated fees to support City services 5. The projected tax revenue to the local agency as a result of the economic development subsidy. Based on current projections, the cumulative total of local TOT generated from Dsrt Surf during the twenty (20) year period of the Agreement is estimated to be approximately $41.8 million. It is proposed that $16.1 million would be rebated to the developer as TOT is available. At such time as the rebate has been paid or twenty (20) years (from first year of occupancy and commercial operation) has expired the City would enjoy 100 percent (100%) of the TOT revenue. The City’s other tax revenues and positive economic impacts on the surrounding supportive services are additional collateral economic benefits to be realized from the project. Sales tax revenue is estimated to be $2,429,000 over twenty (20) years. Property tax revenue is estimated to be $1,093,700 over twenty (20) years. 6. The estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions. The City of Palm Desert experiences seasonal adjustments to its job numbers. By supporting the Dsrt Surf project which will operate year round, the City may experience increased employment. Estimates of the number of full, part time and construction jobs is noted below:  The surfing component should employ an average of 200 full and part time employees across the lagoon, surf center, and food & beverage operations.  The hotel should employ an average of 97 to 262 employees.  It is estimated that 300 full and part time construction jobs will be created over the construction period  The total average across the hotel and the surfing averages 297 to 462 full and part time employees at the project over the course of a full year.