Nevada City Municipal Code Ch. 3.26 Hotel Renovation Incentive Program

The purpose of this chapter is to provide an incentive program for the renovation and expansion of hotel facilities which: (A) enhance the tourist and travel experience for visitors to the City of Nevada City; (B) provide attractive amenities to the public and desirable visitor service facilities and experiences; (C) assist the City in achieving its tourism goals; (D) encourage continued investment in lodging facilities, and (D) increase the transient occupancy tax revenue to the City. In the implementation of this program, the City Council finds:

A. The general welfare and material well-being of the residents of the City depend in substantial measure upon the growth and expansion of the tourism and travel industries in the City.

B. The renovation and expansion of the inventory of hotels in the City will create desirable visitor-serving facilities that will: (1) contribute to the growth and expansion of tourism and travel opportunities in the City; (2) provide employment opportunities for the residents of the City; (3) provide additional transient occupancy tax revenues to the City; and (4) promote and enhance the economy of the City.

C. It is in the best interest of the City to induce and encourage the expanding, renovating and maintaining of hotel facilities that might not otherwise be as successful, thereby creating new sources of revenues for the city's general fund which supports the public services the City provides its residents and visitors.

D. The authority granted and the purposes to be accomplished by this chapter are proper local governmental and public purposes for which public funds can be expended and the renovating, maintaining and expanding of the inventory of hotels is of paramount importance to the City, its residents, and businesses.

(Ord. No. 2016-05, 12-14-2016)

For the purposes of this chapter, the following definitions shall apply:

"Approved hotel" means any existing hotel which has submitted an application and a business plan for participation in the Incentive Program and been approved by the City to participate in the Incentive Program.

"Business Plan" means a written plan submitted to the City documenting at a minimum 1) planned improvements to the hotel property, including the estimated costs of the improvements, and 2) an estimate of revenues and expenditures for the operation of the hotel through the term of the Hotel Renovation Incentive Program. The Business Plan shall compare past revenues with the future estimated revenues as a result of the proposed new expenditures.

"Existing hotel" means any property operating as a hotel containing nine or more guest rooms for compensation and where the guest rooms are: (1) designed and intended as transient occupancy accommodations; and (2) that was issued a final certificate of occupancy on or before December 1, 2016.

"Furniture, Fixtures and Equipment" means movable furniture, fixtures or other equipment that have no permanent connection to the structure of a building or utilities within the Hotel. More specifically, furniture, fixtures and /or equipment would include decorative items, wall coverings, flooring treatment, window treatments, casework, furnishings and accessories, furniture, data communications equipment, voice communications equipment, audio visual communications equipment, electronic surveillance equipment, electronic detection and alarm equipment, commercial equipment, food service equipment, entertainment equipment, athletic and recreational equipment, collection and disposal equipment. Operational supplies include all supplies needed for the operation of the hotel such as stationery, computer equipment and accessories, guestroom TV's and mounts, alarm clocks in rooms, linens, pillows, housekeeping carts and supplies, trash cans, all items for the hotel restaurant and bar, banquet and conference facilities (including china, utensils, glasses, etc.). Furniture, fixtures and equipment, for qualifying cost purposes, include all taxes, freight, warehouse expense, installation fees and purchasing fees.

"Hotel" for the purposes of this Chapter, shall be defined as found in section 17.12.180, except that the Incentive Program shall only apply to properties containing nine or more guest rooms for compensation and where the guest rooms are designed and intended as transient occupancy accommodations and does not include those properties offered as a "bed and breakfast facilities" (as defined in section 17.20.040), "bed and breakfast inns" (as defined in section 17.52.020B), "campground", "guest houses", "homeless housing facilities" and "residential care homes."

"Hotel Renovation Incentive Program or "Incentive Program" means the transient occupancy tax increment rebate program established by this chapter.

"Indemnification agreement" means the agreement between the City and an operator in which the operator agrees to indemnify and defend the City against any claims or lawsuits that are brought against the City (and all liabilities, damages, and costs incurred by the City in connection therewith) as a result of the application of this chapter to a hotel participating in the Incentive Program.

"Operating covenants" means the operating covenants to be recorded against hotel properties for hotels participating in the Incentive Program, which shall include provisions regarding continuing use of the hotel as a hotel, maintenance, and non-discrimination.

"Operator" means the person who runs and operates a hotel, whether in the capacity of owner, developer, lessee, sub-lessee, mortgagee in possession, licensee, franchisee, or any other capacity, or the assignee or designee of such person.

"Shell costs" mean actual and direct third party costs of all materials, labor, and equipment associated with the renovation or expansion of the Hotel as determined by the City Manager, acting in his/her sole and absolute discretion. Items excluded from Shell Costs include, without limitation, Furniture, Fixtures and Equipment costs, architectural and engineering fees, permits and fees, legal costs, accounting costs, taxes, sales or lease commissions, marketing expenses, initial operating capital and other indirect costs, as well as developer or hotel operator overhead.

"Tax sharing agreement" means an agreement between the Operator and the City setting forth the details and obligations of the parties to renovate a Hotel according to the approved Business Plan and receive transient occupancy tax increment as set forth in this Chapter.

"Transient occupancy" means a stay of no more than thirty consecutive calendar days.

"Transient occupancy tax" means the tax established by and paid to the City pursuant to Chapter 3.24 of this code.

"Transient occupancy tax base" means the historical production of transient occupancy tax by an existing hotel calculated as the average transient occupancy tax per year based on the prior three years or prior twelve months, whichever is greater, of reported transient occupancy tax due to the City, then subsequently adjusted on an annual basis based on the San Francisco Area Consumer Price Index — All Urban Consumers published by the U.S. Bureau of Labor Statistics.

"Transient occupancy tax increment" means, on an annual basis, the difference between the transient occupancy tax base and the amount of transient occupancy tax actually received by the City from the approved existing hotel after renovation. It is determined by reference to actual receipts by the City of transient occupancy tax from the improved approved hotel. Under no circumstances shall the City be liable for any reimbursement of transient occupancy tax increment not actually received and permanently retained by the City.

"Transient occupancy tax sharing" means the rebate from the City to the operator of an approved hotel of a portion of that hotel's transient occupancy tax increment, as determined each year for which the tax sharing agreement is valid. The payment of the approved hotel's portion of the transient occupancy tax increment shall be paid to the approved hotel within 30 days after the annual anniversary date of the tax sharing agreement.

"Under construction" means that all necessary discretionary entitlements have been approved by the City, grading and building permits have been issued, inspection approvals by the City of grading and foundations to grade level have been obtained, and vertical construction of hotel rooms has begun.

(Ord. No. 2016-05, 12-14-2016)

A. To participate in the Hotel Renovation Incentive Program, the operator of any existing eligible hotel which plans a renovation to improve the hotel facility must:

1. Complete and submit to the City Manager an application for participation in the Incentive Program on the City's official Incentive Program application form;

2. Submit a Business Plan in writing documenting at a minimum 1) planned improvements to the hotel property, and 2) an estimate of revenues and expenditures for the operation of the hotel through the term of the Hotel Renovation Incentive Program and transient occupancy tax sharing agreement.

3. Allow the City to inspect the existing hotel to determine that the improvements contemplated by the Business Plan, which are the justification for the transient occupancy tax sharing, do not already exist, and, upon demand of the City, provide the City with such evidence of the approved business' intention and ability to proceed to construct the necessary improvements or make the necessary purchases, as are reasonably satisfactory to the City;

4. Receive approval for participation in the Incentive Program from the City Council;

5. Enter into a transient occupancy tax sharing agreement in the form approved by the City which shall include provisions for payment of, and adherence to, prevailing wage requirements, and a commitment to use good faith efforts to hire local residents and contract with local subcontractors, suppliers and other local businesses for property improvements;

6. Execute and record against the hotel property the operating covenants provided in Section 3.26.050;

7. Execute an indemnification agreement in a form approved by the City; and

8. Upon completion of the subject improvements or purchases and before transient occupancy tax sharing commences, to allow the City to inspect the approved business to verify that in fact the contemplated improvements and/or purchases have been made and completed so as to enable the business to increase its occupancy and/or room rate.

B. Required Level of Improvements for Eligibility:

1. Minimum Furniture, Fixture and Equipment Costs of not less than $10,000 per guestroom.

2. In addition to the Furniture, Fixture and Equipment expenditures, Shell/Property Improvements totaling at a minimum, $15,000 per guestroom.

3. Expenses related to hotel expansion projects are eligible expenses provided they are qualifying Shell Costs or Furniture, Fixture and Equipment costs.

C. Major Restorations Entitled to Extended Term of Incentive Program. Where extensive major restoration expenses, exceeding those normally contemplated for expanding, renovating and maintaining hotel facilities, are involved, the term of the Incentive Program provided for in section 3.26.040 shall be extended from 20 to 25 years, with the additional five years added to the initial term in subsection 3.26.040.C providing for a rebate of 85% of the transient occupancy tax increment with subsequent reductions to 65% per subsection D in the sixteenth through twentieth years and to 50% per subsection E in the twenty-first through twenty-fifth years. To qualify for this extended term, the eligibility level of improvements must exceed the minimum levels for eligibility per guestroom set forth in subsection B of this section by a factor of three (3X) or more, totaling in excess of Two Million Five Hundred Thousand Dollars ($2,500,000) in qualifying expenditures for furniture, fixtures, equipment, and shell/property restoration, rehabilitation, renovation improvements and expansion.

(Ord. No. 2016-05, 12-14-2016; Ord. No. 2018-01, § I, 1-24-2018)

A. The City Council is authorized to enter into transient occupancy tax sharing agreements and required recordation of operating covenants with hotel operators who have demonstrated eligibility and satisfied all Incentive Program participation requirements.

B. The term of the Incentive Program shall be for 20 years from the date an eligible hotel has been approved for participation by the City Council and completes renovations.

C. From the first year through the tenth year of the date of Incentive Program participation approval and completed renovations, the hotel operator shall receive an amount of transient occupancy tax increment equal to 85% of the transient occupancy tax increment submitted to the City for the prior year.

D. Starting at the eleventh year and continuing through the fifteenth year of Incentive Program participation, the hotel operator shall receive an amount of transient occupancy tax increment equal to 65% of the transient occupancy tax increment submitted to the City for the prior year.

E. Starting at the sixteenth year and continuing through the twentieth year of Incentive Program participation, the hotel operator shall receive an amount of transient occupancy tax increment equal to 50% of the transient occupancy tax increment submitted to the City for the prior year.

(Ord. No. 2016-05, 12-14-2016)

Each operator of a hotel which enters into a transient occupancy tax sharing agreement with the City shall record against the participating hotel property the following operating covenants, to run with the land:

A. Continuing Use and Operation. During the hotel's participation in the transient occupancy tax sharing Incentive Program, the operator covenants and agrees for itself, its successors, assigns or designees, to continually operate and use the hotel property as a hotel. None of the rooms in the hotel will at any time be utilized as a non-transient residential property or rental periods that exceed 30 days, with the exception of senior living units, which may still qualify for the Incentive Program so long as they meet all other requirements of the Program. No part of the hotel will at any time be owned by a cooperative housing corporation. All uses conducted on the hotel property shall conform to all ordinances, statutes, rules and regulations of the City, the county of Nevada and the state of California.

B. Maintenance. During the hotel's participation in the transient occupancy tax sharing Incentive Program, the operator covenants and agrees for itself, its successors, assigns or designees, to continually maintain and repair or cause to be maintained and repaired, the hotel property, including, but not limited to, buildings, structures, parking areas, lighting, signs, and landscaping, to be in good condition conforming to all applicable laws, including all applicable provisions of the City's Municipal code and to hotel industry standards applicable to that type of hotel, and shall keep the hotel property free from any accumulation of debris or waste materials.

C. Nondiscrimination. During the hotel's participation in the transient occupancy tax sharing Incentive Program, the operator covenants and agrees for itself, its successors, assigns or designees, that the hotel and any of its employees shall not discriminate against any person on the basis of sex, gender, gender identity, gender expression, marital status, domestic partnership status, sexual orientation, race, color, religion, ancestry, national origin, or disability.

(Ord. No. 2016-05, 12-14-2016)

All transient occupancy tax revenues or transient occupancy tax increment remitted to the City by an operator of a hotel which enters into a transient occupancy tax sharing agreement with the city shall be deemed general fund revenues of the City and shall be deposited in the City's general fund.

(Ord. No. 2016-05, 12-14-2016)

The City may terminate the transient occupancy tax sharing agreement on ten days' notice if the operator violates any of the operating covenants, provided that such violation or violations continue to exist at the end of said ten-day period. Specifically, without limiting the generality of the foregoing, a failure to pay to the City, in a timely manner and in the correct amount, the transient occupancy tax which the operator collects shall permit the City to terminate the transient occupancy tax sharing agreement. The City shall give notice to the operator as required by the terms of the transient occupancy tax sharing agreement.

(Ord. No. 2016-05, 12-14-2016)

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.

(Ord. No. 2016-05, 12-14-2016)

Upon any default of City, the Hotel Operator's remedy shall be limited to specific performance and monetary damages shall not be available. A term to that effect shall be included in the tax sharing agreement and/or operating covenants.

(Ord. No. 2016-05, 12-14-2016)

The Hotel Operator shall retain all Hotel financial records, whether audited or unaudited, regarding the Hotel's revenues subject to City's Transient Occupancy Tax during the term of the Tax Sharing Agreement plus five years. The Hotel Operator agrees to make the Hotel's financial records regarding the Hotel's revenues subject to City's Transient Occupancy Tax available to the City within 30 days of a written request for City audit purposes. Once the requested financial records have been supplied and reviewed or audited, the Hotel Operator's obligation to provide those financial records and subsequent retention shall cease.

(Ord. No. 2016-05, 12-14-2016)

This Hotel Renovation Incentive Program shall terminate as to the acceptance of new approvals to the Program from participant Hotels five years after the effective date of the adopting ordinance, unless extended by the City Council.

(Ord. No. 2016-05, 12-14-2016)