Chapter 5.27 — HOTEL OPERATIONS INCENTIVE PROGRAM

The purpose of this chapter is to provide an incentive program for the operation and maintenance of hotel facilities which enhance the tourist and travel experience for visitors to the city of Palm Springs, maximize the use of the Convention Center, provide attractive and desirable visitor serving facilities and experiences, and assist the city in achieving its tourism goals. In the implementation of this hotel operations incentive program, the city council finds:

• a. The general welfare and material wellbeing of the residents of the city of Palm Springs 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 hotels in the city of Palm Springs will create desirable visitor serving facilities that will contribute to the growth and expansion of tourism and travel opportunities in the city, ensure utilization of the Convention Center, 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 Springs 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 hotels is of paramount importance to the city of Palm Springs, its residents, and businesses.

• (Ord. 2126, 2/25/2026)

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

"Actual documented investment" or "ADI" means the total verifiable amount spent by the operator on a project developed pursuant to this chapter. ADI includes actual construction costs; furniture, fixtures, and equipment; and soft goods (e.g., bedding, towels, etc.). ADI does not includes professional services costs.

"Construction" means the process of making, building, fabricating, installing, and setting up tangible physical enhancements to a hotel that include, without limitation, one or more of the following: (1) modification of an existing structure or amenity; (2) new or upgraded furniture, fixtures or equipment; and/or (3) new or upgraded landscaping. Construction may address hotel rooms, common areas, and/or other areas for guest use.

"Convention Center hotel" means a hotel with 125 rooms or more, including on-site restaurant and bar, and at least a Tier 1 level investment.

"Convention Center" means, collectively, the Palm Springs Convention Center located at 277 N. Avenida Caballeros, the Jackie Lee Houston Plaza located at the southwest corner of Amado Road and Calle Alvarado, and the East Lot (also known as the 8.86 acre parcel located at the

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.27.020

§ 5.27.030

northwest corner of Avenida Caballeros and Amado Road).

"Entitlements" means all discretionary permits and approvals from the city required for the development of a project.

"Hotel" means any property containing guest rooms designed, intended, and used as transient occupancy accommodations in exchange for compensation, excluding short-term rental properties.

"Operator" means the person who is proprietor of a hotel, whether in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee, franchisee, or any other capacity, or the assignee or designee of such proprietor.

"Transient occupancy tax base" means the average of the last 36 months of annualized transient occupancy tax owed to the city by an existing hotel prior to the commencement of a qualified renovation program.

"Transient occupancy tax increment" means the difference between the transient occupancy tax base and the amount of transient occupancy tax owed to the city by an existing hotel after the recordation of the operating covenants by the city.

"Transient occupancy tax" or "TOT" means the tax described in Chapter 3.24 of this code.

"Transient occupancy" means an uninterrupted stay of no more than 28 consecutive calendar days.

(Ord. 2126, 2/25/2026)

• a. To apply for an incentive package pursuant to this chapter, the operator of a hotel shall complete and submit to the city manager, the city's application for participation in the hotel operations incentive program prior to receiving entitlements for the proposed project.

• b. The application must:

  • (1) Provide a general description of the project, the project location, projected tax revenue generation, estimated timeline and costs for project;

  • (2) Specify the investment level in Section 5.27.040 that qualifies the project for a specific tier of the hotel operations incentive program; and

  • (3) Include any other information as required by the city.

• c. Upon receipt of a completed application, city manager or his/her designee will review the application and request that city staff perform a fiscal analysis of the proposal and requested incentive tier.

• d. Following the completion of the fiscal analysis, the city will negotiate with the operator and develop a proposed incentive package which will be incorporated into a draft incentive package agreement for city manager or city council consideration and approval, along with the project's entitlements.

  • (1) The city manager or his/her designee shall have discretionary approval over incentive packages awarded as part of the hotel operations incentive program valued at less than $100,000.

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City of Palm Springs, CA § 5.27.030

PALM SPRINGS CODE

§ 5.27.040

• (2) The city shall process incentive packages awarded as part of the hotel operations incentive program valued at, or greater than, $100,000, pursuant to all requirements of California Government Code Section 53083 applicable to grants of economic development subsidies, and shall submit the incentive package agreement to city council for approval.

• e. Applications for the hotel operations incentive program shall be denied if the proposed project has already received entitlements from the city.

• f. The city shall not award an incentive package that is greater than the amount equal to ADI.

• g. The operator must operate at least 90% of the subject property as a hotel, and make a minimum investment of $100,000 per room of the subject hotel, to be eligible for an incentive package pursuant to this chapter.

• h. Funding for the hotel operations incentive program, and the award of any incentive packages, is at sole discretion of the city and contingent on available TOT funds.

• (Ord. 2126, 2/25/2026)

The amount of the incentive package that the city can award to an operator for their project is categorized into the following tiers based on the specified factors. The term of an incentive package agreement awarded based on any of the following tiers shall commence on the date of the issuance of the certificate of occupancy.

• a. Base Tier. An operator investing a minimum of $10,000 per room is eligible to receive an amount equal to 50% of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code and such payments shall be made for a total of 10 years, or until the operator has received an amount equal to ADI, whichever event occurs first.

• b. Tier 1. An operator investing a minimum of $100,000 per room is eligible to receive an amount equal to 90% of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code for five years, thereafter decreasing to 55%, and such payments shall be made for a total of 15 years, or until the operator has received an amount equal to ADI, whichever event occurs first.

• c. Tier 2. An operator investing a minimum of $225,000 per room is eligible to receive an amount equal to 90% of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code for five years, thereafter decreasing to 60%, and such payments shall be made for a total of 20 years, or until the operator has received an amount equal to ADI, whichever event occurs first.

• d. Tier 3. An operator investing a minimum of $350,000 per room is eligible to receive an amount equal to 90% of the transient occupancy tax increment collected and remitted to the city pursuant to Chapter 3.24 of this code for five years, thereafter decreasing to 65%, and such payments shall be made for a total of 25 years, or until the operator has received an amount equal to ADI, whichever event occurs first.

• e. Tier 4. An operator investing a minimum of $600,000 per room is eligible to receive an amount equal to 90% of the transient occupancy tax increment collected and remitted to the

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.27.040

§ 5.27.050

city pursuant to Chapter 3.24 of this code for five years, thereafter decreasing to 75%, and such payments shall be made for a total of 30 years, or until the operator has received an amount equal to ADI, whichever event occurs first.

• f. Projects awarded an incentive package pursuant to this chapter may be eligible for bonus incentives if the below criteria are met. An operator may only elect to receive one of the following bonuses to their incentive package. However, in no case shall an amount exceed 75% benefit to the operator.

  • (1) Hotels that are Class 1 or Class 2 Historic Resources as defined in Palm Springs Municipal Code Chapter 8.05 shall be eligible to receive an additional 5% of the transient occupancy tax increment collected and remitted to the city beginning in the sixth year of the incentive package agreement.

• (2) Convention Center Hotels shall be eligible to receive an additional 10% of the transient occupancy tax increment collected and remitted to the city beginning in the sixth year of the incentive package agreement.

• (Ord. 2126, 2/25/2026; Ord. 2128, 4/8/2026)

• a. In order to receive distributions from an incentive package awarded pursuant to this chapter, the operator shall:

  • (1) Obtain a building permit for the project within 16 months following the date that the city council or city manager approved the incentive package agreement;

  • (2) Obtain a certificate of occupancy for the project within 30 months following obtaining a building permit for the project;

  • (3) Provide the city with copies of permits and business licenses of contractor for construction of the project;

  • (4) Demonstrate to the city the costs incurred using original receipts, invoices, construction drawings and/or other form of customarily recognized cost documentation;

  • (5) Maintain an active, operating city business license;

  • (6) Remain current with all TOT payments, and other city fees and obligations, before, during, and after the term of the incentive program agreement; and

  • (7) Provide any and all forms, documents, and records as may be reasonably requested by the city.

• b. At least 80% of distributions received from an incentive package must be used towards costs associated with construction and furniture, fixtures, and equipment. No more than 20% of distributions received from an incentive package may be used towards costs associated with soft goods.

• c. The city reserves the right to withhold any distribution from an incentive package should operator violate any of the terms of this chapter. Except as set forth in Section 5.27.050d, operator shall have the right to cure any violations of this chapter within 30 days of

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City of Palm Springs, CA § 5.27.050

PALM SPRINGS CODE

§ 5.27.060

receiving a notice of such violation from the city.

• d. Failure to Remain Current with TOT Payments.

  • (1) Should an operator fail to remain current with all TOT payments, pursuant to Section 5.27.050a(6), the city shall issue a written notice to the operator, providing 30 days to become current with all TOT payments.

  • (2) If 30 days passes from the date of receipt of the first notice and the operator is still not current with all TOT payments, the city shall be entitled to terminate the incentive package agreement and the operator shall thereafter not be entitled to any further distributions from its incentive package.

• (Ord. 2126, 2/25/2026; Ord. 2128, 4/8/2026)

• a. Each operator participating in the city's hotel operations incentive program shall execute an operating covenant agreement negotiated between the city and the operator, and recorded in the official records of Riverside County upon the issuance of the certificate of occupancy, against the property where the project receiving the incentive package is being developed.

• b. No incentives, rebates, or credits authorized by this code shall be distributed for a project until the operating covenant agreement is approved and recorded against the property.

• c. The term of the operating covenant agreement will run from the recording of the operating covenant agreement to the end of the specified term of the incentive package agreement or until the operator has received an amount equal to ADI, whichever event occurs first.

• d. Each operating covenant agreement shall include:

  • (1) A requirement that the hotel operate as a hotel open to the public with rooms designed and intended as temporary or overnight accommodations.

  • (2) A requirement that the hotel maintain the applicable qualifying criteria that its particular incentive was contingent on.

  • (3) A requirement that laborers employed relative to the construction of the project be paid the prevailing per diem wage rate for their labor classification, as determined by the state of California, pursuant to Labor Code Section 1720, et seq., and Palm Springs Municipal Code Section 7.06.030(1), if the total contribution of the city exceeds $600,000 and 2% of total project cost.

  • (4) A general indemnification whereby the operator agrees, for itself and for its successors and assigns, to indemnify, defend with counsel acceptable to the city, and hold the city, together with its officers, members, officials, employees, agents, volunteers, and representatives, harmless from and against any loss, liability, claim, or judgment arising from or related to the operator's participation in the hotel operations incentive program pursuant to this chapter.

  • (5) Provide the city, for public use, with a minimum of two room nights per month from Monday to Thursday for official city use, subject to availability.

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.27.060

§ 5.27.090

• e. The city council, in its sole discretion, may include other conditions in an operating covenant agreement to preserve the goals and intent of this chapter.

• (Ord. 2126, 2/25/2026)

Notwithstanding the provisions of Sections 3.24.030, 3.24.035, and 3.24.310 of this code, all transient occupancy tax revenues or transient occupancy tax increment 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. (Ord. 2126, 2/25/2026)

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. 2126, 2/25/2026)

The hotel operations incentive program set forth in this chapter shall cease accepting applications on December 31, 2030.

(Ord. 2126, 2/25/2026)

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.28.010

§ 5.28.010