Chapter 5.26 — HOTEL OPERATIONS INCENTIVE PROGRAM

The purpose of this chapter is to provide an incentive program for the operation and maintenance of quality and first class hotel facilities which enhance the tourist and travel experience for visitors to the city of Palm Springs, maximize the use of the city's 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 program, the city council finds:

• (a) The general welfare and material well being 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 quality hotels and first class 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 city's 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 quality and first class hotels is of paramount importance to the city of Palm Springs, its residents, and businesses.

• (Ord. 1730 § 2, 2008)

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

"Adjusted tax rate" means the hotel operations incentive program tax rates which shall be exclusively utilized for the calculation of the operating assistance to be paid by the city to qualified operators of hotels participating in the hotel performance incentive program. For hotels of 124 rooms or less, the adjusted tax rate shall be 10.9 percent of the rent charged by the operator of the hotel for transient occupancies. For hotels of 125 rooms or more, the adjusted tax rate shall be 12.1 percent of the rent charged by the operator of the hotel for transient occupancies. The adjusted tax rate set forth in this section shall exclusively apply for the calculation of any and all operating assistance for the term of the hotel performance incentive program without regard to any increases at any time in the city of Palm Springs' transient occupancy tax rates.

"Certified renovation investment" means the amount of money that the operator of a renovation hotel plans to invest in the course of a Phase II Renovation Project, and (1) documents to the city's satisfaction, in its Hotel Operations Incentive Program application, all improvements proposed, and subsequently (2) certifies in writing, to the city manager or their designee, upon completion of the project, the actual costs and expenses incurred. If a Phase II Renovation

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City of Palm Springs, CA § 5.26.020

PALM SPRINGS CODE

§ 5.26.020

Project includes hotel rooms, the amount of the investment shall not be less than $5,000.00 per room subject to the project. If the project includes any common area or amenity, or any other area for guest use at the hotel, the amount of the investment shall not be less than the amount, if any, invested in rooms, added to the total number of rooms at the hotel that will exist at the end of the project multiplied by $5,000.00.

"Comfort hotel" means a hotel which provides appropriate standards of physical features and operational services established for hotels by the American Automobile Association, J.D. Power & Associates, Forbes, or Smith's Travel Research Service.

"Committable rooms program" means the Palm Springs convention center's committable rooms program which provides the convention center with a list of hotel properties and a count of hotel rooms available, one year in advance or more, for potential reservation by meeting groups and/ or conventions in the city.

"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, (3) new or upgraded landscaping. Construction may address hotel rooms, common areas, and/or other areas for guest use.

"Existing hotel" means a property that was constructed, occupied, and used as a hotel on or before January 1, 2006.

"First class hotel standard" means standards of physical features and operation which qualify a hotel as a first class hotel and which include operation of the hotel on a 24 hours per day/ seven day a week basis with housekeeping services, food and beverage services, room services, banquet and meeting services, concierge and bellman services, and parking services.

"First class hotel" means a hotel which provides standards of physical features and operational services which meet or exceed the higher rating criteria established for hotels by the American Automobile Association, J.D. Power & Associates, Forbes, or Smith's Travel Research Service.

"Fully entitled" means a hotel that has received and/or been issued all discretionary permits and entitlements from the city required for the construction of a new hotel.

"Hotel" means any property containing four or more guest rooms used by four or more guests for compensation and where the guest rooms are designed and intended as transient occupancy accommodations.

"New hotel," "first class new hotel," and "comfort new hotel" means a hotel or first class hotel or comfort hotel that is or was fully entitled as a hotel after January 1, 2008, but before December 31, 2014 and which is under construction prior to December 31, 2017. The term "new hotel" does not include all, or any portion of, or addition to, an existing hotel.

"Operating covenants" means the covenants described in Section 5.26.050 of this Code.

"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.

"Phase II Renovation Project Transient Occupancy Tax Base Adjustment" means the onetime increase to the Phase II Renovation Project Transient Occupancy Tax Base after the fifth anniversary date of the renovation approval date of the hotel. This increase shall be in an amount equal to three percent, or the annual percentage change in the most recent month's data in the Consumer Price Index, whichever is higher. The Consumer Price Index used in calculating this

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.26.020

§ 5.26.020

adjustment shall be the "Consumer Price Index, Los Angeles-Long Beach-Anaheim, All Items, 1982-84=100 base, All Urban Consumers (CPI-U)."

"Phase II Renovation Project Transient Occupancy Tax Base" means the annual average, during the 36-month period prior to the date when the city deems the Hotel Operations Incentive Program application of a potential renovation hotel to be complete, of transient occupancy tax owed to the city.

"Phase II Renovation Project Transient Occupancy Tax Increment" means the amount of transient occupancy tax that a renovation hotel owes to the city annually, pursuant to Chapter 3.42 of this code, after the renovation approval date, minus the Phase II Renovation Project Transient Occupancy Tax Base as adjusted by the transient occupancy tax base adjustment.

"Phase II Renovation Project" means a hotel improvement project constructed by a renovation hotel commencing no more than 12 months after the city's execution of the operating covenant for that hotel, and completed no later than December 31, 2028. The hotel may suspend all or some of its operations during construction of the project. Collection and payment to the city of transient occupancy tax under Chapter 3.24 of this code for any portion of the hotel that remains open during construction of the project shall continue until the project's completion, without any consideration to the operator pursuant to this chapter. Whether the hotel suspends operations or not, collection and payment to the city of transient occupancy tax under Chapter 3.24 of this code by a Phase II Renovation Project hotel pursuant to this chapter shall commence immediately on the renovation approval date.

"Qualified renovation program" means a property improvement program undertaken by an existing hotel which invests no less than $15,000.00 per room, or invests no less than $1,000,000.00 in ancillary non-hotel room facilities and/or space. The property improvement program shall be comprehensively executed in a single renovation project on the property and be under construction no later than December 31, 2014 and completed no later than December 31, 2015.

"Renovation approval date" is the date of the city's final inspection and approval of improvements constructed pursuant to a Phase II Renovation Project.

"Renovation hotel" means a "hotel" as defined in Palm Springs Zoning Code Section 91.00.00, as the city may amend that section from time to time, which hotel participates in the hotel operations incentive program as a Phase II Renovation Project hotel. Upon the adoption of the ordinance codified in this chapter, "hotel" is defined "any building or portion thereof containing six or more guest rooms used by six or more guests, for compensation (excepting jails and hospitals), where provision for cooking may be made in a limited number of individual suites, and which rooms are designed and intended as temporary or overnight accommodations." In order to qualify and apply for participation in the hotel operations incentive program under this chapter, a renovation hotel must be in operation for a period of five years prior to the date when the city accepts the hotel operations incentive program application of an operator of a proposed renovation hotel as complete. This five-year period may include changes in the ownership and/ or name of the hotel in question and may include lapses in operation. Additionally, the five-year period is not required to be the five years immediately preceding the date when the city accepts the hotel operations incentive program application of an operator of a proposed renovation hotel as complete. However, a renovation hotel shall only be eligible to receive an incentive pursuant to Section 5.26.040(d)(2), if the renovation hotel has been in operation for a total of at least five years within the 15 years immediately preceding the date when the city accepts the hotel operations incentive program application of an operator of a proposed renovation hotel as complete. A renovation hotel that has not been in operation for a total of at least five years in

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City of Palm Springs, CA § 5.26.020

PALM SPRINGS CODE

§ 5.26.030

the 15 years immediately preceding the date when the city accepts the hotel operations incentive program application of an operator of a proposed renovation hotel as complete shall only be eligible to receive an incentive pursuant to Section 5.26.040(d)(3). No property that operates as a homeshare or vacation rental pursuant to Chapter 5.25 of this code may also operate as a renovation hotel or receive any payment under this chapter.

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

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

(Ord. 1730 § 2, 2008; Ord. 1742 § 1, 2008; Ord. 1772 § 1, 2010; Ord. 1821 § 1, 2013; Ord. 1972 § 1, 2019; Ord. 2087, 9/14/2023)

• (a) To qualify for the hotel operations incentive program for new first class hotels, the operator shall:

  • (1) Complete and submit to the City Manager, the City's application for the hotel operations incentive program;

  • (2) Subscribe to the Palm Springs convention center's committable rooms program;

  • (3) Provide independent, third-party, certification acceptable to the City of the level of quality of the new hotel as a first class hotel as defined in Section 5.26.020;

  • (4) Participate in the City's convention center hotel shuttle service on a proportional basis equal to the number of total hotel, or condo-hotel rooms in the first class new hotel;

  • (5) Execute the operating covenants which shall include provisions regarding continuing use, maintenance, non-discrimination, and such other provisions as the city council in its sole discretion, may reasonably determine are necessary or appropriate to preserve the goals and intent of this chapter.

• (b) To qualify for the hotel operations incentive program for new comfort hotels, the operator of each new comfort hotel shall:

  • (1) Complete and submit to the City Manager, the City's application for participation in the hotel operations incentive program;

  • (2) If requested by the City, subscribe to the Palm Springs convention center's committable rooms program;

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.26.030

§ 5.26.040

• (3) Execute the operating covenants which shall include provisions regarding continuing use, maintenance, non-discrimination, and such other provisions as the city council in its sole discretion, may reasonably determine are necessary or appropriate to preserve the goals and intent of this chapter.

• (c) To qualify for the hotel operations incentive program for existing hotels, the operator of each existing hotel shall:

  • (1) Complete and submit to the City Manager, the City's application for participation in the hotel operations incentive program, including documentation satisfactory to the City certifying the renovation project for an existing hotel as a qualified renovation program;

  • (2) If requested by the City, subscribe to the Palm Springs Convention Center's committable rooms program;

  • (3) Execute the operating covenants which shall include provisions regarding continuing use, maintenance, non-discrimination, and such other provisions as the city council in its sole discretion, may reasonably determine are necessary or appropriate to preserve the goals and intent of this chapter.

• (d) To qualify for the Hotel Operations Incentive Program and undertake a Phase II Renovation Project, the operator of a Renovation Hotel shall:

  • (1) Complete and submit to the City Manager, the City's application for participation in the Hotel Operations Incentive Program as a Phase II Renovation Project hotel, including documentation, satisfactory to the City, of

    • a. of the applicant's projected Certified Renovation Investment,

• b. that the hotel in question meeting the requirements of a Renovation Hotel, and

  • c. the hotel improvement project in question qualifying as, and meeting the requirements of a Phase II Renovation Project; and the
  • (2) If requested by the City, subscribe to the Palm Springs Convention Center's "committable rooms" program;

• (3) Execute an operating covenant that includes provisions regarding continuing use, maintenance, good faith, non-discrimination, and such other provisions as the city council, in its sole discretion, may reasonably determine to be necessary or appropriate in order to advance the goals and intent of this Chapter.

• (Ord. 1730 § 2, 2008; Ord. 1742 § 2, 2008; Ord. 1772 § 2, 2010; Ord. 1821 § 2, 2013; Ord. 1972 § 2, 2019)

• (a) First Class New Hotels. The city shall pay to an operator of a first class new hotel an amount equal to 75 percent of the adjusted tax rate. Such payments shall be made for 30 years or until the operator has been paid $50,000,000.00, whichever event occurs first.

The city and a qualified participant under this section may enter into an agreement, at the sole discretion of the city, to receive an increase in the percent of the adjusted tax rate, for

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City of Palm Springs, CA § 5.26.040

PALM SPRINGS CODE

§ 5.26.040

no longer than the first two years of the qualified participant's incentive program.

Without regard to any preceding conditions of this section, the program shall terminate at any point the first class new hotel is not operated as a first class hotel.

• (b) Comfort New Hotels. The city shall pay to an operator of a comfort hotel with 125 or more rooms an amount equal to 50 percent of the adjusted tax rate and such payments shall be made for 20 years or until the operator has received $25,000,000.00, whichever event occurs first. The city shall pay to an operator of a comfort hotel with 51 to 124 rooms an amount equal to 50 percent of the adjusted tax rate and such payments shall be made for 10 years or until the operator has received $20,000,000.00, whichever event occurs first. The city shall pay to an operator of a comfort hotel with 49 or fewer rooms an amount equal to 50 percent of the adjusted tax rate and such payments shall be made for 10 years or until the operator has received $15,000,000.00, whichever event occurs first. Without regard to any preceding conditions of this section, the program shall terminate at any point the deluxe hotel is not operated as a comfort hotel.

• (c) Existing Hotels. The city shall pay to an operator of an existing hotel an amount equal to 50 percent 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 10 years, or until the operator has received $25,000,000.00, whichever event occurs first.

• (d) Phase II Renovation Project Hotels. Operators shall only receive an incentive pursuant to this chapter in accordance with this subsection.

  • (1) On a hotel's renovation approval date, the city shall inspect that hotel, and verify that the operator has implemented all Phase II Renovation Project improvements, and that the improvements remain onsite. Further, on or before a hotel's renovation approval date, the operator of that hotel shall submit to the city such documentation as the city may require, and thereby certify and demonstrate the expenditure of that operator's certified renovation investment. Any unexpended portion of the certified renovation investment shall be subtracted from the certified renovation investment as that sum pertains to an operator's recoupment of same in accordance with Subsection (d)(2) of this section.

  • (2) For a Phase II Renovation Project hotel with 36 complete months of transient occupancy tax payments in the past three years prior to the date when the city deems the hotel operations incentive program application of a potential renovation hotel to be complete and that has been in operation for at least a total of five years within the 15 years immediately preceding the date when the city accepts the hotel operations incentive program application of an operator of a proposed renovation hotel as complete, the city shall on an annual basis, return, reimburse and pay to the operator of a Phase II Renovation Project hotel an amount equal to 50 percent of the Phase II Renovation Project Transient Occupancy Tax Increment collected and remitted to the city. Renovation hotels that are Class 1 Historic Sites as defined in Palm Springs Municipal Code Chapter 8.05, shall receive an amount equal to 75 percent of the Phase II Renovation Project Transient Occupancy Tax Increment. The city shall continue making such payments until the 10-year anniversary of the first payment hereunder, or until an operator has recouped their certified renovation investment, whichever occurs first. Notwithstanding any other provision in this chapter, city payments to an operator, or the successor of an operator of a Phase II Renovation

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City of Palm Springs, CA § 5.26.040

BUSINESS REGULATIONS

§ 5.26.050

Project hotel under this subsection (d) shall terminate immediately and permanently at the end of any period of 30 days during which the hotel in question is not operated as a hotel, unless the city has consented to a suspension of operations pursuant to an operating covenant.

• (3) For a Phase II Renovation Project hotel with less than 36 complete months of transient occupancy tax payments in the past three years prior to the date when the city deems the hotel operations incentive program application of a potential renovation hotel to be complete or that has not been in operation for a total of at least five years in the 15 years immediately preceding the date when the city accepts the hotel operations incentive program application of an operator of a proposed renovation hotel as complete, the city shall on an annual basis, return, reimburse and pay to the operator of a Phase II Renovation Project hotel an amount equal to 50 percent of the Phase II Renovation Project Transient Occupancy Tax Increment collected and remitted to the city. Renovation hotels that are Class 1 Historic Sites as defined in Palm Springs Municipal Code Chapter 8.05, shall receive an amount equal to 75 percent of the Phase II Renovation Project Transient Occupancy Tax Increment. The city shall continue making such payments until the 10-year anniversary of the first payment hereunder, or until an operator has recouped their certified renovation investment, whichever occurs first. Notwithstanding any other provision in this chapter, city payments to an operator, or the successor of an operator of a Phase II Renovation Project hotel under this subsection (d) of this section shall terminate immediately and permanently at the end of any period of 30 days during which the hotel in question is not operated as a hotel, unless the city has consented to a suspension of operations pursuant to an operating covenant.

• (e) No renovation hotel receiving any amount of Phase II Renovation Project Transient Occupancy Tax Increment or any other consideration pursuant to an operating covenant entered pursuant to this chapter may apply for any additional benefit pursuant to this chapter, based upon a second Phase II Renovation Project or otherwise, until the termination of that renovation hotel's receipt of such consideration or benefit in accordance with subsection (d)(2) of this section.

• (Ord. 1730 § 2, 2008; Ord. 1742 § 3, 2008; Ord. 1772 § 3, 2010; Ord. 1786 § 1, 2011; Ord. 1821 § 3, 2013; Ord. 1972 §§ 3, 4, 2019; Ord. 2087, 9/14/2023)

• (a) Each operator eligible to participate in the City's hotel operations incentive program shall execute an operating covenant negotiated between the City and the operator, approved by the city council, and recorded in the official records of Riverside County.

• (b) Each operating covenant shall state that a Renovation Hotel receiving any portion of Phase II Renovation Project Transient Occupancy Tax Increment or any other benefit under this Chapter shall include the following language, modified only as approved by the City Attorney:

  1. Prevailing Wage. In accordance with California Labor Code section 1781(a)(2), the Participant acknowledges that the City has expressly indicated to the Participant and persons associated with the Participant that laborers employed relative to the construction of the Project must be paid the prevailing per diem wage rate for their labor classification, as determined by the State of California, pursuant to Labor Code

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City of Palm Springs, CA § 5.26.050

PALM SPRINGS CODE

§ 5.26.060

Sections 1720, et seq. and Palm Springs Municipal Code Section 7.06.030(1). The Participant agrees with the City that the Participant shall assume the responsibility and be solely responsible for payment of the prevailing per diem wage rate for their labor classification.

The Participant, on behalf of itself, its successors, and assigns, waives and releases the City from any right of action that may be available to it pursuant to California Labor Code Sections 1726 and 1781. The Participant acknowledges the protections of Civil Code Section 1542 relative to the waiver and release contained in this section _____, which reads as follows:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY."

BY INITIALING BELOW, THE PARTICIPANT KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION

_____.

________________ Participant's Initials

Additionally, in accordance with this section _____, the Participant shall indemnify, defend with counsel acceptable to the City, and hold the City harmless against any claims pursuant to California Labor Code Sections 1726 and 1781 arising from this Covenant or the construction or operation of the Project.

2. General Indemnification. Participant 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 participant's participation in the Hotel Operations Incentive Program pursuant Palm Springs Municipal Code Chapter 5.26.

• (c) In the event that a proposed Renovation Hotel's projected Certified Renovation Investment documented in an application for participation in the Hotel Operations Inventive Program equals $100,000 or more, city council consideration of the operating covenant for that Renovation Hotel shall take place at a public hearing subject to all requirements of California Government Code 53083 applicable to grants of economic development subsidies, as that statute may be amended from time to time.

• (Ord. 1730 § 2, 2008; Ord. 1972 § 5, 2019)

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.

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.26.070

§ 5.26.060

(Ord. 1730 § 2, 2008)

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. 1730 § 2, 2008)

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City of Palm Springs, CA

BUSINESS REGULATIONS

§ 5.27.010

§ 5.27.020