City Council
MEETING DATE: 2/11/2015
TITLE:
Title
Amendment No. 2 to the Transient Occupancy Tax Sharing Agreement for the Desert Princess Hotel (Doubletree)
End
FROM:
Leisa Lukes, Economic Development Manager
RECOMMENDATION:
Recommendation
Staff recommends that the City Council approve the Amendment.
Body
BACKGROUND:
T Alliance One Palm Springs, LLC (Owner) acquired the 275-room Desert Princess Hotel (Hotel) in 2013. Prior to this acquisition, the Hotel had had no major renovations or improvements in many years and was a significantly under-performing property. The Owner determined that extensive improvements would be necessary to bring the Hotel up to the standards required to obtain branding by a national hotelier. This would increase the rate of revenue generated for both the Owner and, through transient occupancy taxes (TOT), the City. In March 2013, the City Council approved a Tax Sharing Agreement with the Owner providing for a percentage of the TOT generated by the Hotel to be shared with the Owner on a performance-driven basis to incentivize the investments needed for the hotel transition.
DISCUSSION:
Upon acquisition of the Desert Princess Hotel in 2013, the Owner commenced discussions with Hilton Worldwide and has completed an agreement to designate the Hotel as a Doubletree property pending completion of the required renovations. The renovation plans have been completed, as well as completion of several model rooms in the Hotel. Ongoing negotiations between the Owner, the landowners and Las Estancias Development Co., the master lessor of the property upon which the Hotel is located, are addressing the timing and implementation of the renovations.
The Agreement entered into between the City and the Owner in March 2013 established that 50 percent of new TOT above a base year amount is to be shared with the Owner for 17 years. Commencement is to begin upon Hotel Opening (i.e., Doubletree) and other prerequisites as established by the Agreement. This performance-based tax incentive acknowledges the significant and necessary investments to be made in the property by the Owner and the increase in City tax revenue that would otherwise not be generated without the improvements. The Agreement anticipated a Hotel Opening on or before October 2014.
Amendment No. 1 to the Agreement approved by the City Manager in June 2014 provided for a six-month deadline extension of the Hotel Opening date to allow for the Owner's ongoing negotiations necessary for commencement of the improvements. The extension(s) proposed by Amendment No. 2, potentially extends the time deadline to April 2017 and should accommodate the adjusted timeframe for completion of the rehabilitation project.
The Agreement established a Base Amount determined by the average annual amount of TOT receipts received by the City from the Hotel during the three full calendar years prior to the Owner's acquisition of the Hotel in 2013. TOT collected above the Base Amount, established as $352,705 (Agreement Section 4b, Exhibit "B"), is the amount to be shared. Amendment No. 2 would amend Exhibit "B" confirming that the Base Amount is set at $352,705 for the term of the TOT Sharing Period as determined by the Hotel acquisition date and consistent with Section 4b.
FISCAL IMPACT:
None with this action.
ATTACHMENTS:
TOT Sharing Agreement (Doubletree), Amendment No. 2