HomeMy WebLinkAbout9/4/2013 - STAFF REPORTS - 4.B. �O'?ALM S,6
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cq�rFOAN�P CITY COUNCIL STAFF REPORT
DATE: SEPTEMBER 4, 2013 UNFINISHED BUSINESS
SUBJECT: APPROVE $1,000,000 FUNDING FOR THE "SPECIAL ECONOMIC
DEVELOPMENT FOCUS INCENTIVE PROGRAM AREAS" AND
AUTHORIZE RELATED BUDGET AMENDMENTS.
FROM: David H. Ready, City Manager
Economic Development Department
BY: Community & cono p p
SUMMARY
On July 3, 2013, the City Council approved the creation of two Special Economic
Development Focus Incentive Areas general located along the major corridors south of
Ramon Road and north of Tachevah Road, along the entryways into the Downtown and
Uptown areas. Since July 3, the City has received a number of inquiries and pre-
applications for funding pursuant to the general guidelines approved by Council.
RECOMMENDATION:
1. Adopt Resolution No. , "A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR
FISCAL YEAR 2013-14 TO PROVIDE $1,000,000 IN FUNDING FOR THE
CITY'S "SPECIAL ECONOMIC DEVELOPMENT FOCUS INCENTIVE
PROGRAM AREAS."
2. Authorize the City Manager to execute all documents related to the Budget
Resolution and the Incentive Agreements.
BACKGROUND AND ANALYSIS:
On July 3, 2013 the City Council approved the creation of two Special Economic
Development Focus Incentive Areas general located along the major corridors south of
Ramon Road and north of Tachevah Road, along the entryways into the Downtown and
Uptown areas.
General descriptions of the two new areas are: South Palm Canyon Drive (and Indian
Canyon Drive) between Ramon Road and Sunrise Way, including the short block of
East Sunny Dunes and Industrial Place near Palm Canyon; and, North Palm Canyon
Drive (and Indian Canyon Drive) between Via Lola/Tachevah and Tramway Road (along
ITEM NO.
City Council Staff Report
September 4, 2013 -- Page 2
Special Economic Development Focus Incentive Areas
Palm Canyon) and Tramview Road (along Indian), including the 12 acre commercial
area adjacent to the Visitor Center.
Structure of the Incentive Area
Two of the simplest recommendations were to reinstate the Facade Improvement
Program and the Retail-Commercial Interior Remodel Programs for these areas, with
the additional advantage of being able to receive both an Interior Remodel grant and a
Facade Improvement Grant. Already there have been a number of applications for
these programs.
However, a single incentive program would not be applicable to every potential project
in the area. Another challenge was how to create an incentive for catalyst vacant
projects by layering several different incentives to systematically provide a threshold
that provides the necessary assistance. The Council considered four types of
investments:
• Assisting stalled, vacant land projects
• Renovating and repositioning major vacancies as catalyst projects
• Creative uses of the Hotel Incentive Program for small, dilapidated hotels
• Extending Facade Improvement/Interior remodel programs for the area
To assist projects like these, there are a number of tools that would be available to the
City, in addition to the City's direct cash resources. These include:
• Direct Public Works investment (streets, sidewalks, etc.)
• Direct assistance to private developers
• More aggressive code enforcement within the area
• Leveraging other agencies' public investment (water, Caltrans, etc.)
• Leveraging other public and/or private outside dollars (tax credits, grants)
Vacant Land Projects and Catalyst Vacant Buildings
Since the July 3 meeting, there have been a number of inquiries and requests for
assistance from business owners looking to lease or improve property in the two areas.
These include some major vacancies that were described in July as well as a number of
smaller vacancies. In addition, some businesses have changed hands and new owners
are looking to upgrade the experience. Examples of the inquiries from some of these
vacancies and upgrading businesses in the two areas are:
New North End Catalyst Vacant Building Projects
• Northgate Center
• Dash and a Handful Catering
02
City Council Staff Report
September 4, 2013 -- Page 3
Special Economic Development Focus Incentive Areas
• Cowboy Way Barbecue
• Garden Vista Hotel
• The D Hotel
• Whiskey/Sushi Restaurant
• Coffee/Tiki bar
• Pizza Hut
• Restaurants/Gourmet Market in 1300/1400 Block of NPC
• City Owned Parcels at Palm Canyon and Stevens
• Palm Grove Inn
• The Monroe (formerly America's Best Value)
• The Skylark
• Former Ballard's Western Wear at Indian/Garnet
South End Vacant Land Projects and Catalyst Vacant Buildings
• Cameron Center (commercial portion)
• Former Alan Ladd Building ("The 500")
• Roscoe's
• The Travelodge
• Cedar Creek Inn
• Former Brushfire Grill (New York Restaurant)
• Former Davey's Hideaway space
• Restaurant Behind Koffi on Camino Real
• The Sparrows Hotel
FISCAL IMPACT:
The Fiscal Impact for this program would vary by the size and scope of the projects that
apply as outlined in the attached "Program Guidelines and Application Packet." Section
4 of the Guidelines (pages 24-27) describes the programs and their dollar limits.
Council previously discussed funding the project amount at $1,000,000 for the initial
program launch. Staff recommends this amount be split between two funds (Measure J
Fund and General Fund) at $500,000 each.
kohn S ay nd, Director of David H. Ready, City Manager
o unity conomic Development
Attachments:
Budget Resolution(s)
Program Guidelines and Application Packet
03
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, AMENDING THE BUDGET
FOR FISCAL YEAR 2013-14.
WHEREAS, Resolution No. 23341 approving the Budget for the Fiscal Year
2013-2014 was adopted on May 15, 2013; and
WHEREAS the City Manager has recommended, and the City Council desires to
approve, certain amendments to said budget.
NOW THEREFORE THE CITY COUNCIL DETERMINES, RESOLVES AND
APPROVES AS FOLLOWS: that the Director of Finance is authorized to record inter-
fund cash transfers as required in accordance with this Resolution, and Resolution No.
23341, adopting the Budget for Fiscal Year 2013-14 is hereby amended as follows:
SECTION 1. ADDITIONS
Fund Activity Account Amount
001 1400 59422 $500,000
General Fund Comm & Economic Economic
Development Development
Incentive Focus
260 4500 59422 $500,000
Measure J Fund Measure J Capital Economic
Development
Incentive Focus
Purpose: Establish funding for Special Economic Development Focus Incentive
Program.
SECTION 2. SOURCE
Fund Activity Account Amount
001 29301 $500,000
General Fund Fund Balance
260 29301 $500,000
Measure J Fund Fund Balance
04
Resolution No.
Page 2
ADOPTED THIS 4TH DAY OF SEPTEMBER, 2013.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
05
SPECIAL ECONOMIC
DEVELOPMENT FOCUS
AREAS INCENTIVE
PROGRAM
Guidelines and
Application Packet
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Section 1 .
Background and Legal Guidelines
I. Background
The Special Economic Development Focus Incentive Program Areas establishes a variety of
goals for economic development of each constituent Project Area. These goals frame the near
term economic development objectives for the plan period.
The corridors entering the Downtown and Uptown area of Palm Springs, both from the north
and from the south, have historically lagged the progress made in the city's core. Over the past
30 years, the City and former Redevelopment Agency have tried to incentivize development in
the area through the creation of redevelopment project areas (Project Area 9-A and North Palm
Canyon in the north end, and South Palm Canyon and Project Area 9-E in the south end), but
the overall vitality of the community was at a level that these were likely to see significant
development activity only after the downtown core "filled up."
The general descriptions of the two new areas are: South Palm Canyon Drive (and Indian
Canyon Drive) between Ramon Road and Sunrise Way; and North Palm Canyon Drive (and
Indian Canyon Drive) between Via Lola/Tachevah and Tramway Road (along Palm Canyon)
and San Rafael Road (along Indian).
These areas were former Project Areas of the former Community Redevelopment Agency, and
under Redevelopment Law the Agency (or "RDA") would have been able to undertake a number
of the projects and programs described herein. However, all redevelopment agencies in
California were dissolved under State Law in the 2011-2012 year. On June 27, 2011, the State
of California passed AB 1X 26, which dissolves all of the redevelopment agencies in the State of
California and became effective October 1, 2011. As part of the law, the Agency was prohibited
from entering new contracts after June 27, 2011.
Part of the law contained an 'opt-in" provision, however, which would have allowed agencies to
continue operating in return for a sizable payment to the State. The Agency intended to 'opt in"
under AB 1X 27. However, in August, 2011, the California Redevelopment Association and the
League of California Cities, however, sued the State over the two laws on constitutional
grounds. No action could be taken by the Agency while the lawsuit was pending.
On December 29, 2011, the California Supreme Court upheld AB 1X 26, eliminating
redevelopment agencies, and overturned AB 1X 27, the opt-in payment.
On January 4, 2012, the City Council approved a resolution authorizing the City to become the
Successor Agency and the Housing Successor Agency.
Actions of the Successor Agency under the review of an Oversight Board, which was created
pursuant to Cal. Health and Safety Code §34179. However, actions of the City, acting under its
own Charter and statutory authority, are not subject to Oversight Board review
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The lesser economic vitality of these areas, particularly compared to the downtown and uptown
areas, has prompted the City to look at developing mechanisms to spur development in these
key gateway areas.
On the north end, the lack of population density has made traditional retailing along Palm
Canyon Drive a marginal endeavor. There is almost no non-restaurant `retail' on that stretch,
with the exception of a few galleries and a plant nursery. The significant growth in the area has
been in housing, particularly in the two communities of Mountain Gate, but the speed and lack
of pedestrian amenities along Palm Canyon and Indian have made even restaurant and club
businesses struggle. The number of new housing units has ameliorated some of the population
density issue, but the Highway 111/Caltrans issue persists on the stretch down to Vista Chino.
A map of the northern portion of the focus area is shown in Map 1 below:
Map 1
Special Economic Development Focus Incentive Program Areas
Northern Section
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The south end also faces issues with the former Highway 111 and the broad East Palm Canyon
curve. Street lighting and pedestrian safety are major issues in the area, with two recent traffic
fatalities in the same stretch of South Palm Canyon. And, among its other circulation-related
benefits, Belardo Bridge was supposed to help to be a catalyst for new development, but it also
presented the risk of serving as a "bypass" diverting valuable traffic for Palm Canyon Drive and
making commercial development less viable. There is slightly more retail in the area, but not
much.
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A map of the southern portion of the focus area is shown in Map 2 below:
Map 2
Special Economic Development Focus Incentive Program Areas
Southern Section
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The unique combination of general local economic health but particular location-driven
challenges in the gateway areas suggests the creation of a multi-year incentive program.
II. Project Area Goals
For the purposes of the Program description, the goals for the two project areas are
consolidated and summarized below.
JU Create a Stronger Local Economy. Strengthen the economic base of the Project
Areas and the community at large by installing needed site improvements and
stimulating new commercial expansion, employment and economic growth. Establish
€xvear financial mechanisms to assist and encourage commercial development
opportunities.
Improve Public Infrastructure and Services. Provide necessary public
improvements, including but not limited to flood control facilities, street
�ccau improvements, parking supply, and traffic circulation. Develop emergency, cultural,
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recreational, maintenance, operational, and other services and facilities.
Use Land Wisely. Assemble land into parcels suitable for integrated development
00 with improved pedestrian and vehicular circulation in the Project Areas. Guide and
secure the availability of property to attract major investors and developers. Guide
GROW replanning, redesign, and development of undeveloped areas which are stagnant or
improperly utilized.
Eliminate Blight. Eliminate deteriorating buildings, incompatible and uneconomic
land uses, and other environmental, economic and social deficiencies; improve the
overall appearance of buildings, streets, parking areas, schools and other facilities,
CLEAN
and assure that all buildings are safe for people and businesses to occupy.
Protect and Enhance Community Character. Preserve artistically, architecturally,
and historically worthwhile structures and sites and upgrade urban design standards
PRESERVE to provide unity and to encourage community identity.
All economic development activities are pursued with the intention to seek communitywide
benefits that create a more cohesive and unified community by strengthening the physical,
social, and economic ties between various land uses. The City encourages community and
property owner involvement and citizen participation in the adoption of policies, programs, and
projects so as to ensure that the Economic Development Plans are implemented in accordance
with the objectives and goals of the General Plan. As necessary, the City encourages the
coordination, cooperation, and assistance of other local agencies to ensure that projects are
implemented to their fullest and most practical extent.
In terms of metrics, the City would evaluate the resources expended on an annual basis against
several measures, including:
• Increased tax revenue (Sales, Property, TOT)
• Decreased vacancies, particularly long-term vacancies
• Total new business investment
• Total other public/private sources of funding (e.g. tax credits, grants)
• Total new public works investment
The goal would be that the Program "pay for itself' over time, i.e., that the amount committed by
the City to spur new development in the two areas be matched by increased City revenue from
all sources, with the new tax revenue in excess of any annual allocation of funds from the City.
The natural mechanism available to former redevelopment agencies, the establishment of a
"frozen base" of property tax, is not available to the City at this time, but the City will develop a
geographic baseline of total tax revenue from the areas in order to track economic progress.
Another measure of economic vitality would be the rate of new business creation in the area, as
measured by business license data. The City has already established a baseline of data for
business licenses in the downtown, which has a normal aging curve. The experience in areas
outside downtown is that the aging curve of business licenses is relatively flat, pointing to a low
rate of new business creation in the area and a low rate of economic vitality.
Another measurable aspect of the two areas would be the rate of code enforcement complaints,
whether they are active files or complaints themselves. The closure rate for complaints,
particularly through properties changing hands and undergoing renovation, is also key.
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Finally, the amount and profile of investment in the area will be tracked. Most of the properties
there are small enough to be manageable by a small firm or group, and significant investments
by groups that have the potential to and interest in leveraging their investments into wider area-
wide efforts will also be noted.
III. Project Area Principles and Objectives
1. Coordinate Future Development. The replanning, redesign, and development of
undeveloped areas, which are stagnant or improperly utilized.
2. Assure Commercial Vitality. The strengthening of retail and other commercial functions in the
area.
3. Stimulate Economic Development. The strengthening of the economic base of the Project
Area and the community by the installation of needed site improvements to stimulate new
commercial expansion, employment, and economic growth.
4. Invest in Development. The establishment of financial mechanisms to assist in the upgrading
and/or economic development of properties in the Project Area.
5. Upgrade Urban Design Standards. The establishment and implementation of performance
criteria to assure high site design standards and environmental quality and other design
elements which provide unity and integrity to the entire Project.
6. Promote Hotel Development and Redevelopment. The establishment of financial
mechanisms to assist in the development of key hotels and resort properties. The
establishment or implementation of programs to assist in the upgrading and/or adaptive reuse
of the older hotel structures in the Project Area.
7. Rehabilitate Structures. Encouraging the rehabilitation or modernization of deteriorating or
substandard residential and commercial structures.
8. Redevelop Dilapidated Buildings The demolition or removal of certain buildings and/or
improvements and the preparation of sites for reuse by private developers or government
agencies.
9. Improve Public Infrastructure/Facilities. Providing public improvements such as the
installation, construction, or reconstruction of streets, utilities, and other public improvements
which are necessary for successful economic development and which are necessary to
ensure the public health, safety, and welfare. These improvements may include streets,
alleys, sidewalks and walkways, curbs, gutters, street lights, sewers, storm drains, flood
control facilities, water and sewer facilities, or parks.
10. Protect Unique Character of Community. Restoring architecturally or historically significant
structures.
Iv. General Activities
The City proposes to alleviate and prevent the deterioration in the Project Area through:
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1. The acquisition, installation, construction, reconstruction, redesign, or reuse of
streets, utilities, curbs, gutters, sidewalks, traffic control devices, flood control
facilities, buildings, structures, parks, playgrounds, and other public improvements.
2. The rehabilitation, remodeling, demolition, or removal of buildings, structures, and
improvements.
3. Providing the opportunity for participation by owners and tenants presently located in
the Project Area and the extension of preferences to persons engaged in business
desiring to remain or relocate within the redeveloped Project Area.
4. The development or economic development of land by private enterprise or public
agencies for purposes and uses consistent with the objectives of this Plan.
5. The acquisition of real property, personal property, any interest in property, and
improvements on the property by purchase, lease, option, grant, bequest, gift,
devise, or any other lawful means, after conducting appropriate public hearings and
making appropriate findings.
6. Site preparation and development and construction of necessary off-site
improvements.
7. Improving open space.
8. Managing property acquired by the City.
9. Providing financing for the assistance of commercial and industrial development that
increases the economic base of both the Project Area and the City, and the number
of temporary and permanent jobs.
10. The disposition of real property, personal property, any interest in property, and
improvements on the property through methods such as sale, lease, exchange,
subdivision, transfer, assignment, pledge, encumbrance or any other lawful means of
disposition.
11. Recommending standards to ensure that property will continue to be used in
accordance with this Plan.
12. The closure or vacation of certain streets and the dedication of other areas for public
purposes.
13. Applying for, receiving and utilizing grants and loans from federal or state
governments or any other source.
14. Clearing or moving buildings, structures or other improvements from any real
property acquired by the City.
To accomplish these actions and to implement this Plan, the City is authorized to use the
powers provided in this Plan, and the powers now or hereafter permitted by State law.
V. Public Improvements
To the greatest extent permitted by law, the City is authorized to install and construct, or to
cause to be installed and constructed, the public improvements and public utilities (within or
outside the Project Area) necessary to carry out the purposes of this Plan. Specifically, the City
may pay for, install, or construct the buildings, facilities, structures, and other improvements
identified in Exhibit C, attached hereto, and may acquire or pay for land required therefore.
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Additionally, the City is authorized to install and construct, or to cause to be installed and
constructed, within or without the Project Area, for itself or for any public body or entity for the
benefit of the Project Area, public improvements and public facilities, including, but not limited
to: over or underpasses; bridges; streets; bikeways; curbs; gutters; sidewalks; street lights;
sewers; storm drains; traffic signals; electrical distribution systems; natural gas distribution
systems; wastewater treatment facilities; cable TV and fiber optic communication systems;
water distribution systems; parks; windbreaks; trails; plazas; playgrounds; motor vehicle parking
facilities; landscaped areas; schools; civic, cultural and recreational facilities; camping facilities;
and pedestrian improvements. The public facilities and infrastructure improvement projects that
may be undertaken by the City pursuant to this Plan are identified in the General Plan, and
capital improvement program, incorporated herein by reference.
The City, as it deems necessary to carry out the Plan and subject to the consent of the City
Council, as may be required by Law, may pay all or part of the value of the land for and the cost
of the installation and construction of any building, facility, structure or other improvement which
is publicly owned either within or outside the Project Area, upon the City Council making the
applicable determinations required pursuant to the Law.
When the value of such land or the cost of the installation and construction of such building,
facility, structure or other improvement, or both, has been, or will be, paid or provided for initially
by the City or other public corporation, the City may enter into a contract with the City or other
public corporation under which it agrees to reimburse the City or other public corporation for all
or part of the value of such land or all or part of the cost of such building, facility, structure or
other improvements, or both, by periodic payments over a period of years. Any obligation of the
City under such contract shall constitute an indebtedness of the City for the purposes of carrying
out this Plan.
Preparation of Building Sites
Any real property owned or acquired by the City may be developed as a building site. In
connection with such development it may cause, provide, or undertake or make provisions with
other agencies for the installation, or construction of streets, utilities, parks, playgrounds and
other public improvements necessary for carrying out this Plan.
Removal of Hazardous Waste
To the extent legally allowable, the City may, in its sole discretion, take any actions, which the
City determines are necessary, and which are consistent with other State and federal laws, to
remedy or remove a release of hazardous substances on, under, or from property within the
Project Area.
VI. Private Owner Participation
This Plan provides for opportunities for participation in the economic development of property in
the Project Area by the owners of all or part of such property if the owners agree to participate in
the economic development in conformity with this Plan.
Opportunities to participate in the economic development of property in the Project Area may
include without limitation the rehabilitation of property or structures; the retention of
improvements; the development of all or a portion of the participant's property; the acquisition of
adjacent or other properties from the City; purchasing or leasing properties in the Project Area;
participating with developers in the improvement of all or a portion of a participant's properties;
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or other suitable means consistent with objectives and proposals of this Plan and with the City's
rules governing owner participation and re-entry.
In addition to opportunities for participation by individual persons and firms, participation, to the
extent it is feasible, shall be available for two or more persons, firms or institutions, to join
together in partnerships, corporations, or other joint entities.
The City desires participation in economic development activities by as many owners and
business tenants as possible. However, participation opportunities shall necessarily be subject
to and limited by such factors as the provision or expansion of public improvements and/or
public utilities facilities; elimination and changing of land uses; realignment of streets; the ability
of owners and business tenants to finance acquisition and development activities in accordance
with this Plan; development experience, where applicable, availability of franchises, whether the
proposed activities conform to and further the goals and objectives of this Plan; and any change
in the total number of individual parcels in the Project Area.
Under an Owner Participation Agreement, the participant shall agree to rehabilitate, develop, or
use the property in conformance with this Plan and be subject to the provisions hereof. In the
Owner Participation Agreement, participants who retain real property shall be required to join in
the recordation of such documents as are necessary to make the provisions of this Plan
applicable to their properties.
vll. Rehabilitation of Structures by the City
The City is authorized to rehabilitate and conserve, or to cause to be rehabilitated and
conserved, any property, building or structure owned by the City. The City is also authorized to
advise, encourage, and assist (through a loan program or otherwise) in the rehabilitation and
conservation of property, buildings or structures in the Project Area not owned by the City to the
extent permitted by the Law. The City is authorized to acquire, restore, rehabilitate, move and
conserve buildings of historic or architectural significance.
The City is authorized to conduct a program of assistance and enforcement to encourage
owners of property within the Project Area to upgrade and maintain their property consistent
with this Plan and such standards as may be developed for the Project Area.
The extent of rehabilitation in the Project Area shall be subject to the discretion of the City
based upon such objective factors as:
a. Compatibility of rehabilitation with land uses as provided for in this Plan.
b. Economic feasibility of proposed rehabilitation and conservation activity.
c. Structural feasibility of proposed rehabilitation and conservational activity.
d. The undertaking of rehabilitation and conservation activities in an expeditious
manner and in conformance with the requirements of this Plan and such property
rehabilitation standards as may be adopted by the City.
e. The need for expansion of public improvements, facilities and utilities.
f. The assembly and development of properties in accordance with this Plan.
The City may adopt property rehabilitation standards for the rehabilitation of properties in the
Project Area.
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Clearing or Moving Structures
As necessary in carrying out this Plan, the City is authorized to move, or to cause to be moved,
any building structures or other improvements from any real property acquired.
Seismic Repairs
For any project undertaken by the City within the Project Area for building rehabilitation or
alteration in construction, the City may, by following all applicable procedures which are
consistent with local, State, and federal law, take those actions which the City determines are
necessary to provide for seismic retrofits.
Graffiti Removal
Within the Project Area, the City after making the required findings may take any actions that it
determines are necessary to remove graffiti from public or private property.
Vill. Real Property Disposition and Development
a. General
For the purposes of this Plan, the City is authorized to sell, lease for a period not
to exceed 99 years, exchange, subdivide, transfer, assign, pledge, encumber by
mortgage, deed of trust, or otherwise dispose of any interest in real property. To
the extent permitted by law, the City is authorized to dispose of real property by
negotiated lease or sale without public bidding after a noticed public hearing.
Such sale or lease shall be first approved by the City Council by resolution after a
noticed public hearing, together with such findings as may then be required by
State Law.
The real property acquired by the City in the Project Area, except property
conveyed by it to the City or any other public body, shall be sold or leased to
public or private persons or entities for improvement and use of the property in
conformance with this Plan. Real property may be conveyed by the Successor
Agency of the former Community Redevelopment Agency, after approval by the
Oversight Board and the California Department of Finance, and where beneficial
to the Project Area, to any other public body without charge or for an amount less
than fair market value.
All purchasers or lessees of property from the City shall be obligated to use the
property for the purposes designated in this Plan, to begin and complete
improvement of such property within a period of time which the City fixes as
reasonable, and to comply with other covenants, conditions, or restrictions to
prevent speculation or excess profit taking in undeveloped land, including right of
reverter to the City and to comply with other conditions which the City deems
necessary to carry out the purposes of this Plan.
During the period of economic development in the Project Area, the City shall
ensure that all provisions of this Plan, and other documents formulated pursuant
to this Plan, are being observed, and that development of the Project Area is
proceeding in accordance with applicable development documents and time
schedules.
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All development, whether public or private, must conform to this Plan and all
applicable federal, State, and local laws, including without limitation the General
Plan and zoning ordinance, and all other state and local building codes,
guidelines, or specific plans as they now exist or are hereafter amended. Such
development must receive the approval of all appropriate public agencies.
b. Purchase and Development Documents
To provide adequate safeguards to ensure that the provisions of this Plan will be
carried out and to prevent the recurrence of blight, all real property sold, leased,
or otherwise disposed of by the City, as well as all property subject to Owner
Participation Agreements and Disposition and Development Agreements, shall
be made subject to the provisions of this Plan by leases, deeds, contracts,
agreements, declarations of restrictions, provisions of the General Plan and
zoning ordinance, and all other state and local building codes, guidelines, or
master or specific plans as they now exist or are hereafter amended, conditional
use permits, or other means. Where appropriate, as determined by the City,
such documents or portions thereof shall be recorded in the office of the
Recorder of the County.
Leases, deeds, contracts, agreements, and declarations of restrictions of the City
may contain restrictions, covenants, covenants running with the land, rights of
reverter, conditions subsequent, equitable servitudes, or any other provisions
necessary to carry out this Plan.
The City shall reserve such powers and controls in Disposition and Development
Agreements or similar agreements as may be necessary to prevent transfer,
retention, or use of property for speculative purposes and to ensure that
economic development is carried out pursuant to this Plan.
The City shall obligate lessees and purchasers of real property acquired in the
Project Area and owners of property improved as part of a economic
development project to refrain from restricting the rental, sale or lease of the
property on the basis of race, color, religion, sex, marital status, ancestry, or
national origin of any person. All deeds, leases, or contracts for the sale, lease,
sublease or other transfer of land in the Project Area shall contain or be subject
to such nondiscrimination and non-segregation clauses as are required by
Economic development Law.
IX. Maps and Uses Permitted
The Maps included herein as Map 1 and Map 2 A illustrate the location of the Project
Area boundaries. The land uses permitted by this Plan shall be those permitted by the
General Plan and zoning ordinance, and all other state and local building codes,
guidelines, or specific plans as they now exist or are hereafter amended.
X. Nonconforming Uses
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The City is authorized but not required to permit an existing use to remain in an existing
building in good condition if the use does not conform to the provisions of this Plan,
provided that such use is generally compatible with existing and proposed developments
and uses in the Project Area.
The City may take actions to, but is not required to, authorize additions, alterations,
repairs or other improvements in the Project Area for buildings which do not conform to
the provisions of this Plan where, in the determination of the City, such improvements
would be compatible with surrounding Project Area uses and proposed development.
XI. Interim Uses
Pending the ultimate development of land by developers and participants, the City is
authorized to use or permit the use of any land in the Project Area for interim uses.
Such interim use, however, shall conform to General Plan and zoning ordinance, and all
other state and local building codes, guidelines, or specific plans as they now exist or
are hereafter amended.
XII. General Control and Limitations
All real property in the Project Area is hereby made subject to the controls and
requirements of this Plan. No real property shall be subdivided, developed,
redeveloped, rehabilitated, or otherwise changed after the date of the adoption of this
Plan except in conformance with the goals and provisions the regulations and
requirements of the General Plan and zoning ordinance, and all other state and local
building codes, guidelines, or master or specific plans as they now exist or are hereafter
amended. The land use controls of this Plan shall apply for the periods set forth in
Section 1000 below. The type, size, height, number and use of buildings within the
Project Area will be controlled by the General Plan and applicable zoning ordinance, and
all other state and local building codes, guidelines, or master or specific plans as they
now exist or are hereafter amended.
New Construction
All construction in the Project Area shall comply with all applicable State and local laws
in effect from time to time. In addition to the City land use regulations and requirements
in the Project Area, additional specific performance and development standards may be
adopted by the City to control and direct improvement activities in the Project Area.
Rehabilitation
Any existing structure within the Project Area which the City enters into an agreement for
retention and rehabilitation shall be repaired, altered, reconstructed, or rehabilitated in
accordance with the applicable law and in such a manner that it will meet the following
requirements: be safe and sound in all physical respects, be attractive in appearance
and not detrimental to the surrounding uses.
Open Space and Landscaping
The approximate amount of open space to be provided in the Project Area is the total of
all areas so designated in the General Plan and zoning ordinance, and all other state
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and local building codes, guidelines, or specific plans as they now exist or are hereafter
amended, and those areas in the public rights-of-way or provided through site coverage
limitations on new development as established by the City and this Plan. Landscaping
shall be developed in the Project Area to ensure optimum use of living plant material in
conformance with the standards of the City.
Limitations on Type. Size, Height Number and Proposed Use of Buildings
The limits on building intensity, type, size, height, number and proposed use shall be
established in accordance with the provisions of the General Plan and zoning ordinance,
and all other state and local building codes, guidelines, or master or specific plans as
they now exist or are hereafter amended.
Signs
All signs shall conform to the requirements of the City. Design of all proposed new signs
shall be subject to the review of the City and the procedures of this Plan.
Utilities
The City, in conformity with the City municipal code, and City policies, shall require that
all utilities be placed underground whenever physically possible and economically
feasible on projects funded in whole or in part by the City or subject to a Disposition and
Development Agreement or an Owner Participation Agreement.
If the City determines that placing all utilities underground is not economically feasible,
the City Manager may petition the City Council on behalf of a participant to waive the
requirement to place all utilities underground.
Subdivision of Parcels
No parcels in the Project Area, including any parcel retained by a participant, shall be
consolidated, subdivided or re-subdivided without the approval of the City.
Building Permits
Any building permit that is issued for the rehabilitation or construction of any new
building or any addition, construction, moving, conversion or alteration to an existing
building in the Project Area from the date of adoption of this Plan must be in
conformance with the provisions of this Plan, any design for development adopted by the
City, any restrictions or controls established by resolution of the City, and any applicable
participation or other agreements.
Rehabilitation Loans. Grants, and Rebates
To the greatest extent allowed by State Law, the City may commit funds from any source
to rehabilitation programs for the purposes of loans, grants, or rebate payments for self-
financed rehabilitation work. The rules and regulations for such programs shall be those
which may already exist or which may be developed in the future. The City shall seek to
acquire grant funds and direct loan allocations from State and federal sources, as they
may be available from time to time, for the carrying out of such programs.
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Upon adoption, the administration and enforcement of this Plan or other documents
implementing this Plan shall be performed by the City, as appropriate.
The provisions of this Plan or other documents entered into pursuant to this Plan may also be
enforced by litigation or similar proceedings by the City. Such remedies may include, but are
not limited to, specific performance, damages, re-entry onto property, power of termination, or
injunctions. In addition, any recorded provisions, which are expressly for the benefit of owners
of property in the Project Area, may be enforced by such owners.
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Section 2.
Economic Rationale for Mitigating Long-
Term Vacancies
The issues facing the economic development of existing property are similar to those facing the
developers of new property. In some respects the economics of the project often do not "pencil
out." The economic development of existing buildings also presents additional challenges
particularly in complying with updated building codes, fire codes and ADA, dealing with obsolete
spaces.
So the outcome for long-term vacant properties is often negative: the longer a space sits
unoccupied the more difficult and expensive is to renovate. It is also true that in specialized
properties, such as Magruder Chevrolet, the structures themselves and the site infrastructure do
not lend themselves to "easy" reuses but the eventuality of the buildings' demolition is just a
matter of time.
An interesting lesson, too, can be learned from long-vacant hotels: for very Los Arboles or
Spanish Inn that eventually found an investor to return it to a quality hospitality product, often
shuttered hotels lean to another non-hospitality land use, such as assisted living facilities, drug
treatment centers, sober living facilities, or pain management centers. It is a matter of debate
as to whether such changes in land use are a net positive (i.e., keeping a marginal property
economically viable) or negative (loss of variety and richness of the City's hotel stock.) The fact
is, in some cases, the change of use has been undeniably positive, such as the renovation of
the Tiki Palms into another Michael's House facility on Camino Real, across from The Ace
Hotel.
The Ace Hotel is itself another major example of the economic development of a long-vacant
property from within the study area itself, the redevelopment of the former Howard Johnson
Motor Inn into the Ace. Following in the wholesale redevelopment of the Biltmore across the
street, which included the total demolition of the structures, The Ace Hotel project took a
relatively large hotel property (about 200 rooms) in what was perceived to be a secondary
location (i.e., not near downtown) and made it not only a major tourism asset but one of iconic
parts of the new Palm Springs brand attracting young and hipper hotel guests.
Given that, the challenges faced by developers interested in redeveloping existing property
cannot be addressed strictly by facing off-site improvement or, to some extent, even fees.
The City Council recently approved the creation of an incentive program in the downtown and
Section 14 area. That was specifically targeted at businesses that are redeveloping existing
properties and also intensifying the land use. The example was the Copa Room, where the
tenant is converting a retail space into a nightclub, and is subject to sewer connection fees,
public art fees (based on permit valuation) and regular building fees. In the case of such an
intensification of land use, these fees can represent a considerable cost and disincentive; the
problem is exacerbated in the Central Business District with the imposition of in-lieu parking
fees.
(This study area does not have an in-lieu parking program, so each business is directly
responsible for providing adequate parking to meet the zone code requirements.
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In the end, a direct incentive to the business is likely necessary for the renovation of long-term
vacant properties, rather than relying on fee relief(e.g. deferrals) or off-site improvements.
This approach is more akin to what the City did with the Fagade Improvement Program (grants)
and the Interior Remodel Program (match grants with a maximum City contribution.) Those
programs, collectively improved over 123 businesses in Palm Springs during the worst part of
the recession.
There are a couple of approaches to consider. The first would be now the former RDA assisted
with the economic development of the former Ralphs grocery store at Plaza del Sol into Stein
Mart, in late 2000.
In that case the landlord was still in a lease with Ralphs, which had over 3 years left on it. The
cost of converting the space was over $1,000,000. The landlord allowed Ralphs to buyout of
the lease, which allowed him to receive the three years lease payments in a lump sum, but
discounted by about half. The difference in lease between Ralphs and Stein Mart was only
$3,000 per month. Applying the prepaid rent and monitoring the economic development, it still
left a gap of about $100,000. The City agreed to rebate $20,000 per year for five years to the
owner to close the feasibility gap and allow the project to go forward.
An alternative was the approach taken with the economic development of Lulu California Bistro.
In that case, the business owner proposed to spend over $1.3 million on the renovation of the
former Muriel's/Atlas/Copy Katz space. Acquisition of the building brought the total investment
up to $4.0 million.
While the restaurant was projected to do well it was difficult to rationalize the expenditure at that
level. As described above, the project faced challenges complying with updated building and
fire codes, new ADA requirements, and the discovery of a number of "bootlegged"
improvements in the building. Finally, most of the actual functional kitchen was no longer there,
having been stripped by prior tenants.
While the development of new product always has an impact on surrounding property, it is
important not to underestimate the impact that the economic development and reuse of a vacant
property can have on its surroundings. The most significant recent example of a vacant unit
getting economic development and having a positive surrounding impact is Lulu California
Bistro, which was a very large (22,000 sq. ft.) building near the center of downtown on a
restaurant heavy block. Its economic development removed a major blighting factor on that
block and helped accelerate the positive economic development of the area south of Tahquitz in
downtown.
The final incentive is the existing Hotel Incentive Program, which has proven helpful in getting a
number of older, faded hotel properties into good shape. It should be in the City's toolbox whe
approaching the area.
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Section 3.
Characteristics of the Project Areas
I. Background
The corridors entering the Downtown and Uptown area of Palm Springs, both from the north
and from the south, have historically lagged the progress made in the city's core. Over the past
30 years, the City and former Redevelopment Agency have tried to incentivize development in
the area through the creation of economic development project areas (Project Area 9-A and
North Palm Canyon in the north end, and South Palm Canyon and Project Area 9-E in the south
end), but the overall vitality of the community was at a level that these were likely to see
significant development activity only after the downtown core "filled up."
The general descriptions of the two new areas are: South Palm Canyon Drive (and Indian
Canyon Drive) between Ramon Road and Sunrise Way; with the inclusion of East Sunny Dunes
and Industrial Place up to Palo Fierro; and, North Palm Canyon Drive (and Indian Canyon Drive)
between Via Lola/Tachevah and Tramway Road (along Palm Canyon) and San Rafael Road
(along Indian).
II. Former Redevelopment Agency Activity in the Areas
Over the life of the redevelopment project areas, the Agency had undertaken a number of
capital projects and business assistance projects, though the level and number of projects had
never been very significant. The following are the most significant projects of the agency over
the past decade:
South End
Steinmart Owner Participation Agreement (OPA). An OPA with Wessman
Development Company provided Agency financial assistance to renovate and redevelop
the Plaza del Sol Shopping Center located at 1555 South Palm Canyon Drive. Under
the agreement, the Agency provided assistance in the amount of $20,000 per year for
five years starting in 2001-2002 to cover a portion of the difference between the old
tenant's and new tenant's rent after improvement costs and to capitalize the gap in
improvement costs. (Project Area I — South Palm Canyon)
KFC Public Improvements. The Agency programmed a capital project in its 2003-04
budget for a new traffic island median on South Palm Canyon Drive from Sunny Dunes
Road south to the existing Tahquitz Creek Bridge, adjacent to the KFC /A&W restaurant,
which was a economic development project under construction at the time. The project
was programmed as an incentive to support the redevelopment of the site, which was
considered blighted. The Agency funded approximately $73,000 for construction of the
median in order to provide better and safer traffic circulation in and out of the project site.
North End
Art Colony Project. The City (not the former RDA) owns a parcel within the footprint of
the proposed Art Colony project, and had worked with the developer on the land
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assembly and entitlement of the project, which was never developed. The City still owns
the parcel.
Desert Shadows Inn Street Improvements. The Agency had a multi-project history
with Desert Shadows Inn, including the use of eminent domain to acquire the 2.5 acre
parcel along Vista Chino for a phase of 38 hotel condos; the reimbursement of $79,000
toward the construction of street improvements along Chaparral Road; the closure of
Chuckwalla and the construction of street and parking improvements in the vacated right
of way; and, and OPA for the development of 17 hotel condominiums at the northeast
corner of Indian Canyon Drive and Stevens Road. This included Agency financial
assistance in the amount of$185,000 for off-site improvements. It was the Agency's first
prevailing wage project. (Project Area I — North Palm Canyon)
North Palm Canyon/Stevens Road Mixed Use Project
The former RDA worked to develop a mixed use project is proposed on two contiguous
City-(and former RDA)-owned parcels in the Uptown area of Palm Springs on North
Palm Canyon Drive south of Stevens Road. . (Project Area I — North Palm Canyon) In
2005 the RDA issued an RFP seeking interested parties for the development of the two
parcels. The City currently owns one of the identified properties and will dispose of the
second parcel on behalf of the former RDA for the purpose of facilitating the sale and
development of both properties. The City's preference is to partner with a private
developer interested in developing the combined property with a mixed use/hotel project,
including a small amount of ground-floor commercial space and upper story units.
The property is located in a split C-1/R-2 zone and is situated near developed single-
family home residential areas to the southwest and condominiums directly to the west.
Property directly to the north along North Palm Canyon Drive is developed with
commercial uses, including a Pizza Hut restaurant across Stevens Road. Properties
across North Palm Canyon Drive to the east are a mix of commercial uses and
residential condominiums. There is an undeveloped 48,000 square foot parcel
immediately to the south of the City property, not a part of this proposal, and a multi-
story office building south of that parcel.
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Map 3
City- and Former RDA-Owned Parcels at Stevens Road and
North Palm Canyon Drive
F,NEI sago r.s. 'FIE'
ti
7
Recent Major Development Activity in the Areas
There was a burst of potential development activity that was proposed in these two areas in the
decade preceding the recession of 2009-2010, when several major projects were proposed.
Several projects were actually successfully constructed. These primarily included several
residential projects, including Oceo (still under construction), the Biltmore and a new 4-plex in
the south end, and 43@Racquet Club, Tangerine, the Towers, and Palermo (partially) in the
north end. Like Oceo, Tangerine has recently been completed and Palermo stalled in the
middle of the project.
South End Major Projects
Cameron Center
Both areas have several major projects that were proposed and approved and not
constructed. The primary stalled vacant land project in the south end is the Cameron
Center, an 11 acre mixed use project located at the northeast corner of Mesquite and South
Palm Canyon. The project features 80 townhomes plus 22 live-work units and
approximately 15,000 sq. ft. of retail/commercial space located on South Palm Canyon.
The partnership that owns the Cameron Center site has removed the underground remains
of the former shopping center. Even in 2008, they suggested that the economics of mixed
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use projects are such that it is much more critical to have City participation than in the past.
Even factoring in the effects of the recession, construction costs have again increased
substantially over the past several years while at the same time they are recovering from the
historic softening of the residential and commercial markets. A project that forecast decent
returns to investors in 2004-05 now requires extraordinary creativity in obtaining
construction and permanent financing, even with the recent rebound in residential demand
in Palm Springs, largely because of the decoupling of costs from value.
In 2008, the developer asked the City to consider paying for certain roadway improvements
on South Palm Canyon Drive, including new improvements would include construction of a
landscaped median island, traffic signalization, storm drains, and related street work. This
work is similar to that installed by the former Redevelopment Agency north of Tahquitz
Creek at the KFC Building.
These improvements could accelerate the economic development of the entire area.
Specifically, the developer asked that the former RDA pay for a portion of the street
improvements on South Palm Canyon Drive from the Tahquitz Creek Flood Control Channel
to Mesquite Road. These improvements include a landscaped median island, street
widening, repaving, new sidewalks, street tree planting, and traffic signalization. The
improvements and request included the following:
• Designing and managing the construction of the off-site improvements. Prior to
commencement, all plans will be approved and permits will be issued by the City's
Engineering Department.
• The cost of the street median and storm drain improvements would be split equally
between the City, the developer of the west side of South Palm Canyon Drive and
the Cameron Center developer. The total cost was estimated to be $696,000. The
developer proposed to pay one-third of the cost of these improvements, totaling
$232,000. The City would pay the balance of the cost, totaling $464,000, and obtain
a reimbursement agreement with the other developer for their one-third share.
• The developer proposed to pay for the entire cost of the replacement traffic signal at
Mesquite and South Palm Canyon Drive. The estimate for this work is $190,000.
They would be entitled to obtain a reimbursement agreement for half of these traffic
signal expenditures from the eventual developer of the West side of South Palm
Canyon.
• The City would pay for the cost of the new traffic signal at the Rock Garden Cafe
site. The estimate for this work is $190,000.
• To mitigate community impact during construction, especially on the adjacent
residential neighborhood to the east, they were conditioned to install an irrigated
decorative landscape buffer between the public right-of-way and our site fencing
during Phase I construction. The landscaping shall be substantially in accordance
with the landscaping plans submitted to the City's Planning Department in
connection with our project, but will be installed earlier than would be required as
part of the development plan.
Fairfield
This 11-acre project on South Palm Canyon Drive was first approved as a Radisson Hotel
with timeshare units in 1999. The former RDA approved a DDA with the developers of Star
Canyon Resort in 2001 to provide a land write-down for the 210 room hotel and 176 unit
timeshare project, where it agreed to rebate property tax increment from the project back to
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the developer, to try to close the feasibility gap. In 2002, the RDA approved a change of
scope in the project to make it entirely timeshares, at 255 units. The amendment
corresponded to a sale of the project in the wake of the 9/11 terrorist event to Fairfield
Resorts, a national timeshare development company. That developer, Fairfield
Development, was not successful in obtaining Final Development Plan Approval. The
project's final PDD was denied by City Council due to a lack of consistency between the
original hotel architecture and site plan and the architecture proposed by Fairfield. In 2006,
another developer proposed combining Fairfield's 11 acres with the vacant Magruder
Chevrolet property to the south (on an Indian Leasehold) to construct a new mixed use
project; health and wellness center, hotel, high-end retail, called The Trails. By 2009, the
recession effectively ended The Trails project and the responsibility of the property returned
to the owner, Fairfield Resorts. Since that time, several developers have looked at it for a
variety of residential products, including a retirement-community and single family homes
(different developers).
Staff recommends that there be no subsidy or assistance provided for a purely residential
project, but that the City consider assisting any project that would have a commercial
component, and more assistance for a project that also incorporated the vacant Magruder
Chevrolet property next door.
Any public improvement assistance is described in the Cameron Center request above, as
it would relate to the share of landscaped medians and a traffic signal required of both
projects in prior approvals
More assistance should be provided for a project that also assembles the Rock Garden
Cafe into the site and integrates it into an overall master plan.
North End Major Projects
Northgate Center
The Northgate Center, commonly known as the Loehmann's Center, was built in the early
1980's and for a number of years was the home of Loehmann's Department Store and a
number of other factory outlets, including Dansk and Mikasa. More recently it has been
plagued with a high rate of vacancies. Current tenants include M Modern and Modern
Home (same owner), Caffe Italia, and a Carl's Jr. The property was bank owned and will go
to auction in July, 2013. A new owner would need to develop a concept that was
comprehensive and then work with tenants to have a major opening all at once. Some
assistance may be requested from the City for this.
Art Colony Project
On the north end, the most visible stalled vacant land project in the south end is the Art
Colony project, a 10 acre mixed use project located at the southeast corner of Racquet Club
and North Palm Canyon. The project featured townhomes, stacked flat condominiums and
live-work units and approximately 25,000 sq. ft. of retail/commercial space located on North
Palm Canyon. That project stalled after approval, the developer died, and the property went
back to the lender. The former shopping center at the corner was demolished, as were
several single family homes, and all that operates is a Del Taco store. There is also a small
residential hotel that was part of the land assembly that remains vacant but boarded up.
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Racquet Club
The redevelopment of the famed Racquet Club property got underway prior to the
recession, leaving a partially constructed condo building. The previous developer lost the
property and it is now owned by a group interested in completing the project; they are
soliciting interest from financial partners. Since the final product would be largely, and
perhaps entirely, residential, it may be outside the scope of this program.
Pedregal
Pedregal was a 132 unit residential project that also went back to the bank during the
recession. It now has a new owner that intends to develop it as originally designed and
entitled. Since the final product is entirely residential, it may be outside the scope of this
program.
IV. Other Recent Development Activity in the Areas
South End
There are positive developments that have occurred at the edges of the areas in the past
several years, but their effects on the rest of the areas have been relatively modest. In the
south end, these include the major renovation of Smoketree Village and construction of Smoke
Tree Commons at Sunrise and East Palm Canyon Drive; and, the renovation of the hotel at the
northeast corner of East Palm Canyon Drive and Sunrise Way into (first) The Holiday Inn and
(later) The Saguaro Hotel.
Within the area, commercial development activity includes the economic development of the
former Howard Johnson Motor Lodge into the Ace Hotel; the economic development of the
former Travelodge into The Curve Hotel; the historic preservation and renovation of The Horizon
Hotel, Caliente Tropics and now the Sparrow Hotel; the repositioning of Plaza Del Sol for a
grocery anchored center (Ralphs) into a Stein Mart; the economic development of several
dilapidated commercial structures into new quick-serve/fast food restaurants, including KFC,
Jack in the Box, and Starbucks; and the renovation and expansion of the Sun Center,
culminating with the construction of a new 8,000 sf building, suitable for a sit-down restaurant.
Finally, and most recently, the former Alan Ladd Building has recently undergone a major
renovation and repositioning into a new office complex called "The 500."
Notwithstanding the success of some of the efforts, commercial development in the area has
been a mixed bag. The 3 mile stretch has three liquor stores, and more than half of the new
commercial development has been for fast food restaurants or coffee (Starbucks and Koffi.)
Other types of retail, aside from Stein Mart, has had limited success, and over the past 10
years, even restaurants have had a mixed track record.
The newly-constructed restaurant space at the Sun Center has not been leased; the former
Brushfire Grill is vacant; the Cedar Creek Inn has been closed for several years; Davey's
Hideaway was recently closed; the restaurant space in the Caliente Tropics has had a
succession of unsuccessful restaurant operators; and Twin Palms —while doing reasonably well
when it was operated, has faced two interior fires in the past year; similarly, Rock Garden Cafe
has been for sale, sold, closed, and reopened in the past two years. There is also a vacant
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space next to Koffi, unleased. There are a core of successful restaurants in the area, however,
including Palm Greens Cafe, El Mirasol, Miro's, Kiyosaku, Lyons' English Grill, Pizza Hut,
Carrow's, Elmer's, and King's Highway at the Ace Hotel.
Vacant Land Proiects and Catalyst Vacant Buildings
Both areas have several major projects that were proposed and approved and not constructed,
including the Cameron Center and Fairfield project in the south end, and the Racquet Club
redevelopment and Pedregal on the north end. Additionally, there are major difficult building
vacancies in both areas, such as the Northgate Center, Magruder Chevrolet and Cedar Creek
Inn. The program would be designed to consider assistance based on pro forma need through
a combination of direct (up-front) assistance and some tax sharing over time based on project
performance. Examples of some of the major vacancies in the area are:
North End Vacant Land Projects and Catalyst Vacant Buildings
• Northgate Center
• Former Art Colony project
• Racquet Club
• Desert Moon (under development)
• Blue Pear
• Dink's Restaurant
• Bono's Restaurant
• Numerous Vacant Parcels on North Palm Canyon and Indian
• Pedregal
• City Owned Parcels at Palm Canyon and Stevens
South End Vacant Land Projects and Catalyst Vacant Buildings
• Cameron Center
• Fairfield parcel
• Magruder parcel
• Cedar Creek Inn
• Rock Garden (potential)
• Stein Mart Center and Environs
• Sun Center Restaurant Pad
• 555 South Palm Canyon (Wherehouse Center)
• Brushfire Grill
• Davey's Hideaway
• Chia Cafe
• Koffi/Oceo space
• Numerous Vacant Parcels on South and East Palm Canyon
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Section 4.
Proposed Projects and Programs
The recommendation for how to create an incentive for catalyst vacant projects would be to
layer a couple of different incentives to get to the necessary threshold to provide the necessary
assistance.
Structure of the Incentive Area
The recommendation of how to create an incentive for catalyst vacant projects is to layer
several different incentives to get to a threshold that provides the necessary assistance. First,
this is a relatively large and heterogeneous area. A single incentive program would not be
applicable to every potential project in the area. However, there are four types of investments
that the City should consider:
• Assisting stalled, vacant land projects (Based on Need)
• Renovating and repositioning major vacancies as catalyst projects (Up to $30/sf or
$250,000 maximum)
• Creative uses of the Hotel Incentive Program for small, dilapidated hotels (Based on
share of Future TOT Increment)
• Extending Fagade Improvement/Interior remodel programs for the area (Up to
$5,000 for Fagade Improvement/Up to $25,000 for Interior Remodel Program)
To assist projects like these, there are a number of tools that would be available to the City, in
addition to the City's direct cash resources in building projects. These include:
• Direct Public Works investment (streets, sidewalks, etc.)
• Direct assistance to private developers
• More aggressive code enforcement within the area
• Leveraging other agencies' public works investment (water, Caltrans, etc.)
• Leveraging other public and/or private outside dollars (tax credits, grants)
While residential development is useful to the vitality of nearby commercial uses, it is not the
purpose of this program to create incentives for residential development projects, since the
residential market is driven by local, regional and national forces outside the scope of this
program. In other words, there should not be any special incentives for purely residential
development in the North or South Palm Canyon area.
Public Works
The City has undertaken an ambitious program of new public works using its Measure J funds,
as well as funding traditional public works through normal channels. Public works in these
areas should be "counted" as part of the investment in the project areas, particularly in the area
of leveraging public resources for grant applications. An example would be the Tahquitz Creek
Master Plan: any City money expended as part of the implementation of the Master Plan should
be counted as public investment within the Project Area. Similarly, the extension and
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replacement of palm tree lighting in the uptown area should be considered as part of the public
investment in the project.
In addition, missing sidewalks are particularly a problem in the East Palm Canyon area, on both
sides of the street, presenting problems for pedestrians wanting to traverse the section from the
Saguaro Hotel to the Ace Hotel. Such problem is exacerbated at night.
Need Based Assistance
Need-based assistance would be available for projects in the "stalled, vacant land projects" and
the "renovating and repositioning major vacancies as catalyst projects" categories. Both
categories of assistance would require some direct assistance to the project itself, rather than
merely considering the construction of adjacent public improvements by the City as a way of
assisting a private development project, as was done in several projects by the former RDA.
(See the differences between the Stein Mart OPA and the KFC assistance, above).
First, like in former RDA projects, a review of the project's pro forma should be undertaken to
determine the "warranted assistance" to the project. This analysis would review the project
capital costs, operating costs, anticipated revenues from operations (and/or rents), and the
proposed development capital stack. The warranted assistance would need to show that the
value of the project based on the capitalization of either operating profit or tenant rent would not
be enough to support the capital outlay necessary to get the project into the condition necessary
to bring the project forward.
Example:
As an example, the cost of building out a retail space for a new tenant was $1,000,000,
to bring it to a quality standard adequate to meet the brand standard. The developer
had about half of the amount available in the form of prepaid rent from the previous
tenant, which had vacated. Those funds were available for the renovation. However,
the new tenant was only paying $3,000 per month more than the prior tenant, which,
when capitalized, meant that half of the remaining cost had no "basis" for being
expended — it was pure cost to the owner without a return. In that case, the "warranted
assistance' would be $250,000, which the City/Agency could rationalize a number of
different methods to close the gap: an enhanced version of the Interior Remodel
Program, but rather than a capped dollar amount (the original program was $25,000), a
program that features a dollar match of 3:1, meaning $3.00 of private investment for
each $1.00 of City money. Therefore, in the example above, the City may contribute
$250,000 toward the renovation but only if the private renovation dollars exceed
$750,000.
The maximum dollars per building square foot committed by the City should be $30. However,
the $30/sq.ft. should be reserved for high potential $/sq.ft. projects, meaning major restaurants
or clubs projected to produce significant revenue for the City through sales taxes, property taxes
and other revenue. The base maximum of $10/sq.ft. for would be for general retail. One
criterion to distinguish the types of spaces for one another would be whether Department of
Health review was necessary on the project. Another would be whether there was sewer
connect fees charged to the project.
Page 25
30
The recommended additional criteria for the Catalyst Building Remodel projects is:
Type of Project
Is the proposed property current) vacant?
Has the property been vacant more than two ears?
Does the project intensify the land use, e.g. converting from retail to restaurant?
Does the project combine or assemble two or more properties, spaces, or addresses
into a larger consolidated project?
Does the property add more land square footage, i.e. expanding the site and/or parking
area?
Does the project anticipate increased gross sales tax, increased per sq. ft. sales tax,
and other tax benefits to the City?
Does the project propose a cultural or entertainment use, such as a performing arts
venue?
Does the project attract new investors to the City?
Does the applicant have a plan for integrating new uses into the surrounding
neighborhood?
Is the project entitled?
Are there any environmental conditions (i.e. parking, noise mitigation, Engineering
conditions of approval) that affect the economic feasibility of theproject?
Is the project eligible for any other public funding or other non-profit grant funding?
The Program Application requires the Applicant to provide evidence of their own financial
commitment to the project (cash, especially), leverage of the public resources, viability of the
project over the long-term, and physical conditions that would suggest the project(s) would be
catalytic for the surrounding area.
In addition to pure need-based assistance, the Program would also entertain assistance
requests from projects that are anticipated to be truly catalysts for an area:
• Renovating a vacant property
• Intensifying the use of the property by assembling other parcels
• Proposing a high tax-generating use
• Proposing a large number of persons patronizing the location, such as a club or
performing arts venue
• Attracting significant outside capital, enough to meet a high threshold of dollars per
square foot investment
Such assistance may take the form of a tax sharing agreement to reach the investment
threshold necessary to make the project economically feasible.
Other Types of Assistance
In 2009, the City Council adopted the Interior Remodel Program which assisted a number of
sales tax-producing businesses, particularly restaurants, to upgrade the "front of house'
experience for their customers as a way of spurring new business investment during the
recession. The program was a companion to the larger but more financially limited Fagade
Improvement Program which provided assistance for exterior remodeling for approximately 120
Page 26
31
businesses. Both programs have been phased out due to funding constraints largely
attributable to the loss of redevelopment dollars.
These two renovation programs were extraordinary successful during the recession, helping set
the stage in downtown for the recent growth in new business activity. The latest wave of
business investment activity in the downtown has been the intensification of land uses, namely
the conversion of traditional retail spaces into eating and drinking spaces and/or
nightclubs/performing spaces. As downtown continues its transformation into an arts and
entertainment destination, this next step is necessary to create the critical mass necessary to for
the economic vitality to become sustainable. This type of development has also had a positive
and significant effect on tourism in the City, and created other positive spillover effects.
Most recently, it created a mechanism to assist owners or tenants of businesses investing in the
redevelopment of retail space into eating and drinking spaces and/or nightclubs/performing
spaces in the downtown and uptown core and the western portion of Section 14. This incentive
would be accomplished through the deferral of certain City fees until the business is operating.
Fees would include the Public Art Fee and the Sewer Connection Fee, as well as the Parking
In-Lieu Fee in areas where such fee applies. That recommended geographic area was limited
to the Business Improvement District (BID) area plus the western half of Section 14 (west of
Avenida Caballeros).
1. Stalled, vacant land projects
2. Major vacancies —catalyst
3. Hotel Incentive Program
4. Fagade Improvement/Interior remodel
5. More aggressive code enforcement
Page 27
32
�.. 00���I���iii�+
{s �
SPECIAL FOCUS
AREA
INCENTIVE
PROGRAM --
Program Application
Application packet for the City of Palm Springs' Special
Focus Area Incentive Program_ The areas are generally
north of the Downtown and Uptown Area and South of
Ramon and along East Palm Canyon. Included are the II'
Property Remodel Grant Program,the Facade
Improvement Program, the Hotel Incentive Program
the Vacancy Catalyst Pr y y Program Applications.
Community& Economic Development Department
8/21/2013 in;,
J P'r .
;..:�;�FOF��P
SPECIAL FOCUS AREA INCENTIVE PROGRAM
The prom is a collection of several City incentives to create an incentive to redevelop
vacant properties or spur stalled development projects in the area. It "layers" several
different incentives to get to a threshold that provers the necessary assistance- A single
incentive program would not be applicable to every potential project in the area.
However, this application packet is for four types of investments that the City may
consider-
• Commercial Fagade Improvement Program
• Commercial—Retail Interior Remodel Program
• Major Need-Based Assistance for Renovating Major Vacancies as Catalyst Projects
• Major Need-Based Assistance for Assisting Stalled Vacant Land/Demo Projects
• Creative uses of the Hotel Incentive Program for small, dilapidated hotels
• Assistance with Punic Workslinfrastructure Requests
The Facade Improvement Program is the smallest and simplest of the programs, with
a match up to$5,000 for exterior improvements.
Most interior renovations in the Program Area would be eligible for the Commercial —
Retail Interior Remodel Program, with a match up to $25,000 from the City for a
similar investment by the owner.
The Major Need-Based Catalyst Vacancy Program requires that a building or single
space be at least 8,000 s.f., have approved renovation plans, undergo a pro fomna
analysis by the City, and propose an expenditure of at least $1,000,000—excluding the
acquisition of the property.
The Stalled Vacant Land Program requires that a development parcel be at least 5
acres, have an approved Planned Development District arndlor Tentative Parcel Map,
undergo a pro forma analysis by the City, and propose an expenditure of at least
$10,000,000—excluding the acquisition of the property.
The Hotel Incentive Program. Hotels would be eligible under the"Qualified renovation
program of the City°s Hotel Incentive Program, meaning a property improvement
program undertaken by an existing hotel which invests no less than fifteen thousand
dollars per room„ or invests no less than one million dollars in ancillary non-hotel roan
facilities and/or space. The property improvement program shall be comprehensively
executed in a single renovation project on the property and be under cons uctiar no
later than December 31, 2014 and completed no later than December 31, 2015.
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r�a
COMMERCIAL— RETAIL
INTERIOR REMODEL GRANT PROGRAM
The City of Palm Springs has established a Interior Remodel Grant Program designed to
encourage the improvement and investment in retail properties that contribute to the
revitalization of the Gty of Palm Springs- The Interior Remodel Gram Program features
a match grant up to 525,000 to assist in the cost of interior improvements made by a
property owner or tenant
Eligible uses:
Interior painting or wall covering
• Window treatments
• Flooring covering
Lighting systems
• Ceiling tiles
Display cases (permanent)
• Partition walls
• Interior electrical to dedicated space
Ineligible Uses:
Grant funds may not be used for improvements that are not permanent or wonted or
affixed to the interior of a building. Ineligible uses include, but are not limited to:
• Exterior signs, vinyl letter signage(windows)
• Portable signs, such as sandwich board or r-frame signs, signs not mounted
or attached to storefronts
• Flags or banners
• Benches and trash receptacles
• Tables,chairs,or umbrellas
• Equipment(not affixed to structure), merchandise,suppler or products
• Landscaping
• Patios
Elimble Applicants:
Property owners or tenants located in leased or owned commercial properties in the
Incentive Zone areas: South Palm Canyon Drive (and Indian Canyon Drive) between
Ramon Road and Sunrise Way-, with the inclusion of East Sunny Dunes and Industrial
Place up to Palo Ferro; and, North Palm Canyon Drive (and Indian Canyon Drive)
between Via LotafTachevah and Tramway Road (along Palm Canyon) and Tramview
Road(along Indian)-
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COMMERCIAL - RETAIL
INTERIOR REMODEL GRANT PROGRAM
Grant MowbLs:
The maximum City matching grant shall not exceed $25, . Example: if the applicant's
interior improvement cost is$50,000 the City Match Grant would be $25,000. If the total
improvement cost is$10,000,the City Match Grant would be$5,0DO.00.
Process:
Applications are available in the Department of Community & Economic Development
and on the Cites website. The application will ask for a narrative description of the
Project scope. The applicant will hire the contractor and is responsible for obtaining
design approvals. The City shall provide some assistance in sccping the project and will
reimburse the applicant for work performed, based on submittal of evidence of work
performed and paid invoices.
Contact Information-
City of Palm Springs
Department of Community&Economic Development
3200 E.Tahquitz Carryon Way
Palm Springs, CA 92262
Phone: 760-3238175
Fax 760-322-8325
Email: cathy.vanhornfpalmspringsca.gov
Mailing Address: P.O. Box 2743. Palm Springs, CA 92263
COMMERCIAL - RETAIL
INTERIOR REMODEL GRANT PROGRAM
APPLICATION ON NEXT THREE PAGES
Page 31
36
Md _
COMMERCIAL - RETAIL
mo " INTERIOR REMODEL GRANT PROGRAM
APPLICATION FORM
APPLICANT INFORMATION
Business Flame:
Business Address:
Applicant's Name:
Address:
Phone:
Email:
PROJECT DESCRIPTION
Description of(requested Improvements:
Please note that the maximum matching
grant shall not exceed $25,000. The grant
increases on a dollar for dollar basis up to
the $25,000 cap. Example: if the
applicant's interior improvement cost is
$50,000 the City will pay the match grant
of $25,000. If the total improvement cost
Estimated Cost: is $10,000 the applicant pays $5,000 and
the City will pay a match grant of$5,000.
is this your estimated cost,or have you Amount applying for. S
obtained a bid or estimate from an
architect or contractor?
self contractor architect
(Please provide a copy of estimate if
available)
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37
COMMERCIAL - RETAIL
INTERIOR REMODEL GRANT PROGRAM
APPLICATION FORA
PAGE 2
PROPERTY INFORMATION
FOR OWNER OCCUPANTS FOR TENANT/LESSEES
I hereby certify that I am the owner of my 1 am a lesseeirenter of the space for which
business property. The property is I am applying for a interior Remodel Grant.
vested(owned)under the following name: The owner of the property is:
Property Owner Legal Name:
Contact information for the property
Contact Information: owner:
Remaining years on lease term:
Assessors Parcel Number:
Assessors Parcel Number:
PROGRAM BOUNDARIES
Businesses located in the tollowmg areas: South Palm Canyon Drive (and Indian Canyon
Drive) between Ramon Road and Sunrise Way; and North Palm Canyon Drive (and lodes
Canyon Drive) between Via Lola(fachevah and Tramway Road (along Palm Canyon) and
Tramview Road(along Indian).
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v COMMERCIAL — RETAIL
INTERIOR REMODEL GRANT PROGRAM
APPLICATION CHECKLIST
All applicants must provide:
ZI Application (Completed and Signed by Applicant)
7 If incorporated, evidence that applicant has authorization to apply for program
7 Verification of Property Ownership, 9 owner(Title or Deed of Test)
ZI Evidence of Tenants Right to Make Improvements,if tenant or lessee (Signed)
Description of Scope of Work
O Estimate or Bid, if available
❑ Copy of Valid Palm Spry Business License (Applicant)
ZI Copy of Valid Palm Springs Business License(Contractor hired to perform work)
No assistance may be provided for any contract awarded before the applications
is approved. Once the application is approved by the City, the applicant must
provide the following:
7 If applicable,evidence of required permit approvals from the City of Palm Springs
Zt If clainting cash match, provide verification of funds availability(loan agreement,
canceled checks,etc.)
I hereby declare that the foregoing information is true and correct to the best of my
knowledge. I authorize the City of Palm Springs to verify the information to determine
my eligibility and to conduct an inspection of my property. I understand that as the
applicant t at hire the contractor and am responsible for obtaining design approvals. t
understand that the program provides that the City will reimburse the applicant for work
performed,based on submittal of evidence of work performed and pad,and that the City
will not pay contractors or vendors directly.
Applicant Signature Date
Mail or deliver completed application with copies of required documents to:
City of Palm Springs
Departrnent of Community& Economic Development
3200 E.Tahquitz Canyon Way, Palm Springs, CA 92262
Fax 760-322-8325 or email to Cathy.vanhomQpalrrspringsca.gov
Mail to: P.O Box 2743,Palm Springs, CA 92263
Any questions please cal: 760-323-8175 or 760-323-8259
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COMMERCIAL - RETAIL
MAJOR "NEED-BASED" ASSISTANCE FOR
RENOVATING MAJOR VACANCIES AS
CATALYST PROJECTS
APPLICATION FORM
This Program represents a significant commitment by the City to help mitigate larger,
long-term vacancies in the Incentive Program Areas in an effort to create a catalyst
effect for additional development in an area-
The threshold for investment in a project that would qualify for this assistance would be
$1,000,000, excluding the cost of purchasing the land or building, or leasing the
property- Additionally, the Applicant must show that the project has a feasibility"gap", or
the difference between the proposed investment necessary to make the project "work"
and the amount of investment that could be reasonably be supported by an equity
investment at a standard return on investment.
Additionally, the Applicant must denxanstrate that there are extraordinary costs
associated with the development these costs could be due to challenges complying
with updated building and fire codes, new ADA requirements, the discovery of previous
'bootlegged` improvements in the building, as well as the issues of kitchens (in
restaurants)having been stripped by prior tenants-
While the development of new product always has an impact on surrounding property, it
is important not to underestimate the impact that the economic development and reuse
of a vacant property can have on its surroundings. The most significant recent example
of a vacant unit getting economic development and having a positive surrounding impact
is Lulu California Bistro, which was a very large (22,000 sq. ft.) budding near the center
of downtown on a restaurant heavy Mock- Its economic development removed a major
blighting factor on that block and helped accelerate the positive economic development
of the area south of Tahquitz in downtown-
The recommended assistance structure criteria for vacant or catalyst building remodel
projects should be:
Grant Amounts:
The rraximnrn dollars per building square foot committed by the City wild be $30.
However, the $3tYsq.ft would be reserved for high potential Mars per square foot
projects, meaning major restaurants or dubs projected to produce significant revenue for
the City through sates taxes, property taxes and other revenue- The base maximum of
$101sq-ft.would be for general retail. One criterion to disSirnguish the types of spaces for
one another would be whether Department of Health review was necessary on the
project- Another would be whether there was sewer connect fees charged to the project-
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40
The maximum City matching grant shall not exceed $250,000. Example: if the
applicant's interior improvement cost is $1,000,000, the City Match Grant would be
$250,000. If the total improvement cost is $100,000, the City Match Grant would be
$25,000.00.
Process:
Applications are available in the Department of Conxrrunity, & Economic Development
and on the CrVs website. The application will ask for a narrative description of the
project scope, evidence of permits, plans and drawings, and the financing structure. The
an-cunt of eligible assistance will be based on the overall project cost. the amount of
"need" determined by the project pro forma, the amount of leverage of the City's dollars
(private investment ratio). The assistanr>-- will also be structured based on the
availability of City funds.
The applicant will hire the contractor and is responsible for obtaining design approvals.
The City shall provide some assistance in scoping the project and will reimburse the
applicant for work performed, based on submittal of evidence of work performed and
paid invoices.
Contact Information:
City of Palm Springs
Department of Community&Economic Development
3200 E. Tahquitz Canyon Way
Palm Springs, CA 92262
Phone: 760-323 8175
Fax: 760-322-8325
Email: cathy.vanhomapalnmspnnosca.gav
Mailing Address: P.O. Box 2743, Palm Springs,CA 92263
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41.
COMMERCIAL - RETAIL
MAJOR "NEED-BASED" ASSISTANCE FOR
RENOVATING MAJOR VACANCIES AS
CATALYST PROJECTS
APPLICATION FORM
PROGRAM BOUNDARIES
Businesses located in the following areas: South Palm Canyon Drive (and Indian Canyon
Drive) between Rarnon Road and Sunrise Way; and North Palm Canyon Drive (and Indian
Canyon Drive) between Via Lola(fachevah and Tramway Road (along Palm Canyon) and
Tramview Road(along Indian).
APPLICANT INFORMATION
Business Name:
Business Physical
Address:
Applicant No.1 Applicant No.2
Applicant's Name:
Applicant's Address:
Work Phone-
Cell Phone:
Email;
Ethnic/Gender Status:
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APPLICATION FORM
PAGE 2
BUSINESS INFORMATION
Type of Business:
Type of Legal Entity: Taxpayer IQ:
Year Established: NAISC:
Census Tract:
Project Area:
Low1MoV:
PROPERTY INFORMATION
FOR OWNER OCCUPANTS FOR TENANT2ESSEES
I hereby certify that I am the owner of my I am a lesseetrenter of the space for
business property. The property is vested which I am applying for an Interior
[owned) under the following name: Remodel Grant. The owner of the
property is:
Property Owner Legal Name:
Contact information for the property
Contact Information: owner:
Remaining years on lease term:
Assessors Parcel Number:
Assessors Parcel Number:
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APPLICATION FORM
PAGE 3
PROJECT DESCRIPTION
Description of Requested Improvements: The maximum dollars per building square foot
committed by the City would be$30. However.
the $30?sf is reserved for high potential
dollars-per-square-foot projects. meaning
major restaurants or clubs projected to
produce significant revenue for the City
through sales taxes, property taxes and other
revenue. The base maximum of S10fsf would
be for general retail. One criterion to
distinguish the types of spaces for one
another would be whether Department of
Estimated Cost: Health review was necessary on the project.
Another would be whether there were sewer
Is this your estimated cost, or have you connect fees charged to the project.
obtained a bid or estimate from an
architect or contractor? The maximum City matching grant shall not
exceed$250.000 at a 3:1 ratio. Example: if the
Self Contractor architect applicant's interior improvement cost is
S1,000.000, the City Match would be S250.000.
If the total improvement cost is $100,000, the
(Please provide a copy of estimate if City Match would be S25,000.
available)
Amount applying for: S
Page 39
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APPLICATION FORM
PAGE 4
PROJECT DESCRIPTION
Economic Impact Pro Forma Review
Jobs Retained: Does a project pro forma support:
Jobs Created: (a) The minimum investment of Y1.000.000?
(b) The private investment: public investment
ratio of at least 3:1?
(c) The demonstrated `need.. for assistance to the
project based on ROI?
(d) A projected schedule of "return" to the City
based on increased tax revenue?
[Department UseUrals) Supplemental Questions Yes No
Credit Risk Rating Is the interior space of the proposed property
at least 9,000 s.f 7
❑ Almost Bankable—Grade 1
❑ Standard—Grade 2 Is the proposed property currently vacant?
❑ Pass—Grade 3 Has the property been vacant more than two
❑ Watch—Special Mention Grade 4
• Sub Standard—Grade 5 Years?
❑ Doubdul—Grade S
Is the development project(renovation
Repayment Source excluding property acquisition)at least
$1,000,0007
❑ Primary; Cash flaw from Does the project intensify the land use, e.g.
business operations converting from retail to restaurant?
❑ Secondary:Applicants'income
from outside sources Was Department of Health review necessary
❑ Tertiary: Liquidation of or the project?
eoliaterai(Recourse to applicants
Does the applicant have planning approval?
Leverage Do they have building plans?
Health Department approval?
Total Project Cost:
Does the project combine or assemble two or
Requested more properties, spaces, or addresses into a
Assistance: larger consolidated project?
Ratio: Does the property add more land square
footage, i.e.expanding the site and/or
Public Benefit parking area?
What is the percentage increase?
Does the project anticipate increased Does It add parking demand?
gross sales tax,increased per sq_ft.sales Parking spaces?
tax,and other tax benefits to the City? Is the additional space also vacant?
(City to check and calculate previous
'base"of taxes from the site.)
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45
APPLICATION FORM
PACE 5
PROJECT DESCRIPTION
Background & Management Analysis of Projections
The applicant's proections for Pro Forma
Year 1, which represents estimated income
and expenses for a full year of operation
once the business is operating, must appear
to be reasonable and conservative for income
and for operating expenses.
The City may use RMA industry comparisons
for similar NAICS Codes to determine
average net profits for the industry as a of of
total sales, versus the % reflected in the
anginal projections.
With respect to the variance in the projected
net profits of the business and RMA industry
standards, a should be noted for Pro Forma
Principals, business concept, Year 1, often neither rent expense (paid to
experience, investors, etc. owners) or depreciationfamortization and
interest expense (associated with the
business loan or mortgage)are included.
Based on the RIVIA comparisons, many small
businesses in owner-occupied space report
either rent paid to the principals (when title
and debt is held in a name other than the
operating concern) or depreciation & interest
expense associated with unde€fyirg financing
(when held in the name of the operating
concern).
SOURCES& USES OF FUNDS
SOURCE AMOUNT USE AMOUNT
City Assistance Renovabons
Partner Equity Waking Capital
Business Debt Fees
Personal Debt
Total Sources Total Uses
Page 41
46
APPLICATION FORM
PAGE 6
PROJECT DESCRIPTION
Strengths Summary
Do the applicants have outside income Staff Recommendation:
sources, with net discretionary income that
can be used for working capital to support the Staff would reconnend providing the
operations and debt service of the business? assistance with the following conditions.
How many $ of personal cash do Controlled disbursement of assistance
the Applicants have invested into the proceeds and obtaining lien releases, to
business. ensure no mechanics liens remain on the
Property
is collateral coverage adequate (greater than
1.50 to 1.00) for the debt the business is Subordination of sharehokW loans payable
carrying? by the investors.
Do projections suggest that once the Evidence of any ban guarantee.
business is fully operational, it has the ability
to generate sufficient cash flow to service the
existing and proposed debts?
Is the Project Area undergoing renovation
and resurgence in this type of business?
Weaknesses VACANT LAND PROJECTS
Supplemental Questions
Is the Business retying solely upon
projections for debt service repayment, with :1 Is the project currently undeveloped land?
no historic cash flow? Z-2 Is there an entitled project on it?
ZI Is the project beyond its original 2-year
Does the business' income depend upon a approval window,and needed approval
specific clientele seeking the product or extensions from the Planning
service? Could the 'theme be considered a Commission?
marketing benefit, as no other businesses in ri Is the project solely a residential project
the area offer it, or is a a hindrance d not or does it have a mixed uselconnnercial
enough consumers are drawn to it? aspect to it?
Page 42
47
APPLICATION FORM'
PAGE 7
CASH FLOW ANALYSIS
Note
Cash Flow/Coverage Pro ected Upon Corry letion
Net Profit Before Taxes 1
DepTeciaton t Amortization 2
Interest Ex ease 3
Total Cash Available
Existing 1stTD B
Existing 2nd TD C
Ownees Required Draw D
Total Cash Required
Cash Flow
Coverage Ratio
ADOBACKS: DEvucrrons:
1. Profit before tax per tax returns A. Existing loan with
and interim financial statement of secured by 1' TD against the
business, and net profit before (assets of the business andlor real
taxes per the Borrowers Profomna property), in the an;ount of
Year 1 projections. $ interest rate of
%, monthly P&I payments of
2. Depreciation per tax returns, $ maturing in
interim financial statement, and
Borrower's Proforma Year I B. Are owner's drays are required from
projections of business. the Business? Do owners receive
W-2 wages (or other income) from
3. Interest expense per tax returns, outside sources which will continue
interim financial statement, and even after the business is opened?
Borrower's Pro€om to Year 1
projections of business. C. Based on the above, does the
applicant demonstrate the ability to
service their proposed debt and
existing debts with a coverage ratio
Of in Proforma Year 1 (based
on borrower's income and expense
projections) or based on RMA
industry averages for net
profitability?
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48
MAJOR "NEED-BASED" ASSISTANCE FOR
RENOVATING MAJOR VACANCIES AS
CATALYST PROJECTS
Credit Risk Rating System
While the City's Incentive Program is primarily a Grant program and does not anticipate
requiring the applicant to repay the assistance, it is still important to grade the applicant's
ability to service their existing debt and obligations to ensure that City funds are not
wasted in a venture that is not viable.
Alnxost Bankable-Grade 1
Credit is strong in all respects, but circumstances such as banks' legal lending limits,
rapid growth rates, individual bank lending policies (i_e. ban size) have made credit
unavailable elsewhere.
Standard-Grade 2
Typical credits that have demonstrated capacity for repayment from cash flow but which
do not possess adequate collateral and/or sufficient years in business to mitigate
perceived credit risk exposure.
Pass-Grade 3
Start-up businesses and/or credits that possess a historically suspect capacity for
repayment. In addition businesses that may be lacking in proportionate collateral to loan
request. However; the company shows good potential for improvement through newty
acquired business and/or contracts.
Watch-Special Mention Grade 4
Credits which lack adequate historical cash flow to service the debt and possess
disproportionate collateral to mitigate the risk. Credit would be entertained due to the
involvement of strong outside co- /guarantor.
Sub Standard-Grade 5
Credits exhibiting past performance/credit deficiency, which K not corrected could result
in loss.
Doubtful-Grade 6
Loans that are doubtful and where there is a strong potential for future loss due to a
severe deficiency in the financial condition, borrower payment performance, and/or
collateral position/value-
Recommended Loan Loss Reserve Percentages
Grade 1 3.0% Grade 2 3.0% Grade 3 3.0% Grade 4 6.5%
Grade 5 20% Grade 6 50%
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49