HomeMy WebLinkAbout9/4/2002 - STAFF REPORTS DATE: SEPTEMBER 4, 2002
TO: COMMUNITY REDEVELOPMENT AGENCY
FROM: DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT
PUBLIC HEARING RESCINDING PRIOR APPROVAL OF A DISPOSITION AND
DEVELOPMENT AGREEMENT AND APPROVING A NEW DISPOSITION AND
DEVELOPMENT AGREEMENT WITH SCHLPS, LCC FOR DEVELOPMENT OF THE
STAR CANYON RESORT ON THE WEST SIDE OF SOUTH PALM CANYON DRIVE
BETWEEN SUNNY DUNES ROAD AND MESQUITE AVENUE, MERGED PROJECT
AREA NO. 1 (FORMERLY SOUTH PALM CANYON PROJECT AREA).
RECOMMENDATION:
It is recommended that the Agency rescind Resolution No. 1147 adopted on
September 19, 2001 approving a Disposition and Development Agreement
("DDA") with SCHLPS, LLC and approve a new DDA with SCHLPS, LLC to provide
a land write-down to facilitate the development of the Star Canyon Resort on South
Palm Canyon Drive between Sunny Dunes Road and Mesquite Avenue.
SUMMARY:
This resolution rescinds the previously approved DDA and approves a new DDA
with SCHLPS, LLC, the developers of the Star Canyon Resort on South Palm
Canyon Drive. The original DDA was approved on September 19, 2001 for a
resort, which received final land-use approvals from City Council in May 2000, and
featured a 210-room hotel and 264 time share units (over 13,000 intervals). Based
on the analysis of the developer's pro forma, the project had a significant financing
gap that could not be feasibly closed with private sector financing. Through the
DDA the Agency would acquire the hotel site from the land seller for approximately
$4.6 million using the Developers' funds, convey the site to the Developer for
$1.00, and then repay the Developer for the loan, with interest, over a period of 18
years from tax increment generated by both the hotel and time share components
of the project. The present value of the anticipated assistance was $4.6 million.
On July 17, 2002 the City Council approved an applicant-requested land use
change for the subject site from hotel and timeshare to all timeshare resulting in a
total of 255 timeshare (over 19,000 intervals) units to be developed on the site.
This request was due to the developer's inability to secure financing for a
conventional hotel project at the site.
BACKGROUND:
This action rescinds the approval of the Disposition and Development Agreement
(DDA) between the Agency and SCHLPS, LLC from September 19, 2001 and
approves a new, revised DDA reflecting the changes in the project and several of
the deal points.
City Council originally approved the Star Canyon Resort project on May 17, 2000
by adopting a Mitigated Negative Declaration and approving Case 5.0830,
Preliminary Planned Development District 260 and Tentative Parcel Map 29691.
The project consisted of the hotel and vacation ownership units, as well as the
subdivision of the 11.41 acre project site into 9 parcels, subject to conditions. The
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approval was amended on July 17, 2002 to convert the hotel portion of the site to
time share units and make several other minor physical changes to the plan.
The project was originally proposed to be developed in several phases. However,
as the Developer tried to firm up funding commitments, his financial consultant,
Holliday Fenoglio Fowler, L.P., identified several factors in the project financing
that made the project difficult to finance:
1. Star Canyon does not have its own golf course.
2. The average daily rates (ADRs) of existing Palm Springs Hotels are lower
in Palm Springs than in other Coachella Valley cities such as Rancho
Mirage, Indian Wells, and Palm Desert.
3. The seasonality of Palm Springs and the entire Coachella Valley
substantially lowers occupancy levels and average daily rates.
4. The site location is not centralized to the Coachella Valley.
5. There are only one or two comparable hotels in Palm Springs.
6. Competition from "down Valley" cities is a serious threat.
Other factors contributing to the gap included increased site development costs
related to topography and off-site improvements, competitive pressures on the
hotel from other Valley hotels that have received subsidies, the lack of a
convenient golf amenity at the project site, and the seasonality of the hotel industry
in the desert.
In addition, the decline in hotel occupancy and in average daily room rates over
the past two years has made the financing of the hotel portion of the project
increasingly difficult. This difficulty existed before September 11, 2001, but was
exacerbated by the global effects on tourism due to the terrorist acts. The
Developer had proposed in January a revision to the phasing of the plan that
would have allowed the development of the common area and timeshare buildings
but held off on the hotel building until hotel financing was available. The Agency
was concerned that a delay of more than a year or two in the hotel financing would
leave a permanent hole in the project and rob it of its most significant architectural
element—the five-story hotel right on Palm Canyon Drive.
In the end, the Developer was able to secure a commitment from a timeshare
company for project financing, only if the entire project was converted to
timeshares. That change necessitated the revision to the Planning approval, as
well as a change to the DDA.
The Agency financial participation in the project remains as follows:
a) The Developer would make a loan to the Agency of approximately $4.6
million, which would be repaid with interest to the Developer through the
net tax increment generated by both the hotel and time share component of
the project over a period of up to 18 years. The average imputed interest
Star Canyon Resort DDA
September 4, 2002 '
Page 2 - Z-
rate paid on the note, based on calculating the present value's relationship
to the payment stream, is 10.5%.
b) The Developer commits to keeping the project as proposed and approved
as amended, including the architectural upgrades, quality landscaping, and
other components.
c) The Agency would take title to the land from the seller for an amount of
approximately $4,600,000, including the Developer's carry costs. The
appraisal of the land shows the value to be in excess of$4.6 million.
d) The Agency agrees to contribute the land to the project when the project is
fully funded, permits have been obtained for the initial phase, and the
Developer is prepared to commence construction.
e) The Developer will construct the resort in phases, and receive repayment
of the Agency note through the tax increment of the project, net of pass-
throughs to other taxing agencies and housing setaside payments, over 18
years, with the present value of this contribution projected to be $4.6
million. (The annual value of projected assistance will rise from $175,400
in Year 1 to $769,746 in Year 18, or$10.4 million over 18 years.)
f) The Agency would retain reverter rights if the Developer fails to proceed or
complete the project. Moreover, the Agency will suspend the assistance
payments under the note if the Developer fails to proceed or defaults under
the terms of the Agreement.
g) The Developer also agrees to place an additional fee on the time share
intervals, equal to $28.50 per full interval per year, payable through the
HOA payment. That fee would be paid to the City to reimburse the City for
the public improvements and other area investment that benefits the
project. The total amount of tax benefit to the City is expected to be over
$900,000 per year once the project is built out.
The project, as proposed by the Developer, is extremely attractive and would
provide an economic jump-start to the South Palm Canyon Drive area, which has
lagged behind the downtown and North Palm Canyon Drive areas in revitalization.
While this DDA commits all of the property tax increment from the project to the
loan repayment, it will spur additional development in the area that would have not
otherwise occurred, it will also develop a flow of TOT, development fees and sales
taxes to the City with little "cannibalization" of existing Palm Springs hoteliers.
A separate agreement between the Developer and the City shall allow the owners
or guests at the resort to receive reduced greens fees at the Tahquitz Creek Golf
Resort owned by the City, as an incentive to produce more rounds of golf at the
course, as well as be an attractive amenity for those buying or staying at the
resort. The intent in building the City's Resort Course was to try to develop more
golf-related tourism in the City.
Star Canyon Resort DDA
September 4,2002
Page 3
A Summary Report describing the purchase and sale of the property, as required
by California Health and Safety Code Section 33433 (a), is enclosed with the
resolution.
4 r i 4,1
J HN . RAY
Direct r of Comm ity and Economic Development
APPROVED
m
Executive Director
ATTACHMENTS:
1. Resolution
2. Disposition and Development Agreement
3. Public Hearing Notice
4. City Council Resolution on findings per Section 33445
5. City Council Concurring Resolution
6. Summary Report
Star Canyon Resort DDA
September 4,2002
Page 4 � ^
CITY OF PALM SPRINGS
NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN that the Community Redevelopment Agency of the City of Palm Springs and
the City of Palm Springs will hold a Public Hearing in the City Council Chambers, located at 3200 E.
Tahquitz Canyon Way, Palm Springs, California 92262, beginning at 7:00 p.m.,Wednesday,September
4, 2002, to consider the following:
Rescinding Prior Approval of a Disposition and Development Agreement and Approving a New
Disposition and Development Agreement with SCHLPS, LLC for approximately 11 acres on the west
side of South Palm Canyon Drive between Sunny Dunes Road and Mesquite Road, Palm Springs,
California 92264
The Community Redevelopment Agency of the City of Palm Springs ("Agency's proposes to adopt a
new Disposition and Development Agreement ("DDA' with SCHLPS, LLC. To approve the DDA, the
Agency and the City of Palm Springs are required to make certain findings pursuant to Health and
Safety Code Sections 33421.1, 33433 and 33445 and prior to making those findings, a Public Hearing
is held to receive public input on the matter.
The original Disposition and Development Agreement was approved on September 19, 2001. The DDA
now being considered proposes to have the Agency purchase an approximately 11 acre site for the
development of the Star Canyon Resort, roughly bounded by South Palm Canyon Drive on the east and
Belardo Road on the west, south of Tahquitz Creek and north of Magruder Chevrolet. The Agency will
write down the land cost and convey the parcel to the Developer, in exchange, the Developer agrees
to construct the resort on the site and all necessary public improvements without any financial
assistance from the Agency.
All interested persons are invited to attend the Public Hearing and express opinions on the item listed
above. If you challenge the nature of the proposed action in court, you may be limited to raising only
those issues you or someone else raised at the Public Hearing described in this notice, or in written
correspondence delivered to the City Clerk, at the address listed above, at or prior to the Public
Hearing.
Members of the public may view this document and all referenced documents in the Community and
Economic Development Department, City Hall, and submit written comments to the Community
Redevelopment Agency at or prior to the Community Redevelopment Agency Meeting at or prior to the
public hearing described in this notice.
Further information, including a copy of the Amendment and Resolution, prepared in accordance with
Health and Safety Code Section 33433, is available in the Office of the City Clerk at the above address.
Dated: August 16, 2002
Patricia A. Sanders
Assistant Secretary
Publish: August 20, 2002
August 27, 2002
SUMMARY REPORT:
DISPOSITION AND DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY
AND
SCHLPS, LLC, a California Limited Liability Company
SEPTEMBER2002
INTRODUCTION
Before real property acquired by a Community Redevelopment Agency with tax increment
proceeds may be sold or leased, the transaction must be approved by the Agency Board in
accordance with California Health and Safety Code Section 33433. This Section requires a
"Summary Report", which describes and specifies certain information in regard to the proposed
transaction, be available for public inspection.
DESCRIPTION OF THE PROPOSED AGREEMENT
Site and Interests to be Conveyed
The Site consists of a single parcel of land of approximately 11.41 acres, subdivided as part of
the development into 9 parcels. The Site is located on South Palm Canyon Drive between Sunny
Dunes Drive and Mesquite Drive and backs up to Belardo Road. The Developers of the Property,
SCHLPS, LLC, are seeking Agency financial assistance in developing a proposed 375-room
vacation ownership resort. Part of the assistance will be that the Agency shall purchase the land
from the current owner and convey it back to the project when the project is ready to proceed to
the construction phase. The Developerwill lend the Agency the funds to complete the transaction,
which the Agency shall repay over a period of 18 years to the Developer through the tax increment
the project has produced, including both the hotel and time share portions.
Proposed Development
The Developer is building 375 luxury vacation ownership units on the 11.41 acre site, in addition
to underground parking,water features and other site amenities, and restaurants. The time share
units will be sold in intervals and will be able to be divided into smaller configurations and fractional
shares to increase the total number of intervals available for sale. The project contains significant
architectural and landscaping upgrades as well significant off-site improvements. The project is
in an area that has lagged behind other areas of Palm Canyon Drive in new investment and will
provide a major economic boost to the area.
Financing
The Developer has received commitments of debt- and equity financing sufficient to ensure the
project will be built. Within the project financing structure is an equity gap of approximately$4.60
million, which will be covered by the amount of the Agency financial participation. The Agency's
percentage share of the overall project cost is approximately 6%and counts as Developer's equity
in the financing structure.
Agency Responsibilities
The Agency agrees to repaythe Developerforthe$4,600,000land acquisition costs, plus interest,
for a period of up to 18 years. The maximum amount paid over the period is $10.4 million. The
loan payment shall be made solely from the tax increment generated by the project; should a
portion of the project be undeveloped and the property tax increment not created, the Agency is
not obligated to pay non-project-based revenues to repay the note. All tax increment calculations
are net of pass-through obligations to other taxing entities, as well as the low/mod housing
setaside.
Developer Responsibilities
The developer commits to keeping the project as originally proposed, including the architectural
upgrades, quality landscaping, and other components. The Agency's standard terms and
UA_ fi7
conditions, including non-discrimination and maintenance covenants, and other terms and
conditions remain as in Disposition and Development Agreement for Developer.
COST OF AGREEMENT TO THE AGENCY
The Agency will commit an amount of up to $10,400,000 to the project from project-created tax
increment over a period of up to 18 years to repay a loan made by the Developer to the Agency
to execute the land sale from the Current Owner to the Agency. The present value of the
assistance, based on Year 2002 dollars, is approximately $4,600,000.
Proof of Publication
In Newspaper
STATE OF CALIFORNIA
County of Riverside
Laura Reyes says:
1. 1 am a citizen of the United States, a
resident of the City of Indio, County of
Riverside, State of California, and over the CITY OF PALM SPRINGS
age of 18 years. NOTICE OF PUBLIC HEARING
2. 1 am the Office & Production Manager of NOTICE IS HEREBY GIVEN that the Community
The Public Record, a f o newspaper general Redevelopment Agency of the City.1 Palm Spain and the
City of Palm Springs will hold a Public Hearelg in the City
circulation printed and published in the City of Council Chambers,localed at 320U E.Tedqudz Canyon Way.
Palm Springs, Califomia 92262, beginning at 7:00 p.m..
Palm Springs, County of Riverside, State of Wednesday,September 4,2002.to consider the foloWing:
California. Said The Public Record is a Rescinding Prwr Approval ofa Disposition and Development
Agreement and Approving a New Disposition and
newspaper of general circulation as that term Development Agreement wile SCHI-PS,LLC for Approximate-
ly 11 acres on the west side of South Palm Canyon Drive
is defined in Government Code section 6000, between Sunny Dunes Road and Mesquite Road,Palm
its status as such havingbeen established b Springs,CAIHornle 92264
Y The Community Radevebpmant Agency of Me City of
judicial decree of the Superior Court of the Palm SpringsrAg.ncy')proposes to adopt A new oLbourrorl
State of California in and for the Court of aM Development Agrpment I-DDA-)with SCHLPS,U.C. To
County approve me DDA,the Agency AM the City of P Wit Spnngs are
Riverside in Proceeding No. Indio 49271, requireo to make uNin findings pursuant to Health and Safety
o Code=isms 33421.1,33433 and 33445 AM prior to makkV
dated March 31, 1987, entered in Judgment ., those findings,a Public Hearing is hold to receive public Input
on me matter.
Book No. 129, page 355, on March 31, 1987. The original Dispcanwn and Oov.lopmem Agr«mant
I The Public Record is a news a er of was apProved M September 19.2001.The DOA now being
P P convolved proposes to have Me Agency Purchase en approx-
general circulation ascertained and established innately 11 acre site lot be development of the Star Canyon
Resort,roughly bounded by South Palm Canyon Drive on Me
in the City of Palm Springs in the County of out and B.Iardo Road on the at.south of Tahqultx Crook
Riverside, State of California, Case No. RIC AM north of Magruder Chevrolet. The Agency Will vimg down
the land cost AM convey the parcel to the Develops, in
358286, Filed June 8, 2001. exchange,the Devsbpw agrees to mnstrucl the resort on Me
she and all necessary public improvements without Any Main
4. The notice, of which the annexed is a true cial asWaanca from the Agency.
printed copy was published in the newspaper All Inlerested person=are invited to attend the Public
Hearing And express opmans on has Hem listed atop. II you
on the following publication dates to wit: challeige he nature of the proposed action in court,you may
August 20, 2002 us limited to raising only those sup you or aornsone ol.a
rnaad of the Public Hearing daacrib.d In this notb.,or h wrk-
August 27, 2002 an comeepmckince delivered to the City Clark.M Ind address
listed above,at or prior to MA Pubic Hearing.
Meml rs of ba public may view this document and all
I certify under penalty of perjury that the referenced documents In the Community and Economic
above Is true and Correct. Dp.bpment Deperknem,City Hall,AM!Submit wrid.n con-
Monts to ins,community R.d.v.lopment Agency at or pnor to
Dated at Palm Springs, California, this 27th me Community Redevelopment AganctrM..dngator Prior to
din of August, 2002. Ma Public hearkg described In this notice.
Y 9 Further Infomwbn,Including a copy of the Amendm.nl
AM R..butbn,prepared In Acwderc.with Ha ah and Solely
Cole Section 334M.I.available in the Office of the City Clow
at Me aboa Address.
Dated: August la,2002 Patdd.A.Senders
Assistant Sao.tef
August 20.27,2=
r Reyes
O e & Prod on anager
jr6 �
a
RESOLUTION NO.
OF THE COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF PALM SPRINGS, CALIFORNIA,
RESCINDING PRIOR APPROVAL OF A DISPOSITION
AND DEVELOPMENT AGREEMENT AND APPROVING A
NEW DISPOSITION AND DEVELOPMENT AGREEMENT
WITH SCHLPS, LLC FOR APPROXIMATELY 11 ACRES
ON THE WEST SIDE OF SOUTH PALM CANYON DRIVE
BETWEEN SUNNY DUNES ROAD AND MESQUITE
AVENUE, MERGED PROJECT AREA NO. 1 (FORMERLY
SOUTH PALM CANYON PROJECT AREA).
WHEREAS, the Community Redevelopment Agency of the City of Palm Springs,
California ("Agency") is constituted under the Community Redevelopment Law
(California Health and Safety Code Section 33000 et. seq.) to carry out the purpose as
the redevelopment in the City of Palm Springs ("the City"); and
WHEREAS, the Agency approved a Disposition and Development Agreement, pursuant
to Resolution No. 1147 adopted on September 19, 2001, to effectuate the development
of a resort hotel and vacation ownership project on South Palm Canyon Drive between
Mesquite Avenue and Sunny Dunes Drive in Merged Project Area No. 1; and
WHEREAS, in the process of implementing the terms of the DDA, the Developer
encountered significant obstacles to hotel financing of the Project, which necessitated
significant changes to the nature of the Project's financing structure, requiring an
amendment to the DDA or the adoption of a new DDA ; and
WHEREAS, a Notice of Public Hearing concerning the rescission of the prior approval of
the DDA and approving a new DDA was published in accordance with applicable law;
and
WHEREAS, the California Redevelopment Law requires certain findings by the
legislative body before the Agency can enter into this Agreement, as follows:
a) Section 33421.2 - that the (City Council) find that the provision of such
assistance will effectuate the Redevelopment Plan;
b) Section 33445 - that the (City Council) find that the improvements benefit
the Project Area; that no other means of financing the improvements are
available; that payment of the funds will assist in eliminating blight, and
that assistance to the project is consistent with the Agency's adopted Five
Year Implementation Plan.
WHEREAS, the Agency has considered the staff report, and all the information,
testimony and evidence provided during the public hearing on September 4, 2002.
NOW, THEREFORE, BE IT RESOLVED by the Community Redevelopment Agency of
the City of Palm Springs as follows:
SECTION 1. The above recitals are true and correct and incorporated herein.
Star Canyon Resort DDA /1 pr� —
September 4,2002 /(C/,(/�f cq
Page 5
SECTION 2. Pursuant to the California Environmental Quality Act (CEQA), the
Community Redevelopment Agency finds as follows:
a) In connection with the approval of the DDA, the project
received approval of a Mitigated Negative Declaration on
May 17, 2000 based on the preparation of an Initial Study
and the recommendation of the Planning Commission.
Mitigation measures are included in the project design and
adopted as part of the Conditions of Approval for the
Project.
2. The Agency finds that the Planning Commission
adequately discussed the potential significant
environmental effects of the proposed project (land use,
traffic/circulation, parking, air quality, noise, aesthetics,
geology/soils, water quality, drainage, public utilities, public
safety, archaeological/historic resources and light and
glare). The Community Redevelopment Agency further
finds that the Mitigated Negative Declaration reflects its
independent judgment.
SECTION 3. The Developer proposes to construct a project of at least 350
vacation ownership units (time shares); underground parking;
water features and other amenities; and other landscaping and
on-site improvements.
SECTION 4. The Developer is required to make certain street improvements in
keeping with City codes. Such offsite improvements are
imperative to this project, such as reconstructing curb, gutter and
sidewalks along Belardo Road and South Palm Canyon Drive.
This project improves a blighted parcel in Merged Redevelopment
Project Area #1 (formerly South Palm Canyon) and will increase
tax increment to the Agency and development fees, transient
occupancy tax and sales tax collections to the City.
SECTION 5. The Agency agrees, through this Disposition and Development
Agreement, to borrow approximately $4,600,000 from the
Developer to acquire the 11.41 acre site from the seller, and to
acquire fee title to the site. The Agency agrees to contribute the
land to the project for $1.00 when the project is fully funded, all
permits have been obtained, and the Developer is prepared to
commence construction. The Agency would retain reverter rights
if the Developer fails to proceed or complete the project. The
Agency would then repay the loan from the net tax increment
generated by the project, including both the hotel and time share
portions. Over the 18 years the loan is to be repaid, the total tax
increment paid to the Developer will be close to $10.4 million. The
present value of the assistance, however, remains $4.6 million. In
addition, the Developer agrees to place an "development
reimbursement' fee on the time share units in the amount of
$28.50 per interval per year, payable through the HOA fees.
Star Canyon Resort DDA
September 4,2002
Page 6 �Q Q
SECTION 6. The Agency does hereby find and determine as follows:
(a) The property is currently vacant and lies between
Magruder Chevrolet on the south and the Rock
Garden Cafe to the north. The total site is
approximately 11.41 acres. Because of the
substantial amount of public improvements
required as part of the development, including the
undergrounding of utilities on Belardo Road, a
landscaped median island and traffic signal on
South Palm Canyon Drive, street widening on
South Palm Canyon Drive, and sidewalks,
bikelanes, curbs and gutters, it is only feasible for a
major development such as the Star Canyon
Resort to develop the property and carry the
overhead cost of the public improvements. In
addition, there are topographic challenges with
grade changes and a significant amount of boulder
coverage on the site, which also raises the cost of
a new development.
(b) The DDA effectuates the purposes of the
Community Redevelopment Law by reversing or
alleviating any serious physical, social, and
economic burden of the Community which cannot
reasonably be expected to be reversed or
alleviated by private enterprise acting alone, in that
the assistance will facilitate the development and
operation of the resort hotel development causing
the upgrade of the property, placing the property in
the hands of a first class and experienced resort
operator, in order to increase development fee
revenue and sales tax revenue and attract
additional commercial development within the City
and increase the City's tax base.
(c) The DDA effectuates the purposes of the
Community Redevelopment Law as it is intended to
eliminate blight and promote the health, safety and
general welfare of the people of Palm Springs.
SECTION 7. The proposed project is consistent with the Implementation
Plan for Merged Project Area #1 (formerly the South Palm
Canyon Project Area), and this project will increase tax
increment and create new commercial activities in the
project area. It will increase the City's commercial sector
by developing a major new destination property in the City,
in order to capture a portion of the significant resort and
leisure tourism leakage that occurs in Palm Springs.
Star Canyon Resort DDA q
September 4,2002 i �-
Page 7
SECTION 8. Based on foregoing reasons, this DDA is hereby approved and
incorporated herein by this reference.
SECTION 9. The Chairman, or his designee, is hereby authorized to execute
on behalf of the Agency the Disposition and Development
Agreement and other documents necessary to the Agreement,
and make minor changes as may be deemed necessary, in a form
approved by Agency Counsel.
ADOPTED this day of 2002.
AYES:
NOES:
ABSENT:
ATTEST: COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF PALM SPRINGS, CALIFORNIA
By
Assistant Secretary Chairman
REVIEWED &APPROVED
Star Canyon Resort DDA
September 4,2002
Page 8