ORD 490 ORDINANCE NO. 490
AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES
ESTABLISHING A HOTEL INCENTIVE PROGRAM AND AMENDING THE
RANCHO PALOS VERDES MUNICIPAL CODE.
THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES HEREBY
ORDAINS AS FOLLOWS:
Section 1. Title 3 of the Rancho Palos Verdes Municipal Code is hereby amended
by adding new Chapter 3.48 thereto to read as follows:
3.48.010 Purpose.
The purpose of this chapter is to provide support for the operation and maintenance of
first class hotel facilities within the City of Rancho Palos Verdes, which will provide benefits to
the City's residents, enhance the tourist and travel experience for visitors to the City of Rancho
Palos Verdes, increase the sales tax revenue to the City, provide transient occupancy tax
revenue to the City, and provide attractive amenities to the public and desirable visitor serving
facilities and experiences along the California coast. In the implementation of this program, the
City Council finds:
(a) The general welfare and material well being of the residents of the City of
Rancho Palos Verdes depend in large measure upon the facilities that are available to the
public and the City's residents.
(b) The operation and maintenance of first class hotels in the City of Rancho Palos
Verdes will create desirable visitor serving facilities that will contribute to the growth and
expansion of tourism and travel opportunities in the City, provide employment opportunities for
the residents of the City, provide new tax revenues to the City, and promote and enhance the
economy of the City.
(c) It is in the best interest of the City of Rancho Palos Verdes to induce and
encourage the opening, operation and maintenance of first class hotel facilities that would not
otherwise be successful, thereby creating new sources of tax revenues for the City's general
fund that supports the public services that the City provides to its residents.
(d) The authority granted and the purposes to be accomplished by this chapter are
properly local governmental and public purposes for which public funds can be expended and
that the operation and maintenance of first class hotels is of paramount importance to the City of
Rancho Palos Verdes, its residents, and businesses.
3.48.020 Definitions.
For the provisions of this chapter, the following definitions shall apply:
"Eligible Costs" means start-up costs associated with the opening of a new Eligible
Hotel for which existing construction loan funds (not including the loan funds contemplated by
Section 3.48.090 below) and existing equity funds are not available, and net operating losses
incurred during the Operating Period of a new Eligible Hotel for which such funds (not including
the loan funds contemplated by Section 3.48.090) are not available. Equity funds and
construction loan funds designated for a different purpose necessary for the Eligible Hotel (such
as for capital improvements and replacements and reserves) shall not constitute available
funds. In calculating net operating losses, costs deducted from income can include costs of debt
service, marketing costs, property taxes, working capital, and all other operating costs paid by
an Eligible Hotel during the Operating Period.
"Eligible Hotel" means a First Class Hotel or resort containing 250 or more guest rooms
which can accommodate 250 or more guests for compensation, and where the guest rooms are
designed and intended as transient accommodations.
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"First Class Hotel" means a hotel or resort which is, or is of a quality so that it will be,
rated as a three star or three diamond hotel or higher under the rating criteria established for
hotels by the American Automobile Association, J.D. Power &Associates, Mobil Oil Company,
or comparable hotel rating entity, and which includes operation of the hotel on a twenty-four
hours per day/seven days a week basis with housekeeping services, food and beverage
services, room services, banquet and meeting services, including at least 20,000 square feet of
meeting/banquet space, concierge and bell services, and parking services.
"Maximum Amount" means the lesser of(i) eighty percent (80%) of the total amount of
Transient Occupancy Tax collected and remitted to the City with respect to the Operating Period
by an Eligible Hotel that is enrolled in the City's Hotel Operations Incentive Program, or
(ii) $8,200,000.00.
"Operating Covenants" means the covenants described in Section 3.48.030 of this
code.
"Operating Period" means a period commencing on the date designated in the Notice
of Participation (but no later than the date which is two (2) months after the grand opening of the
Eligible Hotel), and ending on the date which is the last day of the 34th month after such
designated commencement date.
"Owner" means the person or entity that is the owner of an Eligible Hotel at the
beginning of the Operating Period and each successor owner of the Eligible Hotel.
"Transient Occupancy" means an uninterrupted stay of no more than twenty-nine (29)
consecutive calendar days.
"TOT" means the ten percent (10%) Transient Occupancy Tax levied by the City as of
the date this ordinance is adopted, and shall not include any increases in such Transient
Occupancy Tax rate enacted or adopted after the date on which this ordinance is adopted.
3.48.030 Eligibility to Participate in Hotel Operating Incentive Program.
To qualify for the hotel operations incentive program, the Owner of an Eligible Hotel
shall:
(a) Complete and submit to the City Manager an application to participate in the
incentive program established in this Chapter, which application shall be on the form provided
by the City;
(b) Execute and record against the Eligible Hotel property a Notice of Participation,
which shall include provisions regarding continuing use, maintenance, non-discrimination,
discounts to be offered to residents of the City of Rancho Palos Verdes during the term of
participation in the incentive program, the terms of repayment of the TOT to the City, and such
other provisions as the City Council, in its sole discretion, may reasonably determine are
necessary or appropriate to preserve the goals and intent of this Chapter.
(c) Execute an agreement to indemnify and defend the City against any claims or
lawsuits that are brought against the City (and liabilities, damages and costs incurred by the City
in connection therewith) as a result of the application of this ordinance to that Eligible Hotel.
(d) Pay the City for all of City's costs associated with the Eligible Hotel's enrollment
in the Hotel Operating Incentive Program, including, but not limited to, the due diligence
performed by the City and preparation of documents.
(e) Provide the City with audited financial statements and evidence satisfactory to
City that: (i) the Eligible Hotel has at least $10,000,000 in committed funds available to fund
post-opening needs for the Eligible Hotel, (ii) the Owner is not in default under any loan
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documents evidencing a loan secured in whole or in part by the Eligible Hotel, and (iii) the
Eligible Hotel is in compliance with its applicable conditions of approval.
(f) Execute any other agreements containing provisions required by the City as a
condition of participation in the Hotel Operating Incentive Program.
3.48.040 Operating Incentive Program.
(a) After an Eligible Hotel satisfies the requirements of Section 3.48.030 and enrolls
in the Hotel Incentive Program, except as set forth in Section 3.48.040 (b) below, the City shall
pay or"rebate" to an Owner of an Eligible Hotel or its designee an amount equal to eighty
percent (80%) of the TOT collected by the Eligible Hotel for the Operating Period and remitted
to the City, until the Maximum Amount has been paid to such Owner or its designee. The City
will rebate the TOT to such Owner or its designee within five (5) business days of receipt of the
TOT from the Eligible Hotel and after verification by the City, pursuant to an accounting review,
of the amount of TOT that has been collected and remitted to the City. The rebated TOT shall
be remitted to the Owner or the designee of the Owner for the entire Operating Period or until
the Owner has received the Maximum Amount, whichever occurs first, except as set forth in
Section 3.48.040 (b) below.
(b) Without regard to Section 3.48.040 (a), the rebates shall be suspended, after
providing written notice to the Owner and thirty (30) days within which to cure the violation,
during any period when: (a) the Owner fails to remit TOT to the City; (b) the operation of the
Eligible Hotel ceases or substantially ceases; (c) the Eligible Hotel ceases to be operated as a
First Class Hotel; (d) the Eligible Hotel ceases to comply with the provisions of this Chapter 3.48
of the Code; (e) the Owner fails, within one hundred eighty (180) days after the end of each
fiscal year of Owner starting with fiscal year 2008, to deliver to the City annual audited financial
statements for the Eligible Hotel which include an unqualified opinion from the auditor except for
a qualification relating to or resulting from the sufficiency or insufficiency of capital; or(f)the
Owner of an Eligible Hotel on the date such Owner elects to have such Eligible Hotel participate
in the Hotel Operation Incentive Program applies for a reduction in such Eligible Hotel's ad
valorem real property tax assessment, or in the tax assessment of any for-sale portion of such
Eligible Hotel, which, if successful, would reduce such assessment to a value which is lower
than the value agreed upon by such Owner in an agreement with the City executed prior to or
concurrently with the Owner's making such election, except in the event of a force majeure
event (such as damage or destruction)which materially reduces the use of all or a portion of
the Eligible Hotel or for-sale portion thereof. The preceding clause (f) shall not prohibit either
any reassessment resulting from a change of ownership of such Eligible Hotel or for-sale portion
thereof, nor prohibit any challenge to any such reassessment.
3.48.050 Resident Discounts.
Each Eligible Hotel which has enrolled in the Hotel Incentive Program is required, at all
times until the Eligible Hotel has reimbursed the City for the rebated TOT in accordance with the
provisions of Section 3.48.060, to provide the following discounts to any resident of the City of
Rancho Palos Verdes who has registered with such Eligible Hotel:
(a) a discount of 25% off the best available room rate for a comparable room on a
comparable date;
(b) a discount of 10% off fees for use at any time of any spa and golf course that is
located at the Eligible Hotel;
(c) a discount of 20% off fees for use during off-peak times of any golf course that is
located at the Eligible Hotel; and
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(d) a discount of 10% off food and beverage charges at the Eligible Hotel, including
charges for alcoholic beverages.
The participation in this program shall be memorialized in the Notice of Participation
referred to in Section 3.48.130, which shall be recorded with the Office of the Los Angeles
County Recorder.
3.48.060 Interest; Repayment.
The Maximum Amount (or portion thereof) received by an Owner or its designee shall be
repaid to the City as follows:
(a) Each rebate of TOT to the Eligible Hotel shall accrue interest from the date made
until the date repaid at 3-month LIBOR plus a margin of 800 basis points and will be added to
the rebate balance quarterly (resulting in quarterly compounding). If the Eligible Hotel elects to
extend the repayment date for one year beyond the initial repayment date, the interest rate
during the period of the one-year extension shall be 3-month LIBOR plus 1,100 basis points. In
the event the balance is not paid in full on or before the date of the one-year extension, the
interest rate shall be 3-month LIBOR plus 1,300 basis points. However, in no event shall the
interest rate exceed the maximum interest rate permitted by applicable law.
(b) Upon each sale or refinancing of a participating Eligible Hotel after the date on
which the Owner of such Eligible Hotel elects to participate in the Hotel Operation Incentive
Program, the City shall be paid, through the escrow established for such sale or refinancing, an
amount equal to 100% of the net proceeds (calculated after (i) repayment of all amounts owed
under all loans secured by the Eligible Hotel at the time of such sale or refinancing, and (ii)
subtraction from the gross proceeds of all costs of such sale or refinancing), until the Maximum
Amount, together with any accrued interest, has been repaid in full. For purposes of clarity, in
the event that an Owner takes back a purchase money loan upon a sale, the principal amount of
such loan shall be deemed to be cash received for purposes of the calculation described in the
preceding sentence. Except with the consent of the City, the Owner of an Eligible Hotel on the
date such Owner elects to have such Eligible Hotel participate in the Hotel Operation Incentive
Program shall not, after the date on which such Owner elects to participate in the Hotel
Operation Incentive Program, sign a loan amendment which will have the effect of increasing
the aggregate principal amount of all loans then secured by the Eligible Hotel by more than
$3,000,000, which $3,000,000 must be expended on costs incurred in connection with the
ownership, development and operation of the Eligible Hotel. For purposes of clarity: (x) nothing
in the preceding sentence shall prohibit such Owner from increasing the principal balance of
one existing loan in order to use the proceeds to pay down the principal balance of another
existing loan; and (y) nothing in the preceding sentence shall prohibit an Owner from executing
and encumbering the Eligible Hotel with a security instrument securing a larger principal
balance than existed as of the date of such election, if such security instrument either secures a
new refinancing loan or secures a loan the proceeds of which are used to purchase the Eligible
Hotel, provided that in each case such security instrument is executed as part of a refinancing
or sale transaction in which net proceeds are paid to the City as set forth in the first sentence of
this Section 3.48.060 (b).
(c) In any event, the Maximum Amount (or portion thereof) that has been rebated by
the City to an Owner of an Eligible Hotel (or its designee) shall be repaid in full to the City,
together with accrued interest, no later than four years after December 31st of the first year
when the TOT rebate payment is made to the Owner or its designee by the City; however, the
Owner may extend such repayment date by one (1) year upon written notice given to City at
least ninety (90) days prior to the initial repayment date.
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(d) No distributions may be made to the equity investors in the Owner of a
participating Eligible Hotel until the City has been repaid in full.
(e) Upon repayment in full, the City and the Owner of the participating Eligible Hotel
shall execute, and the City shall record, a notice of termination of the Notice of Participation.
3.48.070 Use of Incentive Payments.
The incentive payments may be used by the Owner of an Eligible Hotel (i) to pay for
Eligible Costs, or (ii) to reimburse a lender (as described in Section 3.48.090) who has
advanced to such Owner funds which were used to pay Eligible Costs.
3.48.090 Designation of Recipient of Incentive Payments.
An Owner may use the projected Maximum Amount as collateral for a loan, the funds
from which are used to pay Eligible Costs. If the Owner elects to obtain such a loan, then the
Owner may designate in writing the party or parties who will receive the entire TOT rebate up to
the Maximum Amount. Once such designation is made, the designee may only be changed by
the original designating party or by the designated party, and not by the City nor by any
subsequent Owner of the Eligible Hotel.
3.48.100 General Fund Revenues.
All transient occupancy tax revenues or transient occupancy tax increment remitted to
the City by an Owner of an Eligible Hotel that is subject to the Operating Covenants, as
provided in this chapter, shall be deemed general fund revenues of the City and shall be
deposited in the City's general fund.
3.48.110 Administrative Rules and Regulations.
Consistent with the intent and goals of this chapter, the City Manager or the Director of
Finance may adopt administrative rules and regulations for implementation and furtherance of
the requirements of this chapter.
3.48.120 Remedies
Failure by an Eligible Hotel which has elected to participate in the incentive program
established by this ordinance to comply with the terms of this ordinance will constitute: (i) a
violation of the terms of the business license for such Eligible Hotel, and (ii) a violation of the
conditions'of approval for such Eligible Hotel, and the City may then, after providing notice to
the Owner and thirty (30) days within which to cure the violation, in its sole and absolute
discretion revoke the business license, conditional use permit(s) and certificate(s) of occupancy
for the Eligible Hotel, and/or exercise any and all other remedies available to the City. In the
event that distributions are made to equity investors in the Owner of an Eligible Hotel before the
Maximum Amount, together with all interest accrued thereon, is repaid in full, then the City may
recover such distributions from the party to whom they were distributed. Promptly after applying
to participate in the incentive program, the Owner shall inform all such equity investors in writing
of this prohibition on distributions and the City's right to recover distributions. In the event that
the Maximum Amount, together with all accrued interest, is not repaid as set forth in this
Chapter, in addition to any other remedy set forth in this Section 3.48.120, the City may sue to
seek a judgment for the amount not paid when due, and if a judgment is obtained, may take all
steps permitted under California law to enforce such judgment, including by recording a
judgment lien against the assets of Owner, including the Eligible Hotel.
3.48.130 Required Language for Form of Notice of Participation.
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Each Notice of Participation in this Hotel Incentive Program shall include the following
language (in addition to the provisions described in Section 3.48.030 above):
"This Notice confirms that the real property encumbered by this Notice is a Hotel that has
agreed to participate in the Hotel Incentive Ordinance adopted by the City of Rancho Palos
Verdes (Chapter 3.48 of the Rancho Palos Verdes Municipal Code). Such ordinance requires
that 100% of the net proceeds of any sale or refinancing of such real property must be paid to
the City until the Maximum Amount (as defined in Chapter 3.48) together with all interest
accrued thereon has been paid in full, Failure to comply with the terms of the ordinance will
constitute a violation of the terms of the business license and operating conditions of such hotel
and the City may then revoke the business license, conditional use permit(s) and certificate(s) of
occupancy for the Eligible Hotel. Foreclosure of any lien senior to this Notice will not extinguish
any of the obligations under the Hotel Incentive Ordinance.
PASSED, APPROVED AND ADOPTED, this 7th day of July, 2009.
M yor
ATTEST:
City Clerk
State of California )
County of Los Angeles ) ss
City of Rancho Palos Verdes )
I, Carla Morreale, City Clerk of the City of Rancho Palos Verdes, do hereby
certify that the whole number of members of the City Council of said City is five; that the
foregoing Ordinance No. 490 passed first reading on June 30, 2009, was duly and regularly
adopted by the City Council of said City at a regular meeting thereof held on July 7, 2009 and
that the same was passed and adopted by the following roll call vote:
Ayes: Stern, Wolowicz, and Clark
Noes: None
Absent: Long (Recused); Gardiner
Abstain: None
City Clerk
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RANCHO PALOS
VERDES
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS AFFIDAVIT OF POSTING
CITY OF RANCHO PALOS VERDES)
The undersigned, being first duly sworn, deposes and says:
That at all times herein mentioned, she was and now is the appointed City Clerk
of the City of Rancho Palos Verdes;
That on July 8, 2009, she caused to be posted the following document entitled:
ORDINANCE NO. 490, AN ORDINANCE OF THE CITY OF RANCHO PALOS
VERDES ESTABLISHING A HOTEL INCENTIVE PROGRAM AND AMENDING
THE RANCHO PALOS VERDES MUNICIPAL CODE, a copy of which is attached
hereto, in the following locations:
City Hall Ladera Linda Community Center
30940 Hawthorne Blvd. 32201 Forrestal Drive
Rancho Palos Verdes Rancho Palos Verdes
Hesse Park
29301 Hawthorne Blvd.
Rancho Palos Verdes
I certify under penalty of perjury that the foregoing is a true and correct affidavit of
posting.
eel& CA IV,P-dA-
City Clerk
W:\FORMS\Form 150-Affidavit of Posting Ordinance No.490.doc