2020-10-26 Centre Pointe Dev - Letter to HOA re TOT
October 26, 2020
Desert Resort Management
42635 Melanie Place, Suite 103
Palm Desert, CA 92211
Re: Centre Pointe HOA
The La Quinta City Manager, City Directors, and City Attorney have discussed the Centre
Pointe Development Agreement (DA). including the Transient Occupancy Tax (TOT)
mitigation fee that is paid by the members of the Centre Pointe HOA. The City would like to
continue good faith discussions with designated HOA board members that would allow for
easier tracking of the TOT mitigation fee and make it more equitable for current and future
homeowners.
Attachment 1 to the letter is a summary of possible amendments. The City’s finance
department is available to answer any questions, provide additional information, or consider
any other amendments the HOA would like to discuss.
The City would like to disclose that DA amendments and/or separate implementation
agreements would require the following approvals before being implemented.
City Council review and approval
The City’s legal review and approval
Developer’s approval and legal review
Thank you for your time and consideration. We look forward to future discussions with the
HOA regarding the TOT mitigation fee.
Respectfully,
Karla Romero
Finance Director/City Treasurer
Kromero@laquintaca.gov
760-777-7073
ATTACHMENT 1
Centre Pointe HOA DA Amendments for Consideration
A – Per unit TOT Mitigation Fee -
Reset the base year of the per unit fee starting in 2016 (versus 2013)
and the base year payment ($150/unit) would be adjusted per the CPI
starting in July 2017 for the 2017 billing and would then be adjusted
every year thereafter.
o If the base year is reset to 2016, only the outstanding 2020 year
would be recalculated and with an adjusted bill.
B – TOT Mitigation Threshold
The annual TOT mitigation threshold was formulated based on the assumption
that the Sanctuary Villas (formerly proposed 26 units, but now medical offices)
and Casitas Development consisting of 136 units (40 have been built) would
be built and subject to the fee. (Note: The developer, with the obligation to
construct the 96 remaining units for the Casitas Development, is out of
compliance with governing agreements, as amended, with the City.)
Homewood Suite hotel operations are not associated with the HOA, therefore,
the HOA does not have oversight of the hotels operations, projections, control
of rental rates which determine TOT remitted, or the long-term use of the
hotel cancelling the collection of TOT remittances.
The average annual hotel TOT remittance from 2016 to 2019 was
approximately $523,000, which is below the 2012 base amount of $546,131
and below the current threshold amount of $633,118.
Consider two alternatives to address the Homewood Suites TOT
remittance threshold:
o Recalculate the base amount of the Homewood Suites TOT
remittance threshold ($546,131 in 2012) to a lower value based
on actual and projected revenues.
o Eliminate the Homewood Suites TOT remittance threshold and
replace it with an agreed upon HOA TOT remittance threshold.
Any recalculation of the threshold shall require a professional third-party fiscal
analysis accepted by the City.
o The threshold shall be attained for three years within an eight-
year time frame to remove the TOT mitigation fee.
C – Short-Term Vacation Rentals
The current HOA’s Covenants, Conditions and Restrictions (CCR’s) prohibit
short-term vacation rentals (STVR’s), which is in direct contradiction to the
applicable, statutory Development Agreement (DA), which encourages
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STVR’s. If the threshold is changed from the hotel to the HOA TOT
remittances, the HOA shall amend its CCR’s to allow for STVR’s.
D – Consumer Price Index for TOT mitigation fee and threshold
The $546,131 hotel TOT remittance threshold “may” increase by the
Consumer Price Index (CPI) annually. City Staff recommends the following
updates:
Change “may” to “shall” within the DA, section 3.4.3 Casitas
Development Annual Mitigation Fee: Termination to match section
3.4.7 Consumer Price Index Adjustments, which state the CPI “shall”
be adjusted annually.
Updating the CPI index referenced in section 3.4.7 of the DA from Los
Angeles-Riverside-Orange County to “Riverside-San Bernardino-
Ontario (or successor Index)”. The latter CPI was not in existence
when the DA was signed and adopted.
Add a CPI annual maximum of not to exceed 2% per year.
Allow for negative CPI adjustments should they occur during any year.
E – Legal Fees
Legal fees at City Council-approved rates for reimbursable work are 100%
recoverable as a pass-through payment based on actual costs incurred by the
City Attorney’s Office. The City may consider charging the HOA a fee based
on the portion of the work to complete for the HOA’s requested items, which
shall require DA amendments.
F – Public Facility Fee
Section 3.4.5 Payment of Casitas Development Public Facilities Fee refers to
a 5% fee charged by the HOA and remitted to the City for Casitas
Development rentals exceeding a period of more than 30 days.
The City and HOA do not track or have permits for long-term rentals.
This fee has never been charged in this development.
Staff recommends removing any reference to the Public Facility Fee within
the DA.