2019 Economic Development Subsidy ReportsCity of La Quinta
CITY COUNCIL MEETING: November 5, 2019
STAFF REPORT
AGENDA TITLE: RECEIVE AND FILE REPORTS FOR ACTIVE ECONOMIC
SUBSIDY AGREEMENTS
RECOMMENDATION
Receive and file reports for active Economic Subsidy Agreements.
EXECUTIVE SUMMARY
Pursuant to state law, local agencies shall issue a report for each
economic development subsidy and shall hold a public haring to consider
any related written or oral testimony.
The City has two active Economic Subsidy Agreements (Agreements) with
One Eleven La Quinta, LLC and SilverRock Development Company, LLC.
Both Agreements are in compliance with their terms and conditions.
FISCAL IMPACT - None
BACKGROUND/ANALYSIS
In January 1, 2014, Assembly Bill 562 added Section 53083 to the California
Government Code, which requires local agencies to issue a report and hold a
public hearing every five years after granting an economic development
subsidy.
The City has Agreements with One Eleven La Quinta, LLC (Attachment 1) and
SilverRock Development Company, LLC. (Attachment 2). The Agreements
promote the City’s economy by increasing employment, enhancing
infrastructure, developing vacant land, increasing diversification in the local
economy, and enhancing tax revenues for the City.
A public hearing notice was published with the Desert Sun on October 25, 2019
pursuant with state law.
ALTERNATIVES
The purpose of this item is to meet the requirements of California Government
Code. No alternatives are recommended.
PUBLIC HEARING ITEM NO. 1
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Prepared by: Angela Ferreira, Management Analyst
Karla Romero, Finance Director
Approved by: Jon McMillen, City Manager
Attachments: 1. One Eleven La Quinta, LLC. Economic Subsidy Report
2. SilverRock Development Co., LLC Economic Subsidy
Report
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ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT
CODE SECTION 53083
FOR THE SALES TAX SHARING AGREEMENT BETWEEN ONE ELEVEN LA
QUINTA, LLC AND THE CITY OF LA QUINTA IN CONNECTION WITH THE
HOBBY LOBBY BOUNDED BY WASHINGTON STREET, HIGHWAY 111, ADAMS
STREET AND THE WHITEWATER CHANNEL
Pursuant to Government Code Section 53083, the City Council of the City of La Quinta
must hold a noticed public hearing and, prior to the public hearing, provide all of the
following information in written form and available to the public and through the
City’s website, regarding active economic development subsidies. As of November 5,
2019, the City has one existing sales tax sharing agreement. Notice was published
on City’s website for a public meeting held on November 5, 2019.
The purpose of this report is to provide the information required pursuant to
Government Code Section 53083 representing the economic opportunity and
development subsidy report associated with the Sales Tax Sharing Agreement
(“Agreement”) by and between One Eleven La Quinta, LLC (“Developer”) and the City
of La Quinta (“City”). This report shall remain available to the public and posted on
the City’s website until the end date of the economic development subsidy, as further
described in number 2 below.
1.The name and address of all corporations or any other business entities,
except for sole proprietorships, that are the beneficiary of the economic
development subsidy.
Hobby Lobby is a craft supply retailer. A majority of the 111 La Quinta Center
(“Center”), including Hobby Lobby, is owned by One Eleven La Quinta, LLC, managed
by Michael Shovlin.
One-Eleven La Quinta, LLC.
71084 Tamarisk Avenue
Rancho Mirage, CA 92270
2. The start and end dates and schedule, if applicable, for the economic
development subsidy.
On September 9, 2014, the City entered into a sales tax sharing agreement with One
Eleven La Quinta, LLC (“Hobby Lobby”). Under the terms of the agreement the City
shall make quarterly payments of 50 percent of any sales tax revenue generated
(including Measure G transaction and use tax) from Hobby Lobby in an amount not
ATTACHMENT 1
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to exceed $400,000 over an eight-year period. The agreement terminates when
either the $400,000 limit is reached or in eighth year (December 2022) whichever
comes first.
3. A description of the economic development subsidy, including the
estimated total amount of the expenditure of public funds by, or of revenue
lost to, the local agency as a result of the economic development subsidy.
Status of the Agreement
The Hobby Lobby business opened in December 2014. A traffic signal was installed
at Adams Street and Corporate Center Drive, landscaping has been enhanced and
continues to be maintained to City standards, pedestrian connectivity within the
shopping center was improved along with signage and aesthetics. Anchor stores
continue to exist since the Agreement was executed and include Stater Bros., Staples,
Big 5, Petco, Ross, Kohl’s, AAA, and Hobby Lobby. In addition, Mor Furniture opened
in August of 2018. As of June 30, 2019, the City made $173,017 in reimbursement
payments to the owner leaving an outstanding balance of $226,983. The City
anticipates making reimbursement payments until the agreement ends in 2022.
Summary of Reimbursements
4. A statement of the public purposes for the economic development
subsidy.
The Center is one of the first and largest shopping centers in La Quinta. The Center
consists of approximately 60 acres bounded by Washington Street, Highway 111,
Adams Street and the Whitewater Channel. The project Specific Plan identifies
approximately 617,000 square feet of retail space when built out. Approximately
539,000 square feet of retail space exist today and includes numerous anchor stores
and businesses such as Stater Bros., Staples, Big 5, Petco, Ross, Kohl’s, Mor
Furniture, AAA, and Hobby Lobby.
The Agreement facilitated improvements such as a new traffic signal located at
Adams Street and Corporate Center Drive, creating a new access point to the Center,
landscape enhancements, pedestrian connectivity within the shopping center,
signage and aesthetic improvements. The Center continues to provide additional
shopping interest at the Highway 111 business district.
Calendar Year 2015ᵅ 2016 2017ᵇ 2018 2019ᶜ
Agreement Year Year 1 Year 2 Year 3 Year 4 Year 5
ᵅ Includes December of 2014.
ᵇ Increase due to the passage of Measure G 1% sales tax effective 4/1/2017.
ᶜ Reimbursements from 1/1/19 through 6/30/19.
Sales Tax
Reimbursement 27,342 25,888 42,673 51,884 25,229 173,017
TOTAL
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5. The projected tax revenue to the local agency as a result of the economic
development subsidy.
The City retains 50 percent of the sales tax generated by Hobby Lobby and all sales
tax revenue generated by the additional anchor stores within the Center. The
Agreement is limited to Hobby Lobby, therefore, the additional sales tax generated
equals the payments made to date, $173,017. Under current economic conditions,
from July 1, 2019 through December 31, 2022, the City anticipates generating an
additional $187,000 in sales tax revenue and approximately $53,000 every year
thereafter.
6. Estimated number of jobs created by the economic development subsidy,
broken down by full-time, part-time, and temporary positions.
In October 2019, Staff attempted to obtain employment information from Hobby
Lobby’s local and corporate offices. At the time this report was published, the City
had not received a response.
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ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT
CODE SECTION 53083
FOR A TRANSIENT OCCUPANCY TAX SHARING AGREEMENT SILVERROCK
DEVELOPMENT COMPANY, LLC IN CONNECTION WITH THE DEVELOPMENT
OF TWO LUXRY AND LIFESTYLE HOTELS LOCATED AT THE SILVERROCK
GOLF COURSE ON JEFFERSON STREET BETWEEN AVENUE 52 AND AVENUE
54 IN THE CITY OF LA QUINTA
Pursuant to Government Code Section 53083, the City Council of the City of La Quinta
must hold a noticed public hearing and, prior to the public hearing, provide all of the
following information in written form and available to the public and through the
City’s website, regarding a proposed economic development subsidy to be provided
by the City pursuant to a Purchase, Sale, And Development and related Agreements
including Hotel TOT Rebate Agreements by and between the City of La Quinta and
SilverRock Development Company, LLC (collectively, “Developer”) (“Agreement”).
Notice was published on City’s website for a public meeting held on November 5,
2019.
The purpose of this report is to provide the information required pursuant to
Government Code Section 53083 in regards to the Agreement. This report shall
remain available to the public and posted on the City’s website until the end date of
the economic development subsidy, as further described in number 2 below.
1. The name and address of all corporations or any other business entities,
except for sole proprietorships, that are the beneficiary of the economic
development subsidy.
The Agreement is with SilverRock Development Company, LLC, who owns and
operates the business that will benefit from the economic development subsidy:
SilverRock Development Company, LLC
3551 Fortuna Ranch Road
Encinitas, CA 92024
2. The start and end dates and schedule, if applicable, for the economic
development subsidy.
The La Quinta City Council approved the Agreement on November 4, 2014. The TOT
rebate period would span 15 years, commencing once the luxury hotels are developed
and fully operational.
3. A description of the economic development subsidy, including the
estimated total amount of the expenditure of public funds by, or of revenue
lost to, the local agency as a result of the economic development subsidy.
ATTACHMENT 2
197
The agreement provides a Transient Occupancy Tax (TOT) rebate for a period of up
to 15 years for the luxury and lifestyle hotels. In years 1-10, 95% of TOT is available
for rebate until the developer achieves an 11% return on cost annually. Years 11-15,
75% of TOT is available for rebate until the developer achieves an 11% return on
cost annually. In any given year, the TOT rebate stops upon the developer achieving
an 11% return.
In addition to generating TOT, the proposed development will generate property and
sales tax revenues. The following table outlines the projected tax revenues, the
projected rebate amount, and the City’s share of the projected tax revenues.
ESTIMATED TAX REVENUE OVER 15-YEAR PERIOD
Revenue Category Estimated Net New City
Revenues
Luxury and Lifestyle Hotel TOT (net revenue after rebate) $16,500,000
Branded Residential TOT $15,800,000
Sales Tax $ 7,600,000*
Property Tax $ 7,800,000
Total Net New City Revenues
Note: 15-year period starts at the opening of Luxury Hotel
*Additional tax revenue is due to the passage of Measure G
sales tax increase
$47,700,000
4. A statement of the public purposes for the economic development
subsidy.
The City approved the TOT rebate to enable the development of Silverrock Resort,
providing jobs, cultural and recreational opportunities to the community and
providing new and ongoing general fund revenue.
5. The projected tax revenue to the local agency as a result of the economic
development subsidy.
The projected tax revenue and developer returns would result in the developer
receiving an economic development subsidy of up to $20,100,000 over a fifteen
year period beginning in the first year of operations. The revenue and
subsequent subsidy are estimated based upon projected financial returns,
occupancy rates and average daily rate for the Luxury and Lifestyle hotels. Sales
tax revenues are based on estimated sales from the proposed mixed-use
village, resort spa and hotel food and beverage sales. Property tax revenues
are derived from the improvements made to the property.
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No expenditure of public funds is proposed. The estimated economic
development subsidy of $20,100,000 is representative of potential revenue
lost by the City. However, the City is estimated to receive $47,700,00 in TOT
(net revenue after rebate), sales and property tax revenue directly attributed
to the proposed development.
6. The net tax revenue accruing to the local agency as a result of the
economic development subsidy.
To date, the luxury hotels have not been constructed and the City has not yet accrued
any tax revenue.
7. Estimated number of jobs created by the economic development subsidy,
broken down by full-time, part-time, and temporary positions.
The City anticipates the following jobs created:
Job Category Full-time Jobs: Part-time Jobs:
Temporary Construction Jobs 1,750 206
Permanent Operation Jobs 466 169
* Note: Part-time jobs are presented as full-time equivalents
8. The net number of jobs created by the economic development subsidy,
broken down by full-time, part-time, and temporary positions.
To date, the luxury hotels have not been constructed and therefore no jobs have
been created.
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