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Palm Springs to consider downtown deal with Grit ahead of criminal trial for former developers

City considers deal with downtown developer

PALM SPRINGS, Calif. - Grit development is preemptively offering Palm Springs a multimillion-dollar incentive deal which would also allow the development company to move forward with additional phases of the downtown project.

Grit development's Michael Braun has previously said the company is struggling to obtain financial backing while the criminal case against developers John Wessman and Richard Meaney, and former Mayor Steve Pougney goes on.  Braun also said a potential lawsuit involving California's prevailing wage law is keeping investors at a distance, as they wait to see potential liability.

"This reservation (of rights and remedies due to the City) has created a "cloud" of uncertainty for Grit securing financial lending, preventing it from proceeding with any future work associated with the project," stated a staff report summary.

Braun took over Wessman Development when his father-in-law John Wessman was charged, and renamed the company Grit.

Wessman and Meaney are accused of bribing Pougnet to obtain his influence on the major development project downtown.

If the trio is found guilty Palm Springs could "claw back" some benefits obtained through ill-gotten contracts, part of Government code section 1090 claims. 

City Manager David Ready said, "if they're found not guilty, the city gets nothing."

By putting together an agreement now, Grit could achieve funding to finish the project regardless of the outcome of the corruption trial.

"The trial court could take a year or more," said Ready.  "If the council could agree to this, then continued development could occur, as opposed to in the future."

City Council members will review an initial draft of the deal on Wednesday.  The deal would retain the city's existing TOT (transient occupancy tax) deal with the Kimpton Rowan Hotel.  Grit would also give Palm Springs three parcels of land, including one $5.3 million property downtown which could be used to build a library-- which Grit would pay for 'at cost.'  The other two parcels include the existing Crescendo and Boulders projects, near the base of the Palm Springs Aerial Tramway, which the city would retain as 'open space,' said Ready.

The value of the land of the Boulders project is estimated at $14.66 million. The Crescendo project is a 41.6 acre property located on Tram Way and W. Racquet Club Road valued at $6 million.  The total proposed settlement value is $30,160,000, according to the staff report.

Ready said leaving the TOT deal with the Kimpton intact would preserve the economic and tourism benefits brought to Palm Springs by the hotel.  Forcing a "clawback" of approximately $1.2 million in past TOT, and more than $30 million in estimated future TOT would bankrupt the hotel, and therefore other tenants around the hotel.

"This would have a cascade effect on sales tax, property tax, and the economic benefits the Rowan helps bring in for tourism and conventions," said Ready.

"While a hypothetical closure of the Rowan Hotel would potentially allow another hotel operator
to succeed it," stated the staff report,  "there is no guarantee the quality or type of hotel would match the caliber of the current Rowan Hotel and is a risk to be considered avoiding."

"I look forward to receiving input from our residents and business community on the proposal and discussing the terms with my colleagues on Wednesday night," said Geoff Kors in an email Monday evening. "It is important to note that this is an outline of what an agreement might look like and it will be important that any agreement has the necessary safeguards so that the public receives what is promised.  If an agreement is reached, it will resolve a great deal of uncertainty and what could be years of litigation and inactivity at the rest of the downtown project which is not in anybody's interest." 

No one will vote on Wednesday, but the public is invited to attend the city council meeting to ask questions and give guidance on whether the deal makes economic sense.

 


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