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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: DIRECTOR OF PLANNING, BUILDING AND CODE ENFORCEMENT
DATE: AUGUST 17, 2004
SUBJECT: LONG POINT RESORT HOTEL PROJECT: ZON2004-00309 (REVISION ‘A’ TO CUP 215, ET. AL.)
Prepared By: Ara Michael Mihranian, AICP, Senior Planner
Dennis McLean, Director of Finance and Information Technology
Carol Lynch, City Attorney
Review and discuss the applicant’s proposed amendments to the City Council approved conditions of approval to: 1) Allow 50 rooms within the main hotel complex and the bungalow units to be sold to individual persons or private entities with deed restrictions limiting the duration of use; and 2) Establish a 1% Property Transfer Fee and a non-profit corporation to be used for the maintenance and enhancement of public open space or streets within the City. If the proposed amendments are deemed acceptable by the Council, direct Staff to prepare the appropriate Resolutions for adoption at the September 7, 2004 meeting.
This item is before the Council because the applicant is seeking to amend the conditions of approval for the Long Point Resort Hotel Project. The applicant seeks to amend the project conditions to allow 50 hotel rooms and the bungalows to be sold to private individuals or entities with restrictions that regulate the use and duration of stay, similar to existing conditions for the 50 casitas (3 keys), and to establish a 1% Property Transfer Fee with proceeds of the fee to go to a non-profit corporation. Staff seeks Council direction on the concept of the Transfer Fee and non-profit corporation. If the concept is acceptable, Staff recommends that the Council approve the proposed revisions to the project conditions.
On August 28, 2002, the Long Point Resort Hotel project was unanimously approved by the City Council. Subsequently, the City’s decision was appealed by the Coastal Commission, and after conducting an appeal hearing, the Coastal Commission approved the project on August 7, 2003 with modified conditions of approval. The modified conditions were accepted by the City Council at its October 7, 2003 meeting, marking the Council’s decision as the final project approval date. At the same meeting, the Council directed the project applicant to provide the City with future quarterly updates on the status of the project.
On June 1, 2004, the project applicant provided the Council with its first formal status update on the project. At the June 1st meeting, the project applicant informed the Council that they would like to amend the approved conditions to help secure financing for the project. Specifically, the applicant requested their desire to amend the conditions so that a portion of the hotel rooms and the bungalows could be sold to private individuals consistent with the conditions for the casitas. That evening, the Council advised the applicant to submit the appropriate applications to begin the process. On June 15, 2004, the applicant submitted Revision ‘A’ to Conditional Use Permit No. 215, et. al.
In accordance with the provisions of the California Environmental Quality Act (CEQA), Staff has determined that the proposed revision to the City Council approved conditions of approval will require an addendum to the Environmental Impact Report prepared and approved by the City Council under Resolution No. 2002-70 that allows the construction of a 400-room resort hotel with a golf academy/practice facility on the 102 acre Long Point parcel (6610 Palos Verdes Drive South). At the time the City Council adopted the Environmental Impact Report and Statement of Overriding considerations, it found that the Project’s cumulative impacts, with the exception of the impacts to Noise and Air Quality, are not significant or that potential impacts could be mitigated to a less than significant impact, as noted in the Mitigation Monitoring Program.
As such, Staff believes that the proposed project revision does not modify the scope of the project, specifically as it relates to the design of the project and the related amenities approved by the City Council. Furthermore, the proposed revision specifically relates to the financial component of the project. As such, Staff is of the opinion that the proposed revision will not result in new significant environmental impacts, but rather serves to make the project more economically viable. As a result, no further environmental review will be necessary other than the adoption of Addendum No. 2 to Environmental Assessment No. 725.
The project applicant is requesting to amend the Council approved conditions to allow 50-rooms within the main hotel complex and the 20 bungalows (2 keys per unit for a total of 40 units), located seaward of the hotel complex, to be sold to individual parties or private entities. Additionally, the applicant is also proposing to establish a 1% Property Transfer Fee and a non-profit corporation to manage the funds generated by the transfer fee. The transfer fee is proposed to compensate the City for the possible loss of revenue resulting from a projected decrease to the Transient Occupancy Tax (T.O.T) when these units are sold to private individuals. The applicant’s proposed revision to the project conditions and the establishment of a Transfer Fee, as well as Staff’s review of the Developer’s calculations of Fiscal Benefits, are discussed in greater detail in the following sections.
Proposed Amendments to the Project Conditions
The applicant’s proposal to sell 50 hotel rooms and the bungalows to private individuals, is intended to assist in securing the economic viability of the project. The applicant is requesting to mirror the condition regulating the sale and use of the 50 casitas for the 50-hotel rooms and bungalows. According to Condition No. 36 of the project conditions of approval, the casita units may be sold to individual persons or private entities, subject to the specific restrictions that limit the time duration an owner of a unit may utilize that unit. Furthermore, when the unit is not being used by the owner, the casita unit is to be available as a hotel accommodation.
Staff has reviewed the applicant’s proposal and is of the opinion that the change to the conditions to allow the ownership of the 50-rooms within the hotel complex and the bungalows will not result in new impacts to neighboring properties, nor physically alter the exterior appearance of the project, as approved by the City Council in 2002. Furthermore, the applicant’s proposal will not result in a deviation to the findings made by the Council when the project was approved in 2002. As such, Staff believes that the proposed amendment is acceptable and is consistent with the findings made for the original project. In order to allow the applicant’s proposal, the following amendments to the Council approved project conditions are proposed for review by the Council (the underlined text represents new language and the strike-out text represents deleted language):
Review of Fiscal Benefits Calculations
Finance and Information Technology Staff reviewed the calculations of Fiscal Benefits included in the letter titled Long Point Resort Request For Revision, dated June 9, 2004, Page 3, issued by the Developer (see attachment). The purpose of the review was to determine whether or not the calculation of "Net Added Revenue to City and Community" was reasonable. The letter stated that Net Added Revenue to City and Community resulting from the revision would be $278,766 in Operating Year 4 (the first year the Developer’s projections assume stabilized occupancy rates).
In a letter dated August 6, 2004 (see attachment), subsequent to the issuance of the Developer’s letter, dated June 9, 2004, the Developer offered to exclude the favorable variance (increase) from property tax revenue of $30,184 from its calculations, resulting in amended Net Added Revenue to City and Community of $248,582 (see Attachment). In its reply, dated August 6, 2004, the Developer asserts that the 8-Year Total Net Added Revenue to City and Community would be $1,464,647. The Developer stated "…Since we do not want to presume precisely how the assessor will determines value, we feel that it is prudent and conservative to exclude this relatively minor benefit from the City’s consideration." Based upon its limited review of the calculations, Staff believes that the calculation of Net Added Revenue to City and Community as amended August 6, 2004, appears reasonable.
After performing its initial review of the calculations, Staff sent a letter, dated July 29, 2004, asking several questions about the calculations and assumptions on which they were made (see Attachment). Staff inquired whether the calculations were based upon the same financial projections, including the same assumptions that were being distributed for purposes of securing debt and equity financing. Additionally, Staff requested additional detail information to verify the accuracy of the calculations. In its reply, dated August 6, 2004, the Developer asserted"… And yes, the revised operating assumptions (provided in Schedule A) that are the basis for the calculations of Hotel Occupancy Tax, Transfer Fees and Property Taxes are identical to those currently being used to secure both debt and equity financing for the project under the current plan. In addition, the operating assumptions used to calculate Hotel Occupancy Tax, Transfer Fees, and Property Taxes for the revised plan (also provided in Schedule A) will be those used to secure financing under the amended plan."
Staff successfully validated the reasonableness of the calculations contained in the Developer’s reply, dated August 6, 2004. The estimates of occupancy rates and average daily room rate used in the calculations are slightly less than assumptions contained in projections reviewed by Hospitality Valuation Services International (HVSI) during the project’s original review conducted by the Finance Advisory Committee in 2001 and 2002.
The Establishment of a Transfer Fee and Non-Profit Corporation
As noted in the applicant’s submitted application, the stated purpose of this revision is to improve the financing for the hotel project. Like the villas and casitas that are conditioned to be sold, the owners of the additional units would not be required to pay rent to occupy their units. Accordingly, they would not be required to pay the Transient Occupancy Tax (TOT), which the City has imposed on transients, pursuant to Chapter 3.16 of the Rancho Palos Verdes Municipal Code.
Because seventy more units will be sold, and the owners of those units will be able to occupy them for up to sixty (60) days per year, the applicant has projected a reduction in the amount of Transient Occupancy Tax that would be paid to the City of approximately $84,000 per year.
In an effort to replace the annual loss of approximately $84,000 of TOT, Destination has proposed that the City impose a transfer fee in the amount of 1%, which would be paid to a non-profit entity whenever a unit is sold. The applicant is suggesting that either the City or the applicant could create the non-profit entity (or expand the powers of an existing City non-profit entity) that would collect the transfer fee with restrictions on how the monies could be expended. Accordingly, the applicant has prepared the following condition of approval, which has been reviewed by the City Attorney:
"The City (or, at the City's election, the applicant) shall create a new non-profit corporation or shall expand the powers of an existing non-profit corporation to undertake the duties specified in this condition. The non-profit corporation will be charged with spending its resources (net of its operating expenses) for only the following purposes: the maintenance, repair, replacement and enhancement of trails, parks, open space areas and streets within the City of Rancho Palos Verdes, which are owned in fee or by easement or by license by the City."
"The applicant shall record against the condominium units at Long Point a Declaration of Covenants, Conditions and Restrictions and Notice of Transfer Fee. Such document(s) shall set forth the obligation to pay a 1% transfer fee upon each transfer of ownership of a unit, which 1% shall be assessed against the sale price for the unit. The fee shall be required to be paid through the escrow for the sale or, if no escrow is used, at the time of recordation of the deed transferring title. The fee will be paid to the non-profit corporation. The recorded documents shall provide a lien right in favor of the nonprofit corporation to secure the payment obligations and any costs of collection."
Whether the amount of the reduction of the TOT justifies the additional expenditure of staff time to work with the non-profit corporation, and whether the proposed transfer fee would be an adequate replacement for the reduction of the amount of the TOT are policy matters for determination by the City Council. Therefore, Staff respectfully requests further direction from the Council regarding the establishment of a 1% Transfer Fee and a non-profit corporation.
Pursuant to the Development Code, a public notice was published in the Peninsula News on July 31, 2004 inviting public comments on the proposed revision to the project conditions. To date, no written or verbal comments have been submitted to the City. In the event the City receives public comments after the transmittal of this Staff Report, Staff will present the comments at the August 17th public hearing.
Coastal Commission Review
In addition to the City Council’s review of the proposed revision to the project conditions, the California Coastal Commission will also have to review and approve the proposed revision. In fact, the Coastal Commission notified the project applicant of the procedural steps involved in amending the project conditions (see attachment).
Expiration of Entitlements
According to the adopted conditions, the project entitlements are valid until October 7, 2005, which is two years from the final approval date (October 7, 2003). The two year expiration requirement is based on State requirements for parcel maps.
Director of Planning, Building and
ATTACHMENTS (the following attachments are not available electronically and can be viewed at the Planning Department at City Hall)