Council Hints at Willingness to Share $1.1-Million Cost of Plaza Banderas Water Line

The City Council said Tuesday night it is willing to pay for at least a portion of a $1.1-million water line needed at the site of the future Plaza Banderas hotel.

“It’s incumbent upon the city to upgrade its infrastructure," said Councilman John Taylor. "If the hotel was there ... maybe store owners would keep their shops open later. We should get this thing moving, and the water line shouldn’t be an issue."

Just how much should come out of city coffers needs to be hammered out, as the council has yet to finalize a that would spell out such obligations. The developers of the 124-room hotel proposed Tuesday night that the city be at least partially responsible for paying for the water line, as it would be needed for any future development in that portion of downtown, at El Camino Real and Ortega Highway.

Whatever proportion the council agrees to will be included in a development agreement with the hotel developers.

A public hearing on the draft development agreement, which no member of the public spoke at Tuesday night, was continued with a 5-0 vote to Feb. 15. At that time, the city staff is expected to have come up with a payment proposal.

Still at issue is whether the council will agree to extend discounts on impact fees that are scheduled to expire this summer.

"I understand the importance of this hotel … but I am concerned that the hotel is being built because we asked it to be built, and I am concerned about the free market, and whether the market is going to be able to sustain this hotel," said Councilman Derek Reeve. "I’m not a big fan of subsidizing this project or extending this 75 percent fee reduction."

Once approved, the development agreement will allow the developers to pull permits—worth an estimated $1.2 million—and proceed with construction.

The developers’ consultant, Civic Solutions, told the council that the draft agreement presented to the council Tuesday is mutually beneficial to both the city and the developers. His opinion contrasts significantly to prior comments from the Planning Commission.

“From my point of view, this development agreement is fairly benign, because it has the city doing things that cities do to provide infrastructure to support development,” Tom Merrell said.

In December, and again on Jan. 11, the Planning Commission recommended the City Council and asked for additional review by the city staff, council and attorney, because, as they said, it could “give away the farm.”  

 Merrell, however, listed the benefits to the city within the agreement:

• Combined sales, property and bed taxes will generate $750,000 to $800,000 in tax revenues, and impact fees and permit fees will total $1.2 million.
• The hotel will serve as a stimulus for downtown.
• The city will maintain rights to build a parking structure.
• The hotel represents what the city has determined to be the ideal use for the property.
• The building’s architectural style and design was modeled on what the council wants.

Also on Tuesday, the city council voted to:

• Direct staff to compile a list of business-related fees that "are causing people a lot of heart burn." It also asked for a policy to guide it in offering a six month amnesty period to merchants who have yet to pull permits.
• Craft a letter urging Gov. Jerry Brown to not abolish redevelopment agencies.
• Refinance $8 million in promissory notes with members of the Kinoshita family, from whom the redevelopment agency purchased 56 acres in 1991. The notes will be refinanced preferably with a fixed interest rate at 5 percent, or as a back-up option, with a variable rate ranging between 4.75 percent to 6 percent.