San Juan On the Hook for Share of New Hotel's Development Costs

Months of wrangling over who would pay for to a water line at the site of a future hotel in downtown came to a close Thursday night, with the hotel developers taking responsibility for most of the costs. 

An agreement the City Council adopted Thursday calls for taxpayers to upgrade a portion of the line at a cost of $378,000. The developer will will pay for $891,000 in improvements and could even take on the $378,000 share if it's ready to erect the 124-room hotel before the city is ready to upgrade its infrastructure.

"If the developer cannot afford the water line, it doesn't have to build the project," said Tom Merrell of Civic Solutions, the developer's consultant.

consists of three structures on 3 acres at the northeastern corner of Ortega Highway and El Camino Real: a 76,000-square-foot hotel, 10,000 square feet of office spaces and retail outlets and a 6,090-square-foot restaurant.

City Councilwoman Laura Freese called the hotel a "major, major step to ."

The agreement was adopted Thursday after eight months of negotiations and after the Planning Commission called an earlier draft a "." It outlines the obligations on the part of the city and the developer to build the hotel. The agreement requires the city to establish a special district at a cost of about $374,000, whereby the landowners' property taxes will be assessed to pay for other needed utilities in the area.

The city is also giving up $588,939 by giving the developers a break on fees that would otherwise be assessed to hook up to city sewer and other infrastructure.

Meanwhile, the developers will spend about $878,000 on building permits and $359,363 on the discounted hookup fees.

City Councilman Derek Reeve said he believes the city will end up paying for its $378,000-share of the water line, the costs for which are programmed in San Juan's budgets for long-term projects. The city has planned to expand the line when the .

Construction for the new interchange and the simultaneous realignment of Del Obispo Street is scheduled to take place between late 2012 and November 2014.

To take advantage of incentives contained within the agreement, developers Stroscher G3 LLC must build Plaza Banderas by August 2013.

Mayor Sam Allevato countered Reeve's concerns by saying: "If there was no hotel project, we’d fund [the water line] anyway."

Resident Ian Smith spoke during Thursday's City Council meeting to say he thinks that building the hotel during the time of the highway and freeway reconstruction is a bad idea.

He said people don't want to live next to road construction in a high-traffic area. "My advice to the people who own this hotel is to cut your ribbon when Caltrans kisses San Juan Capistrano goodbye, because until that day, you won't have peace," he said.

A majority of the City Council members said that even though they agree that the traffic will be unpleasant, the property owners have a right to build.

"The timing is going to be dicey, to say the least," said Allevato. But "if they want to take the risk ... that's their choice, not mine."

The agreement was adopted in a 4-1 vote, with Reeve dissenting. It requires a second approval from the council before taking effect 30 days thereafter.