HomeMy WebLinkAboutSS02 - Marinapark Hotel ProposalCITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
October 25, 1999
Study Session Item?
TO: Honorable Mayor and City Council
FROM: Homer Bludau, City Manager
SUBJECT: Marinapark Hotel Proposal
BACKGROUND
The City's Marinapark property consists of 10.71 acres between 15" and 19th Streets, north of
Balboa Boulevard. Portions of the property are leased to the Marinapark Mobile Home Park, the
American Legion, the Girl Scout House, and the Balboa Community Center, which houses the
Power Squadron. All the leases will expire on March 31, 2000.
Status of Leases
The mobile home park has been a tenant since 1955. It currently pays the City approximately
$550,000 per year. The current lease was signed in 1985, and contains the following language
that acknowledges the City's intent to convert the mobile home park to another use at the end of
the lease. These provisions were included in response to the 1972 Parks, Beaches and Recreation
Commission's recommendation that the property be converted to public use, for consistency with
the City's Tidelands Trust Agreement, among other reasons.
SECTIOND. The City Council presently intends to convert Marinapark to a public
recreation area upon expiration of the lease.
SECTIONS. The City Council finds that it is in the best interests of the City of Newport
Beach to enter into this Lease because Lessees have agreed that City has
the right to convert Marinapark into a public recreation area upon the
expiration of this Lease, or shortly thereafter, without payment of
relocation benefits or other forms of assistance to persons displaced due
to conversion.
The American Legion originally purchased a site at 10'" Street from the City in 1924. The City's
extension of Bay Avenue in 1930 made that site too small for the Legion Hall, and the current
site has been leased from the City since 1940. The American Legion currently pays the City
approximately $105,000 per year. Following City Council direction, staff has been negotiating a
lease extension with the American Legion. A one -year extension is on the Council agenda for
October 25, 1999.
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undertook preliminary design work and contact with potential investors and operators on a
volunteer basis. The EDC received a presentation on his development concept at their meeting
of August 25, 1999, and unanimously recommended that the City Council consider a proposal of
this concept. The attached proposal from Sutherland Talla Hospitality has been submitted for
Council consideration.
Pronosal Descrintion
The proposal is for a 156 -room resort hotel, using all of the property except the Girl Scout
House. Hotel amenities would include limited meeting spaces, two restaurants, a bar, retail
space, a swimming pool, and eight tennis courts. The tennis courts would be available to
Newport Beach residents as well as hotel guests; the beach would remain open to the public, and
a new public park would be developed at the west (15' Street) end of the property. The manna
would be redeveloped for yachts in transit and local boaters to tie up, and two yachts would be
available as hotel guestrooms.
A lease of 60 years is proposed, with payments of $800,000 in the first two years, $1,200,000 in
the-third year, and $1,400,000 in years four through ten. Subsequent rent increases would occur
every ten years, based on CPI. All development is to be at the developer's expense, although
concessions on City fees are requested. The proposal includes relocation of the American
Legion, up to $500,000.
The income from guestrooms is projected to be approximately $13.6 million per year, which
would generate $1,224,000 in transit occupancy tax. Food and beverage revenue is projected to
be approximately $4.6 million per year, which would generate $46,000 in sales tax.
There are a number of approaches the City Council could take in responding to the hotel proposal
for Marinapark.
Indicate no interest in a hotel on Marinapark.
If there is no interest in a hotel on this site, staff believes the Council should make that
known to the community and to potential developers.
2. Analyze and consider Sutherland Talla proposal.
If the Council is interested in the current proposal, they could direct staff to analyze its
feasibility and potential benefits to the City, and provide a report for consideration at a
regular Council meeting.
3. Request proposals from other lessees.
This would provide an opportunity for other tenants, especially the American Legion, to
make long -term proposals for use of all or a portion of the site.
Page 3
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INCOME PROPERTY
The City owns and manages an extensive and valuable assortment of property
including streets, parks, beaches, public buildings and service facilities. The City also
owns and operates a yacht basin, a mobile home park, a luxury residential development
and various other income properties. Most of the income property is tidelands, filled
tidelands or waterfront. Unencumbered fee value of income property is estimated at
upwards of one hundred million dollars, and income typically contributes ten percent
of all City revenues.
As owner of property, the City is the steward of a public trust, and state law requires
the City to maximize its returns or be subject to a charge of making a gift of public
funds. Nevertheless, the City Council recognizes the importance of this property not
only as a revenue generator, but also as a means to provide otherwise unfeasible uses
and facilities to benefit the community.
In managing its property, the City will continually evaluate the potential of all City
owned property to produce revenue. This may include leasing unused land, renting
vacant space, and establishing concessions in recreation areas or other similar
techniques. The City Council will evaluate the appropriateness of establishing new
income properties using sound business principals and after receiving input from
neighbors and users.
The policy of the City Council is that income property be managed in accordance with
the following:
A. Whenever a lease, management contract, concession, sale or similar action
regarding income property is considered by the City, an analysis shall be
conducted to determine the maximum or open market value of the property.
This analysis shall be conducted using appraisals or other techniques to
determine the highest and best use of the property and the highest value of the
property.
B. All negotiations regarding the lease, management contract, concession, sale or
similar action regarding income property shall include review of an appraisal or
analysis of the use being considered for the property conducted by a reputable
and independent professional appraiser, real estate consultant or business
consultant.
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F -7
F. Generally, lengths of leases, management contracts, concessions or similar
agreements will be limited to the minimum necessary to meet market standards
and will contain appropriate reappraisal and inflation protection provisions.
Also, all agreements shall contain provisions to assure complete audits
periodically through their terms.
G. All negotiations regarding the lease, management contract, concession, sale or
similar action regarding income property shall be conducted by the City
Manager or his designee under the direction of any appropriate City committees
prior to consideration by the City Council.
H. To provide an accurate accounting of actual net revenues generated by the City's
income property, all costs and charges directly attributable to the management of
a specific income property shall be debited against the gross revenues collected
on that property in the fiscal year the costs are incurred. Costs and charges
include property repairs and maintenance, property appraisals, and consultant
fees, as authorized by the City Council, City Manager or by this Income Property
Polity.
Adopted - July 27,1992
Amended - January 24,1994
Amended - February 27,1995
Amended - February 24,1997
Amended - May 26,1998
Formerly F -24
3
The City Council is well aware of Mr. Uzes' credentials and experience in this area and those
are the very reasons he was retained to express an opinion relative to the Marinapark parcel.
While Mr. Uzes "recommends" use of the Finley Meander Survey as the basis for establishing
the tidelands boundary, he readily admits that all surveys referenced in his report are flawed.
The City Council, after reviewing the Uzes report, found the evidence in his report fell
considerably short of the applicable legal standard for establishing tidelands boundaries.
Accordingly, The City Council believes the appropriate tidelands boundary is a prolongation of
the boundaries on the adjacent parcels and they are requesting a corresponding determination
from the Commission.
Sincerely,
ROBERT H. BURNHAM, City Attorney
City Council Policy on Income Property
City Council Policy F -7, which guides the City's management of income property, is attached for
Council reference. The thrust of this policy is to ensure that the City receives fair market value
for the highest and best use of its property. It provides for fair market value analysis and
appraisals prior to property transactions, and the use of an open bid or proposal process whenever
possible.
Pursuant to this policy, a Marinapark Revenue Study was presented to the City Council Finance
Committee and the full City Council in August 1997. The study showed that hotel and single
family residential development would generate the most revenue for the City.
After reviewing the study, the Council authorized staff to begin negotiations with the American
Legion to renew their lease at market rates. The Council also directed staff to prepare a request
for proposals (RFP) for development of the property, excluding the American Legion site. The
Finance Committee was authorized to review and approve the RFP, and existing lessees were to
be given the opportunity to respond to the RFP. The Council also directed staff to request that
the State Lands Commission review the City's tidelands boundary report from Boundaries
Unlimited, confirm the status of the Marinapark Mobile Home Park use, and provide advice on
the City's responsibilities as trustee of public tidelands. The RFP was not to be distributed until
the City received a response from the State Lands Commission.
Staff brought a recommendation to use a two -step developer selection process, a request for
qualifications (RFQ) followed by a request for proposals from qualified developers, to the
Finance Committee in October 1997. The Committee approved the process, and made some
revisions to the draft RFQ that also was presented at that meeting. Nothing further was done
with the RFQ, pending a response from the State Lands Commission.
Status of Tidelands Boundary Determination
On February 22, 1999, the City Council directed staff to send a letter (copy attached) to the State
Lands Commission urging the Commission to declare that the Marinapark property is "uplands"
rather than tidelands. An uplands designation would give the City the maximum discretion over
the future use of the land, since a residential use would be as appropriate for the site as a
commercial or other visitor - serving use. Despite relatively frequent calls from the City to the
Commission, Commission staff has not yet made a formal determination as to the boundary, and
has given no indication as to when such an opinion may be forthcoming.
HOTEL DEVELOPMENT PROPOSAL
Background
The Economic Development Committee (EDC) established hotel development as one of its
priorities in March 1998, and appointed a subcommittee to work in this area. The subcommittee
developed a list of potential hotel development sites, and began to contact property owners to
determine their interest in such development as well as the need for City incentives to facilitate
hotel development. The Marinapark site rose to the top of the list as the most feasible site. The
subcommittee chairman, Stephen Sutherland, is in the hotel development business, and
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4. Request hotel proposals from other potential developers.
Receiving proposals from other potential developers would provide the Council with
alternatives to compare.
Request proposals or statements of qualifications from any interested developers.
This would be similar to the Council's direction in 1997. Responses to an RFP or RFQ
would give the City an indication of the market possibilities for the site, and more options
with regard to future use of the property.
6. Wait for State Lands Commission determination.
This, too, would be similar to the Council's direction in 1997. A determination on the
tidelands /uplands boundary would provide the City with more specific information on the
potential future uses of the property, and could present an opportunity for a broader range
of uses to be considered.
Attachments: City Council Policy F -7
Letter to State Lands Commission
Sutherland Talla Hospitality proposal
Page 4
PREFACE
Newport Beach is one of the finest beach communities in Southern California. Within a
one our drive from West Los Angeles and the Los Angeles International Airport, it is
blessed with pristine beaches and the beautiful Newport Harbor.
The Harbor in Newport is ringed with numerous fine restaurants and elegant estates.
World -class yachts add to the enjoyment and scenery. Upscale boutiques and trendy
restaurants lore residents and visitors alike to Newport Beach's Fashion Island Balboa
Islands rustic architecture and quaint streets have been a draw for visitors for most of this
century. With everything that Newport has, it is surprising that it lacks a single five star
hotel or even a true resort.
With this in mind, Sutherland Talla Hospitality is proposing to develop "UO7£L
R£S0107 VILLA FIOR£N7INA" a Five Star Resort to be located on city owned
property on the Balboa Peninsula. Architecturally styled after the 1880 built Villa
Fiorentina, located on Cap Ferrat, in Southern France, the proposal calls for a low
density, low rise and high quality resort which will benefit the City and it's residents in
many ways. Amenities of the resort include a full world class Spa to be operated by
America's premier health club developer. The Spa will be open to Resort guest and
residents of Newport Beach. A Racquet Club for tennis will be developed for the use of
Resort guest and residents of Newport Beach. A Sailing Club and a Rowing Club (sculls)
will be open to Resort guest and residents of Newport Beach. The new Marina will be
designed to accommodate "Yachts in Transit" for the use of Yachtsmen from ports
worldwide. Guest docks will be available for local boaters to "tie -up" and visit the hotel's
facilities. A new and extended Boardwalk will run along the waterfront from 15'' Street
to 18th Street and be open to the public.
The largest benefits to the community however will come from two specific items. First
is the revenue that the Resort will generate for the city. With the income from the ground
lease and the revenue from the Transit Occupancy Tax (based on room sales projected at
$13,579,825.00 annually) the city's revenue is expected to be in excess of $2,800,000.00
per year. This does not take into account revenue from state sales tax shares from other
Resort sales nor the spin -off sales from area restaurants and retailers. Maybe the most
important benefit from this project will be the impetus that it has on the quality of the
Peninsula. A Resort of this quality can be expected to be the "shot -in- the -arm" that the
Peninsula needs. There may be avenues available that could be utilized to direct portions
of the revenue generated by the Resort directly into improvements for the area Never-
theless, the HOTEL / RESORT VILLA FIORENTINA will have a definite positive
effect on the community and the City of Newport Beach.
4500 Campus Drive, Suite 500, Newport Beach, CA 92660, (949) 757 -1662 Fax (949) 660 -1252
F -7
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C. The City shall seek, whenever practical and financially advantageous, to operate
or manage all property and facilities directly with City staff or contractors.
D. In all negotiations regarding the lease, management contract, concession, sale or
similar action regarding a non - residential income property, the City shall seek
revenue equivalent to the open market value of the highest and best use; and,
whenever possible the City shall conduct an open bid or proposal process to
insure the highest financial return.
E. Whenever less than the open market or appraised value is received or when an
open bid process is not conducted, the City shall make specific findings setting
forth the reasons thereof.
Such findings may include but need not be limited to the following:
1. The City is prevented by tideland grants, Coastal Commission guidelines
or other restrictions from selling the property or converting it to another
use.
2. Redevelopment of the property would require excessive time, resources
and costs which would outweigh other financial benefits.
3. Converting the property to another use or changing the manager,
concessionaire or lessee of the property would result in excessive vacancy,
relocation or severance costs, which would outweigh other financial
benefits.
4. Converting residential property to another use or opening residential
leases to competitive bid would create recompensable liabilities and other
inequities for long -term residents.
5. The property provides an essential or unique service to the community
that might not otherwise be provided were full market value of the
property be required.
6. The property serves to promote other goals of the City such as affordable
housing, preservation of open space or marine related services.
2
Pg. 2
THE PROPOSED PROJECT
The proposal herein submitted to the City of Newport Beach by Developer is
pursuant to the Conceptual Master Plan attached, and further described as
follows:
A. 156 guest room resort hotel, proposed to be operated by Regent
International Hotels to be called MERE6FA NEWPORT BEACH.
B. The guest rooms will be housed in eighteen Italian style villas. The
resort's Lobby, Spa, Main Restaurant, Lobby Bar, Meeting Spaces
(limited) Retail Spaces and Administrative Offices will all be located in
a single structure on the North -East (15'' Street) end of the property. A
Speciality Restaurant (3,000 S.F.) is at the central area of the site
overlooking the main pool.
C_ The extensive use of Walkways, Courtyards, Loggias, Water Fountains
and Landscaping will be designed throughout the project
D. The Marina will be re- developed to accommodate two restored vintage
yachts to be added to the guest room count and sold as guest rooms.
Additional boat slips for yachts in transit and for local boaters to tie -up
and visit the property will be made available. Seven to ten Finger Docks
for Yachts up 80' LWL, will be constructed. There will be no Public
Marina.
E. A small sailing and rowing (sculls) club will also be located here and
four "hospitality rooms" will be designed near the Marina for the use of
visiting yachtsmen.
F. Developer will have the right to dedicate up to twenty of the 156 guest
rooms for Time Share or Fractional Ownership as long as the City's
revenue from TOT income is replinished.
Developer's terms and conditions of the lease to the City of Newport Beach
are to include the following area by use summary.
AMERICAN LEGION:
1.35 Acres
15TH STREET PARK:
0.42 Acres
PLAYGROUND:
0.30 Acres
MUNICIPAL PARKING:
0.25 Acres
MARINA PARK TRAILER COURT:
4.27 Acres
TOTAL: 6.59 Acres
March 18, 1999
Curtis Fossum, Senior Counsel
STATE LANDS COMMISSION
100 Howe Avenue, Suite 100 -South
Sacramento, CA, 95825 -8202
RE: Marinapark Parcel
Dear Curtis:
On February 22, 1999, the Newport Beach City Council reviewed information related to the
appropriate line of mean high water on the Marinapark parcel. The City Council received the
report from Boundaries Unlimited (Uzes Report) and material presented by the Marinapark
lessees.
The City Council, after consideration of the report and information and discussion of the issues,
concluded (by a unanimous vote) that the evidence supports a tideland boundary consistent
with the boundaries on the adjacent parcels. The City Council was persuaded that the judicial
determination of the tideland boundaries on the adjacent parcels fairly reflected the then
current line of mean high water. As you know, aerial photos depict a relatively straight
shoreline between Marinapark and adjacent parcels well before the decisions in the Superior
Court cases that adjudicated the boundaries on the adjacent parcels. The Council was also
persuaded by the correspondence from Mr. Cuomo and the commitment of First American to
issue a title policy confirming the line proposed by the lessees. Accordingly, the City Council
indicated its support of the analysis and conclusions in the letter recently submitted to you on
behalf of the Marinapark Homeowners Association.
Pg. 4
Annual lease rate of
$1.00. Developer to
Maintain.
On behalf of my development group, I am looking forward to the successful
completion of this project, which in my opinion will bring exceptional
financial, aesthetic as well as civic benefits to our city.
Sincerely,
tephen . Sutherlandc
Principal Partner
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Main Restaurant
Speciality Restaurant
Room Service
Meetings & Banquets
Weddings & Events
SUB -TOTAL REVENUE FOOD & BEVERAGE
PROJECTED REVENUE FROM SPA
TOTAL PROJECTED REVENUE FROM OPERATIONS
$1,800,000.00
$1,314,000.00
$ 500,000.00
$ 500,000.00
$ 500.000.00
$4.614.000.00
$1.000.000.00
$199768,700.00
* Food & Beverage revenue projections are an estimate from the resorts proposed operator.
TABLE OF CONTENTS
PAGE 3
PAGES 4 - 7
PAGES 8 & 9
PAGE 10
PAGE 11
PAGE 12
PREFACE
PROPOSAL
PROJECTED INCOME
FROM OPERATIONS
EXISTING AREA BY
USE SUAVAARY
PROPOSED CONCEPTUAL
USE SITE PLAN
TYPICAL GUESTROOM
LAYOUTS
PAGES 13 & 14 CONCEPTUAL RENDERINGS
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October 14, 1999
Mr. Homer Bludau
City Manager
CITY OF NEWPORT BEACH
3300 Newport Blvd.
Newport Beach, CA 92663
Re: DEVELOPMENT PROPOSAL — MARINA PARK SITE
Dear Mr. Bludau:
Following please find our proposal in behalf of my Design - Build- Finance
group: Sutherland Talla Hospitality, hereinafter DEVELOPER, for the
development of the MARINA PARK parcel, located on the North side of
Balboa Blvd., between 15d' and 180' Streets in the City of Newport Beach.
The major portions of the site relevant to this proposal include: the
MARINA PARK TRAILER COURT, the AMERICAN LEGION �.
POST, its related MARINA, DRY BOAT STORAGE and PARKING
LOT included. The 15TH STREET PARK as well as the current
PLAYGROUND will also be utilized for the development.
From the list above, the PLAYGROUND as well as the 15TH STREET
PARK is proposed to be improved and relocated to the MUSEUM OFFICE
site and to the 18d' Street end of the property respectively.
In addition, the existing TENNIS COURTS will be redesigned with
additional courts, corver<;:,g it to a RACQUET CLUB for the use of resort
guest and residents of Newport Beach.
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In. addition, and as a part of the lease agreement, Developer shall have full
use of the Marina off the American Legion property for the purpose of the
construction of a Class "A" Boat Docking Facility for Sailing and/or Power
Vessels up to 80' LWL. The 15'h Street public docking facility is not a part
of this proposal.
THE PROPOSED LEASE, TERMS & CONDITIONS:
TERM: 60 Years
PAYMENT DUE: Quarterly in advance
LEASE AMOUNT: Years one & two $ 800,000.00
Year three $1,200,000.00
Years four —ten $1,400,000.00
CPI INCREASE: Every ten years based on the yearly CPI increase as
published in the Wall Street Journal and not to exceed 2% per year.
CONTINGENCY: Acceptable Developer's Market Feasibility Study. All
agency approvals. .
FEE MORATORIUMS: Concessions toward City Permits, Bonds &Fee's to
be negotiated.
GENERAL TERMS & CONDITIONS:
SITE CLEARANCE & DEMOLITION:
GEO -TECH SURVEYS:
CONSTRUCTION OF PUBLIC PARK:
PLAYGROUND CONSTRUCTION:
RELOCATION OF AMERICAN LEGION:
REDEVELOPMENT OF TENNIS COURTS
By Developer _
By Developer
By Developer /
Maintenance &
Insurance
By City
By Developer /
Maintenance &Insurance
By City .
By Developer, up to
$500,000.00 Cost &
Expenses
By Developer, Insurance
Rider by City, for Public
User's. Developer to pay
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SEPTEMBER 26, 1999
PROJECTED INCOME FROM OPERATIONS
REVENUE FROM GUESTROOMS
i 10 Junior Suites x Average Daily Rate $325.00 x 365 Days x 70% =
40 Double Queens x Average Daily Rate $325.00 x 365 Days x 70 %=
6 Full Suites x Average Daily Rate $425.00 x 365 Days x 70 1/6=
2 Vintage Yachts x Average Daily Rate $925.00 x 365 Days x 60 %=
SUB -TOTAL GUESTROOM REVENUE
PROJECTED REVENUE FROM MARINA
10 Yachts In Transit x Average Rate $225.00 x 356 Days x 50%
SUB -TOTAL MARINA REVENUE
PROJECTED REVENUE FROM FOOD & BEVERAGE
t
$ 9,134,125.00
$ 3,321,500.00
$ 651,525.00
472 67 (_.. )
$13,579,825.00
$ 574 875.00
$ 574.875.00
(Homeowner Associbi t ' '-- D
22 October 1999
Honorable Mayor Dennis O'Neil and
Members of the City Council
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California
Re: Marinapark Site
Proposed Hotel Development
Dear Mayor and Members of the City Council:
'99 OCT 25 A 9 :49
Y -LERF.
"RECEI jp? AFTER AGENDA
PRINTEV a
9°1
This organization represents the 58 households who currently lease mobile home
park spaces from the City of Newport Beach at the site known as Marinapark. We
understand that the City has received a proposal from a real estate promoter to enter into
a lease for the Marinapark Site in order to develop a luxury hotel, and that the City
Council has scheduled a study session on October 25, 1999, to consider this proposal.
For the reasons described below, we believe that this is an ill- conceived proposal which
has little likelihood of succeeding, and that it is highly premature for the City to be
considering such a use on this site in any case.
Our current leases for the site are scheduled to expire in March 2000. While we
understand that the City has no obligation to renew our leases, we assumed from past
actions of the Council that continuation of our tenancy would at least be given reasonable
consideration by the City.
Concern has been expressed that Marinapark may be located at least partially on
land that is legally tidelands, and such a status might preclude continued use of the site for
residential purposes in the future under the public trust doctrine. Approximately two
years ago, the City Council initiated an inquiry with the State Lands Commission
regarding this issue. Since that time,we have submitted considerable information to the
State indicating that the site is very unlikely to consist of tidelands, and the City Council
ultimately joined with us in support of that position. At this time, however, there has been
no recommendation by Staff at the State Lands Commission, and the Commission itself
has given no indication of what action it may take in the future on this issue.
Consequently, until this is resolved, it is inconceivable that the City could contemplate any
particular future use of the site which might be in conflict with tidelands status of the
property. Based upon our research, the proposed luxury hotel would be in greater conflict
with the trust status of tidelands than would be our continued residential occupancy of the
site.
2. lack of Evidence of Credible proposal
To the best of our knowledge, the hotel proposal is simply that - a proposal,
nothing more. A local individual purporting to represent a major hotel chain apparently
has represented to the City that his client has an interest in the Marinapark Site, and has
shown you some attractive, but merely conceptual, illustrations of how such a
development might appear on the site. As far as we know, you have not been presented
with any form of commitment in writing from the proposed developer, let alone a
commitment from any financial institution to finance development of the proposed project.
In other words, what you have before you is nothing more than a promoter's vision of
something that could be developed on the site, if an actual developer came forward to
carry out such a project and if financing could be obtained for such a project. This is no
more credible than if we, the current tenants, presented you with a very beautiful
illustration of a commercial development that would return many millions to the City each
year, and could be constructed on an elevated platform in such a way as to allow both the
new project and our existing homes to occupy the site concurrently, and asked you to hold
a study session to consider such a fantasy.
Moreover, the financial projections which we understand you have been given by
the hotel project promoter cannot have any basis in fact. In the absence of a genuine
development plan, backed by a financial commitment and a marketing study, it is
inconceivable that any financial projections being made at this time could be reliable
enough for serious consideration by the City.
1z
In addition to our concern over the proposed hotel project, there is considerable
opposition from the surrounding community. A hotel facility at this location will result in
additional non - resident vehicle traffic, increased noise, obstruction of views and other
undesirable effects on the surrounding community, including the adjacent peninsula homes
and those on Lido Isle. This is in sharp contrast to our occupancy of the site, which has
been low -key, of limited impact on City services, noise or traffic, and completely
noncontroversial. To the contrary, our tenancy has been marked by community action,
specifically in cleaning the beach and in behalf of local charities and the Newport
Elementary School. Furthermore, the hotel project presumably would require
substantially greater controls over access to the beachfront to attain the desired level of
exclusivity demanded by the high -level image being promised.
We should point out the organized support of our position already expressed by
the affected Peninsula residents comprising the Central Newport Beach Community
Association and the Peninsula Point Association. These expressions were rendered when
a proposed hotel and restaurant were much smaller in scale than the one now before you.
Establishment of a hotel facility at this site would have substantial environmental
impacts, including but not limited to the community impacts described in the preceding
paragraph. A project as visible and as controversial as this is likely to become a magnet
for environmental opposition, and very likely. litigation. That could hold up the project for
many months, if not years.
A particular area of vulnerability for such a project would be the need for approval
by the State Coastal Commission. A luxury hotel project would face substantial
opposition from Coastal Commission staff, and would be very unlikely to obtain approval
from the Commission itself without imposition of public access requirements so extensive
that the type of project being proposed would be very unlikely to proceed. In other
words, the desires of the developer to create a private, high -priced enclave at this location
runs directly counter to the goals of the Coastal Act and the priorities of the Coastal
Commission.
Even if the proposed hotel project, or some other project of this kind, survives all
of the pitfalls described above and is able to proceed, that process will take a considerable
period of time during which the City runs the risk of being deprived of the income
currently derived from the site. Even under our current leases, we are generating an
annual cash flow of approximately $700,000 to the City, and we recognize that an
extended lease would need to provide for rent at a higher level, as we stated before the
Council two years ago. It would be financial folly for the City Council not to at least
extend our leases for a period of several years, while any proposed alternative use is being
planned and is making its way through the various regulatory processes.
6. Possible Alternatives
If the City is intent on changing the use of the site, and it is able to do so within the
scope of the legal and environmental controls affecting the site, it should strive for a
superior project, but one which has the least impact on the surrounding community and
still maximizes the financial gain to the City. The City Council, in late 1997, initiated a
process for obtaining proposals for alternative uses of the site, but suspended that due to
the uncertainty of the possible tideland status of the property. Once that has been
resolved, the original process should be resumed, rather than reviewing the first proposal
coming in the door, in this case the hotel project. One of the alternatives to be considered
will be continuation of the current use of the site.
The City's own guideline for management of its income property explicitly requires
that, "whenever possible, the City shall conduct an open bid or proposal process to insure
the highest financial return" That is a far cry from the arbitrary process in which the City
has been induced to engage at this point. Other policy guidelines require that "The City
Council will evaluate the appropriateness of establishing new income properties ...after
receiving input from neighbors and users." Also, "All negotiations regarding the lease ...
regarding income property shall include review of an appraisal or analysis of the use being
considered for the property conducted by a reputable and independent professional
appraiser ... ". Also, "All negotiations regarding the lease ... shall be conducted by the
City Manager ... prior to consideration by the City Council." If any of these provisions
have been carried out in this case, they are not apparent to the public. We strongly urge
you to reconsider the entire course of action which you have adopted to this point.
We would be happy to meet with members of the City Council and City Staff to
discuss further our views on this subject. Thank you for your consideration.
Sincerely,
MARINAPARK HOMEOWNERS ASSOCIATION
�5teww slur
President
cc: Cary D. Lowe, Esq., Jenkens & Gilchrist