Oceanside council agrees to invest in beach resort

By: DAVID STERRETT - Staff Writer | Wednesday, August 16, 2006 11:33 PM PDT ∞

OCEANSIDE ---- The City Council voted unanimously Wednesday to approve a tentative agreement requiring the city to invest $27 million to help pay for a 300-room beach resort in downtown Oceanside.

The council members said the agreement is a historic milestone in the development of a proposed $187 million Westin resort on 2.75 acres across from the pier.

A couple of residents criticized the city's proposed contribution to the project, which is nearly three times more than originally expected, and said Oceanside is giving too much taxpayer money to San Diego developer S.D. Malkin Properties Inc.

But about 10 other residents expressed support for the tentative agreement and said the four-star resort will spur development downtown.

Council members said the resort will be the centerpiece of downtown and a large city investment is needed because of skyrocketing construction costs and restrictions placed on the design of the hotel.

Oceanside has attempted to lure a resort to the downtown area for more than 30 years, and when the council approved the tentative agreement, there was a loud, round of applause.

"This is a really big step for Oceanside," Mayor Jim Wood said. "This is the future of downtown Oceanside, no doubt about it. To get what we want, this is what we have to pay."

Under the agreement, Oceanside will lease two city-owned blocks bound by Seagaze Drive, Pier View Way, Myers Street and Pacific Street to the developer for 75 years with a 24-year extension.

The city will give the developer $200,000 in redevelopment money to do environmental studies before the start of construction on the resort expected to open by the spring of 2010.

Once the environmental studies are finished and the developer completes a detailed application, the City Council will review a final agreement with Malkin. The terms of the agreement could change during the year-long environmental process, and city staffers and consultants will continue to negotiate details with the developer.

Under the tentative agreement, the city would give the company about $27 million that the hotel will raise through property, hotel and redevelopment tax revenue after the project is built.

The city will recover its investment within the first 14 years, taking into consideration inflation and interest. City officials stressed that all of the money the city invests in the project will come from money generated by the resort.

"The city needs this project," Councilman Jack Feller said. "I hope people understand the cost of this hotel is because of the many restrictions we placed on it."

The plans call for a U-shaped, 289-room hotel facing the ocean on the south block, and a 47-room "boutique" hotel with larger rooms and 48 time-shares on the north block.

The project includes a two-story underground parking garage with more than 600 spaces and more than 30,000 feet of meeting space including a 500-person ballroom.

The city requested the developer include the ballroom for special events such as weddings of business conferences.

The city restricted the project to eight stories high to preserve existing ocean views and wouldn't allow the developer to close any public streets or beach accesses.

Without these requirements, the project could be less expensive for the city, but Oceanside officials said the standards are needed to get broad support for the hotel.

"If we didn't want to pay for anything we could have a two-star hotel," Sanchez said. "But what the community wants is a four-star hotel, a 500-person ballroom and something high class for Oceanside."

But some residents said the city is spending too much money on a private development.

"I don't believe the city should subsidize private development," said resident George Barrante, who is running for City Council. "This is one hell of a good deal ---- for S.D. Malkin, not this city."

Barrante said if the resort shouldn't be built until developers had enough money to pay for the entire project.

Resident Larry Barry said public money should not be used for a resort.

"We don't want to pay for this," Barry said. "We need to get money for the people of Oceanside, not the developer."

Resident Richard Merel said the city needs to look carefully at the tentative agreement and make sure it's the best deal for Oceanside. A couple of residents questioned why the city is not going to make the developer pay rent on the property for the first 12 years of the lease agreement.

"I want this hotel, but still believe $27 million is way too much money to invest," Merel said.

When the council selected Malkin to do the project in April 2005, the developer proposed the city pay $9.9 million for a $110 million resort with 302 hotel rooms and 72 time-shares.

But city officials said the price tag of the project increased by $77 million in the last year because of soaring construction costs and an increase in the number of hotel rooms from 302 to 336.

"I almost fell off my chair when I first heard there was $27 million subsidy," said Councilwoman Shari Mackin, who helped lead opposition to a previous resort proposal by developer Doug Manchester.

But Mackin said a hotel is needed in downtown, and there is broad support for this agreement.

About 10 residents including representatives of the Chamber of Commerce, MainStreet Oceanside, Citizens for the Preservation of Parks and Beaches, Redevelopment Advisory Committee and Economic Development Commission.

"This will be a linchpin for the downtown," said resident Mary Ann Thiem. "If we don't move forward we will start to go backward."

The resort needs to be built before CityMark can develop the five blocks it owns downtown.

City officials said the resort will generate annually about $2.5 million in hotel tax for the city and about $1 million in property tax. In addition, guests at the hotel will spend more money at local restaurants and stores.

"Oceanside is gong to meet its destiny," said resident Kay Parker. "Our destiny is to be the premiere city of North County. This is a step in that direction."

Oceanside has tried to attract a downtown resort since 1975, and at least four previously proposed projects have fallen through for various reasons.

Most recently, San Diego-based developer Doug Manchester made a proposal in the late 1990s to build a 475-room resort on the property with a $15 million contribution from the city.

Opponents criticized the high price-tag for the city and the design of the 12-story hotel, which would have closed several streets and spilled onto the beach area.

The city ended up paying Manchester $2.2 million in 2003 to settle lawsuits after the California Coastal Commission rejected the project.

City officials said the Manchester project failed because it faced opposition from the community, and the Malkin project has the support of a majority of residents.

"This is a great project," Councilman Rocky Chavez.

The developer has 90 days to file a formal application with the project and then will probably take about a year completing environmental studies. Construction will likely begin in late 2007 or early 2008 for the 24-month project.

After the City Council approved the agreement, council members, staffers and the developers shook hands.

"Now we can move onto the next phase," said Jane McVey, the city's director of economic development and redevelopment. "There is still a lot of work to be done."

-- Contact staff writer David Sterrett at (760) 901-4067 or dsterrett@nctimes.com.

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