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Oceanside council puts taxpayers at risk for hotel
By: GEORGE BARRANTE - Commentary: | ∞
Last week, the Oceanside City Council approved a tentative agreement to invest $27 million to help pay for a massive, 300-room beach resort in downtown Oceanside. The agreement is a fantastic deal for the developer, S.D. Malkin, but leaves Oceanside's residents holding the bag, and bearing the risk, should the project not meet the city's rosy expectations.
Under the terms of the agreement, S.D. Malkin will receive a $27 million taxpayer subsidy, a land lease with no payments for 12 years and an option to sell after eight years with a 20 percent profit. In return, Oceanside gets little more than a promise ---- and significant downside risk.
Taxpayers are paying 15 percent of the project's construction costs. At minimum, a fair agreement would grant the city a 15 percent ownership interest in the hotel, with an escalation clause should the costs to the city increase. The estimated subsidy two years ago was $9 million. It now stands at $27 million. If costs tripled in that time, what will happen over the next four years?
The city wants to use $18 million in redevelopment money to build the hotel's parking lot. However, its legal authority to do so is uncertain. Legislation currently pending in Sacramento may prohibit the city from extending the life of the downtown redevelopment district. Instead of using redevelopment money, the city could have created a parking district authority, which could spread the costs among those properties benefiting from the additional parking.
Out of the city's general fund, the account that pays for street maintenance and repair, as well as the city's police and firefighters, the council agreed to pay $200,000 for an environmental impact report. If S.D. Malkin can't even afford to pay for its own environmental study, how financially secure can this developer be?
Oceanside had a committee bargaining with S.D. Malkin, and the results show it. To appease various interest groups, the city imposed restrictions on the project that made the hotel financially infeasible. The sad truth is that, if the city becomes a partner in this project, the city won't allow the project to fail. While the developer can always declare bankruptcy and walk away in the event of a sudden drop in tourism, where can we taxpayers go if we want out of the deal?
As Southern California develops, the value of this land will continue to skyrocket. Hotels will be built in Oceanside on a size and scale that developers and lending institutions believe will support their investments, as they balance risk against the expected rate of return.
Ultimately, the downtown hotel project should be treated like any other project. S.D. Malkin should not receive preferential treatment. Tax money should not be used to subsidize a for-profit enterprise. If the developer will not pledge its own money, and if outside lenders won't assume the risk, the project must be too risky in its current form. Why then should we taxpayers have to take on a risk that no lending institution is willing to accept?
-- Oceanside resident George Barrante is a former planning commissioner and a candidate for City Council.
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What a Joke! wrote on Aug 18, 2006 11:21 PM:Barrante never met a developer he didn't like and vote for when he was on the Planning Commission. Now he wants to pick up a few votes bad-mouthing the hotel project. Oceanside has tried to get a beach resort for 30 years or more and we finally have a council willing to get the job done and then some nay sayer whose sincerity is questionable is playing the critic to grab a few (and I do mean a few) votes! I sure will not be one of his votes. I want the spin off business boom the hotel will surely bring to downtown.
Jane wrote on Aug 19, 2006 12:43 AM:Right on, George. Glad to see someone is looking out for the taxpayers. This project could bankrupt the city.
Ronald wrote on Aug 19, 2006 12:56 AM:If Carlsbad can build a Hilton hotel near the beach without giving up 27 million in tax payers money so can Oceanside. We just need the right people in council to get the job done right.
It's all your fault! wrote on Aug 19, 2006 4:53 AM:With Councilwoman Shari Mackin's expense account budget-doubling cost overruns and illegal expenditures, it is no small wonder that our council is making a $27 million gift of public funds to S.D. Malkin!
Chuckles wrote on Aug 19, 2006 8:21 AM:Well said, Mr. Barrante, but I suspect that it's all a bit too complicated for the current council to understand. After all, if Shari Mackin can't figure out how to use her city-issued credit card responsibly, how can she possibly be expected to balance the city's finances?
Emilee wrote on Aug 19, 2006 9:21 AM:This is the perfect storm for trouble. No city council member knows a thing about finance, development processes, or tax revenue. Worse, they refuse to believe anyone else or get the kind of consultation that tells them the hard facts, not some worthless, emotional driven drivel that supports anything the council wants. And, the people in the redevelopment and economic development offices in Oceanside are amatuers. Taken together, this is the perfect combination for the worse stew you can imagine. The stirer of this toxic caldron in Malkin. He probably cannot believe how easy it will be to rip off the citizens of Oceanside. Can't anyone turn off the fire under this pot that is about to boil over?
Mike wrote on Aug 19, 2006 10:14 AM:Poor Oceanside. It's been full of potential for almost thirty years, and still there are no tourists downtown. When the Marines are gone, Oceanside is dead. Why? BECAUSE THERE'S NO PLACE FOR TOURISTS TO STAY IN OCEANSIDE! It's about time the city did something to get people there, and the people of Oceanside should share in that. It will only benefit everyone in Oceanside so shut up and do it!!
Give us more credit, George! wrote on Aug 19, 2006 10:54 AM:Do you honestly think we don't know who you really are? This is the guy that was Manchester's #1 cheerleader, willing to give away the store!!! It's obvious that George is only trying to get votes. Otherwise, he would have supported the project as have the Economic Development Commission, the Chamber of Commerce, and every other real business out there. VP of Economic Development Commission, Jim Schroeder, who spoke at the council meeting, who really does have hospitality expertise (having run Marty's Valley Inn, etc.) gave this 2 thumbs up. This editorial is as genuine as George's rug. Obviously, George is completely out of step with the public and the economic needs of our city. No real contender here.
Victior wrote on Aug 19, 2006 11:14 AM:"If your going to waste my tax dollars get the best. A Trump resort Hotel or Hard rock. Weston is more like a three star hotel. Near Airports. Also lets get some of those people away from the pier. It might scare away the paying customers. "
My way or the highway wrote on Aug 19, 2006 12:43 PM:It’s not the councils fault they were misled by allot of bad people. Thats why they had to get rid of all those department heads.
Lets make a Deal wrote on Aug 19, 2006 12:48 PM:Looks like council needs you to get us a better deal Barrante. I would perfer a Trump resort or Hard Rock.
To what a joke wrote on Aug 19, 2006 1:23 PM:Ever hear of Cattelis or Manchester. This council killed those hotel proposals with less subsidy. Why is this the one? This proposal might bankrupt the city. Why should taxpayers foot the bill when there are other ways to pay for it?
LAWSON............ wrote on Aug 19, 2006 2:35 PM:Barrante as an esteemed citizen-politician has taken a courageous position on an important issue,especially when the Oceanside City Council will do almost anything or pay anything just to get the hotel,that we all want!With CREDITCARD- GATE on us,which councilperson will be willing to tell us the public something-anything-that resembles the truth about the beach-resort cost-over-runs and the $27 million taxpayer subsidy?With Wood at the helm it looks like a series of terrible leadership moves will ensue,I'm sure Wood and Sanchez can deploy some tepid excuse for rhe cost overruns??
Melbo wrote on Aug 19, 2006 3:43 PM:The Weston time share resort Is not the last hotel in the Universe. Fix the deal or move on. Barrante never suported Manchester deal. What a sad spin.
Veritas wrote on Aug 19, 2006 4:31 PM:When you can not refute the facts, attack the messenger. How can so many people be so wrong about this giveaway?
Less Subsidy??? wrote on Aug 19, 2006 5:53 PM:Less Subsidy??? that is an ignorant statement, how soon we forget that Manchester demanded subsidy was tow public streets, the bluffs, the amhitheater and the rec center!!!!!!!
No room at the Inn wrote on Aug 20, 2006 3:39 AM:What? $370 to $400 + tax for a room? The Weston is too much for a room, in Oceanside. My friends and family will gladly sleep on the couch. One good thing. I can tell my mother in law no room at the Inn.
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