Fees would kill Oceanside harbor hotel project, owner says

By: MARGA KELLOGG - Staff Writer
Officials working to maintain number of lower-cost rooms | Sunday, December 23, 2007 10:33 PM PST ∞

OCEANSIDE ---- Local businessman Shantu Patel says he wants to put a new face on the downtown GuestHouse Inn, but is worried that hefty new fees being considered by the California Coastal Commission could be a death knell for the project.

Patel plans to demolish the 80-room inn and the Flying Bridge Restaurant at 1105 N. Coast Highway and replace them with a 127-room Hyatt hotel, overlooking the nearby harbor.

The Hyatt would increase occupancy rates on the property because it would offer an upscale hotel that is more consistent with recent condominiums and time-share developments in Oceanside, he said.

But a recent proposal by the staff of the California Coastal Commission would require developers who want to revamp downtown properties to pay up-front "in-lieu fees," --- money that the proposal says should be used for projects that would promote more affordable lodging options along the coast.

Patel says that, if approved, the proposal would add an estimated $1 million to his $25 million project.

At its Dec. 12 meeting, the commission killed a similar fee proposal that targeted new hotel and motel projects in Oceanside's downtown redevelopment area. But the panel stalled on how the fees should be applied to renovations such as Patel's.

Patel said if he has to pay the fees, he'll have to shelve his project. And, he said, if such fee proposals spread, it could lead to the demise of smaller hotels and motels on the California coast.

"In the long term," he said, "it will just cause the decay of those hotels and the coast will be littered with them. Whoever came up with this idea is not thinking it through. It may be a short-term tax to fund their projects like parks and hostels, but in the long term, it is definitely a negative."

A bigger picture
Jim Abrams, president and chief executive officer of the California Hotel and Lodging Association, said last week that his organization is drafting a letter to the commission, challenging the fees.

The association has 1,800 member properties throughout California and represents the lodging industry in government matters.

Abrams said the commission has no legal authority to impose in-lieu fees and added that, in Patel's case, if such fees mean he can't develop his property, they would constitute the unlawful taking of private property.

"If you're going to take my property or make it unusable, then that's basically eminent domain. You can't just willy-nilly do things to people's property," he said.

Under the recent proposal, developers who plan to demolish and rebuild a hotel or motel in Oceanside's downtown redevelopment area would have to pay fees of $30,000 per unit for half of any new rooms.

The money would be set aside to build campgrounds, RV parks and hostels to ensure there is still affordable lodging near the beach. The Coastal Commission defines affordable as $100 a night or less.

Abrams said the commission's staff has made it clear that while they're focusing on Oceanside, they're trying to come up with a policy that would cover the coastal zone for the entire state. If that's the case, he said, there are procedures that must be followed or the commission is breaking the law.

Abrams also questioned how the Coastal Commission determined that $100 a night constituted a low-cost hotel room, how it arrived at the $30,000 in-lieu fee and why the fees wouldn't be used to help developers build lower-cost hotels, rather than hostels and campgrounds.

The other side
Coastal Commission Executive Director Peter Douglas said last week that, in regard to a plan for the entire state, Abrams is right. That's why the commission is focusing on Oceanside and has addressed other similar situations on a case-by-case basis, Douglas added.

He said that at the Dec. 12 meeting, the commission approved two projects on the Central Coast that included in-lieu fees for hotels.

"We've been imposing in-lieu fees for over 25 years," Douglas said, pointing to a number of lower-cost accommodations that have been built with such fees, including two hostels in Santa Monica, and cottages at Crystal Cove State Park, which he said were preserved using in-lieu monies.

"We can't adopt a statewide policy except by regulation," he said, "but Oceanside's local coastal program was before us. We decided we didn't want the fees to apply to new hotels in that area because the commission agreed with the city that there are sufficient lower-cost accommodations available."

However, if the lower-cost hotels are renovated into pricey new properties, the affordable options diminish, Douglas said.

That's why the panel did not waive the in-lieu fee for remodeling projects, he added.

Most existing hotel rooms are lower-cost ---- $100 or less ---- he said, and need to be protected.

Working out a plan
Kathy Baker, Oceanside's redevelopment manager, said the city is working on a proposal to take back to the commission that would preserve the minimum of 375 low-cost rooms that the panel wants protected in the city's coastal zone.

"We need to brainstorm to find a way to make them feel sure that we'll always meet that minimum instead of (them) imposing a fee," Baker said. "The reality is that a lot of the small hotels want to demo and rebuild because of the size of their property. They can only get so big."

Baker said the city needs to show the commission that imposing fees on smaller hotel proprietors flies in the face of redevelopment.

"I do believe we need to keep a good stock of affordable rooms, but you also can't tie the hands of somebody who wants to improve their property," Baker said.

Douglas said the commission is working with the city to figure out a way to make the in-lieu fee for converted hotels and motels work.

"There are a number of ways that the goal of no net loss of lower-cost rooms can be achieved," he said, "so we need to work that out. I think it's going to take several months."

Contact staff writer Marga Kellogg at (760) 901-4067 or mkellogg@nctimes.com