SAN MARCOS - The San Marcos City Council unanimously agreed Tuesday night to sell 2.3 acres near Las Posas Road and Highway 78 to a development firm that plans to build a 109-room Marriott Residence Inn on the site.

The city will receive about $3.9 million for the vacant property at the southeast corner of Los Vallecitos Boulevard and Las Posas Road. The land was part of a larger parcel the city acquired to build the Las Posas freeway interchange, which opened in June 2006.

City officials estimate that the business-class hotel, slated to open in fall 2009, will generate about $400,000 per year in hotel tax for the city, which is officially called transient occupancy tax.

San Marcos received about $312,000 in hotel tax during fiscal year 2006-07, the least of any city in North County. The city now has two hotels, an 85-room Ramada Limited Suites on San Marcos Boulevard and a 69-room Hampton Inn off Twin Oaks Valley Road.

The Lake San Marcos Resort, located on unincorporated land adjacent to the city, has 139 rooms.

Councilman Chris Orlando said he was excited about the project.

"The city's TOT tax is anemic," said Orlando.

Council policy dictates that the city lease land it owns to private developers instead of selling it, because leasing provides a consistent revenue stream. But City Manager Paul Malone said the opportunity to bring a much-needed hotel to town warranted a one-time exception to that policy.

Malone estimated during Tuesday's council meeting that revenue from property tax, redevelopment tax and hotel tax generated by the hotel would be larger than the sales tax and lease revenue generated if the city leased the site for retail use.

City officials said they received many development proposals for the site, including plans for a gas station and a fast food restaurant, but none of those worked out. Malone said Tuesday that a business class hotel is an important amenity for the community.

Revenue from city-owned rental property, which includes the Best Buy/Lowe's Plaza, was $2.8 million in 2006-07, and the city budget for 2007-08 projected an increase to $3.9 million.

The new hotel will be four stories high and include some meeting rooms, according to Thomas Crosbie, an attorney representing the developer, OTO Development of Delaware.

Crosbie said OTO, which includes Blockbuster Video founder Wayne Huizenga among its investors, has built between 50 and 60 hotels in California in recent years.

Crosbie said OTO hopes to break ground on the hotel within eight to 10 months, with construction expected to conclude in September 2009.

Members of the council expressed concern that they would not be allowed to give final approval to design plans for the hotel, but Malone explained that commercial proposals in San Marcos are approved only by city staffers, not the council or the city's Planning Commission.

Malone promised Councilman Mike Preston that the city would post an artist's rendering of the hotel on the city Web site as soon as one becomes available.

Councilman Hal Martin said it was important for the council to be careful with the project because it is located in "a sensitive area."

He was referring to the project's close proximity to the controversial Palomar Station condominium project, which was approved by the council in July over objections from some nearby business owners.

Malone said the city plans to use the $3.9 million from Tuesday's property sale to redevelop other parts of the city, primarily the 217-acre zone near San Marcos Creek where the city is planning a large downtown grid of shops, restaurants and housing.

Tuesday's council meeting was the first in San Marcos history to be broadcast on the Internet. Replays of the meeting are available at www.san-marcos.net.

- Contact staff writer David Garrick at (760) 740-5468 or dgarrick@nctimes.com.