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A proposed 63-room, four-story luxury hotel with rooms at $350 a night at 1400 El Camino Real could deliver Menlo Park up to $8.5 million in transient occupancy tax revenue over 10 years. But the developer is also suggesting that $1 million of that go to investors instead – an option the council was not averse to discussing further, provided the city recoups the money down the road.
During a study session on Tuesday, Feb. 24, local developer Jeff Pollock of the Pollock Financial Group said that a “minimal level of assistance” from the city would help secure the $31.5 million project’s financing.
The appeal for the city is obvious – right now the property, which used to house a Shell gas station, is home to a bunch of shrubs and dirt. “It looks like a lot of (downtown) lots,” Vice Mayor Rich Cline wryly noted.
While not opposed to sharing the transient occupancy tax revenue, Mr. Cline said he was concerned about maintaining the integrity of the downtown/El Camino Real specific plan “as projects come in and start whittling it down … at what point can we say no to others who want to come in?”
City Attorney Bill McClure said there was nothing binding about making exceptions for one project, pointing out that the specific plan allows for some discretion. He also said that as far as public benefit in exchange for exceeding the base level of building density goes, the plan does regard a hotel as a benefit in and of itself because other uses allowed on a site, such as office space or residential buildings don’t generate anywhere near as much annual revenue.
The boutique hotel would also require a small exception for parking – the developer plans to build a 75-car garage underground that uses hydraulic lifts to stack vehicles vertically, but the specific plan’s rules state the project should have 79 parking spaces.
Transportation Manager Nikki Nagaya attributed the difference to the specific plan assuming a hotel would include a fitness center that could be used by the public, thereby increasing site traffic. Since the Pollock hotel doesn’t include exercise facilities, it’s reasonable to allow four fewer parking spaces, she suggested to the council.
The developer is still fine-tuning the details. Based on the council’s input, project representatives said they’d look at adding charging stations for electric vehicles to the garage, and incorporating more “green design” elements if it makes sense economically.
Mayor Cat Carlton suggested the Pollock Financial Group pay particular attention to how well the hotel’s architecture will suit Menlo Park. If she’s learned anything in two years on council, she said, it’s to not underestimate people’s passion for architecture. “Modern just doesn’t fly here… Think warmth, Mediterranean … don’t think walls with windows.”
Mr. Pollock told the Almanac he hopes to start construction of the 33,750-square-foot hotel in early 2016 and finish within 12 to 14 months.
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Slippery slope, once you grant financial exception to one developer, expect future developers to ask for them as well. Where is the line? What are the standards to grant these exceptions? Is it by the whims of each individual council member?
If the financial exception was a loan from the city to the developer to be paid back as a true loan with interest rates, would the conversation be different?
If you watch the video of meeting a conventional loan was discussed.
You can plug that address into Google maps. The visual is just as Cline’s quote, maybe worse.
What if the developer were to stack the cars 4 high and charge the Residence Inn for their overflow parking? Also build an additional 4 floors. Then city financing might not be necessary.
Menlo should study the Warriors agreement in SF.
The proposed $1M giveaway to the developer is a terrible idea. The Council is acting as if it’s 2008 and the economy has just tanked.
The so-called investors should earn their return based on the success of the hotel, and not on the largesse of the taxpayers.
The Specific Plan expects projects at the public benefit level to contribute to making the improvements described in the plan. A hotel QUALIFIES as a public benefit project but that doesn’t necessarily constitute all of the expected benefit.
If the council wants to assist a project like this in the first couple years, they should require longer term for-sure benefits above and beyond the TOT for the community. That’s only fair for the city taking risk upfront that the project investors aren’t willing to do,
The council needs to immediately finish its work on the specific plan by listing all the expected improvements, estimating the costs for these, and identifying a way that these will be funded by all the developers who are reaping value from the city’s largesse for giving away for nothing a lot of very substantial new development rights, even at the Base level. Projects are in front of the city now, and there is no plan. The city’s consultant last summer said the same thing – there is no plan and the city is missing its opportunity. The council needs to do its work NOW.
At the last City Council meeting it was announced the Public Benefit discussion would occur in April.
While a revenue generating boutique hotel at Glenwood & El Camino could potentially be additive to the City, as it is currently proposed, it represents a threat to the neighborhood. I would like the City Council to stand up for the regulations that they diligently put in place to preserve the character of each neighborhood and not be bullied by developers. Allowing this hotel to go in with sub-standard parking, as is currently proposed, will congest and harm the environs of the development.
There is currently a parking problem at the El Camino/Glenwood/San Antonio location. There are no public lots and all street parking is already taken by Ducky’s Carwash employees, by the residents of the San Antonio apartments (which do not meet today’s current code for parking), and by Gombei Restaurant which does not have sufficient parking for its patrons. It is ludicrous to assume that the overflow of cars caused by the hotel can park on the streets. And let’s remember that the Marriott isn’t even open yet – and yes, the City Council allowed that to pass with substandard parking so street parking will only get worse when that opens.
Furthermore, the substandard parking may in fact be even more substandard than one thinks. I question if the true demand for parking from the hotel has been properly calculated. Beyond hotel staff & guests, there will be a restaurant & bar which will be patronized by non-hotel guests, requiring greater parking needs. The hotel has proposed a 1,700 sq ft restaurant but has the City accounted for the outside patio that will be used for dining, increasing patrons & parking needs? I also think it is questionable to believe that the conference room will not be utilized, at all, by non-hotel guests – surely there will be some attendees to some events that will drive their cars.
I hope the City Council will require more underground parking for the hotel so that we can all enjoy it instead of being annoyed by it.
Sounds like Pollack simply paid too much for the land and can’t make the numbers work for his proposed project. No reason for the taxpayers to bail him out. Pollack has a problem…the longer he takes to get a project to a point it starts producing income, the higher his cost basis. Menlo Park should stand firm and deny Pollack’s offer.
While the enticement of occupancy fees tax revenue should be enticing to the City Council it should not stampeded them into giving $1M of such revenue back to the investors. This sounds like a bad deal to me. If this is indeed a “minimal level of assistance” to the Pollock group, then they should be able to get by without it.
The merits of this development is another subject. How it fits into the El Camino Real specific plan needs to be considered. And, in my view, ANY significant commercial development in the City should be held to the highest sustainability standards, such as LEED Platinum or Living Building.
Steve:
do you have any idea what LEED Platinum adds to the cost of construction? Who do you think pays for that? (hint: ultimately it’s not the developer, it’s users/customers of the facility). What you are asking for is simply another tax.
Council hasn’t agreed to a deal yet. What they have agreed to do is talk. I have no problems with the city being flexible as long as the taxpayers are made whole. And this project does fit very well into the Downtown Specific Plan- one of the few places it varies is that if falls short by four parking spaces. Four. A boutique hotel is a good fit for that particular lot, and let’s see what the city negotiates.
In November 2012, voters passed the following:
“To partially restore the annual revenue loss of $1.2 million caused by the State’s dissolution of the City’s redevelopment agency, to maintain current City service levels for police, library, streets, sidewalks, storm drains, and parks and recreation facilities and programs, and to keep parity with neighboring cities’ hotel tax rates, shall the City of Menlo Park adopt an ordinance to increase the transient occupancy tax on hotel guests from 10% to 12% effective January 1, 2013?”
Now that property tax revenue is going through the roof, the council should consider restoring the 10% tax rate. Perhaps this would be enough to allow the developers to continue the project without having to suffer under the state’s absurd “prevailing wage” laws.
I forgot to mention today’s story in the Daily Post, entitled “Developer drops tax break request”. In that article, City Attorney Bill McClure is quoted as saying “…if he wanted the tax break, he would have to follow the state’s prevailing wage law…”
The developers aren’t the ones paying the hotel tax. The visitors are. The TOT is just a pass-through the hotel operator, who may not be the developer. Follow the money.
If there is a space left build on it, If the city wants to make a financial contribution it should be treated as an investment partner. I pay taxes on my properties, All I see are increases every year. I don’t want my funds going to build a hotel. How about lowering my tax rate. With the price of commercial real estate going up 20% in the last year why would you use my tax dollars as a gift/loan whatever you want to call it to build a hotel. This is not monopoly. The property owner is making a fortune while it sits vacant, He doesn’t need our money.
Bad idea, Terrible precedent.
This project looks like it’s before the Planning Commission on Monday evening- interested to see where it’s got to…..