The first concerns the statement in my earlier post that “Stanford misled city officials into thinking the university was open to developing a large hotel on its property.” Several commentators stated that Stanford never promised to build a large hotel. That may be true, but what are we to believe if Stanford made it clear that no hotel would be built on its property? That no one of the Planning Department staff, the Planning Commission, or the City Council sought to question the one assumption that was responsible for almost all of the net income that presumably would accrue to the city? That during the lengthy and fully vetted process touted by advocates of the DSP, not one person would have asked Stanford about its intentions? That everyone involved was either incompetent in not verifying the assumption or dishonest in not revealing Stanford’s clarification of its intentions?
In the end, it does not matter how it happened that the assumption was made, what is relevant is that the Downtown Specific Plan was doomed once Stanford’s true intentions became known. No one denies the fact that taxpayers will have to subsidize the DSP with higher taxes, higher user fees, lower levels of city services, or some combination of the three.
The second statement suggests that the city has already obtained 146 of the hotel rooms that were needed to avoid taxpayer subsidies. Those derive from two sources: eight additional rooms at the Mermaid Inn and 138 rooms and the Marriott Residence Inn (“MRI”). I am unfamiliar with the first project, but I know a little about the second: I am aware that the General Fund will receive NO REVENUE from the 138 rooms.
The 138 rooms from the MRI are essentially remodels of the 138 rooms from the former Glenwood Inn/Casa on the Peninsula, a senior residential facility. Some residents have decried the loss of an important and difficult-to-replace facility, but I am focusing only on the economics of the matter. There are three reasons that the General Fund will not be the recipient of hotel taxes for this project:
1. The MRI provides extended stays; there is no hotel tax for stays of more than 30 days
The approved plan assumes that 23% of the revenue will NOT generate hotel tax [from the city's analysis: Web Link">Web Link">Web Link">Web Link pp. 698, 708]. If the assumption is accurate, it means that, from an economic standpoint, 32 rooms (23% of the total) should be subtracted from the 138, for a remaining total of 106 rooms.
The assumption of 23% long-term stays may be conservative. It is derived from a similar Marriott in Los Altos. However, there is another MRI located in Mountain View, for which the percentage of long-term stays is not provided. It might be expected that the figure would have been disclosed by Marriott had it been lower than 23%.
It is conceivable that 100% of the stays at the hotel could be long term, meaning that the city could receive NO HOTEL TAX. At the average daily rate assumed in the city’s peer review analysis of $171.31 [Web Link">Web Link">Web Link">Web Link p. 707], a month’s stay would cost no more than $5,300, though longer stays cost less than the average. Compare that to lease prices for Menlo Park homes of $5,000 to $10,000 per month, and it is not unreasonable to assume that local corporations might reserve banks of rooms for visiting or relocating executives.
2. Hotel Tax Revenue has been dedicated to capital improvements needed in the plan area
The revenue originally planned for the General Fund has been dedicated to the Capital Improvement Program “to fund infrastructure projects, in particular circulation improvements, within the El Camino Real/Downtown Specific Plan area” [Web Link">Web Link">Web Link">Web Link p. 579]. Even if there were some surplus revenue deriving from the DSP, none of it will reach the General Fund
Meanwhile, the General Fund will incur additional costs, as disclosed in the original Fiscal Impact Analysis. However, the circulation improvements required by the Downtown Specific Plan, and the total extent of them, has never been discussed in any of the analyses. In the end, the taxpayers will have to contribute even more than expected to make up for the General Fund shortfall created by the Downtown Specific Plan.
3. Marriott gets free parking from the city
Marriott argued that because of the benefits accruing to the city, it should not have to pay to lease needed parking spaces on city property. The council agreed and gave Marriott free parking spaces for at least five years [Web Link">Web Link">Web Link">Web Link pp. 579-580]. The result is that revenue that should have gone to the General Fund is lost, so the General Fund is even worse off: it receives none of the hotel tax and it loses parking revenue for five years.
* * * * *
In sum, there might be an economic-equivalent total of only 114 new hotel rooms (8 + 106), less than half the rooms needed to make the DSP break even financially. Even then, none of it will reach the General Fund because it is now targeted for capital improvements necessitated by the DSP. Though nothing new goes to the General Fund, there will be an additional need for city services as a result of the DSP. Taxpayers will have to pay to make up for the shortfall in the General Fund as well as the Capital Fund shortfall created by the need for “circulation improvements” necessitated by the DSP.
I would love to be wrong about part or even all of the facts I have laid out above. However, I do not think that I am. The result of all this is that we have to pay higher taxes to give developers the right to bring more traffic and more pollution to the city.
Measure M will not fix all these problems, and it certainly won’t give us representatives who will stand up for taxpayers, but it will limit the losses to taxpayers.
--Chuck Bernstein
444 Oak Court, Menlo Park
[email protected]
