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Battle Pits Slow-Growth Residents Against Big Hotels Slated for Downtown Santa Monica  

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Harding, Larmore
Kutcher & Kozal, LLP

By Niki Cervantes
Staff Writer

First in a series

April 25, 2017 -- Slow-growth advocates see the three big luxury hotels proposed for downtown Santa Monica as towering massive structures that will erase what is left the City's quaint beach-town feel.

Proponents, however, see them as sustainable economic engines that generate less traffic than housing or commercial development and will pump millions of dollars a year into the City's coffers.

The battle over the trio of hotels in the heart of downtown -- which total 1,264,635 square feet of new building within blocks of each other -- will enter a new phase Wednesday when the often-changed final blueprint for new downtown development goes before the Planning Commission ("Santa Monica Downtown Plan Seeks to Strike a Compromise, Officials Say, But Some Remain Skeptical," April 13, 2017).

If approved, the Plaza at Santa Monica, the Ocean Avenue Project (a hotel designed by Frank Gehry) and the major redevelopment of the Fairmont Miramar Hotel will provide the fastest-rising stream of revenue the City can rely on for years, according to the City Finance Department.

Hotel taxes from the proposed upscale hotels could well be needed as spending -- mostly on employees -- quickly outpaces total revenue for coming budgets.

Certainly, that is the case for three other hotels already newly completed or under construction in the downtown.

City officials estimate $7.1 million a year in direct and indirect benefits will be generated by the Courtyard by Marriott and the Hampton Inn and Suites, across the street from each other and just blocks from the Pier.

The third is a mixed-use hotel complex at 710 Wilshire. Estimates of the fiscal benefits were not available.

A “significant portion of the (future revenue) growth relates to the three new hotels set to open during the period,” according to a report updating the City’s economic forecast through fiscal year 2021-2022 ("Forecast Predicts Slowing in Santa Monica Economy," January 26, 2017).

Santa Monica, like other cities with booming tourism, is heavily reliant on the transient occupancy tax (TOT), also called the hotel tax, which is 14 percent.

Property and sales/use taxes bring in more revenue, but are shared with other governments and, once re-allocated by the county, end up providing only 14 percent and 16 percent, respectively, of the City’s coffers.

The TOT flows directly to the City, providing $47,628,525 last year, or 15 percent of all revenue.

The proposed hotels -- which are located on what the Downtown Plan previously referred to as "opportunity sites" -- would be a major generator of those taxes.

All told, the three projects would add 670 hotel rooms, although as mixed-use developments they also set aside public space for multi-residential units, retail, offices and public or semi-pubic uses.

About six percent of space for the three projects is for 114 apartments, including -- at last count -- 48 affordable units at the Plaza, 40 at the Miramar and five at the Gehry Hotel.

The Miramar, now being re-designed, initially also planned 120 condos; the Gehry project includes 22.

The sudden rise of proposed hotels downtown is of intense concern to neighborhood groups, the slow-growth movement and other critics who worry the flurry of development will be approved mostly as a fiscal bail out.

They predict the size, density and height of the three projects -- which under the proposed downtown plan can reach 130 feet -- will worsen gridlock, shadow sunlit streets and block ocean breezes.

“Enough is enough,” Janet G Heinleare, a longtime resident, wrote to the City after it unveiled its final iteration of the DCP on April 12.

“Think of the residents for once,” she said. “No more hotels. Leave us room for trees and grass. Stop the madness!”

Instead of allowing Metropolitan Pacific Capital to build the Plaza at Santa Monica, activists are calling for the City to build a sprawling urban park on the land, which it owns ("Slow-Growth Activists Girding for Fight Against "Plaza at Santa Monica" Downtown," February 28, 2017).

But City officials argue the new building will provide needed housing downtown, which the DCP envisions as a neighborhood for residents, as well as a business hub and tourism hotspot.

They note that the proposed Plaza at Santa Monica, which is on 2.5 acres of City-owned land, includes public green spaces and cultural and community amenities. The other two projects make similar promises.

Nonetheless, the three hotels promise a huge financial bounty for the City that green space couldn't begin to match.

Editor's note: This story has been changed to reflect the that the report updating the City's economic forecast refers to three hotels City officials say have been newly completed or under construction, not to the proposed hotels.

Next: Proposed Santa Monica Hotels Offer Revenue Bounty

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