|By Craig Tenbroeck, North County Times,
Escondido, Calif.McClatchy-Tribune Regional News
Jun. 3, 2009--OCEANSIDE -- Four years after the selection of S.D. Malkin Properties to build Oceanside's long-proposed beachfront resort, the city is poised to sign on the dotted line.
The City Council is expected to approve a lengthy development agreement June 17 that includes a $27.6 million public subsidy. Malkin signed last month.
The broad strokes haven't changed much since the council approved a "memorandum of understanding" with the company in 2006. But the new iteration adds more than 250 pages of detail.
"Every attempt has been made to identify esoteric events and worst-case scenarios and spell out the process and the remedy," Economic Development Director Jane McVey said in a report to the council.
The resort, as approved, would include a 289-room Westin or Hyatt Regency hotel, a 47-room boutique hotel, 48 time shares, a ballroom, and 18,500 square feet of commercial space on two city-owned blocks near the Oceanside Municipal Pier. Keyser Marston Associates, a city-hired consultant, estimates the cost at $209 million.
Oceanside's redevelopment agency would lease the land for 75 years with an optional 24-year extension. The developer wouldn't have to pay rent for the first 12 years.
The project would have to be of the quality of Loews Coronado Bay Resort or the Hilton Waterfront Resort in Huntington Beach, the agreement states.
"This is huge," said Jim Spain, a member of the city's Economic Development Commission, which endorsed the agreement Tuesday. "I think this is the most important thing to come before this commission since its inception."
To come up with most of the subsidy, the city's redevelopment agency would issue bonds tied to increases in property taxes in the redevelopment area. It would also hand over redevelopment money at a rate based on the hotel's performance.
If Oceanside fails to issue the bonds or can't sell them, the developer would get a significant slice of the redevelopment agency's funding until it's made whole. The general fund wouldn't be at risk, McVey said.
George Barrante, a former planning commissioner, has been a critic of the deal for years. "That's prime land there," Barrante said Tuesday. "We should not have to subsidize somebody to build on that land."
But McVey said the subsidy is necessary to end up with a high-end project.
"Right now, today, the marketplace would not build as nice of a hotel as we're asking for," McVey said Tuesday.
Oceanside's total investment, including costs for acquiring the site, would be $37.4 million, Keyser Marston states. It has already paid $200,000 toward the project's environmental impact study.
Over 75 years, the city would collect $72.8 million from taxes and lease payments, according to the firm.
That's a return of roughly 1 percent annually on the city's investment.
The estimates don't include indirect revenues -- everything from construction workers eating lunch nearby to hotel guests shopping around town. Excess parking at the resort would be open to the public at market rates.
Another benefit, McVey said, is the projected spillover effect on downtown's development. City leaders have long seen the resort as a catalyst for other projects.
"This is the key," McVey said. "We're putting that first building block in place."
Even with a deal in place, shovels wouldn't hit the dirt for awhile. Malkin would have 18 months (plus two optional six-month extensions) to secure financing -- a challenge in an economic recession. Construction could take an additional 24 to 40 months.
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Copyright (c) 2009, North County Times, Escondido, Calif.
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