April 14--SAN BRUNO -- Officials here plan to begin negotiations this summer with a South Carolina-based hotel developer, which wants millions in city subsidies to build an upscale hotel on a city-owned piece of land.

OTO Development has preliminarily asked for city "participation" in the estimated $30.1 million project across from Tanforan shopping mall to the tune of up to $3.9 million, including free land, waived permit fees and getting a 50 percent cut of hotel tax for five years.

But that possibility has some local hotel owners crying foul.

They want to know why San Bruno should give subsidies to a developer while they built their own hotels without any city assistance. They also point out the market is so hot that San Mateo County hotels reported an 89.8 percent occupancy rate in November.

"I can't understand why the city would want to bend over backwards for these people," said Sunil Bhas, co-owner and general manager of the Comfort Inn & Suites on San Bruno Avenue. "It's not fair."

He said his family's hotel, which opened in 2002, didn't get any subsidies. In fact the city required they fix nearby sidewalks and make changes to the hotel sewage system that tacked another $50,000 onto the building price tag.

There's also concern about whether there will be enough business to go around. Prativ Patel, owner of the Super 8 on El Camino Real, said, "Last year was a good year, but that doesn't mean anything." He's also feels

it's unfair for a developer to get city subsidies.

Mayor Jim Ruane said the city hasn't committed to giving money or land to the developer, it has just agreed to negotiate exclusively with OTO.

"They city didn't offer anything to anybody," Ruane said. He said the developer "came to us and said 'this is what we would like you to do to make this happen.' "

There are already 13 motels or hotels in San Bruno with a total of 653 rooms, according to city records. They generated about $2.1 million last year in tax revenue compared to $1.7 million in 2011.

The discussion around the subsidies stems from the city's desire to control the type of hotel that will be built on the land. City leaders have wanted a hotel at the vacant 1.5-acre site which sits on El Camino Real at Interstate 380 since the late 1990s, when the U.S. Navy gave up the property.

But the tourism slump after 9/11 and, until recently, a lack of developer interest stalled the project. So in July 2012 San Bruno stepped in and bought the property for $1.4 million from the company behind the neighboring 1,063 unit condo project there.

The city doesn't want to get into the hotel business. But city leaders believe, if left up to market forces, San Bruno will not get the kind of hotel they would like.

City officials want the hotel to have an approximately 3,000-square-foot meeting space, which could host everything from wedding receptions to city events. The current options for events in San Bruno are limited and include the well-used 12,700-square-foot senior center.

"We wanted to make sure the city was in the position to control and have interaction with the project that got built," said City Manager Connie Jackson. "We don't want any old hotel."

OTO's preliminary outline for the proposed 131-room Marriott SpringHill Suites hotel includes the city chipping in the land, waiving building fees and other subsidies. Proposals from four other developers considered by the city also included public subsidies of between $1.2 million and $17 million.

OTO didn't respond to repeated requests for comment, but at a February City Council meeting the company's co-founder explained the subsidies make the project an "attractive" investment.

OTO vice president of real estate Todd Turner told the council the site is small so it will need underground parking, which is more expensive than a surface lot. He also said that if San Bruno wants construction workers to be paid the prevailing wage that would add to the cost as well. Lastly, the price guests would pay per night contributed to OTO's estimate on the subsidies.

"Were this market running at $191 a night instead of $141 a night we would not be asking for any subsidy," Turner told the council.

But a San Francisco-based hotel consultant, who is not involved in the project, questioned whether San Bruno even needs another hotel. RSBA & Associates President Rick Swig said if the project is deemed essential, city leaders should negotiate hard.

Swig said an investment of subsidies should produce a return like an increase in hotel tax revenue, more jobs or sprucing up an area in order to stimulate other development.

"If there is a case for a hotel, then the risk should be placed on the developer," Swig said. "At the very most I think the city should contribute the land on a lease-basis so the developer doesn't have to pay cash for it."

Contact Joshua Melvin at 650-348-4335. Follow him at Twitter.com/melvinreport.

___

(c)2013 the San Mateo County Times (San Mateo, Calif.)

Visit the San Mateo County Times (San Mateo, Calif.) at www.mercurynews.com/san-mateo-county

Distributed by MCT Information Services