|By David Garrick, North County Times,
Escondido, Calif.McClatchy-Tribune Regional News
Feb. 18, 2010--Three months after plans to build a seven-story Marriott next to City Hall were abandoned, city officials said Wednesday that the project's developer has satisfied the financial criteria required to move forward.
The developer, Craig Clark of La Jolla, has provided a $3.9 million contingency fund to cover unexpected problems with the roughly $60 million project. In addition, the agreement now prohibits the contractor from requesting extra money or scaling back the 198-room hotel if problems arise.
The city would still need to provide $10.7 million in subsidies, but that money would not come from the city's rapidly dwindling reserve fund. Instead, the money would come from redevelopment revenue the city expects to have beginning in 2013.
City officials said spending such money on the hotel would not worsen the city's budget crisis, because redevelopment revenue must be used for economic development projects and could not be spent on law enforcement, firefighting or other city services.
And City Councilmen Sam Abed and Dick Daniels said Wednesday that the hotel would almost definitely help alleviate the budget crisis by increasing and diversifying city revenues, which have mostly consisted of property tax and sales tax.
The hotel would provide the city an estimated $1.3 million in hotel taxes and extra sales tax revenue the first few years it's open, and roughly $10 million per year when the developer begins making lease payments to the city. The project would be built on a 75-space parking lot between City Hall and the performing arts center.
"This project is more important than ever because the city badly needs more revenue," said Abed, predicting the hotel would open within two years.
Daniels, who withdrew his support for the hotel last year when declining sales tax revenue worsened the budget crisis, agreed.
"This (crisis) has taught us big time that we can't keep relying so much on sales tax," he said.
Abed, Daniels and Mayor Lori Holt Pfeiler said they planned to support the project during a City Council hearing that they expected to take place next month.
Councilwoman Olga Diaz, who has consistently opposed the project, said she was concerned about committing redevelopment money too quickly, and said that such money was far from a guarantee for the city.
Diaz said the city should create a list of potential projects requiring redevelopment revenue so they can be weighed against each other.
"The hotel has jumped to the top of a list that we haven't even made yet," she said.
Diaz also questioned a city plan to acquire the $10.7 million hotel subsidy by issuing revenue bonds that would be paid off with redevelopment revenue the city is projected to begin receiving three years from now. She stressed that the economic downturn could jeopardize that money, and that the state has previously taken such money away from cities to help balance its budget.
Other critics have warned that the hotel could be a failure because tourists have virtually no reason to visit Escondido.
Lisa Prazeau, leader of an Escondido slow-growth group that has opposed the hotel, said Wednesday that a severe downturn in the hotel industry during the past few years should be troubling to city officials.
But Prazeau also said she was encouraged by the plan to use redevelopment money instead of reserves for the hotel subsidy.
Councilwoman Marie Waldron said the developer's new concessions had made her optimistic about the project. But she also said she wanted to see the new agreements and the redevelopment revenue bond proposal before making a firm decision.
Clark, who did not return phone calls Wednesday, received much of the financing for the project from Transcan, a Bay Area venture capital group.
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Copyright (c) 2010, North County Times, Escondido, Calif.
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