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The Artful Dodgers

By Mary Marlow

The Miramar Hotel managed to use a loophole in 2006 when they purchased the Miramar property for $200 million to save approximately $1.2 million every year in property taxes.

That means the County of Los Angeles, the City of Santa Monica and the local school district lost needed revenue for the past 14 years of around $20 million dollars.

Of the $1.4 million annually in lost taxes, the City lost around 17 percent of the total and the same for SMMUSD or $453,000 each year.

I bring these lost revenues up now because the Miramar is coming before our City Council with another revenue dodge -- a development agreement that offers meager community benefits in exchange for a massive new building that will bring them profits in excess the generous 12 percent expected of hotel projects.

Let’s start with the Downtown Community Plan expectations for a development agreement:

"All development agreement projects are expected to provide community benefits that contribute to Downtown’s priorities and fees in excess of Tier 3 fee requirements.

"Table 2 in the Staff Report provides guidelines to priority areas that should guide development agreement negotiations. These priority areas are a baseline for further negotiation” (DCP page 30)

The calculated community benefits in excess of Tier 3 requirements are:
Fees and Contributions Amount
Enhanced Affordable Housing Commercial Linkage Fee $330,000
Enhanced Transportation Impact Fee $510,000
Historic Preservation for Palisades Park $50,000
Contribution to Reed Park Ambassadors Program $200,000
Affordable Lodging Contribution $75,000
Economic/Opportunity Fund Contribution $550,000
Land for Affordable Housing $12,750,000
Minus Inadequate Park & Recreation Fee ($630,000)
Minus Inadequate Cultural Arts Fee ($250,000)
Total $13,585,000

The Miramar attempts to take credit for the “GAP” financing for the 42 units of affordable housing on it of $24,509,000 -- $12,830,000. This GAP financing is the actual cost between the project cost and the tax credits likely from the state of California taxpayers to build the project.

This dodge tries to take credit for building affordable housing, but not the full cost. Note that the Miramar boasts of bringing 214 new jobs to the city, but only wants to house 42 of their total 675 workers.

This is a problem for the city due to the approximately 6,000 new affordable units required of the city in the next 8 years for current workers.

But that's not all; the costs of $11,600,000 to renovate a landmark building as luxury hotel rooms is claimed to be a community benefit instead of a renovation cost.

On-site water reuse and hookup to recycled water for their landscaping of $2,100,000 is also claimed as a benefit to the community rather than a cost of doing business.

A Short List of Miscellaneous Credits they Expect:

Service and transportation passes to affordable housing residents, a requirement of their Transportation Demand Management Plan;

The public accessible open space at the corner of Ocean Avenue and Wilshire is listed as a community benefit, but they expect to write off $752,000 in direct costs whatever that is;

The 55-year cost of $1,375,000 (note other costs are for 26 years) of providing a community room for public use at city rates. Other development agreements, for example, the Colorado Center, offers free use of a community room per their development agreement;

Local hiring for construction jobs;

Internship program for local high school or college students, and

Subsidized community events and/or hotel stays, which is generally a tax deduction.

The Miramar project is estimated to cost $500,000,000. You would expect at least 10 percent of the cost would go toward community benefits in excess of other Zoning Code complying properties. The Miramar is offering 2.7 percent of the project cost.

The most important role of City Council is the financial health of the city. This project leaves needed money on the table at a time of financial crisis.

I urge the city council to send this development agreement back for renegotiation because it is not the best deal for the city of Santa Monica.

Time to stop the artful dodging and demand the best project with the best community benefits in exchange.

Mary Marlow heads the Santa Monica Transparency Project.

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