City locks in its costs for Treasure Island park

Barbara Diamond

Mayor Wayne Baglin is steamed about a deal cut by the city Tuesday

night that would allow the developer of the soon-to-be completed Laguna

Colony Resort to get building permits in exchange for capping the city’s

costs of the park at the controversial project.

“I see this as $1.5 million of smoke and mirrors,” Baglin said.

Despite Baglin’s opposition, a council majority voted Tuesday to

instruct city staff members to confirm changes in the development

agreement proposed in a letter from Athens Group, owners of the 26-acre

oceanfront property most folks still call Treasure Island.

The letter proposed that the city allow Athens Group to pull building

permits for the condominiums on the site. In return, the developer would

agree to cap the disputed park costs to the city, reduce the interest

rate on the money that the developer has fronted for the park and rescind

some of the fee waivers.

The changes would reduce Athens Group’s $9.3-million bill for park

construction to $7.7 million or $7.8 million, depending on interest rates

and concessions offered by the developer.

“It’s capped now,” said City Manager Ken Frank, albeit at a figure a

tad higher than the $175,000 he recommended during early discussions of

the park.

The council had declined to cap the expenditures at that time.

Councilwoman Toni Iseman called it a blank check and a bad contract to

start with.

“There are citizens who have been involved in this project for such a

long time and we had the goal of making it a better park and a better

city,” said former Councilwoman Ann Christoph. Resident Bill Rehn

approved of the cap, but urged the council to be wary of what it agreed

to.

Under the terms of the proposed operating memorandum, any increases in

park costs over the cap will be paid by the developer. Any decreases will

be taken off the city’s bill.

Councilwoman Cheryl Kinsman wanted a guarantee of the developer’s cap.

“The city will not pay one penny more and you will make it gorgeous,”

she said. “I don’t like what has happened so far, but I do like putting a

cap on it.”

Sans the approval, the city would have had to go to arbitration to

settle the disputed costs.

“I don’t think either side is ready to pop the champagne, but this is

better than we’d get in arbitration,” said Councilman Paul Freeman.

Freeman is a strong supporter of the project and a member of the

council subcommittee that negotiated the original memo of understanding

for the project and concessions outlined in the Athens Group letter of

May 2.

The park costs fronted by the developer are to be paid back out of bed

taxes, expected to take about three years at 75% to 80% occupancy,

depending on room rates. Bed taxes are kept by the city, not shared with

county or state.

“You are incurring a general fund debt for three years,” said resident

Eric Norby. “I think you can make a better deal.”

When they kick in, the bed taxes are expected to put $3 million a year

into the city general fund. The business district assessment would add

another $600,000 a year, half of it to go to the Visitor’s Bureau, half

to the city’s cultural organizations.

The resort would also generate about $200,000 in sales taxes and

$300,000 in property taxes. The Laguna Beach Unified School District,

also supported by property taxes will get an estimated $500,000 a year.

“Money is the driving force,” said Arnold Hano, who opposed the deal

offered by Athens Group.

Maybe for the city, but the developers wanted the condominium building

permits in the worst way. The development agreement could have been

interpreted a couple of ways, one of which was that no residential

construction could take place until all the public amenities were

completed.

City negotiators Freeman and former Councilman Wayne Peterson included

the provision to ensure the hotel would get built.

“No one thinks that now,” Peterson said in support of the developers

request for the building permits. “Wouldn’t it be wonderful to complete

everything -- at least have the condos enclosed and the landscaping in --

so construction would be out of sight of hotel visitors?”

The developer’s proposal, made public Tuesday, also included an escape

clause for the announced hotel operator Ritz-Carlton, as long as another

five-star hotel operator is selected. The clause is good for 40 years.

It took the council almost three hours to approve the proposal and to

approve 6- to 11-inch height increases for some portions of the hotel

structure. Baglin also opposed the height increase, as did Iseman.

Athens Group spokesman John Mansour claimed the increases are still

well below the building envelope and would be obscured by landscaping.

“I think there is a lot of difference between looking through a tree

and looking through a building,” Iseman said.

The discrepancy in roof heights approved in the coastal development

permit and the actual construction heights was discovered by Baglin and

verified by the Athens Group.

Mansour said the heights were increased to hide mechanical equipment

and routing. The plans that the Planning Commission, Design Review Board,

City Council and Coastal Commission reviewed and approved in the coastal

development permit were not complete.

“Bluebird Park (renovations) were estimated at $250,000, it came in at

$900,000,” said Laguna resident Tom Slattery.

Mansour said it is standard to make changes in a large building

project.

“Have roof heights in Laguna ever been a minor problem?” Baglin

demanded.

Baglin promised he would oppose any height increases in the project.

Construction is on track for the resort to open in January of 2003.

The park is all but completed and gorgeous, according to those who

testified Tuesday.

“You should be so proud to sit on the council for this project,” said

former Councilwoman Kathleen Blackburn, a longtime supporter of the

project. “The park is breathtaking.”