Newport council examines hotel for City Hall site

In an unexpected move, the Newport Beach City Council decided Tuesday to seek developers who could build a hotel on the current City Hall site.

Prior to the study session, most of the official discussions were focused on developing an apartment complex on the 4-acre parcel, which administrators will be vacating once the new Civic Center across town is built.

Neighbors of the publically owned land at 32nd Street and Newport Boulevard have advocated for a hotel there for months, and the city presented initial results of a hotel study Tuesday that showed robust tax revenue projections.

“The numbers for [hotel bed tax] and sales tax are eye-popping,” said Councilman Steve Rosansky.

An apartment is still under consideration, however, and the council now appeared to be open to both ideas.

For either type of development, the city would essentially act as a landlord to the developer, who would sign a long-term ground lease.

While the city still plans to conduct a fiscal impact analysis, the initial study estimates that a 120-room hotel would generate $29.4 million per year in spending on shopping, lodging, dining and other visitor services. A 99-unit apartment development, by contrast, would generate about $2.9 million in retail spending.

The best type of hotel would be a 120-room boutique hotel, said the city’s hotel consultant, Bruce Baltin of PKF Consulting. He gave the examples of Shutters on the Beach hotel in Santa Monica or the Canary Hotel Santa Barbara, calling the concept for Newport “a four-star equivalent hotel.”

The study estimated that the city could receive between $476,000 and $680,000 annually in hotel bed tax.

While the sales and hotel bed tax figures are potentially much greater with a hotel, the apartments could generate a higher land value, which could mean more annual rent for the city’s ground lease.

“It would provide us the highest direct revenue,” Councilman Ed Selich said of an apartment development.

The economic analysis pegged the hotel land value at up to $5.5 million, including public improvements, while the apartments there would make worth it up to $13.6 million. The city plans to build a public plaza and a promenade that would extend to the surrounding streets.

“Money is not everything,” said resident Lori Morris. She said the hotel would “bring people to Newport Beach and really revitalize West Newport.”

Almost all of the residents who spoke at the meeting said that they wanted a hotel instead of apartments.

There’s a void in the city’s hotel market for upscale properties within walking distance to the beach, said Gary Sherwin, president of Visit Newport Beach, the city’s destination marketing organization.

The PKF study said a hotel would average about 76% annual occupancy, and that there is enough demand to support two hotels in Lido Village.

But Councilman Rush Hill said that the city needs “reliable, predictable funds,” and higher rent from an apartment project could support the development of a new West Newport community center. The city has tentative plans for a center near Superior Avenue and Industrial Way.

The council will review final economic studies at the next City Council meeting on Sept. 25, and in the meantime, city administrators are preparing to request qualifications from developers of hotels and apartments.

mike.reicher@latimes.com

Twitter: @mreicher