Delays in building a destination beachfront hotel are almost over

OCEANSIDE — The development of a destination beachfront hotel and smaller boutique hotel on Pacific Street have faced a decade of delays. First there was the state dissolution of city redevelopment districts, and recently a lawsuit was filed against the city.

The city will be facing the lawsuit in October, and expects hotel development to proceed.

City attorney John Mullen said the lawsuit by San Diegans for Open Government (SDOG) “came out of nowhere.”

There was no word from SDOG throughout the development process that began with city approval of S.D. Malkin Properties (Malkin) as the developer in 2004, up through the City Council meeting in September 2014 when the transit occupancy tax (TOT) agreement, now under dispute, was approved.

The destination hotel is part of the city’s redevelopment plan.

It’s seen as a boon to downtown. The hotel is expected to bring thousands of annual visitors to Oceanside, and be a catalyst to jumpstart surrounding development.

Malkin entered a negotiation agreement and MOU with the city to develop the property in January 2008, and had all discretionary land use entitlements in place prior to state closure of the Redevelopment District.

Hotel development got back on track when the city formed a Successor Agency to replace the Redevelopment District.

In September 2014 the Successor Agency and Oversight Board approved property sale to Malkin.

In November 2014, well past the 60-day filing period to challenge the action, SDOG filed its lawsuit against the city, its Successor Agency, Oversight Board, and Malkin.

The lawsuit filed by SDOG claims, among other things, the city did not provide sufficient public notice on development terms, which include the city and developer splitting the hotel’s transit occupancy tax for 15 years or $11.3 million as an incentive to develop the luxury hotel.

The TOT incentive is in lieu of previously promised city issued limited public bonds to kickstart development financing.

Mullen updated the Oversight Board on Tuesday about litigations.

The city filed a demurrer, that objects to points being invalid, but the case has never been heard on its merits because the plaintiff filed an amended complaint.

Instead of pursuing the demurrer the city elected to get the case to a hearing on the merits as soon as possible, and will speak to the amended complaint in October.

Mullen said SDOG attorney Cory Briggs has discarded some of his previous objections in the amendment.

Those still included are allegations of an incomplete economic development subsidy report, failure to provide public notice of the Oversight Board’s approval of the TOT agreement, and claims the city’s agreement to share TOT revenues with Malkin violate the state’s restrictions against incurring future indebtedness, all of which Mullen disputes.

The city spells out in its demurrer that the incentive in generated TOT is to entice Malkin to take the risk to build the first luxury hotel of its kind and scale in the city.

SDOG claims the city economic subsidy report does not accurately specify the amount of subsidy.

To which the city states SDOG distorts the report, which clearly gives numbers for the $13.6 million net present value, and $25.6 million total TOT payments.

The city also states the TOT revenue survives SDOG’S challenge of going against the state’s prohibition of long term indebtedness without pubic vote, because it is a conditional obligation, not an immediate indebtedness.

It does not create immediate indebtedness for the total amount, and will be paid quarterly from generated TOT revenues.

The city will write its brief to the complaint this Friday.

Mullen said he is confident the city will prevail, and hotel construction will move forward.

The city’s demurrer states there is no apparent connection with SDOG and the city, and there is doubt a SDOG member lives in Oceanside.

The document states “the residents of Oceanside neither need nor want help from this carpetbagger” (SDOG).

Briggs has filed a long list of lawsuits against cities and nonprofits, and has been under investigation himself for questionable professional conduct.

The court date for SDOG claims against Oceanside is Oct. 23.

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