North Bay communities weigh in on recently proposed hotel projects.
The magic of the grape crush, a charity challenge with 200 classic sports cars and the Mill Valley Film Festival had the North Bay hopping on a sunny weekend in October, filling hotel rooms and giving tourism a late-season boost in an area that annually draws millions of visitors from around the world. In the wake of the recession, tourism is on an upswing, and as it grows, the demand for hotel rooms is increasing. As a result, construction of new lodging is on the rise. These projects bring the promise of new business that municipalities welcome because the resulting revenues boost city coffers to support essential services. The prospect of new development, though, almost always leads to controversy. Because depending on the point of view, it can be a city’s salvation or threaten a community’s character and lifestyle.
Looking for quality
When City Manager Richard Spitler arrived in Calistoga in 2010, he faced a dismal financial picture. “We were in trouble. We needed to find a new source of revenue,” he says. To address the problem, the city launched an economic development program and decided that hotel and resort development was a good focus. A demand for such facilities existed, the land was zoned for lodging, and attracting luxury resorts was in line with the city’s policy and politics.
The city subsequently approved three projects—Indian Springs, the Silver Rose Inn and Enchanted Resorts—but residents weren’t sold on the idea. Some mobilized and created an action group called SOS, Save our Small Town Calistoga, to formally oppose the proposed hotels in the belief that such development was in conflict with the General Plan and would have a negative impact on wildlife, traffic and the neighborhood at large.
The largest proposal, Enchanted Resort, drew the strongest opposition. But despite environmental concerns and an initial opinion that the resort was too ambitious, many local business owners came out in favor of development. “Downtown merchants rallied behind all these projects,” says Spitler.
The controversy led to extensive discussion, and voters eventually went to the polls to make the final decision. The resulting approval of all three proposals gave development the go-ahead. “It was a big dialog in the community,” says Spitler, who believes that, as a result of the debates, the larger community came to understand that new hotels would provide the revenue the city needed to maintain its infrastructure and services. “The community did the right thing,” he says.
Spitler points out that hotels are a triple revenue source, and the property tax, sales tax and 12 percent transient occupancy tax (TOT) they generate in Calistoga will add a projected $7 million annually to the city’s budget. “That’s doubling the revenue in our General Fund,” he says.
Once the developers got the green light, the benefits came quickly, because as part of structured deals, the city asked for impact fee payments up front. Such payments demonstrate the developer is serious and provide immediate funding for infrastructure needs, such as sidewalks, which are advantageous for the coming hotels as well as the community. “If they’re serious, they have to commit,” says Spitler, explaining that the city wants developers to buy into the vision of Calistoga’s future rather than acquiring entitlements and then flipping the property.
The change will be gradual. So far, only Indian Springs is under construction, and work on the Silver Rose Inn (an existing lodging that Colorado developer Bald Mountain purchased and plans to replace) should start in spring 2014. Enchanted Resort will come later, so the rollout will take time. “The true financial impact will be in three to five years,” says Spitler, who points out that hotel development in small towns provides benefits for government, schools and also nonprofit organizations.
For the most part, development that’s consistent with Calistoga’s small town character is welcome. “We’ve shown that it’s in our capacity to deal with it,” says Spitler. “We’ve always been a tourist town, and people get that.”
He adds that leisure resorts are very particular about where they want to locate, and the town’s development agreements stipulate that the lodgings must be high-end, so the new hotels are a good fit and will be in keeping with the character of the community. “It’s our best foot forward,” he says.
Putting up a fight
When developers started eyeing downtown Sonoma, with its small B&Bs, shops, restaurants and historic sites, some residents viewed the prospect of larger buildings and increased traffic with alarm. They worked to put Measure B on the ballot (election day is November 19, 2013) and, if successful, it would add wording to the city’s General Plan limiting the construction of any new hotel or the expansion of existing lodgings to 25 rooms unless the city’s annual occupancy exceeds 80 percent. (The outcome of Measure B wasn’t available at press time, but whether or not it succeeds, it illustrates the quandary some communities face.)
Larry Barnett, chairman of the Preserving Sonoma Committee, which gathered sufficient names to put the initiative on the ballot, says PSC isn’t anti-hotel. Rather, it recognizes that large hotels would change the town’s character in ways the group finds undesirable. A former B&B owner, Barnett recalls conversations over breakfast with guests who found Sonoma “genuine” and appreciated the authentic, small town feeling. He believes large hotels would change the sense of place, threatening the assets people admire and expect to find in Sonoma. “The small town qualities that the community enjoys are the same as what tourists want,” he says.
The development applications that triggered the protest were a 59-room hotel on West Napa Street and the expansion of the 19-room Inn at Sonoma. The larger property would have contributed as much as $5 million to the city’s economy in the first five years after completion, but after opposition surfaced, the developer withdrew the application. The proposed expansion at the Inn at Sonoma got approval, but it was relatively small and involved converting an existing office building into eight new guest rooms.
Barnett claims the ballot measure has substantial community support. “Six to seven out of 10 are in favor of our measure,” he says, and he points out that a precedent exists in the voters’ 1999 rejection of a 105-room Rosewood resort. He explains that proponents of the current initiative believe controls on development are necessary because traffic, pedestrian safety and overcrowding are already problems. “It won’t take much to make it bumper-to-bumper during the tourist season,” he says. “Preserving the quality of the town is more important than big money.” He believes development throughout the area that the Association of Bay Area Governments (ABAG) oversees, which includes Sonoma, Napa and Marin counties, needs a fresh look and says, “Sonoma is at the forefront of sending a message.”
City Manager Carol Giovanatto says it’s difficult to project, but Measure B, should it succeed, has the potential to slow growth in Sonoma and could be problematic because the funds tourism brings in are significant and support the city’s infrastructure. “We’re a tourist-based economy,” she says. “International tourism is really important here in Sonoma.”
Tourism is the largest source of revenue in the city of Sonoma, with hotels contributing 22 percent to the General Fund through a 10 percent TOT. Promoting and accommodating tourism year-round are elements of the General Plan, and the Sonoma city council recently formed a tourism improvement district (TID) for an initial three years to market the town. “We’re starting to see results in the growth of TOT revenue through the efforts of the TID,” says Giovanatto.
For growth, however, hotels are important, because increased occupancy translates into new tourist dollars for restaurants, shops, wineries and attractions, as well as tax income for the city. The threshold Measure B sets is high. Giovanatto points out that seasonal shifts affect occupancy, so while it exceeds 90 percent in the peak months, it can drop to 64 percent in the off season. Exceeding the 80 percent annual average would be difficult. Giovanatto speculates the measure’s passage could result in hotel development in Sonoma Valley, outside the city’s boundaries, which could result in more traffic because people would have to drive downtown instead of walking. In another possible scenario, “We could end up with a number of small hotels,” she says.
Regardless of the outcome, Giovanatto is optimistic. “The city has survived the recession and the economic downturn. We’ll also survive regardless of whether the ballot measure passes or not,” she says.
Demanding more
Sometimes opposition comes from surprising quarters. When Urban One of Los Angeles sought entitlements to build a hotel on the Hanna Ranch property in Novato in 2011, a small group of residents appeared before the Novato Design Review Commission to request that the developer add affordable housing to the mixed-use plans, which already included a 116-room hotel, a retail/office building and two restaurants. The property is home to marshland and ponds, so the Marin Conservation League also expressed concern over environmental issues, putting the factions on opposite sides of the debate.
Additional opposition came from other local hotel owners, who claimed occupancy was low in existing lodgings and that Novato didn’t need any more rooms. Novato Chamber of Commerce CEO Coy Smith says occupancy had dropped to 57 percent during the recession, so it was a valid point. “You want to be in the 80s or 70s, percent-wise,” he says. However, he acknowledges that a new hotel has the potential to be beneficial if it were different from the lodging already in Novato.
The Courtyard by Marriot, Inn Marin and the Best Western Novato Oaks Inn have meeting rooms that can accommodate about 60 to 100 people at a sit-down meeting, but for anything larger, people have to go to the StoneTree Golf Club, Margaret Todd Senior Center or use a hotel in San Rafael. He observes that a hotel with a large meeting room (250 to 400 people) could draw a new kind of visitor to town, which would have the potential for spillover business. “If it brought 300 people to Novato [for a meeting], they might shop, go to movies and eat at restaurants. There’s a huge benefit to that,” he says.
He adds that a new hotel would give the city new revenue from the 10 percent TOT as well as additional taxes—but only if it generated new business and didn’t take it away from existing hotels. “If it’s different clients, there’s a potential for new business,” he says, especially in a destination like Novato, which is well located with easy access to Wine Country and San Francisco. “We like to think we’re a good place to stay. We like to look at ourselves as a good mid-stop,” he says.
Although Urban One won the entitlements to the Hanna Ranch property two years ago, Novato Community Development Director Bob Brown reports it has yet to proceed with firm development proposals, and when contacted, the company declined to make a statement on the project’s status. Should the current plans go ahead, however, the proposed development would occupy only a small part of the property (approximately 7 percent would encompass the building footprint, 23 percent parking and roadways, and 70 percent would remain open space/landscaping). As for affordable housing, the Novato City Council separately decided Hanna Ranch isn’t a suitable location for residential development.
Hitting roadblocks
Environmental issues are frequently controversial in Marin County, especially when shoreline properties are involved. When Daniel Altman and Avi Atid filed plans to renovate the historic but dilapidated Marshall Tavern on Tomales Bay and convert it into a B&B, the California Coastal Commission (CCC) imposed conditions that would be expensive and difficult to meet. Inexplicably, the commission made approval contingent on a handful of excessive (and unjustifiable) demands, including the construction of a pier for public access and the removal of pilings—at some environmental risk—from the shoreline of a neighboring property with no relationship to the tavern. The Pacific Legal Foundation filed suit, and CCC backed down in May 2013, letting Altman and Atid move forward with restoration of the building, which dates back to the 1870s.
Whaler’s Point Inn and Spa, a proposed hotel in a prime location on the Richardson’s Bay shoreline in Tam Valley (an unincorporated area of Mill Valley), has experienced perhaps the most protracted process in Marin County. Owner Jack Krystal of San Rafael first submitted a proposal to the county in 1977, with numerous revised proposals in the years that have followed. Each has failed to satisfy supervisors and local planning regulations. Bulk, height, traffic and parking issues have surfaced over the years, along with environmental concerns because it’s a shoreline development, which gives the Bay Area Conservation and Development Commission the right to weigh in.
Krystal’s first application, in 1977, was for a 300-room, 12-story hotel, which county supervisors turned away (asking for a “less imposing” design, even though the hotel’s size fit with zoning at the time), and since then, he’s continually revised and resubmitted the plans, scaling them down time after time as the county’s General Plan changed. “My hotel has been very, very slowly proceeding,” says Krystal, who’s found the experience both time-consuming and expensive. Since first proposing his hotel, Krystal has partnered with several successful, high-profile hotel chains and hospitality operators interested in the project, but none are on board now. “They’ve all dropped out because the process is too slow,” says Krystal.
“Over the years, regulations have become stricter and stricter,” says Marin County Senior Planner Christine Gimmler, who was involved when the Board of Supervisors rejected Krystal’s plans in 2009 (see “Bayside Denied,” Sept. 2009).
Krystal expects to appear before supervisors with a new set of plans before the end of the year and hopes that, this time, he’ll make the grade. Several months ago, he submitted plans for a 105-room, four-story hotel to the Tamalpais Design Review Board, the governing body that approves plans for Tam Valley before they go to the county for final approval. He complied with requests for changes and provided additional information in a process that he calls “design by committee”: “Essentially, it has everybody’s fingerprint on it,” he says. With input from the Tam Board, he revised plans even further, so now it’s a 55-room, two-story hotel—however, it finally passed muster, and Krystal got the approval he requires to go back to the Board of Supervisors.
It’s Krystal’s opinion that the hotel would be beneficial to the community. “I believe it would be a very positive addition,” he says, citing new jobs for local residents, and increased property and sales tax revenues and boosts to the county’s TOT as pluses. He also believes it would give people an additional opportunity to stay overnight in Marin County instead of San Francisco, so it would put additional money into the county via restaurants and such.
“It’s a very elegant and special boutique hotel—a mini version of what Marin is,” he says. “Hopefully the time has come that everyone will be receptive.”
Changing plans
Even in Healdsburg, which welcomes hotels, the process can be rocky. Kessler Collection’s proposal for a downtown hotel received few objections initially, but after the company submitted plans in September, the city started receiving complaints that it was too big for the site and, in November, the company withdrew its submission. “That plan is off the table,” says Owen Smith, Kessler’s director of real estate development, Western region, explaining that the company will hold some community meetings, get some feedback and attempt to come up with something that suits Healdsburg better.
Healdsburg still supports the concept of another hotel because it would increase other downtown business. “Hotels bring in folks able to patronize stores and restaurants. It’s really the indirect pieces of the pie,” says Assistant City Manager David Mikaelian, pointing out that these businesses provide ancillary revenues for the community.
Healdsburg currently has three hotels, Hotel Healdsburg and its sister property, h2hotel, both of which are downtown and belong to Piazza Hospitality Group, and the Best Western Plus Dry Creek Inn, which is on the outskirts of town. Healdsburg Chamber of Commerce CEO Carla Howell reports that, to her knowledge, none of the lodging properties had objections to Kessler Collection’s plans. “We’re at full occupancy a lot,” she says, adding that it’s better for the businesses in Healdsburg for visitors to stay in Healdsburg than to go other places because they can’t find rooms.
“We made a decision a number of years ago that we wanted to be a tourist-based community,” she says. To encourage tourism, the hotels formed their own assessment district, the Healdsburg Tourism Improvement District, and charge a 2 percent tax, which goes to promote the town as a destination. Howell points out that hotels attract people who want to visit wineries, ride bikes and enjoy the town and says, “It’s very advantageous for the rest of us, because we get to share in the benefits of being a visitor destination. We can also enjoy the restaurants, bakeries and bookshops.”
At 14 percent, the TOT is substantial, but, says Howell, “That’s money that’s earmarked for downtown beautification and parks. [As a result,] the downtown looks beautiful.” The revenue goes into the General Fund, along with property and sales taxes, which pay for law enforcement, fire protection and roads. “If you have a healthy business community, you have a healthy community” Howell observes.
“Healdsburg as a tourist destination offers all the wonders of Wine Country,” she adds. She recalls her own recent visit to Montana, where she saw an entire town boarded up and noted the dramatic contrast to Healdsburg, which has a thriving economy. “It’s just such a positive thing,” she says. “I think we’re very lucky.”
Looking forward
Sonoma County’s Comprehensive Economic Development Strategy, which takes a close look at expectations for the county from 2011 through 2016, predicts that agriculture, food, wine and tourism will continue to attract visitors and drive the local economy, so it’s reasonable to expect continued growth throughout the North Bay region.
It’s a desirable area, and tourists want to visit, but additional hotels will inevitably have an effect on the communities where they locate. When change is involved, everyone has an opinion, and beliefs and values differ, so consensus is difficult. The challenge is to find common ground. “It’s about meeting the needs of the community and businesses,” says Healdsburg’s Mikaelian. And if communities can find a way to do that, everyone wins.
