Buyer/Developer Wants, City Mgm't Seeks Council Approval To Give Up Half of Hotel Room Tax For 20 Yrs From New Hotel Proposed At SE Corner Pine/Ocean Blvd.

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(May 10, 2016, 12:45 p.m.) -- A commercial buyer/developer wants -- and city management will seek Council approval on May 17 -- to give up half of LB's hotel room tax ("transient occupancy tax" or "TOT") for 20 years from a downtown hotel proposed at the prime SE corner of Pine Ave./Ocean Blvd. (site of the former Jergins Trust building) to "incentivize" the project for a buyer/developer.

"...[T]he Buyer/Developer [American Life, Inc.] is seeking to share the Transient Occupancy Tax (TOT) generated by the Project. The Buyer/Developer seeks 50 percent of the TOT actually received by the City (not including the 3 percent TOT generated under the Long Beach Tourism Business Improvement Area), for a period of 20 years," says a memo signed by Mike Conway, City Hall's Director Economic and Property Development Mike Conway and by Amy Bodek, Director of Development Services.

"Over the 20-year term of a proposed TOT sharing agreement, it is estimated that the Buyer/Developer and the City would each receive approximately $27 million," their memo states. It adds, "For comparison purposes, the Buyer/Developer's project across the street from LA Live in downtown Los Angeles includes a rebate of 100 percent of the TOT received by the City of Los Angeles for a period of 25 years. Staff believes that the proposed TOT sharing agreement for this Project is mutually beneficial and an essential requirement for development of the Project."

[Scroll down for further.]

The hotel room tax "sharing" proposal comes as LB Mayor Garcia, the City Council (without dissent) and city staff say the City needs more revenue to provide basic core services as it seeks public approval of a June 2016 ballot measure ("Measure A") that would raise LB's sales tax to 10% (currently 9% in Signal Hill/Lakewood and 8% in most OC cities.)

The agendizing memo states that without the hotel room tax "sharing" agreement, the project would not proceed. (To view the full agendized item, click here.

As previously reported by LBREPORT.com, the Council voted on April 5, 2016 (7-0, Lowenthal and Austin absent) to receive and file a city staff report indicating that staff planned to study development of a "Transient Occupancy Tax Incentive Program" that would kick-back ("share") a portion of LB's hotel room tax as an "incentive" to attract new hotels. (City management described the program as applying the principles of LB City Hall's "Retail Sales Tax Incentive Program" (begun in 1992) under which the City kicks back (City Hall says it "shares") part of LB's sales tax as a [memo text] "business retention or attraction tool." LB has five such sales tax kick-back agreements currently in effect (at least three of which are with automobile dealerships. [LBREPORT.com has editorially likened these programs to corporate welfare.]

The Jergins Trust building [demolished despite civic attempts to save it] was acquired by the City from LB's dissolved Redevelopment Agency, which acquired the property using public money and then failed for years to successfully redevelop it.

City management's memo seeking Council approval committing the City to the sales tax aspect of the deal mentions future "discussion" -- short of a commitment -- to incorporate some currently unspecified type of public access to the Jergins Tunnel in the project design.

The agendizing memo also states: "Activation of the Jergins Tunnel will be discussed during the due diligence and entitlement phase of the development. Restoration and redevelopment of that portion of Victory Park, which fronts Ocean Boulevard, is also an integral part of the proposal."

For detailed discussion -- including LBREPORT.com "Amnesia File" coverage -- of the Jergins Tunnel aspect of this story, see separate LBREPORT.com coverage here.

The text above was updated on May 17 to note that the statement in city staff's memo that "without the hotel room tax 'sharing' agreement, the project would not proceed" is from city staff, not Keyser-Marston Associates, the city's real estate economic consultant.