Hotel Developer of Historic Jergins Trust Site (SE Corner Ocean/Pine) Wants 80% Of Hotel Room Tax Over Nine Years (Upfront Increase From 50% Over 20 Yrs) is reader and advertiser supported. Support independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.
(Dec. 12, 2017, 12:55 p.m.) -- City management will ask the City Council at its Dec. 12 meeting to let a corporate entity ("American Life, Inc.") keep 80% of LB's hotel room tax ("transient occupancy tax") for nine years (that LB taxpayers would otherwise receive) to facilitate the company's conceptual plan to build a 416 room hotel on the site of the former historic (demolished) Jergins Trust Building (100 E. Ocean Blvd., SE corner of Pine Ave.)

In an agendizing memo at this link, Director of Economic Development John Keisler indicates the proposed tax giveback percentage has been increased from 50% that the Council voted to approve on May 17, 2016 as part of a transaction that stalled as a result of a litigation challenge. [ has learned that the litigation was brought under CEQA by LB Citizens for Fair Development (Exec. Dir. is Warren Blesofsky); the City prevailed in the litigation's initial stage and Mr. Blesofsky's group is pursuing a judicial appeal.]

The Council vote on the original tax giveback transaction (in which the Council also declared the site "surplus" and sold it to American Life for $7 million) was 8-0 (Yes: Suja Lowenthal, Price, Supernaw, Mungo, Andrews, Uranga, Austin and Richardson; Absent: Gonzales)

As part of the previous deal, city staff estimated the Buyer/Developer and the City would each receive roughly $27 million over 20 years. Under the now-proposed deal, the Buyer/Developer would receive $27 million upfront in the first nine years.

An agendizing memo states in pertinent part:

Delays caused by the lawsuit have resulted in increased costs for labor, construction materials, and financing for the Proposed Use. To accommodate for these new costs, the Buyer/Developer has increased the number of proposed hotel rooms from 350 to 416, and added revenue generating amenities. Total projected development costs submitted by the Buyer/Developer have increased from $165 million to $262 million or approximately $629,600 per room. This cost, when compared to the estimated present value, reflects an economic gap of approximately $61 million for the modified Proposed Use.

As a result, the Buyer/Developer has requested a RTOTSA [Revised Transient Occupancy Tax Sharing Agreement] to provide for more upfront reimbursement.

Under the RTOTSA, the Buyer/Developer seeks 80 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 nine years. After the nine-year period, the City would receive 100 percent of the TOT generated for the remaining 11 years. Under the RTOTSA, the Buyer/Developer is projected to receive approximately $27 million over the first nine years and the City is projected to receive approximately $7 million. After year nine, the City is projected to receive 100 percent, or $4.0 million, per year of the TOT generated by the Proposed Use for a total of $50 million over the total 20-year term.

To verify the economic feasibility gap, City staff commissioned KMA, the City's real estate consultant, to conduct an in-depth review of the revised Proposed Use proforma. The KMA analysis projects total development costs of approximately $248 million for the revised Proposed Use based on similar construction costs for projects in the region, resulting in a projected economic feasibility gap of approximately $47 million. Under the terms of the RTOTSA, the Buyer/Developer would receive approximately $27 million, or 57 percent, of what is needed to cover the economic feasibility gap. KMA also recommends a minimum required investment of $230 million by the Buyer/Developer to entitle the Buyer/Developer to receive the full $27 million in TOT reimbursement. There are no proposed changes to the purchase price of the Subject Property, which remains at $7,000,000, or $197 per square-foot.

In addition to the RTOTSA, the Buyer/Developer has made a commitment to collective bargaining. Additionally, the Buyer/Developer has also committed to creating a safe workplace environment that includes the implementation of panic buttons for housekeeping workers.

The Buyer/Developer's Proposed Use is conceptual in nature only and remains expressly subject to the preparation, review and approval of (1) a specific development plan for the Subject Property, (2) appropriate documentation required by CEQA applicable to any proposed project on the Subject Property, and (3) an entitlements application with respect to such project. The requested action hereunder does not constitute a review or approval by the City of a development plan, environmental review, an entitlements application, or any other regulatory requirement applicable to the Subject Property or any proposed project thereon, and the City retains full discretion to impose mitigation measures, make modifications to the Buyer/Developer's Proposed Use, to consider alternatives to the Buyer/Developer's Proposed Use, and to disapprove the Buyer/Developer's Proposed Use...


If the City Council approves the RTOTSA, the Buyer/Developer obtains the necessary entitlements following completion of the CEQA process and the Subject Property closes escrow, then, upon Proposed Use occupancy, up to 80 percent of the TOT received by the City, not including the TOT associated with the Long Beach Tourism Business Improvement Area, will be rebated back to the Buyer/Developer, with 20 percent of the TOT retained by the City. New TOT revenue generated by the Proposed Use is anticipated to total $77 million over the 20-year period, of which the Buyer/Developer is anticipated to receive approximately $27 million and the City $50 million.

Assuming the Proposed Use is approved after completion of the appropriate CEQA review, the approval of this recommended action will provide continued support to our local economy by creating or facilitating the creation of approximately 1,700 short-term jobs and 360 long-term jobs.



The developer American Life, Inc. says on its website home page: "We specialize in real estate development and EB-5 investments."





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