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RESOLUTION NO. 2017-204 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AGREEMENT FOR DEFERRAL OF DEVELOPMENT IMPACT FEES BETWEEN THE CITY AND SETHI MANAGEMENT, INC. FOR APPROXIMATELY $1.3 MILLION IN FEES IN CONNECTION WITH A 204-ROOM HOTEL PROJECT AT 2424 FENTON STREET
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
Sethi Management Inc. is developing a 204-room hotel located in the Eastlake Business Center. Once operational, the hotel will generate significant positive community impacts by creating jobs, generating Transient Occupancy Taxes to the City, and providing visitor accommodations and amenities. In order to make the project financially feasible, staff is recommending an agreement to defer payment of Public Facilities and Transportation Development Impact Fees totaling approximately $1.3 million for a period of fifty-four (54) months.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not Applicable.
DISCUSSION
Staff recommends entering into a development impact fee deferral agreement with Sethi Management Inc. for the development of a 204-room hotel project at 2424 Fenton Street. The developer has pursued and secured financing to commence and complete the project, but requires assistance in the form of a development impact fee deferral to make the project fiscally feasible.
The project is anticipated to create 50 fulltime and 20 part-time jobs and to generate approximately $800,000 in Transient Occupancy Tax (TOT) revenues to the City on an annual basis. In addition to these direct economic impacts, the project will result in between 150 and 200 daily visitors staying overnight and patronizing other local businesses. Finally, the project will provide much needed visitor accommodations and amenities in the eastern territory.
The proposed agreement defers the Public Facilities Development Impact Fees (PFDIF) and Transportation Development Impact Fees (TDIF) for the project, in accordance with the following terms:
• City agrees to defer collection of PFDIF and TDIF fees due for the project for a period of fifty-four (54) months from the date of issuance of the certificate of occupancy for the project (the “Effective Date”).
• The deferred fees will accrue interest at a rate of 2% per annum from the Effective Date.
• Lump sum payment of the deferred fees and the interest thereon will be due fifty-four months from the Effective Date.
• The Developer agrees to record a Trust Deed to secure repayment of the impact fee deferral.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property-related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(11), for purposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The deferral agreement supports the Economic Vitality goal as it seeks to lower economic barriers to new growth.
CURRENT YEAR FISCAL IMPACT
All costs associated with preparation of the agreement are funded by the respective fee programs, resulting in no net impact to the General Fund or Development Services Fund in conjunction with this action.
ONGOING FISCAL IMPACT
Approval of the proposed agreement defers impact fee revenues of approximately $1.3 million that would have otherwise been collected by the PFDIF and TDIF, as summarized in the table below.
|
Fee Program |
Amount |
|
PFDIF |
$122,340 |
|
TDIF |
$1,223,478 |
|
Total |
$1,345,818 |
In order to mitigate future construction cost increases and lost investment earnings, the deferred impact fees will accrue interest charges at a rate of 2% per year, beginning with the issuance of the certificate of occupancy for the project.
ATTACHMENTS
1. Agreement with Sethi Management Inc.
Staff Contact: Tiffany Allen, Development Services Department