By In June 2001, the Los Altos City Council approved the development of a hotel at the corner of First and Main Streets in downtown Los Altos.
Prior to that, city staff had sent a “request for proposal” (RFP) to property developers for the site, which resulted in several responses, including building a hotel, movie theaters, offices, residential facilities and retail. After lengthy debates and reviews, on a motion by King Lear, the project for a hotel as proposed by developer Roxy Rapp passed 3-2.
In general, the motion called for the city to accept Rapp’s offer to buy the land from the city for $3 million, develop an 85-room boutique hotel and provide the city with a minimum of 75 parking places.
The city had purchased the property in 1995 for $1.4 million and currently receives approximately $230,000 per year in lease income. The property was not bought as an investment at the time but rather to develop more parking.
Under the purchase agreement proposed by Rapp that was accepted by council, the city could get double its money back up front, i.e., $3 million, and would begin reaping somewhere between $500,000 and $700,000 annually in hotel occupancy tax, plus increases in sales and property taxes that would come to the city. So what happened to this golden goose?
Shortly into the negotiations with Rapp, the city began to change the terms. Instead of an outright sale of the property, they insisted that it be a ground lease for 55 years with a combination of base lease, acceleration clauses and additional fees that created a complex arrangement that most experienced business persons could never have created. Rapp backed off, saying it was impossible to finance the project or stay in business with such a plan.
So even though the city had sent RFPs years earlier and had approved the project, on July 10, 2003, staffers sent out another RFP to a half dozen or more other potential hotel developers to see if they would bite. As of this writing, only one has responded at all and that was not positively - confirming Rapp’s decision.
Attention, city council: You are letting hundreds of thousands of dollars of the people’s money go down the drain. You are wasting valuable time with your procrastination and constant changing of the rules. You have invested $100,000 or more of staff and consultant time on the hotel project already. Rapp has given you $25,000 in a nonrefundable deposit and has spent approximately $100,000 in consultant and feasibility studies, Rapp says. And what do you have to show for it? Nothing.
It is time for the city to take action. And the action is simple:
1. Sell the property to Roxy Rapp and stop playing real estate developer since you have proven you can’t do it.
2. Accelerate the planning and permit process so when the economy rebounds, the hotel is up and going.
3. Take the $3 million and run. Better yet, invest it in new property that benefits the whole city - parks, parking lots or civic center improvements.
It is our money, folks. We all need to speak up.
