By Linda Taaffe

Not a single developer has accepted Los Altos’ invitation to built a hotel on the city-owned land at the corner of First and Main streets, officials confirmed last week.

Los Altos city staff sent out Request for Proposals to eight select hoteliers across the country last month to gauge the interest in building a hotel at the site following severed negotiations with local developer Roxy Rapp.

“We sent out letters with no great expectations,” Community Director James Walgren said Friday. “We had one informal discussion with one hotel operator who was unable to meet the city’s terms.”

Walgren said the city plans to table the project until the economy improves. The council has no plans to reopen talks with Rapp, Walgren added.

Money appears to be the holdup. The city wants to lease the property. Under the proposed lease conditions, the developer would provide the city a minimum base rent of 9 percent of the property’s appraised value at the time of the project’s groundbreaking or profit-sharing returns of 4 percent on every dollar of the hotel’s gross receipts from occupancy if it is higher than the minimum rent.

The city would increase the hotel’s minimum rent every 10 years to equal 80 percent of the average rent from the previous three years. The city would also collect a 10 percent transient occupancy tax on all occupancy revenues.

If the land were appraised for $3 million, the developer would pay an annual base rent of $270,000. If revenues rose above the base rent, the city would collect the higher amount. Assuming revenues of $7 million, the city would collect $280,000 in profit sharing, rather than the base rent, as well as $700,000 from the occupancy tax.

Rapp called the proposed lease ludicrous and broke off negotiations last May after two years of work on the project.

“We felt so strongly that what they were asking was impossible that we told them to feel free to go back to other developers with those conditions,” Rapp said.

Walgren said the city offered the same conditions to the other developers as it did to Rapp.

“If a developer brings a strong project to the council and is willing to negotiate within the city’s terms, staff is prepared to finalize a deal now,” according to the letter.

The city collects $230,000 annually from the current property tenants. If the council approved a hotel project this year, the city would be able to continue to collect those revenues while developers secure the proper permits for the site.

“We would be ready to stick a shovel in the ground the day those leases expire,” Rapp said.

A group of residents plan to push the item back on the city’s agenda before a new council is elected this November.