The Escondido City Council voted four to one June 30 to approve a set of staff recommendations that move the Marriott hotel project forward. Included was a $10.7 million subsidy.  The vote sets in motion a series of events that will probably allow the project to be built, unless there are problems on the developer’s side.

Council chambers were packed. More than 40 people spoke for or against the project before the Council members had their say. In the end, no one opposed building a hotel. But Olga Diaz voted against the project because she feels subsidizing it by borrowing against future redevelopment money is not appropriate.

After the jump there is a play-by-play report of who said what for the four-hour meeting. Read from the bottom up.

Read coverage in North County Times.

Read coverage on KGTV Channel 10.

(8:03 p.m.) The meeting adjourns.

(8 p.m.) Sam Abed tried to move to approve the staff recommendations. Diaz noted an error in the proposal and that the items were jumbled in the agenda. Abed restated the motion to ensure clarity. Daniels seconded the motion to approve. The motion passed, Daniels, Waldron, Abed, Pfelier voting yes, Diaz voting no.

(7:56 p.m.) Mayor Pfeiler speaks. Every small business says they bring people to town and the visitors have no place to stay. The hospital will be a state-of-the-art attraction and will bring people. The Center for the Arts will be more successful with a hotel. Finally we are putting this together. We’re trying to provide a full-service community and the one thing we are lacking is a hotel. “I’ve been an advocate for building a hotel for a long time.”

(7:46 p.m.) Sam Abed speaks. Subsidies have been important to bringing many projects to Escondido, including the Lexus dealership and North County Fair, the Auto Park, and the movie theatres. We don’t regret it. This is not about subsidies, it’s about what the project would do for the City. Other cities provide higher levels of subsidy — Oceanside gave $27 million to their luxury hotel project. We have many needs, but none of the redevelopment funds can be used for them. However, the funds generated from the hotel project CAN be used for those needs. Using the redevelopment money prevents it being recaptured by the state, which has been doing that year after year. I agree with the opposition on one thing. The occupancy rate and room rental seems high. I used lower figures (60 percent occupancy for $150 a room) to compute more realistic, conservative figures. Still the income to the city each year is $1.27 million. It’s a good development agreement that will protect the city’s interest. “I’m one council member willing to take that risk to achieve a bright economic future for Escondido.”

(7:31 p.m.) Marie Waldron speaks. She says she opposed the use of General Fund money but the redevelopment money is for that only and cannot be used for the city’s many other needs. It is appropriate to use redevelopment money with private development in partnership. We are working to get a benefit to the city and to protect our risks. The project will generate funds allowing the City to meet other obligations. Allows reduced obligations for Center for the Arts and relieve the City of these expenses. Will help with business development by impressing out-of-town prospects. Sees the hotel as a way of diversifying city revenue sources.

(7:25 p.m.) Dick Daniels speaks. “I’ve been a strong and consistent supporter for a hotel.” Many of the risks the city would have had to take have been eliminated. But there are still risks. We all take risks — is it possible for any project to be totally risk free? No. But if we let that stop us we would never accomplish anything. The hotel is the means by which we will be able to pay for other things. I will vote for the agreement to make the Marriott a reality.

(7:12 p.m.) Public hearing closed. Olga Diaz speaks. It is clear no one opposes the project, just the subsidy. Wants to avoid speculative investments. She worries about blight, the appropriate use for redevelopment funds. Does not see a secure return or a preservation of capital. The parking lot is not blighted. Defining it as such is “a stretch.” There are other, better ways to improve the city, such as widening the Nordahl overpass over SR 78, that would help with the new hospital. A list of how to prioritize spending redevelopment money should be developed. Now there is no list. Using redevelopment dollars is not appropriate. Same with Maple St. improvement. “We’re bending the rules” of how to spend the money to fund that project. She says “I will vote my conscience.” She cannot support a subsidy when we have so many other needs. If we use redevelopment money as intended, the city will be better and you will want to come here. But she thinks the project will be approved.

(7:09 p.m.) Larry Hartley of California Community Bank has worked with Marriott and respects their business. If Escondido doesn’t do this some other city will. Encourages support of the project.

(7:07 p.m.) Guy Whitten talked about some of the money being spent not being “real money” that you cannot spend today. He’d like it better if this could be done entirely by the private sector. The reality is that this has been wanted for 25 years, will create synergy that is hard to value, and you’re doing the right thing.

(7:04 p.m.) Wayne Louth talked about vision. Noticed a lot of changes in the developer presentation. What is to prevent more changes and we end up with another white elephant next to the Arts Center?

(7:02 p.m.) Lisa Gulliver owns a retail store on Grand Avenue and has concerns about the proposal, but believes the hotel will bring “significant additional revenues” to the shops along Grand Avenue. Vision requires looking ahead and she thanks the Council for supporting the hotel project.

(7:01 p.m.) Ralph Genese, opposes the contract, not the concept. “There are too many variables.. the numbers just don’t add up.”

(6:58 p.m.) Barbara Benedict would love a better hotel, but wonders if the project has been evaluated for the new “green” building codes for the state. She wonders what effect that will have on the project. She also wonders about high-speed rail and a possible stop in Escondido.

(6:55 p.m.) Ed Gallo, former city council member, said this is a “watershead moment” for Escondido. This project is the salvation for Grand Avenue and will “help us reach the next level.” Even if the return on investment is only 9 percent it will be three times what we get on anything else. It is easy to delay, not so easy to do the right thing. Invest in the future and diversify the city’s income.

(6:52 p.m.) Patricia Worfman, urges denial of the project. Projections are unrealistic, “wishful thinking.” City needs to take a “reality check” before swallowing this proposal. Even if the projections are only slightly off the consequences will be devastating. Every aspect of the project relies on subsidies, giveaways and fee waivers. It is a bad deal for taxpayers. Residents get all the risk, the developer gets none.

(6:48 p.m.) John Ward would like to see the hotel and a lot of other things for Escondido. But he’d like to see the many problems in Escondido attended to. Would like to see street lights, sidewalks that don’t end in mid-street. Take care of your priorities.

(6:45 p.m.) Jim Rady, former Council member and Mayor when Civic Center was conceived. Sees hotel as “putting the last piece in the puzzle.” The Civic Center was always intended to lose money and that was the cost of supporting culture for the city. No hotels have been built in California for the last two decades without a subsidy. Many people want something other than the hotel. It’s too bad the firefighters oppose it.

(6:43 p.m.) Thora Guthrie of Downtown Business Association supporting the project.

(6:42 p.m.) Mike Diaz for the Firefighters Association says they oppose the project. You’re asking residents to forego public safety services and instead pay into a hotel project.

(6:40 p.m.) Mike Davis thinks this is the worst possible time for a project like this. Commends the ECOC presentation. Doesn’t think the City chould be a major investor in any private enterprise, even when times are good. We could be facing more tough economic times. Put the hotel on the back burner for at least a year and see if the economy has recovered.

(6:36 p.m.) Mike O’Connor thinks if this is such a great deal then why doesn’t the developer just pay for it? Wants to commend the ECOC for the presentation. The Councilmembers are the stewards of our tax dollars. The time restrictionon speaking  is inappropriate. The hotel is a bad idea for Escondido.

(6:34 p.m.) Carmen Miranda Griffin opposed hotel project. What about public safety, the library, other projects? This hotel is overpriced and this is not the time. Listen to the citizens and hopefully you’ll make the right decision.

(6:30 p.m.) Kim Ellison wants improvements to unsafe intersections rather than luxury hotels. It would be nice to see a fabulous hotel here, but first do some basic enforcement on bar noise that hurts businesses nearby. Recently booked hotels rooms for her husband in comparable cities at way less than $100 per night. $174 per night is not realistic.

(6:29 p.m.) Diana Wallace has been around “a long time in this town.” We’re not ready for this project yet. Where is everybody going to park?

(6:26 p.m.) Klaus ??? thinks Escondido is a “modest town” and not a destination city. Such a thought is nothing but a “mirage.” The Center for the Arts was such a project. Loading up the City with unconscionable obligations is not right. If you were investing your own money without being assured a financial subsidy. Would you be willing to invest in this mirage?

(6:24 p.m.) John Devore, 42-year resident of Escondido. It looks so nice, but can we afford it. We built the Arts Center and now it’s a while elephant. It doesn’t make sense to me.

(6:23 p.m.) Judy Hawkins, director of finance for the San Diego North Convention and Visitors Bureau, speaking in favor.

(6:20 p.m.) Bruce Sims was surprised to learn of this project. As an engineer, he’s learned to look at the best situation and the worst situation. What we’ve heard today is only the best. There are other ways to make as much money as the hotel would produce. There’s not any really hard analysis of the money involved. There’s a lot that needs more study. Postpone your vote.

(6:17 p.m.) Melissa Walker thinks $174 is a reasonable price to project for room rates. Sees a good market for such a hotel. Notes that many businesses have closed downtown because the hotel has not been built. The hotel will help the city diversify its revenue sources. Need more hospitality options for downtown.

(6:14 p.m.) Tom D’Agosta, former council member and candidate for mayor, recalls a developer who approached the city years ago to build two hotels but wanted a subsidy. The idea went out to developers for proposals. Developer Clark entered the discussion at that time. Marie Waldron said at the time that “not one dime” of taxpayers money should go for the project.

(6:10 p.m.) Jim Crone, developer and candidate for Council, is not against the hotel. Doesn’t believe the 13.9 percent projected profit on investment. The city seems unable to project its revenues just a few years into the future — how can you predict how this hotel will do? This project will be worth $40 million but will cost $69 million to build it. This doesn’t pencil out for the developer or the city. There’s no way to get your money back.

(6:07 p.m.) Laura McGee recalled all the dreams associated with the Center for the Arts. It’s the same for this hotel project. We have to accept who we are. This is the wrong time to do this. Just don’t understand why you want to proceed with something on such shaky financial ground. Instead Escondido should be putting its money into completing the unfinished projects that blight the city.

(6:04 p.m.) Edwin Handley, local resident and contractor asks for unanimous support. Lack of hospitality is hindering the city. Big name performers will not stay in second-rate hotels and perform in the Center for the Arts. Move now while construction costs are lower. Urges approval.

(6:03 p.m.) Carol Ray, former City employee, has always regretted not having a hotel here. These moneys are a wise investment in our future. Lets welcome Marriott.

(6 p.m.) Chris Nava speaks in opposition. The developers have a wonderful vision, but this is not the time. It is ill-timed and risky at best. The Council is squandering taxpayer money during a time of hardship. Hotels are not doing well. What makes you think a luxury hotel in Escondido will fare any different? Rates and occupancy are questionable. Developer Clark is the real beneficiary. The taxpayers get the risk. Borrowing money based on future revenues is irresponsible. You’re not serving the public, you’re serving the developer.

(5:58 p.m.) Chris Swanson, a resident since 1970, who once ran a hotel. She never had help from the cities in developing hotels. The numbers being used for occupancy and room rates are too high and won’t be realized. We should not build the hotel on borrowed money.

(5:57 p.m.) Christine Gueverts with a concrete company new to the city. Supports project. Our company has made a significant investment in the city and we’re excited that Clark and his partners want to do the same.

(5:54 p.m.) Jerry Kaufman for Chamber of Commerce. The recession will end. People are willing to invest millions of dollars. It’s a great opportunity that will pay off. The hotel will bring people who will like what they see and will want to become a part of Escondido.

(5:51 p.m.) Alex Galenes wants to talk about “choice.” Points out difficulty the Palomar Hospital had in getting approval. Points out that the Science & Technology Charter High School went to San Marcos, because of City Council opposition. Choose progress and, if this project passes muster, approve it.

(5:46 p.m.) Tina Pope speaks for the Chamber of Commerce in supporting the project and urging an approvel. Harvey Mitchell from the Chamber of Commerce reads a letter from Ted Owen, president of the Carslbad Chamber of Commerce (who lives in Escondido), urging approval.

(5:43 p.m.) Paul McNamara adds that the projected room price is not realistic. Does not feel that the hotel will do any good. He recommends the Council follow the recommendation of the North County Times and delay any approval.

(5:40 p.m.) Rick Moore continues… Reason #5 — $3 million of the $6 million dollars available redevelopment money is unrestricted and can be used for public safety. Reason #4 — stop adding tax burdens to the tax paying residents of Escondido! Despite all the recent cuts, the hotel proposal has survived. It is a sacred cow! Reason #3 — The Council must recognize the city’s higher priorities and keep their word to the residents. A redevelopment district should be created and discussed BEFORE funds are deployed. Fund should be used to improve blighted areas. Reason #2 — the subsidy is too large and unfair to residents. Reason #1 — nothing has changed. The City has deficits projected for the next four years, the hotel is not expected to turn a profit for six years. The Council has a choice — to stand with and for residents or to stand with and for private business and the building industry. A recent telephone poll found overwhelming opposition to the project. The hotel is not in the best interests of residents. The Council should vote no.

(5:37 p.m.) Kurt Nunez continues… Reason #9 — Is the hotel a diversified investment or a risky taxpayer-subsidized investment? Revenue projections keep changing. The project does not pay off for Escondido, rather giving our tax dollars to out of town developers and builders. Reason #7 — what has the council done for you lately? Reason #6 — The council has failed to fulfill the promises of the public safety bond. All funds from the bond have been depleted.

(5:33 p.m.) Jerry Lenhardt continues… yet the project gets continued, in some cases “to a date uncertain.” Project declared dead for lack of financing, then comes up with redevelopment funding as new option. Reason #11 — what’s the back up plan? What if state takes back more redevelopment money? What if the developer defaults? Reason #10 — This is a bad deal for taxpaying residents. The city is giving away the Conference Center. No rent payments until 2022.

(5:29 p.m.) Michele Ann Mareck continues… various local hotels are in default… yet the developer has been updating the financial consultants report. Reason #12 — the hotel deal is always changing. Hotel and condo project caused parking concerns. Additional subsidies were requested. Developer C. W. Clark misses deadlines.

(5:26 p.m.) Margaret Liles continues… Reason #15 – Other City initiated projects have not fared well, such as the Arts Center. Many mixed-use and residential projects have not fared well. Councilman Daniels withdrew support a year ago because of the uncertainty of city finances. Reason #14 – the City is not a lender. A number of projects have been turned down because they required city loans. Reason #13 – The recession has been punishing to the hotel industry. Reason #12 — the deal keeps changing. History of the project reviewed. It keeps coming back after apparent failure. Reason #11 — what’s the backup plan? There are many “what if” questions for which there are few answers.

(5:23 p.m.) McQuiston continues… Reason #18 – Pensions. Pay increases have been approved consistently for city employees, including the Mayor and Council, in addition to the pension increases the Council approved. Reason #17 – Too many developer incentives have been granted: $22 million in eight years.

(5:15 p.m.) Pam Stahl begins the presentation from the Chamber of Citizens, while President Lisa Prazeau manages the presentation. ECOC is not opposed to a hotel, rather it is opposed to a subsidy. Will list reasons in reverse. #20 – Redevelopment tax dollars are not intended to be used to subsidize private development. This property is not blighted, as is claimed in the proposal. #19 — the ongoing budget crisis. Escondido faces years of projected shortfalls, all the way to 2014. Delores McQuiston continues…

(5:12 p.m.) Mayor Pfeiler reports there are 30 speaker requests and that speaker time will be limited. Diaz requests that the public be allowed to speak for longer periods, since this is a combined meeting of the planning committee and Council. City Attorney Jeff Epp says the decision is up to the chair (Mayor Pfelier). Pfeiler says she will not allow speakers to yield their time to Prazeau.

(5:08 p.m.) Representative of Jaynes Corporation, which would be the general contractor for the project. “We have already furnished a performance and payment bond for the full amount of this project.” Has experience in Escondido with other projects and a good relationship with city inspectors. The project will create some 370 jobs at “the prevailing wage.”

(5:03 p.m.) Representative of Dow Hotel Company, which will manage the hotel.  The firm has experience managing theatres in Illinois and Sacramento as well as conference centers. Cited symbiotic relationship between conference center, performance venues and hotel, which all reinforce each other. The firm estimates 120 full-time and 30 part-time employees in the hotel.

(4:56 p.m.) Allison Cumberland, VP of Development for the Western Region of Marriott, speaks to the “power of the Marriott brand.” The company is “wildly optimistic” about prospects for business travel as the nationa emerges from the recession. Company has an agressive sales and marketing program that will result in high room occupancy.

(4:45 p.m.) Developer Craig Clark addresses the Council. Larry Kimball presents for the developer. Believes the hotel will be a regional asset. Will discuss how they will develop the hotel and contribute to the community. Says hotel will use colors and features consistent with design for Maple St. project. Describes building features… alleyway along the side of the hotel connects downtown to Grape Day Park. “Great Room” concept for lobby area. Restaurant and bar people will use before Center for the Arts activities. Meeting rooms in the hotel itself and in the former Center for the Arts Conference Center. He quotes a $1.5 million cost for the upgrade. Hotel will rent conference center and hotel theatre. “We think it’s a good fit for Escondido.”

(4:27 p.m.) Questions from Council members. Dick Daniels asked the cost of refurbishing the Conference Center. It was estimated at about $1 million.Olga Diaz asked how long the project might sit vacant should financing fail. Staff responded that it could take the City more than 18 months to gain control of the project in case of default. Diaz also asked about projected revenues, questioning the assumptions. Marra indicated that even adjusting some of the assumptions would yield a 10 percent return. Diaz asked about redevelopment funds. City Manager Clay Phillips said about $6 million is now available in the redevelopment fund and that it could be available for general fund use. Sam Abed noted that the City now pays $100,000 per year in utilities for the Conference Center. Cost of repair of the Conference Center would be avoided if the hotel project is approved. Discussion of costs of running the Center for the Arts, with questions from Diaz.

(4:15 p.m.) Paul Marra with the project consulstants commented on the project’s economics… he said the costs were on the “high side” for comparable properties, in part because of refurbishing the conference center and other special characteristics. Construction costs are guaranteed within a ceretain amount. There is a significant contingency fund of nearly $4 million. There is another nearly $4 million in developer fees that provide a buffer. There is no hotel comparable to this proposal in the area. Projected room revenues reflect the unique aspects of the project and the consultants feel projected room rentals and revenues are possible when the economy recovers. Consultants believe for the project to be feasible it needs $24 million, instead of the proposed subsidy. Financing costs, at 29 percent, are high. The consultants discount this to some degree because the developer has gained attractive financing at a difficult time. Assuming the hotel meets projections, it should produce a 13.7 percent annual return, according to Marra. The consultants recommend approving the time extension, and thus continuing the project. Abed asked what would happen if the developer walked away from the project. Staff answered that the City would own all of the assets. The City has control except in the case of a foreclosure.

City staff presented a summary of the project’s history and noted that the topic of the hearing is not the hotel per se, but rather an extension request from the developer. Among issues discussed:

The developer’s ability to complete the project.  A higher deposit has been made and other guarantees have been added.
Should the city use general fund money for the project? New proposal is to fund from redevelopment money.
Would city funds be expended before the project is completed? No. The city’s redevelopment funds will be used to build a parking structure.

During oral communications, that portion of every meeting set aside for comments about items NOT on the agenda, Lisa Prazeau of the Escondido Chamber of Citizens complained to the Council about the handling of several recent items. She felt information had been provided too late to allow for adequate response. She asked for a longer-than-usual time period to make a presentation on the proposal today. There was no comment from the Council.