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December 5, 2023
ITEM TITLE
Agreement: Approve the Springhill Suites Hotel Development Impact and Sewer Capacity Fee Deferral Agreement
Report Number: 23-0216
Location: 870 District Place
Department: Development Services
G.C. § 84308: Yes
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act (“CEQA”) State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution approving the Agreement for Deferral of Development Impact and Sewer Capacity Fees for the Springhill Suites Hotel.
SUMMARY
Eastlake Hospitality Ventures LLC (the “Owner”) is developing a 179-room Marriott Springhill Suites hotel in the Eastlake Business Center II Sectional Planning Area, located at 870 District Place. Once operational, it is anticipated that the project will p rovide various economic development and fiscal benefits, including the creation of jobs, generation of significant recurring annual transient occupancy taxes to the City (estimated to be $1.2 million to $1.5 million per year), and development of visitor ac commodations and amenities. To facilitate project development, staff is recommending the deferral of $ 2,243,343.10 in sewer capacity fees, transportation development impact fees, and public facilities development impact fees for a four-year period at an annual interest rate of 3.5%.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the CEQA and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which P a g e | 2
does 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.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
The 179 -room Springhill Suites by Marriott hotel will be located at 870 District Place (formerly called Showroom Place), north of Otay Lakes Road and west of Hunte Parkway. The City issued a building permit for the project in October 2022 and project construction is nearly complete. The applicant has indicated that they plan to apply for a Temporary Certificate of Occupancy before the end of the current calendar year, with a final Certificate of Occupancy tentatively scheduled for early 2024.
This hotel is expected to provide economic development an d fiscal benefits, including the creation of an estimated 40 full-time and 11 part-time jobs, generation of significant recurring annual Transient Occupancy Tax (“TOT”) revenues to the City; and development of visitor accommodations and amenities. Based on the projected 2024 average room rate and occupancy data reflecting opening year estimates provided by the applicant, the hotel is estimated to generate between $1.2 million and $1.5 million per year in TOT. Deferral of the fees will facilitate development of the hotel project and enable its attendant employment, visitor, and public benefits.
The following fees for the hotel project would typically be due upon the call for final inspection prior to the issuance of a Certificate of Occupancy for the project:
Eastern Transportation Development Impact Fee (“ETDIF”). This fee was established by the City in 1988 pursuant to the Mitigation Fee Act ( California Government Code Section 66000) to fund transportation improvements necessary to accommodate projected growth in the area east of I-805.
As described in Master Fee Schedule Fee Bulletin 16 -100, this fee is charged based on daily traffic generation. The ETDIF fee for this project is $1,763,417.79. Public Facilities Development Impact Fee (“PFDIF). Established in 2006, the PFDIF is also a Mitigation Fee Act fee. This fee is charged based on gross acre for nonresidential uses, and the PFDIF fee for the hotel project is $111,570.25.
Sewer Capacity Fee. This fee was established in 1985 by Ordinance No. 2107 to purchase capacity from the City of San Diego Metropolitan Wastewater Department to transmit and treat wastewater from Chula Vista. (Unlike ETDIF and PFDIF, the Sewer Capacity fee was not established under the Mitigation Fee Act.) The Sewer Capacity Fee for the project, which is based on the number of hotel rooms and the number and type of sewer fixture units (i.e., showers, sinks, toilets, etc.), i s $368,355.06.
The Chula Vista Municipal Code (“CVMC”) provides for fee deferral incentives for hotel and motel projects.
Specifically, CVMC sections 3.50.160.D and 3.54.160.F.1 include requirements and procedures for the hotel/motel project deferral of PFDIF and ETDIF fees, respectively, which deferrals can be approved at the discretion of the City Manager. The City is separately authorized to defer Sewer Capacity Fees pursuant to its general Charter City authority and its general police powers authority to act in the public interest. Further, CVMC 3.4 5 requires the City to adopt a Master Fee Schedule , which Schedule gives to the City Council P a g e | 3
authority to waive or defer fees, and to impose terms and conditions as may be deemed appropriate for such actions.
The Agreement for the Deferral of Development Impact and Sewer Capacity Fees would defer the principal amount of $2,243,343.10 for four years and would charge an annual simple interest rate of 3.5%. The Owner’s obligation to repay the pr incipal and interest is evidenced in a promissory note executed by the owner in favor of the City, and the promissory note is secured by a first priority pledge of a bank account or brokerage account, whose minimum balance shall be maintained at a level no less than the principal amount described above or, alternatively, shall be secured by a deed of trust to be recorded against the property.
Although ETDIF and PFDIF fees may be deferred at the discretion of the City Manager, staff is requesting City Council consideration of all deferred fees for the hotel development to expedite the review and approval process for the Agreement and to support efficient management and administration of the fee deferrals.
DECISION-MAKER CONFLICT
Staff has reviewed the prope rty holdings of the City Council members and has found no property holdings within 1,000 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)(7) or (8), 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.
CURRENT-YEAR FISCAL IMPACT
There is no current year fiscal impact to the General Fund or Development Services Fund as a result of this action. This action would result in a temporary deferral of revenues from ETDIF, PFDIF and the Sewer Capacity Fee in the current fiscal year in the amount of $ 2,243,343.10, which total amount, with interest , shall be paid in full to the City in no more than four (4) years.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact to the General Fund or Development Services Fund as a result of this action.
Under the terms of the Agreement, the principal amount and interest would be due and payable four years from the date of the Temporary Certificate of Occupancy. Based on the current schedule, the deferred amount would be repaid with interest in Fiscal Year 2028.
ATTACHMENTS
1. Agreement for Deferral of Development Impact and Sewer Capacity Fees
Staff Contact: Scott Barker, Transportation Engineer
Laura C. Black, AICP, Director of Development Services