CITY COUNCIL STAFF REPORT
Meeting: April 3, 2024
Subject
Amendment to a Development Agreement (DA-2018-01) for the De Anza Hotel Project from five to eight years and associated environmental review. (Application No(s): DA-2023-003; Applicant(s): De Anza Properties (John Vidovich); Location: 10931 N De Anza Blvd.; APN: 326-10-061) Recommended Actions
That the City Council conduct the public hearing and conduct the first reading of Ordinance No. 24-_____ (Attachment A):
Find the amendment to the existing development agreement consistent with the project's Mitigated Negative Declaration (State Clearinghouse No. 2019079010) and Adopt the ordinance to amend the existing Development Agreement (DA-2023-003).
Reasons for Recommendation
Project Data:
General Plan Designation:
Commercial/Residential
Special Area:
Homestead Special Area (North De Anza Gateway)
Zoning Designation:
CG-rg –General Commercial with special development conditions per Ordinance No. 436 Project Consistency with
General Plan:
Yes
Zoning:
Yes
Environmental Assessment:
Mitigated Negative Declaration (State Clearinghouse No. 2019079010) Background:Figure 1 Location of Subject PropertyFigure 1 Location of Subject Property Figure 1 Location of Subject Property
Figure 1 Location of Subject Property
The project site is located on the west side of N. De Anza Boulevard between Interstate 280 and Homestead Road, in the North De Anza Gateway within the Homestead Special Area. The General Plan identifies the Homestead Special Area as a major mixed-use corridor that continues to be a predominantly mixed-use area with a series of neighborhood commercial centers and multi-family housing. The land uses allowed along N. De Anza Boulevard, between Interstate 280 and the shared city boundary with Sunnyvale, include residential and commercial (which allow hotel uses with a Conditional Use Permit).
The existing use of the site is a 8,323-square-foot auto repair center, Goodyear Tires. Access to the site is via two driveways from N. De Anza Boulevard, along the north and south property lines, both of which also provide access for the Homestead Shopping center and its loading/service areas, located to the west of the project site. Other surrounding uses include a strip shopping center to the north, a 96-unit, three-story condominium complex to the southwest, the four-story Cupertino Inn (126 rooms) to the south and the 140-unit, three-story, Aviare apartment development to the east, across N. De Anza Boulevard. Heights of the various buildings range from one story to four stories up to a maximum height of 45 feet.
Application Request
On March 3, 2020, the City Council approved a General Plan Amendment (GPA-2018-01, Resolution No. 20-006), a Development Permit (DP-2018-01, Resolution No. 20-007) an Architectural and Site Approval Permit (ASA-2018-02, Resolution No. 20-008), a Use Permit (U-2018-02, Resolution No. 20-009), Mitigated Negative Declaration (EA-2018-03, Resolution No. 20-005), and subsequently on April 21, 2020, conducted the second reading to adopt a Development Agreement (Attachment 2 - Ordinance No. 20-2195) to allow construction of the following:
A new seven-story, 155-room hotel;
New restaurant with separate bar on the ground floor;
Rooftop lounge with separate bar;
Conference Meeting Rooms; and
Updated landscaping along the perimeter of the property, including updated frontage improvements to provide pedestrian accessibility.
The applicant, John Vidovich of De Anza Properties, applied to amend the approved Development Agreement (DA-2023-003) to extend the total term by three years, from five years to eight. If the amendment is not approved, the project approval entitlement would expire on April 21, 2025.
Planning Commission Recommendation
The Planning Commission convened at a regular scheduled hearing on March 12, 2024, to consider the proposed amendment to a Development Agreement. The Planning Commission recommended (4-0, Madhdhipatla absent) that City Council adopt the proposed amendments to the Development Agreement as indicated in Exhibit A of Planning Commission Resolution No. 2024-03 (Attachment B), with the following modification:
Development Agreement to require that the project comply with the bird safe and dark sky ordinance, Cupertino Municipal Code Chapter 19.102: Glass and Lighting Standards.
The Planning Commission’s recommended modifications have been incorporated into the Draft Ordinance (Attachment A).
Discussion
Development Agreement
In May 2015, the City Council adopted a process by which the Council would authorize projects proposing General Plan Amendments, taking into consideration voluntary community amenities in four categories (School Resources, Public Open Space, Public Facilities, Transportation Facilities) offered with any proposal requesting the City to consider changing its General Plan. The Development Agreement approved with such projects include voluntary community amenities offered by the project applicant through this General Plan Amendment Authorization process. These voluntary community amenities were incorporated as terms of the Development Agreement, which also included terms that offered the conventional certainty regarding regulations, standards, and conditions that would apply to the project during the life of the Development Agreement. The DeAnza Hotel Development Agreement has a five-year term, ending on April 21, 2025.
Impact fees that are standard or required, such as housing and school fees, are not included in the consideration of voluntary community amenities. Voluntary community amenities are characterized as voluntary contributions more than required fees or requirements. The voluntary community amenities included in the DeAnza Hotel Development Agreement are outlined below. Key provisions from the 2020 Development Agreement include:
Community Amenity Funding: The Developer agreed to pay the City $500,000 in installments, which is available for the City’s use in any part of the City to benefit residents, businesses, and visitors, including on projects that will enhance and enrich the experience of City residents, retail and restaurant customers, and hotel guests closest to the project. Candidates to receive these funds include local transportation facilities, Transportation Management Association start-up costs, local public art, and landscaping beautification improvements in public parks, parkways, or roadway medians. To date, the applicant has made $250,000 in payments as obligated.
Shuttle Service: The Developer agreed to provide access to a shuttle service to hotel guests, people traveling to or from the hotel that use the hotel’s meeting rooms for functions, and, subject to availability, nearby residents, businesses, and the general public to travel between the hotel and airports and major employment centers.
Meeting Rooms: The Developer agreed to allow the City and Cupertino public schools the use of the hotel’s meeting rooms for official business for up to 12 days per year, subject to availability.
Rooftop Amenity: The Project would include an enclosed publicly accessible rooftop amenity including, but not limited to, outdoor deck seating, bar, or restaurant, not to exceed the height of any rooftop mechanical equipment enclosure, for as long as the Project is in operation, all or in part, as a hotel.
Minimum Hotel Standard: The Developer committed to maintaining the project as an upscale boutique hotel, which means that the hotel will charge higher rates and provide amenities superior to most hotels.
The applicant is requesting to extend the total term from five years to eight. As described in the applicant’s justification letter (Attachment 3), various factors have contributed to the delay in applying for Building Permits to construct the entitled hotel. Per the justification letter, the lingering effects of the COVID pandemic, which include prices of goods and materials tripling, as well as the business travel industry (which is generally a significant portion of the hotel guests in Cupertino) being slow to recover from employees not required to return in-person fulltime have affected the hospitality industry. Other extenuating circumstances, such as the conflict in the Ukraine, have stalled necessary delivery and availability of aluminum and elevator systems.
Once operational, the project is expected to generate net positive fiscal impacts to the City’s annual budget due to the collection of Transient Occupancy Taxes (TOT) and property tax increases is estimated to be $1 million a year. As such, City staff has negotiated with the applicant the following amendments to the development agreement to ensure development of the project as approved by City Council:
The term of the agreement extended to the (8th) anniversary of the Effective Date (April 21, 2028).
In the event the Developer submits for a Building Permit for the core and shell of the hotel within three years of the Effective Date of the 1st Amendment, the Term of the agreement is automatically extended for two additional years, for a total of five years, i.e., until April 21, 2030.
If Certificate of Occupancy for the Project is issued within five years of the Effective Date of the First Amendment (April 21, 2029) Developer shall be relieved of its obligations to make further Community Amenity Funding payments.
Any proposed revisions to the amount of parking and/or parking layout, are treated as an Administrative Project Amendment and not subject to an amendment to this agreement.
Staff Analysis
The proposed amendments to the Development Agreement as listed above allow for the developer to submit for building permits at a time that is economically feasible. General Plan Strategy LU-9.1.3: Economic Development and Business Retention encourages the City to attract new businesses and retain existing businesses that add to municipal revenues, and contribute to economic vitality to the community. Adding incentives to the Development Agreement for the completion and occupancy of the hotel will add much needed TOT and sales tax revenue to the City’s general fund.
Lastly, by streamlining a process for parking modifications by not requiring further amendments to the Development Agreement, the developer is able to save on costs, and timing to encourage the development of the Hotel.
The amendments to the Development Agreement do not revise the scope of the project. The developer will continue to be obligated to meet all other agreements for voluntary community amenities, as well as compliance with all approved aspects of applicable General Plan standards and other development regulations. The developers of the project have further indicated that they have no objections to the Planning Commission’s recommended modification requiring that the project comply with the bird safe and dark sky ordinance.
Cupertino Municipal Code Findings
The Cupertino Municipal Code includes findings for approval of various permits necessary to approve the proposed project. These provide a framework for making decisions and facilitating an orderly analysis of the review of a project. Listed below are the findings for the Development Agreement sought by the applicant that the City must make in rendering a decision whether to grant an exception on this project.
Development Agreement (CMC 19.144.110)
Is consistent with the objectives, policies, general land uses and programs specified in the General plan and any applicable specific plan; General Plan Strategy LU-9.1.3: Economic Development and Business Retention – Encourages the City attract new businesses and retain existing businesses that provide local shopping and services, add to municipal revenues, contribute to economic vitality, and enhance the City’s physical environment. Approving the requested amendment supports and facilitates a potential revenue generating use for the City, with added community benefits that include restaurant and community shuttle services. Nothing in the Development Agreement Amendment revises the scope of the project as approved by the City Council on March 3, 2020 and April 21, 2020, in which the project was found to be in conformance with the General Plan and Zoning standards applicable to this site, as well as those standards that were amended as part of General Plan Amendment (GPA-2018-01, Resolution No. 20-006).
Is compatible with the uses authorized in, and the regulations prescribed for, the land use district in which the real property is or will be located; Nothing in the Development Agreement Amendment revises the scope of the project as approved by the City Council on March 3, 2020 and April 21, 2020, in which the project was found to be in conformance with the General Plan and Zoning standards applicable to this site, as well as those standards that were amended as part of General Plan Amendment (GPA-2018-01, Resolution No. 20-006).
Is in conformity with and will promote public convenience, general welfare and good land use practice; Nothing in the Development Agreement Amendment revises the scope of the project as approved by the City Council on March 3, 2020 and April 21, 2020, in which the project was found to be in conformance with the General Plan and Zoning standards applicable to this site, as well as those standards that were amended as part of General Plan Amendment (GPA-2018-01, Resolution No. 20-006). Extending the expiration of the Development Agreement, or future revisions to the amount of parking and/or parking layout, to be treated as an Administrative Project Amendment will not be at odds with promoting public convenience, general welfare and good land use practice.
Will not be detrimental to the health, safety and general welfare; Nothing in the Development Agreement Amendment revises the scope of the project as approved by the City Council on March 3, 2020, and April 21, 2020, in which the project was found to be in conformance with the General Plan and Zoning standards applicable to this site, as well as those standards that were amended as part of General Plan Amendment (GPA-2018-01, Resolution No. 20-006). Further, on March 3, 2020, the City of Cupertino adopted the Initial Study and Mitigated Negative Declaration, State Clearinghouse (SCH) Number 2019079010, and approved the project. The Development Agreement extends the term of the entitlement up to eight years from the original entitlement, with no changes to the development scope.
Will not adversely affect the orderly development of property or the preservation of property values; and Nothing in the Development Agreement Amendment revises the scope of the project as approved by the City Council on March 3, 2020, and April 21, 2020, in which the project was found to be in conformance with the General Plan and Zoning standards applicable to this site, as well as those standards that were amended as part of General Plan Amendment (GPA-2018-01, Resolution No. 20-006). The treatment of the amount of parking or revisions to the parking layout as an Administrative Amendment would not affect the orderly development of the property or the preservation of property values.
Will promote and encourage the development of the proposed project by providing a greater degree of requisite certainty.
Nothing in the Development Agreement Amendment revises the scope of the project as approved by the City Council on March 3, 2020, and April 21, 2020, in which the project was found to be in conformance with the General Plan and Zoning standards applicable to this site, as well as those standards that were amended as part of General Plan Amendment (GPA-2018-01, Resolution No. 20-006). An extension in the number of years for which the project entitlement is valid for and a reduction in the voluntary community amenity payments would promote and encourage the development of the proposed project by providing a greater degree of requisite certainty.
Public Outreach and Noticing
The following table is a brief summary of the noticing done for this project:
Notice of Public Hearing and Intent, Site Notice & Legal Ad Agenda
Site Signage (10 days prior to the hearing)
Legal ad placed in newspaper (at least 10 days prior to the hearing) Public hearing notices were mailed to property owners within 300 feet (10 days prior to the hearing) Posted on the City’s official notice bulletin board (one week prior to the hearing) Posted on the City of Cupertino’s website (one week prior to the hearing) Public Comments
Please refer to Attachment E for public comments.
Fiscal Impacts
The project will generate net positive fiscal impacts to the City’s annual budget due to the collection of Transient Occupancy Taxes (TOT) and property tax increases. This is estimated to be $1 million a year. As previously mentioned, to ensure collection of the TOT, a condition on the project is that reservations may not be made that exceed 29 consecutive nights of stay. Further, onetime payments in the form of impact and permit fees, as well as construction tax are estimated to be $2.9 million, of which $2 million would be allocated to the City’s BMR fund.
However, if Certificate of Occupancy for the Project is issued within five years of the Effective Date of the First Amendment, the Developer will be relieved of its obligations to make further Community Amenity Funding payments.
Sustainability Impacts
The project will incorporate a green roof on the second floor and is designed to achieve LEED silver. Further, via the City’s Zero Waste Policy will require that the project recover and divert at least 65 percent of the construction waste generated by the project. Further, complying with the bird safe and dark sky ordinance, Cupertino Municipal Code Chapter 19.102: Glass and Lighting Standards, will ensure that lighting will be energy efficient.
California Environmental Quality Act
On March 3, 2020, the City of Cupertino adopted the Initial Study and Mitigated Negative Declaration, State Clearinghouse (SCH) Number 2019079010, and approved the project. Since this Development Agreement Amendment extends the term of the entitlement up to eight years from the original entitlement with no changes to the development scope, the agreement is still in conformance with the Mitigated Negative Declaration and no further environmental review is necessary.
Under CEQA guidelines Section 15162, no further environmental review is necessary since there are (1) no substantial changes to the project requiring major revisions to the MND because of new or substantially increased significant environmental effects of the project; (2) no substantial changes in circumstances requiring major revisions to the MND because of new or substantially increased significant environmental effects of the project; and (3) no new, previously unknown or unknowable, information of substantial importance showing: (a) new or substantially more severe significant efforts than were discussed or shown in the MND; (b) that previously infeasible mitigation measures/alternatives are now feasible and would substantially reduce significant efforts; or (c) that considerably different mitigation measures than analyzed in the MND would substantially reduce significant effects.
Prepared by: Gian Paolo Martire, Senior Planner
Reviewed by: Piu Ghosh, Planning Manager
Luke Connolly, Assistant Director of Community Development Benjamin Fu, Director of Community Development
Approved for Submission by: Pamela Wu, City Manager
Attachments:
A – Draft Ordinance
B – Planning Commission Resolution No. 2024-03
C- Ordinance No. 20-2195
D- Justification Letter
E – Public Comments
De Anza Hotel April 3, 2024
DA-2023-003 10931 N De Anza Blvd. Page 2