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Something for Nothing

With the City ready to charge $30 million on the taxpayers credit card, local writer and 25 year resident, Becky Johnson, questions whether the project will benefit the City or provide the badly needed revenue the Redelopment Agency claims it will. She gave a shorter version of this speech to the City Council during the public hearings on the Coast Hotel Project on January 18, 2005 on behalf of HUFF.
Comments to the Santa Cruz City Council

re: proposed Coast Santa Cruz Hotel Project

Santa Cruz, Ca. -- I was talking to my mother a while back about property values. She said she had been talking to a real estate agent about how they value land. The agent told her that waterfront property was the most valuable. And of all waterfront property, a rocky beach was good, but a sandy beach was the most valuable of all. We have such a lovely beach here in Santa Cruz. Protected as it is from the ocean's full force, Cowell Cove is valuable beach front property indeed.


Can't such an extraordinary piece of property attract investors to build this project with their own resources?


I am speaking to you tonight on behalf of HUFF, Homeless United for Friendship & Freedom. We are a not-for-profit volunteer homeless civil rights organization. As such, we take it upon ourselves to guide the city in affecting policy. We hope such policy will have a positive benefit to the people who live here, including how city policy affects homeless people.


I don't see how this project is going to help anyone at all but Northwest Hospitality Group of Boise, Idaho. Long before the go-ahead, this project has already benefited the Redevelopment Agency. In fact, later on, I expect to hear arguments that the City has already committed so much money to this project already, that it would fiscally unsound NOT to proceed with it.


Let's look at the Redevelopment Agency. Back in 1989 we didn't have one. But after our downtown was devastated in the Loma Prieta Quake, we created a Redevelopment Agency to facilitate and organize the huge amount of reconstruction required to rebuild our downtown.

It was the RDA that eliminated the Pacific Garden Mall and turned Pacific Ave. into an open, police-friendly shopping mall. The RDA helped arrange the removal of sitting space at the planter in front of the Pacific Trading Company. That was about $10,000 to make sure that no homeless person could sit down on the planters edge.

Currently, the agency we drafted to help us recover from an earthquake, 16 years ago, is now a $1.5 million bureaucratic expense.


In an article in the Santa Cruz Sentinel, Jan 16, 2004, it says, "More than a year ago, the agency initiated the project by approaching Northwest Hospitality Group president Bob Suits, who agreed that the existing stark, beige hotel desperately needed a new look."

I find it somewhat repugnant, that the City should be investing in a hotel charging $350 a night for a room when we don’t have the kind of affordable housing we need for the 1500 to 2000 homeless people we have in our city tonight.

Yes, the RDA initiated this idea. This should give us all pause. For if the project was destined to be as profitable as the RDA would have us believe, why hasn't any for-profit investor come sniffing around looking to fund this?


A lot of people don't know how the RDA gets its funding. One source of funding is the increased assessment differential. That piece of legislation assures that when a property is improved, and hence has an increase in its assessed value for taxation, the RDA gets all of that tax money from the increase in the assessment. The RDA will get such a huge boost to their budget from this project that they could hardly be expected to be unbiased about it.

Also: reading again from the Sentinel article:


"Agency officials say a $30 million bond would be repaid with new taxes generated by the project."


So we will get something for nothing?

Let's look a little at the finances. The best case scenario for this project is that it will generate $2.7 million a year in revenue. But it will cost $2.2 million to service the debt. That’s only $500,000 per year of likely income. But what happens if we don't have a good year?

What happens if there is just too much competition from Monterey, or Seaside? What happens if, due to the internet, convention business declines as people teleconference instead?


We the people will be on the hook for the entire $30 million. We assume the risk if the project fails to produce the kind of revenue we hope it will.

Oh, and in the worst case scenario, if the value of the property is re-assessed downwards in value from the rosy RDA figures. That means the RDA will only make LESS money. But they will still make money even if we, the taxpayers, lose money.


Now you may say, "But what about the high-paid union jobs the construction will generate for the next 2 or 3 years?"

Good jobs for 2 or 3 years doesn't balance out the length of time it will take to pay back the loan, up to 30 years according to Dick Wilson.

Now you may say, there are agreements in place to have only union living -wage labor in the hotel afterwards?

Don't believe these "binding commitments". Ask the residents of De Anza Senior Mobile Home Park and Clear View Court what happened to the "irrevocable" leases they signed with the City which guaranteed rent control "in perpetuity." NOTHING is set in stone!

The City doesn't have the money to invest in this project. HUFF does not object to the project going forward provided the residents of nearby Clear View Court are not compromised. We can even support the project. But we believe that public money should not used.
 
 


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Comments

Re: Something for Nothing

Public money is not intended for venture capitalism. Roads and highways are one thing. This goes far beyond the domain of necessary general infrastructure and services for society at large. If individual taxpayers want to invest in this, let them do so *with their own money* instead of conscripting the rest of us into their financial army with the use of taxation.

The City Council should, by all means, suspend taxes, licenses, fees, and other burdonsome forms of financial parasitism where this project is concerned, to encourage its completion. I'd love to see this convention center built. The Santa Cruz economy is weak and needs this boost.

But TAX MONEY does not belong here!
 

Re: Something for Nothing

We should not be spending this money on the hotel!!!! We should be spending it on bussing the homeless out of our county. 2000 $100 tickets would cost only $200,000. we could save $29,800,000 and give it back to the taxpaying citizens.
 

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