By Emily Rasmussen
After back-to-back meeting discussions and controversy, San Juan Capistrano City Council adopted a Luxury Hotel Transient Occupancy Tax (TOT) Revenue Sharing Incentive Program between the city and potential hotel developers, at its meeting on Tuesday, June 19.
The program will allow any new, 4-to-5 star hotel development projects or existing hotels seeking to upgrade to 4-to-5 stars to be reimbursed by the city via TOT revenue over 10 years. There is a set of criteria for an applicant to be deemed luxury-hotel status, according to a city staff report, would include characteristics such as cleanliness and condition, management and staff, exterior, grounds, public areas, guestroom décor, ambiance, amenities, bathrooms and guest services.
According to the city staff report, and sentiments from Councilmember Kerry Ferguson, and Councilmember Brian Maryott—who first requested city staff to develop the concept of a hotel incentive program months back for Council consideration—advantages of a Luxury Hotel Incentive Program is that it could bring more total TOT to the city’s general fund and make San Juan Capistrano more of a “global” destination.
San Juan Capistrano currently receives 10 percent of TOT (also known as ‘bed taxes’), which are deposited into the city’s general fund.
The reimbursement is fulfilled through at 50/50 percent revenue split between the city and the hotel. In order for the program to remain in effect, the certification of the luxury hotel quality will be looked at on an annual basis to “ensure ongoing adherence to the luxury hotel standards,” the staff report said.
The program passed 3-2, with Mayor Sergio Farias and Councilmember Derek Reeve opposed.
“Don’t be fooled, this isn’t about our residents or the public,” Farias said at the June 11 meeting, “this is gifting money to one developer.”
The incentive program came to City Council for consideration on May 1 and included a request from the Plaza Banderas Hotel Project developer for more than $2 million in “improvements and estimated costs” to go from 3-star to 4-star status. Farias was skeptical of the hotel developer’s inclusion of the incentive program and, in addition to other questions and comments from City Council, the Council voted to have city staff do more research and develop an incentive program that was less specific to the Plaza Banderas Hotel Project.
On June 11, after back-and-forth discussion over how to go forward with the incentive program, City Council voted 3-2 with Farias and Councilmember Derek Reeve opposed, to direct city staff to continue developing the incentive program.
On June 19, the city staff report read that any applicant would need to apply for the incentive program, if the program was adopted. The program was further amended to state that city staff will approve reimbursement agreements, based on whether the applicant has met criteria or not.
Any developer seeking to participate in the TOT revenue sharing program would submit a letter of interest and deposit, and work with city staff to complete all required hotel quality and financial certifications, the staff report read. Pending satisfaction of approved criteria, staff would develop a draft reimbursement agreement that would be brought forward to the Council for review and approval.