REPORT ON INITIATIVE PETITION TO AMEND GENERAL PLAN LAND USE DESIGNATION AND ZONING CLASSIFICATION OF CERTAIN SPECIFIED PROPERTY

Recommendation:

That the City Council receive this report as an informational item and take one of the actions available to the council described in the City Clerk's staff report.

Background:

The City Council, at its 1/12/99 meeting, ordered the preparation of a report pursuant to Section 9212 of the Election Code. The City Council requested that the report contain information as set forth below:

1. Is the proposed ballot measure consistent with the project voted on by the City Council at its 5/28/98 meeting? Are there any differences? What are these differences and what significance do they have?
   
2. Review of the fiscal impact of other commercial development on the Mar Vista site, specifically a hotel or motel as opposed to the proposed reconfigured residential development.

The Proposed Initiative:

The purpose of this initiative is to change the land use designation and zoning classification of a portion of two parcels of property from Commercial to Medium Density Residential. The new designation would allow a maximum of 17 units on the area under consideration. The initiative does not approve or disapprove the project that had been considered by the Planning Commission and City Council, nor could it legally, in that initiatives may only address legislative matters. If the initiative is approved the project sponsors could make an application for a residential project on the site and it would be subject to all the requirements and procedures contained in the zoning ordinance.

In response to the first question, the ballot measure contains two issues that the City Council considered on 5/28/98 meeting. Namely, the General Plan and Zoning Amendments. All other aspects of the project would be the subject of later action by the City if the voters approve the initiative. It is important to keep in mind that the only issues being considered on the ballot are the land use designation and zoning classification. The project could change from what has been proposed and reviewed by the Planning Commission and City Council.

In response to the second question, the fiscal impact of the proposed change from commercial to residential is set forth below:

A new hotel on this site would have positive fiscal impact on the City revenue as compared to residential development of the same size in terms of land area used. It is estimated that a hotel of 75 guestrooms could be built on this site. In developing these estimates staff has reviewed the plans for a hotel that will be considered by the Planning Commission at its meeting of 2/16/99, as well as other projects and occupancy use rates in the South Bay area.

The following is a comparison of the direct fiscal impact of a 75-guestroom hotel and a residential project of 8 homes. The sales price of the homes is based on a conversation with Kurt Nelson of JCC Homes. Hotel occupancy rates are the result of conversations with hotel operators in Hermosa Beach as well as others in the South Bay. The occupancy rates for hotel ranged from a low of 65% to 85%. In developing the TOT estimate, an occupancy rate of 75% was used with a $75 room rate.

HOTEL DEVELOPMENT
Business License Tax Revenue	1,125.00
Transit Occupancy Tax	153,984.00
Property Tax	8,200.00
TOTAL	$163,309.00

RESIDENTIAL DEVELOPMENT
Business License Tax	100.00
Property Tax	*10,400.00
TOTAL	$100.00

*This represents 1% of the $650,000 estimated sales price of the homes. The City receives an estimated 20% of the total property tax paid. This means that a tax bill of $6,500 the City will receive $1,300.00 per home or $10,400.00 per year.

The original project had an expansion of the adjoining lumber business. It can be anticipated that the sales from the lumber business will increase as the frontage increases and is more convenient to customers. It is very difficult to predict what such an increase would be as the city does not have any sales information on single businesses such as this as the information is considered confidential by the state. I do believe that the increase would not equal the revenue a hotel would bring in.

Other retail uses that might fit on a site of the existing size include such retailers as Cost Plus, Savon Express, fast food restaurants and other miscellaneous retail. The revenue from virtually any of these outlets would be greater than a residential development. This is because in addition to property tax the city also receives sales tax. Each of these outlets would fit on the site and meet the parking and other requirements contained in the zoning ordinance.

The original purpose behind establishing a deeper commercial zone along this portion of Pacific Coast Highway was to encourage commercial development of a type that required greater depth. The zone change and general plan amendment contemplated by the initiative could arguably set a precedent for a reduction in the depth of this commercial corridor elsewhere along the highway, thereby eliminating the possibility of this type of commercial development. There are several others sites that have similar depth that could be impacted. The fiscal impact of this change in long range land use objectives is unknown.

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