By Jorge Casuso

July 29, 2020 -- The City Council voted 6 to 1 on Tuesday to continue negotiations on "The Plaza" project proposed on City owned land Downtown, deciding the revenues, jobs and housing it would create outweigh the risks of pending litigation.

Negotiations were put on hold earlier this month after a Santa Monica watchdog group served the City with a complaint claiming the 2.57 acre site at 4th and 5th streets and Arizona Avenue should be reserved for public use under State law ("City Halts Negotiations on 'The Plaza' Project," February 26, 2020).

Rendering of proposed "The Plaza at Santa Monica" project (Courtesy of Clarett West)

The proposed 357,000-square-foot mixed-use hotel development includes 106,800 square feet of creative workspace, 42,000 square feet of public space and makes a one-time payment of $24 million to produce affordable housing ("Council to Decide Fate of 'The Plaza' Project," June 22, 2020).

It is also expected to generate long-term union hotel jobs, as well as temporary construction jobs, and pump several million a year into the City's coffers in ongoing bed tax revenues and other taxes.

A strong lobbying effort by Unite HERE Local 11 may have helped sway the Council in favor of the project, which is opposed by a coalition of neighborhood and slow-growth groups ("Neighborhood, Slow-Growth Groups Band to Defeat 'The Plaza' Project," February 19, 2020).

"A lot of speakers emphasized the jobs," said Councilmember Gleam Davis. "If we are trying to view things through a social justice perspective, affordable housing is a component of that."

But, Davis added, "we're talking about a project that provides long-term unionized employment that makes this a unique project."

Mayor Kevin McKeown said that while traffic impacts need to be mitigated -- the project is expected to generate approximately 5,000 new car trips a day Downtown -- "The Plaza" has the potential to be a "spectacular project."

The proposed project -- which is designed by the world-renown Dutch architect Rem Koolhaas -- would help the City create a vibrant plaza by closing Arizona Avenue along the site to traffic, McKeown said.

The developer, Clarett West Development, LLC and DLJ Real Estate Capital Partners, LLC, also would provide the City wiith $24 million that could be used to purchase land for more than 100 affordable housing units.

"You have to have the land," McKeown said. "Affordable housing developers don't have the land."

Councilmember Sue Himmelrich, who cast the lone dissenting vote, said she believes the project is illegal.

"I think it's illegal," she said. "I think that it poses great risk to the City."

Hillemrich also said the project includes office space that is not needed on a site that should be used to build affordable housing.

"I think we're making a mistake," said Himmelrich, who added that the council should reopen the proposal process. "Competition always makes things better."

The Council, she said, is "taking the easy way."

Two other Counciilmembers expressed reservations after the City was sent the legal complaint filed by the Santa Monica Coalition for a Livable City (SMCLC) on June 22 (Coalition's Letter to the City Council).

The complaint claims that the City is violating the State's Surplus Land Act by denying non-profits the chance to propose projects on the public land.

"I'm concerned about the legal risk," said Coucilmember Ted Winterer, adding that he also worried that the coronavirus pandemic had affected the need for the types of uses proposed by The Plaza developer.

Winterer also worried that the developer could sell the project rights -- including the proposed 99-year lease -- to a developer who could build a project under the current zoning without Council approval.

Newly appointed Councilmember Kristin McCowan expressed similar reservations before casting her first major vote since joining the Council July 14 ("Council Appoints Kristin McCowan to Fill Vacant Seat," July 14, 2020).

"I was really conflicted about the potential legal issues," said McCowan. "I'm conflicted as someone who remembers projects that didn't go the way we, as a community, were promised."

But, McCowan added, "We purposefully found a developer that is a private developer that doesn't flip projects."

"At this point I think we have to move forward and see what happens next."

In its instructions to staff, Council asked them to "negotiate local hire terms as well as terms relating to continued partnership in the project throughout construction," officials said.

Staff also was instructed to negotiate "profit participation for the City should the developer ever release its interest in the property to another entity."

As for the threatened litigation, staff said that the California Housing and Community Development Department (HCD) "provided supplemental guidance" in March that the proposed project qualified for an exemption from the Surplus Land Act expanded in December.

"The developer has stated that it will indemnify the City in the face of any legal challenge to the decision to continue negotiations," officials said after the vote.

The final project is expected to be heard by the Planning Commission and approved by the City Council in around 2022 and, if approved, would open in approximately 2025.