DATE: October 10, 2017
SUBJECT:
Title
RESOLUTION AMENDING SECTION 4 OF RESOLUTION NO. 2016-139 TO MODIFY THE SCOPE OF SUNROAD ENTERPRISES’ PROPOSED DEVELOPMENT ON THE ELBOW SITE FROM A 325-ROOM HOTEL THAT DOES NOT REQUIRE A PORT MASTER PLAN AMENDMENT TO AN APPROXIMATELY 500-ROOM HOTEL OR UP TO TWO ADDITIONAL HOTELS WITH 325 ROOMS, WITH CONDITIONS
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EXECUTIVE SUMMARY:
At the July 14, 2015 Board of Port Commissioners (“Board”) meeting, the Board directed staff to issue a request for Statements of Interest, Qualifications and Vision (“SOIQV”) for the redevelopment of approximately 48 acres within the East Basin Industrial Subarea of Planning District 2 (“East Basin Industrial Subarea Site”). The Board subsequently directed staff to also include an adjacent parcel of land within the East Harbor Island Subarea, known as the “Elbow Parcel” at its October 6, 2015 meeting (“Elbow Site”) (Attachment A). The East Basin Industrial Subarea Site and the Elbow Site are collectively referred to as the “Site”. At the September 8, 2016 meeting, the Board bifurcated the Site and selected Sunroad Enterprises (“Sunroad”) to develop the Elbow Site and OliverMcMillan, Inc. (“OM”) to develop the East Basin Industrial Subarea Site and directed staff to enter into an Exclusive Negotiating Agreement (“ENA”) with each developer for their respective sites. In addition, for the Elbow Site, the Board directed staff to enter into an ENA with Sunroad for a 325-room hotel that does not require a Port Master Plan Amendment (“PMPA”). Following the parameters of Resolution 2016-139 (Attachment B), staff successfully negotiated an ENA with Sunroad HIE Hotel Partners, L.P., a California limited partnership (“Sunroad Partnership”), the entity designated by Sunroad for development of the Elbow Site, for a proposed development with a 325-room hotel that doesn’t require a PMPA (“Sunroad ENA”)1.
The District has been in ongoing litigation with the California Coastal Commission (“CCC”) regarding Port Master Plan Amendment No. PMP-6-PSD-14-003-2 (East Harbor Island Subarea) that would allow the development of three hotels on the Elbow Site and adjacent site totaling 500 rooms consisting of a 175-room hotel and up to two additional hotels with 325 rooms (“Litigated PMPA”). Since the Litigated PMPA has not been reconsidered by the CCC, Sunroad has requested an amendment to Resolution 2016-139 that would permit Sunroad to proceed under the current Port Master Plan (“PMP”), which allows for the development of a high quality hotel of approximately 500 rooms that includes restaurant, cocktail lounge, meeting and conference space, recreational facilities, including piers, and ancillary uses (“Existing Entitlement”), but gives it the flexibility to change to up to two additional hotels with 325 rooms as set forth in the final Port Master Plan Amendment No. PMP-6-PSD-14-003-2 (East Harbor Island Subarea) pursuant to 14 California Code of Regulations Section 13632(e) (“Modified Entitlement”). If the Board approves the amendment to Resolution 2016-139, staff would administratively enter into an amendment to the Sunroad ENA with the Sunroad Partnership to revise the requirements of the proposed development to allow the Sunroad Partnership to proceed with the Existing Entitlement unless the Modified Entitlement succeeds the Existing Entitlement by a date certain to be administratively negotiated by Sunroad Partnership and District staff.
Staff recommends the Board adopt the resolution amending Section 4 of Resolution 2016-139 to modify the scope of the proposed development on the Elbow Site from a 325-room hotel that does not require a PMPA, to an approximately 500-room hotel under the Existing Entitlement or up to two additional hotels with 325 rooms under the Modified Entitlement, subject to the timelines to be administratively negotiated by Sunroad Partnership and District staff.
RECOMMENDATION:
Recommendation
Adopt a Resolution Amending Section 4 of Resolution 2016-139 to modify the scope of Sunroad Enterprises’ proposed development on the Elbow Site from a 325-room hotel that does not require a PMPA to an approximately 500-room hotel or up to two additional hotels with 325 rooms, with conditions.
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FISCAL IMPACT:
Amending Section 4 of Resolution No. 2016-139 will not have a direct fiscal impact; however, staff anticipates that giving Sunroad Partnership flexibility to modify the number of hotel rooms on the Elbow Site may have a future fiscal impact.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A Port that the public understands and trusts.
• A vibrant waterfront destination where residents and visitors converge.
• A Port that is a safe place to visit, work and play.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
Background
At the July 14, 2015 Board meeting, staff was directed to issue a SOIQV for the redevelopment of the East Basin Industrial Subarea Site. On October 6, 2015, the Board directed staff to include the adjacent Elbow Site in the SOIQV. The Site includes land parcels which are currently occupied, or were occupied, by Hertz, Avis and National Rent-a-Car, the District’s Harbor Police Department Headquarters, the former Airport taxi staging lot, Lockheed Martin, and adjacent water parcels.
On September 8, 2016, the Board bifurcated the Site and selected two developers: Sunroad to develop the Elbow Site with a 325-room hotel that does not require a PMPA, and OM to develop the East Basin Industrial Subarea Site. The Board also directed staff to enter into an ENA with each developer. Staff has entered into ENAs with both developers and continues to work with each to advance their proposed developments.
CCC Litigation and Sunroad Request
The District has been in ongoing litigation with the CCC regarding the Litigated PMPA. Since the Litigated PMPA has not been reconsidered by the CCC, staff recommends the Board amend Resolution 2016-139 to allow Sunroad Partnership to proceed with the Existing Entitlement, but give it the flexibility to change to the Modified Entitlement.
If the Board approves the amendment to Resolution 2016-139, staff would administratively enter into an amendment to the Sunroad ENA with the Sunroad Partnership to revise the requirements of the proposed development to allow the Sunroad Partnership to proceed with the Existing Entitlement unless the Modified Entitlement succeeds the Existing Entitlement by a date certain to be administratively negotiated by Sunroad Partnership and District staff.
Next Steps
If the Board adopts the resolution, staff will proceed to administratively amend the Sunroad ENA with Sunroad Partnership to revise the requirements of the proposed development to allow the Sunroad Partnership to proceed with the Existing Entitlement unless the Modified Entitlement succeeds the Existing Entitlement by a date certain to be administratively negotiated by Sunroad Partnership and District staff. If Sunroad Partnership proceeds under the Existing Entitlement, it is currently anticipated that Sunroad Partnership’s first submittal, which includes a preliminary project description, preliminary site plan, development cost estimate and pro forma financial analysis, would be due by December 28, 2017. Sunroad Partnership will commission a market demand and feasibility study to analyze the components of the proposed development by January 27, 2018. Their second submittal, which includes a detailed project description, site plan, elevations, conceptual renderings and drawings, would be due by March 30, 2018. The negotiation period of the Sunroad ENA would end June 29, 2018.
Staff Recommendation
The amendment will expedite a proposed hotel development on the Elbow Site. Staff recommends the Board adopt the resolution amending Section 4 of Resolution 2016-139 to modify the scope of the proposed development on the Elbow Site from a 325-room hotel that does not require a PMPA, to an approximately 500-room hotel or up to two additional hotels with 325 rooms, with conditions.
The Board has the discretion to accept, modify, or reject staff’s recommendation.
General Counsel’s Comments:
The General Counsel’s Office has reviewed this agenda sheet as presented to it and approves it as to form and legality.
Environmental Review:
The proposed Board actions to amend section 4 of Resolution No. 2016-139 to modify the scope of Sunroad Enterprises’ proposed development does not constitute an “approval” of a project under the California Environmental Quality Act (CEQA) because the Board’s authorization does not constitute a binding commitment to approve the amended proposed development or any other associated discretionary approvals. Any project developed as a result of the amendment would require Board approval. CEQA requires that the District adequately assess the environmental impacts of projects and reasonably foreseeable activities that may result from projects prior to the approval of the same. Accordingly, if a project results from the amendment, and before the Board considers approval of a development, the District will conduct CEQA review of any potential environmental impacts from the proposed amendments and any reasonably foreseeable activities that may occur as a result of the proposed amendment. Such CEQA review may result in the District, in its sole and absolute discretion, requiring implementation of mitigation measures or adopting an alternative, including without limitation, a “no project alternative.” The current Board action in no way limits the exercise of this discretion. At this time, no further action under CEQA is required.
In addition, the proposed Board actions allow for the District to administrate its obligations under the Port Act and/or other laws. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed presentation is consistent with the Public Trust Doctrine.
The proposed Board actions do not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit (CDP) Regulations. Therefore, issuance of a Coastal Development Permit or exclusion is not required for the proposed Board actions. However, the “development” or “new development” that may arise from the proposed Board actions require processing under the District’s CDP Regulations. If a proposed development arises, the Board will consider approval of a proposed development after the appropriate determination under District’s CDP Regulations is made, which could include a Coastal Development Permit. The current Board action in no way limits the exercise of the District’s discretion under the District’s CDP Regulations.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Wendy Ong
Program Manager, Redevelopment
Real Estate
Sean Jones
Asset Manager, Redevelopment
Real Estate
Attachment(s):
Attachment A: Location Map
Attachment B: Resolution 2017-520
1 Exclusive Negotiating Agreement between District and Sunroad Partnership dated April 14, 2017 filed with the Office of the District Clerk as Document No. 66537.