Two new hotels planned as part of a more-than $600 million renovation of the county-owned Dana Point Harbor remain in limbo after an OC Board of Supervisors majority said on Tuesday, Aug. 11, proposed new land leases need more scrutiny before the 66-year deals could be inked with the developers.
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The board was first presented the new leases for consideration in June, but several said then they wanted to take more time to look at what was proposed, especially after Fifth District Supervisor Katrina Foley suggested additions related to hotel employees and limits on rent increases for marina slips.
Foley said Tuesday she came to the board meeting ready to support new leases — one would be for the 2,265-slip marina and commercial core, and the second for a 130-room boutique-style, market-rate hotel and a lower-priced surf lodge to replace the Marina Inn. Without the new leases, the hotel developer said those elements would likely not be feasible, and instead the inn would probably be renovated.
But on Tuesday, the other four supervisors said they had concerns and decided to again push the decision to the next meeting so staff and the developers could address their questions.
The county tapped Dana Point Harbor Partners in 2018 for the massive overhaul of the county-owned harbor; the new proposal would also reset the timeframe of the leases for the developer partners to 66 years.
Bob Olson, of R.D. Olson, is the partner who has been designing and planning the luxury hotel and the surf lodge. Joe Ueberroth, of Bellwether Financial Group, is leading the marina reconstruction, and Bryon Ward, of Burnham-Ward Properties, is constructing the commercial core, both of which are well underway.
“This has been a difficult and exciting project,” Foley said Tuesday, and she supported the lease agreements today, she said, because “the county and I remain committed to pushing the Dana Point Harbor revitalization across the finish line.”
But concerns for workers at the Marina Inn — and other harbor businesses being displaced — were raised again on Tuesday, this time by Third District Supervisor Don Wagner and Second District Supervisor Vicente Sarmiento.
“I’ve not gotten to a place to be satisfied,” Wagner said, adding that beyond the Marina Inn employees, he wonders whether the county has an obligation to assist the 198 employees of the Wind & Sea restaurant now set to close on Sept. 15.
“I guess they don’t have enough of a union behind them to come and champion them,” Wagner said, referring to the showing of Unite Here hotel union members at Tuesday’s meeting on behalf of the Marina Inn workers.
“They’re also workers in this county who deserve some thought from this board of supervisors,” Wagner said. “What provisions are being made for (them) and many other employees in the harbor now, whose positions are at risk?”
But, Wagner said his “greatest philosophical problem” is with a request in the lease agreements that the county be guaranteed free access to meeting space and public venues up to six times a year.
He called it a “gift to the county of free space.”
“Nice little project you’ve got there; it would be a shame if something happened to it. By the way, give us space, rooms,’” is how he described what he considered extortion on the county’s part by asking for the access. “We’re a county; we should not be in the position of extorting benefits for county employees.”
Thanking Foley for the work she and her office, as well as Mat Miller, the county’s CEO of real estate, and his team, have done since the June meeting, Sarmiento said, “We understand the benefit of this; it will revive a county asset.”
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But he also asked for more clarification about what the developers get from the project.
“The developer is paying us rent,” Miller said, outlining the public-private venture that is allowing for an overhaul of the harbor area that the county could not afford to do. “The county doesn’t have the responsibility to pay for that. We do get a percentage of rent from that.”
“The better the harbor does, the more money,” he added. “Based on projections now over the term of the lease, the county will get about $2.2 billion. The developer coming in is probably north of $25 billion. Out of that money comes the responsibility to maintain and finance and take responsibility for all non-public parts of the harbor.”
Sarimento said he was happy that the county will be “relieved from the operational cost” of the harbor, but he added that the current negotiations for the new land leases are a “one-time opportunity to negotiate a meaningful lease.”
The difference between the lease proposed by the county’s real estate staff in June and the one presented on Tuesday is that the MOU between the county and the partners was deleted, the specifics around the county’s use of unbooked meeting rooms were finalized, and the option to remodel the Marina Inn was added back in if the partners cannot get financing for the two new hotels.
If the developers are unable to get financing, they have to show evidence of that, Miller added, and if a remodel-only of the Marina Inn is done, the lease length reverts to what was agreed to in 2018, which would be 58 years at this point.
Miller said it will likely take two years from demolition to build the hotels, and that will displace 20 workers from the Marina Inn.
Sarmiento said he wasn’t comfortable that enough was done to guarantee assistance for the workers. “There’s nothing that binds them to be able to find a different position for them and make sure their positions are secure. Given the numbers we’re talking about, this seems like such a small piece that our partners would say, ‘Sure, let us absorb that.’”
When it appeared the board would not have the four-fifths vote needed for the new lease agreements, Foley asked Olson to give some guarantees at Tuesday’s meeting about how he would take care of the workers.
But Fourth District Supervisor Don Chaffee said he was still concerned and said the agreement needed to be rewritten to include the guarantees from Olson.
“If that can be handled, I’m all for this project,” he said, also saying, “I do not want this project to die.”
Olson confirmed he would give 60-day notices to the workers. “We will take care of them,” he said. “There’s a dearth of associates for hotels in South County; they’ll be snapped up for employment in no time. Everybody needs help.”
Olson said after the meeting he was disappointed with the delay.
“We’re willing to do what makes any of the supervisors happy relative to the (employees at Marina Inn),” he said. “These people have worked for us for a long time, and our plan is to make sure everyone is treated fairly and hopefully with jobs, and hopefully they come back to the new hotels, if we’re so fortunate.”
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